Jan 31, 2013

Thailand to gain from Myanmar debt clearance

The clearance of Myanmar's debt by the World Bank group would benefit Thailand and spur economic activity in Southeast Asia, security analyst Surachart Bamrungsuk said on Monday.

Mr Surachart, an associate professor at Chulalongkorn University, told the Bangkok Post that the agreement between the World Bank group and Myanmar to write off overdue debt should not only help accelerate development in Myanmar but also spur transactions within the region.

The clearance of arrears was announced in Washington on Sunday night (Bangkok time) by the World Bank and the Asian Development Bank (ADB). It followed the World Bank board of directors' approval on Jan 22 of US$440 million in re-engagement and reform support credit for Myanmar.

Mr Surachart said he believed trade and other business would certainly increase as a result of economic and development assistance by the World Bank, the Japanese government and other partners.

Thailand, with its geo-political location, would certainly benefit from the logistical windfall and increased transactions between the world and Myanmar, said Mr Surachart.

"Myanmar has come a long way in its economic transformation, undertaking unprecedented reforms to improve people's lives, especially the poor and vulnerable," the World Bank's country director in Myanmar Annette Dixon said.

"Much work remains to be done. We are committed to helping the government accelerate poverty reduction and build shared prosperity. The bank's engagement, together with the ADB, the government of Japan and other partners, will help attract investment, spur growth and create jobs," said Ms Dixon, who was previously based in Bangkok.

"We have on the part of the government a set of very serious reform-minded politicians and technocrats, and we also have on the positive side a momentum behind these reforms that will be extremely difficult to reverse," Stephen Groff, an ADB vice president, said. "The challenges are intense and great and there are a lot of things the country is going to have to overcome."

Maung Maung Thein, Myanmar's deputy finance minister, said the country needs capital investment for development and to do business, and this agreement would facilitate the financing of development.

"More debt cancellation is coming in the next six months," Myanmar's finance ministry said in a statement. Myanmar had about US$3.5 billion in arrears with the Paris Club members other than Japan, according to the International Monetary Fund.

"As Myanmar can clear the debt it would be recognised as a responsible nation," the statement said. Funds saved through debt relief would be invested in schools, hospitals and poverty reduction programs, it said.

The credit approved last week supports critical reforms being implemented by the government to strengthen macroeconomic stability, improve public financial management and improve the investment climate. Its proceeds will also help the government meet its foreign exchange needs, including repaying a bridge loan provided by the Japan Bank for International Cooperation (JBIC) to clear arrears.

Myanmar is rich in natural resources, including large natural gas reserves, and extensive agricultural potential, particularly in rice production, and after decades of international isolation, is already seeing increased trade and investment from the wider international community. Myanmar's economic growth accelerated to 5.5% in fiscal year 2011-12. GDP growth is expected to reach 6.3% in fiscal year 2012-2013.

Over the past year, the World Bank has opened an office in Yangon, appointed a country manager and brought in technical experts to undertake and support analytical, diagnostic and advisory work as Myanmar begins to prepare a broad development program.

The bank also provided a US$80 million grant to help finance the National Community-Driven Development project, which will enable villagers to develop rural infrastructure improvements including schools, health clinics, roads and irrigation schemes in about 640 village tracts across Myanmar over six years.

Source: Bangkok Post