From: Lynwood <lynnwoodm@googlemail.com>
To: "Bun Dite" <bundite@gmail.com>
Subject: Banks

 
 
August 31, The Financial Times
Backstreet bankers - How underground financial networks ease Burma's
burden - Amy Kazmin

For Burmese migrants living in Singapore, the small grocery shops in the
Peninsula Plaza are the place to go for the tastes, sounds and sense of
home. Shelves are laden with traditional Burmese staples such as pickled
tea-leaf salad, pungent spices, felt-and-leather flip-flops and ladies'
batik sarongs. Those hankering for their military-ruled country's
tightly-controlled pop culture can buy Burmese astrology and celebrity
magazines, books, movies, music CDs and - astonishingly - the
privately-run but heavily-censored weekly news journals now in vogue in
Rangoon.

But while clearly a powerful magnet, the Peninsula Plaza's Burmese shops
are not primarily in the business of fulfilling migrants' nostalgic
longings. Instead, those who flock to the tatty downtown mall each weekend
have another important purpose: to transfer a portion of their Singaporean
earnings to needy families back home.

In a steady flow, young workers - from electricians to engineers - hand
over wads of Singaporean dollars and leave, not with bagfuls of groceries
but with anonymous-looking receipts recording sums deposited, and names
and addresses of intended recipients in Burma. Indeed, these seemingly
humble businesses - working through counterparts inside Burma - will
deliver the equivalent amount of Burmese kyat, the local currency, to the
designated recipients, usually
within a day or two and sometimes right to the beneficiary's front door.

For many of Burma's 52m people, funds from relatives working overseas are
crucial for their basic survival. In an economy crippled by the junta's
mismanagement and western sanctions, jobs are scarce and neither salaries
nor pensions keep pace with spiralling inflation. "My parents live on
this," says a 30-something engineer as she entrusts a small shop with
Sing$200 ($131) for her parents in Rangoon.

Migrants have no real guarantee that these tiny unregulated operators and
will send the money to its intended destination. "You trust, you send,"
one moneyman, operating from a store selling Burmese books and CDs, told
the Financial Times. "You don't trust, you don't send."

But send they do - with each individual remittance a small act of defiance
against an authoritarian regime that seeks to control every aspect of the
economy - and especially access to, and use of, foreign currency. Money
sent via this underground system helps finance the purchase of essential
goods for Burma's population, bypassing import restrictions intended to
conserve foreign exchange for the junta's priority items, such as military
hardware.

"It allows people a degree of freedom from the state," says Sean Turnell,
a Macquarie University economics professor. "If this money had gone
through the formal banks, there would be all sorts of restrictions about
the timing, the amounts, and in what form people could withdraw it."

Dependence on migrant remittances is a common theme among the world's most
crippled, tightly controlled economies. Pyongyang, for example, exports
labourers and keeps their salaries to fill its own coffers, though some
North Koreans are working illegally in China and sending money home to
families. Zimbabwean migrant workers in South Africa earn money that
allows them to bypass currency controls and send much-needed goods back
home, where everything from
food to fuel is in desperately short supply.

Burmese migrants generally steer clear of state banks, which technically
are supposed to monopolise international banking services, and instead get
their money home through a system known as hondi - derived from a Sanskrit
word meaning "to collect". Operating all over Thailand and Malaysia, as
well as in Singapore, Australia, the US and, indeed, any place where
people from Burma live, hondi brokers handle transfers ranging from small
sums handed over by workers in Thailand's seafood processing industry to
tens of thousands of dollars sent by professionals in Singapore.

"The Burmese just don't trust state financial institutions in any form,"
says Prof Turnell, who edits the journal Burma Economic Watch. "No one
sends anything through the official banks."

Entrusting money to an underground financial network may seem risky. Yet
hondi dealers have a powerful incentive to keep their customers' faith:
the money they collect from migrants is an integral part of the country's
trading system, which is always in danger of paralysis due to the regime's
stifling red tape.

Traders use migrant payments to buy foreign consumer goods to send to
Burma for sale - a highly lucrative enterprise given both import
restrictions and limited domestic production capacity. This money is also
sometimes sought by Burmese exporters to meet the onerous foreign-currency
working capital requirements generated by regime demands. "Without this
foreign currency in the system, everything will be stuck," said a
Singapore-based Burmese trader.

Burma's current trade restrictions are a legacy of nearly total state
control of the economy from 1962 to 1988, when Gen Ne Win was pursuing his
quixotic "Burmese way to Socialism". While the junta that took power after
that has
presided over tentative economic reform, it remains deeply wary of private
entrepreneurs. The generals' deep-rooted impulse to control the market –
mocked by some as a true "command economy" - has been exacerbated by
western sanctions, including a US ban on all imports from Burma.

In theory, every shipment in or out of Burma must be sanctioned by a
high-level trade council overseen by a top general, and transactions can
only go ahead if every detail - including the price - meets regime
approval. But requests to import goods that would compete with products
from Burma's creaky state industries are generally denied. Traders
complain that they face regular demands from officials to obtain higher
selling prices for exports, or pay less for imports, irrespective of real
market prices. Burmese traders also confront onerous paperwork and working
capital requirements to trade.

Unsurprisingly, Burma's official foreign trade figures are anaemic. In
2006, the country's total exports were recorded at $5bn, 43 per cent of
which comes from natural gas exports, with much of the rest generated by
timber and gem sales. Official imports were just $2.9bn, of which $676m
was accounted for by diesel and petrol. Yet with undocumented migrant
earnings, resourceful Burmese businessmen can work around the crippling
restrictions, bringing in supplies ranging from foodstuffs to medicine to
spare auto parts, and cushioning the population from the full force of
state controls. "It allows the people some consumption space outside the
control of the government," said Mr Turnell.

It is impossible to estimate accurately the value of oversees remittances
to Burma's economy, given that it flows through decentralised, informal
channels, and often never actually enters the country as cash. Even
reliable data on the numbers of Burmese workers overseas are unavailable.
Yet even the roughest calculations suggest that the value of remittances
to Burma's long-suffering population far exceeds the paltry $200m, or $3.8
per capita, the country receives in foreign aid. It also suggests that the
quantity of "black" imports financed by migrant money is quite substantial
when compared to officially sanctioned imports.

The public face of the hondi system varies dramatically depending on the
locale. In Singapore, business is conducted from the well-known Peninsula
Plaza; in the Thai province of Samut Sakhon - where an estimated 160,000
Burmese are employed in seafood processing plants - sisters Ma Aye, 32,
and Thaw Da Htwe, 28, operate as agents from a tiny room where they also
live and sell paan, the betel nut commonly chewed around Asia.

The sisters, who say they are agents for a big businesswoman from their
hometown in Burma, earn a Bt20 commission for every Bt1,000 ($31) they
collect, then wire the money to a bank account, usually in locations near
the Thai border. On the other side, their boss arranges payouts for the
families. The sisters say they handle around Bt100,000 in transfers each
month, adding Bt2,000 to their own earnings from paan sales. A Macquarie
University survey of 2,500 Burmese migrant workers in Thailand - which has
an estimated 1.5m legal and illegal migrants from its neighbour - found
each sending home an average of $380-$400 annually.

Burma's ruling generals do periodically try to crack down, arresting and
harassing those involved in illegal financial transactions and trade. Yet
these crackdowns have merely driven the informal financial system deeper
underground, businesspeople say, while also encouraging the fragmentation
and decentralisation of the business. With Burma's urban population
already seething at spiralling inflation, frequent power shortages and now
rising fuel prices, the regime may well be reluctant genuinely to choke
off what has become a crucial safety valve for the public.

"It's the survival margin," Mr Turnell says of the remittances. "It's not
going to turn Burma into Thailand, but it does seem key to survival for an
awful lot of people. It underlies the extent to which the country can just
motor on at a low level of development, and the people, no matter how
desperate, can just sort of survive."