Myanmar
On yer bike
Jun 16th 2005 | YANGON
From The Economist print edition
Government bungling makes cars a rare luxury
FOR outsiders used to the gridlocked cities of South-East Asia, Yangon's leafy and uncongested boulevards make a pleasant change. For locals, however, they are just another reminder of the incompetence of their military rulers. The 5m inhabitants of the city own just 152,533 cars, say official statistics, or three cars for every 100 people. By contrast, some 3m vehicles ply the roads of Bangkok, in neighbouring Thailand. Myanmar's relative poverty must account for much of the difference, of course. But that poverty stems, in large part, from ludicrous government policies such as those governing the import and sale of cars. Cars are so scarce because no one can afford to buy them. They cost a fortune, and not just by local standards. A 1993 Toyota saloon that can be bought for $1,000 from a Japanese wholesaler would sell for as much as $75,000 in Myanmar, according to one local's estimate. A brand-new Toyota Land Cruiser, at $300,000, costs six times what it would in America. Prices are so high because the government has given a near-monopoly on imports to the Union of Myanmar Economic Holdings Limited, which is owned by the army. It sells the import rights to dealers for roughly $100,000 per car. On top of this, importers must pay a duty of 30% or more on the value of the car. Dealers, naturally enough, only bother to import top-end models that could justify such an outlay. But there is only a tiny market for such vehicles. So Myanmar, a country of 50m people, officially imported only 4,500 cars last year—and even that minuscule figure was a big increase on previous years. Another 1,500 vehicles were assembled inside the country, and sold at equally prohibitive prices. The only economically viable way to bring cheaper, second-hand cars to Myanmar is to smuggle them across the border from Thailand. Various ethnic militias, allied to the junta and based in the border region, have imported perhaps 40,000 vehicles this way since 2000, with the connivance of the military-intelligence agency. But that once all-powerful body was abolished last year, after its leader, Khin Nyunt, fell from grace. Now the authorities are trying to round up all the smuggled cars. They have seized 14,000 so far, and are threatening anyone caught driving one with seven years in prison. In all likelihood, therefore, the number of cars on the road this year will decrease. Prices, needless to say, have risen, by about 20% in the past few months. The government recently exacerbated the shortage, by prohibiting car dealers from shipping old vehicles from the provinces to Yangon. It has also banned the import of second-hand spare parts. The junta seems oblivious of, or indifferent to, the ill effects of all this. In 2003, it accidentally precipitated a bank crash, which is still crimping the economy. The top generals, schooled under past socialist regimes, are thought to have only the woolliest idea of how market forces work. No one dares set them straight. Pliant bureaucrats recently estimated last year's economic growth rate at 12.6%, which is higher than China's. For the automotive sector, at any rate, it looks as if they forgot a minus sign.
On yer bike
Jun 16th 2005 | YANGON
From The Economist print edition
Government bungling makes cars a rare luxury
FOR outsiders used to the gridlocked cities of South-East Asia, Yangon's leafy and uncongested boulevards make a pleasant change. For locals, however, they are just another reminder of the incompetence of their military rulers. The 5m inhabitants of the city own just 152,533 cars, say official statistics, or three cars for every 100 people. By contrast, some 3m vehicles ply the roads of Bangkok, in neighbouring Thailand. Myanmar's relative poverty must account for much of the difference, of course. But that poverty stems, in large part, from ludicrous government policies such as those governing the import and sale of cars. Cars are so scarce because no one can afford to buy them. They cost a fortune, and not just by local standards. A 1993 Toyota saloon that can be bought for $1,000 from a Japanese wholesaler would sell for as much as $75,000 in Myanmar, according to one local's estimate. A brand-new Toyota Land Cruiser, at $300,000, costs six times what it would in America. Prices are so high because the government has given a near-monopoly on imports to the Union of Myanmar Economic Holdings Limited, which is owned by the army. It sells the import rights to dealers for roughly $100,000 per car. On top of this, importers must pay a duty of 30% or more on the value of the car. Dealers, naturally enough, only bother to import top-end models that could justify such an outlay. But there is only a tiny market for such vehicles. So Myanmar, a country of 50m people, officially imported only 4,500 cars last year—and even that minuscule figure was a big increase on previous years. Another 1,500 vehicles were assembled inside the country, and sold at equally prohibitive prices. The only economically viable way to bring cheaper, second-hand cars to Myanmar is to smuggle them across the border from Thailand. Various ethnic militias, allied to the junta and based in the border region, have imported perhaps 40,000 vehicles this way since 2000, with the connivance of the military-intelligence agency. But that once all-powerful body was abolished last year, after its leader, Khin Nyunt, fell from grace. Now the authorities are trying to round up all the smuggled cars. They have seized 14,000 so far, and are threatening anyone caught driving one with seven years in prison. In all likelihood, therefore, the number of cars on the road this year will decrease. Prices, needless to say, have risen, by about 20% in the past few months. The government recently exacerbated the shortage, by prohibiting car dealers from shipping old vehicles from the provinces to Yangon. It has also banned the import of second-hand spare parts. The junta seems oblivious of, or indifferent to, the ill effects of all this. In 2003, it accidentally precipitated a bank crash, which is still crimping the economy. The top generals, schooled under past socialist regimes, are thought to have only the woolliest idea of how market forces work. No one dares set them straight. Pliant bureaucrats recently estimated last year's economic growth rate at 12.6%, which is higher than China's. For the automotive sector, at any rate, it looks as if they forgot a minus sign.
