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Myanmar Facing Massive Inflation Before Economy Really Gets Going

by Joshua Kurlantzick
September 13, 2013

Toe Aung, deputy head of urban planning, poses for a photo at the Yangon City hall, with the lit Sule Pagoda seen behind him, in Yangon, on September 5, 2013. Toe Aung, a former army major, bears one of the biggest responsibilities in reform-era Myanmar: planning Yangon's unstoppable transformation from a regional backwater into Southeast Asia's next megacity. (Soe Zeya Tun/Courtesy Reuters) Toe Aung, deputy head of urban planning, poses for a photo at the Yangon City hall, with the lit Sule Pagoda seen behind him, in Yangon, on September 5, 2013. Toe Aung, a former army major, bears one of the biggest responsibilities in reform-era Myanmar: planning Yangon's unstoppable transformation from a regional backwater into Southeast Asia's next megacity. (Soe Zeya Tun/Courtesy Reuters)

A short piece by Agence France-Presse (AFP) run in the Straits Times yesterday, buried amidst the big international stories on Syria and the stand-off in the Philippines and others, caught my attention. The short piece, titled “Poor and Homeless in Costly Yangon” discussed how, because of Myanmar’s political and economic opening, and the lack of quality office and apartment and factory space in Yangon, rents for any decent property have soared through the roof. AFP estimates that land prices in Yangon have risen since 2010, the beginning of Myanmar’s opening, to as much as $700 per square foot now, far more than the price per square foot in Bangkok, which is vastly richer and has twenty-four hour electricity water, and all other modern conveniences. Other articles have suggested that some properties in central Yangon are renting for more than $1000 per square foot, more than rentals in Manhattan.

Conversations over the past three weeks with several executives from American and Japanese companies that have considered investing in Myanmar or are indeed investing confirmed for me the unreality of property prices in Yangon, an unreality I had seen myself too on recent visits. Some of these properties that are attracting London-type rental prices are not much more than bare metal and brick buildings that do not even have regular utilities; much of Yangon remains without electricity, water, or decent roads. But what is much more disturbing, and what the article raises, is that the skyrocketing rent is not only deterring investment and hitting the pockets of expatriate managers moving into Yangon; the rents are forcing thousands of families out of their simple places in Yangon, as landlords realize they can rent even the most basic apartments or buildings out to new investors for huge sums.

How many people are being pushed out of their homes in Yangon—where GDP per capita is still only around $1,300—is impossible to estimate, although the government has become so concerned about the skyrocketing rents, and the impact on ordinary Burmese, that it is considering imposing new property taxes. Although many advisors to the president’s office are not in favor of this idea, at such an early stage of trying to attract investment, Myanmar already is running a serious risk of becoming like Cambodia in the 1990s, where massive investment and inflows of expatriates created such high inflation for rentals and, ultimately, even everyday essentials, that huge numbers of average Cambodians were driven out of the capital.

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