A potential (and literal) commodities goldmine…where most likely, you’ve never thought to look.
As recently as 1962, Myanmar – or Burma, as the British have called it for the last 150 years – was the richest country in Asia. Today, it is one of the ten poorest countries in the world.
In 1962, in a military coup, General Ne Win put an end to Myanmar’s democratic government, establishing a one- party state and instituting the party’s "Burmese Path to Socialism."
Guided by astrology and numerology and driven by xenophobia, chauvinism, and arrogance, Ne Win cut the country off from the rest of the world and ushered in the era of economic stagnation that persists today, despite Myanmar’s potential wealth in raw materials and agriculture and its large force of cheap labor.
Direct military control of the country came in 1988, when popular pressure forced Ne Win to resign. In 1989 the country’s name was changed back to Myanmar. Outsiders opposing the generals insist on calling the country Burma – a fairly new colonial name. The anticolonialist people of Myanmar and the generals insist on the historical name.
I decided to stay neutral on the political situation until I had done my homework, but on the matter of the country’s name I did take the side of history and the people in the street: Myanmar.
The History of Myanmar: Slowly Reopening Borders
Various armed separatist movements have dominated the country’s politics over the last four decades. Nevertheless, in the ’90s, Myanmar slowly began to reopen its borders to both people and capital – a process that continues today. Considering the wealth of natural resources and labor advantages a liberalized Myanmar could potentially offer, it’s worth taking a closer look at where the country is headed.
In 1990, for the first time in thirty years, Myanmar held multiparty free elections. The results, however, were nullified when the opposition party headed by Aung San Suu Kyi, the daughter of one of the country’s founders, won a decisive victory. In 1991, Myanmar became the focus of international attention and the target of U.S. sanctions when Aung, who had been placed under house arrest along with other leaders of the elected government, was awarded the Nobel Peace Prize.
Under General Than Shwe, who assumed leadership of the ruling junta in 1992, the political repression diminished somewhat. A convention was called to draft a new Burmese constitution in 1996. (Aung San Suu Kyi’s father had been instrumental in liberating Burma from the British, and the constitution whose drafting he oversaw stipulated that Burma could not be placed under the leadership of someone married to a foreigner. Aung San Suu Kyi, educated at Oxford, who had been living in England before the election, was married to an Englishman when she ran for prime minister, making her ineligible for the position, according to the country’s military rulers.)
At the same time, the country began to emerge from its international isolation. In 1997, in the face of U.S. trade sanctions, Myanmar was made a full member of the Association of Southeast Asian Nations (ASEAN), the region’s powerful trading group. Twenty years ago, there weren’t tourists in Myanmar. Fifteen years ago, tourists could spend a week there. In the mid-1990s things loosened up even more. Around the country, tourist hotels started appearing. The government declared 1997 the Year of the Tourist.
The History of Myanmar: The Best Way to Change a country
When I started posting reports from Myanmar on my Web site, I received numerous e-mails from people who were furious that I was there, insisting that I was merely supporting the rule of the evil generals in charge. I should have been boycotting the country along with all good people, they said. But not all good people were boycotting the country.
Numerous nations were and are engaging Myanmar and doing business there: Japan, China, India, Malaysia, Russia, Singapore, for instance. These countries were poised to exploit a variety of natural resources – timber, natural gas, gold, and other minerals – and to capitalize on the inevitable growth of tourism.
I would submit that the best way to change a country is to engage that country. Isolation rarely brings change. You want to put an end to Fidel Castro’s hold over Cuba? The pope’s visit in the late 1990s did wonders – the Cubans have openly celebrated Christmas ever since, not having done so in more than thirty-five years. Send Jennifer Lopez next. Castro will not live forever, and while the U.S. State Department is sitting around waiting for him to depart this vale of tears, the Europeans, the Mexicans, the Canadians, and everybody else are flooding into Cuba, buying up all the good stuff. By the time Castro is gone, there are not going to be any decent deals left for Americans. If it were legal to do so, you can bet I would be putting money there now.
In Delhi I had visited Indian friends, Ajay and Aodiiti Mehta, who had studied in the United States. With them was an American woman who talked about her upcoming trip to Myanmar. When I told her I would be there the following month, she grew indignant, claiming that U.S. sanctions prohibited my going. "Why can you go and I can’t?" I asked.
"Because I work for an NGO," she said.
The History of Myanmar: The Road to Mandalay
"I’m going to Myanmar to examine the situation," she said.
"So am I," was my answer. "Why should I let you go to Myanmar, examine the situation, and make a judgment for me?"
Did I mention that we did not get along?
The road to Mandalay, to which we were heading, was no road at all; it was the Manipur and Chindwin Rivers. We had to find our own roads, winding through the jungle. And many of the roads were horrible. Myanmar is a primitive country, and thus it was all the more striking to observe that all the houses, however modest, were made of teak. But, of course, teak is the country’s major export. What would have been really surprising, once we thought about it, would have been to see a building constructed of pine.
One of the first things we noticed about Myanmar was how pious the Burmese people are. Everywhere we turned we saw another Buddhist temple. Every day in Mandalay at four A.M., at a shrine to Living Buddha, the monks wash Living Buddha’s face and brush his teeth, preparing the statue for a busy day. For the next twelve hours, as they have every day since 1784, the faithful, lining up and awaiting their turn, walk up to the figure and apply gold leaf to its surface.
The leaf is procured from goldsmiths who work nearby. Wielding heavy sledgehammers, unpackaging gold as it is delivered, they pound for hours, flattening it out. They work all day, taking breaks only when indicated by a variation on the hourglass: a hollow coconut, with a hole punched in the bottom, floating in water. When the coconut fills with water and sinks, it is time to take a break. I bought leaf from one of them – only men, no women, are allowed to approach the statue – joined the queue outside the temple, and added gold to the two hundred years’ worth that had been applied to Living Buddha.
We left Myanmar with a certain amount of regret. All in all, it was an exquisite country to visit. The people were gentle, religious, hard-working, and disciplined. While I predict that the country will become more prosperous and more open to the outside world, I do not see a great future for Myanmar within the confines of its British-drawn borders. It is unlikely to survive the next fifty years intact. Already parts of the Shan State are practically autonomous, controlled by warlords empowered by the opium trade. Nor will violent separatist movements in other parts of the country be put down easily.
Perhaps the Burmese ethnic group will have its own country eventually. Nonetheless, if you want to see a country that is untouched and pure, if you enjoy noodle soup and fried dough for breakfast – you will get plantains for dessert and a vegetable stew made with fish paste, called ngapi, at all other times – I recommend Myanmar as one of the great places to visit, and I suggest traveling there soon before the rest of the world arrives. Entrepreneurs should be especially quick, as the rest of Asia is rushing in.
for the Daily Reckoning
October 02, 2003
P.S. When we were in Bagan, now a UN World Heritage site, hundreds of people were completing pilgrimages to the temples there, making offerings of food and flowers and saying their prayers. In the countryside we stumbled upon a cheroot factory, where one of the women rolling cigars asked if we could send her some perfume when we got to Yangon. Paige sent her some Chantilly. I suspect that the NGO woman, with her concern about sanctions, would not have approved.
In the past decade, sanctions have become a favorite tool of the United States. Wherever we went, however, we found that they were not effective, because competing products swept in or American products were smuggled in. Either way, American workers, businesses, and taxpayers, not the ‘offending’ countries, were the losers. Sanctions resulted only in more enemies for the United States.
In a record-breaking 3-year, 152,000 mile journey, Jim Rogers and his wife Paige Parker took the "ultimate" road trip – in a bright yellow Mercedes. "I’ve been around the world twice now:" writes Jim in the foreward to our new book, Financial Reckoning Day, "once on a motorcycle. Once in a Mercedes. So I guess that means I’m crazier than most people."
The consummate investor, Rogers gathered precise details on the investment climate across the Mideast, Southeast Asia, China, Siberia, Europe, Africa and South America. He’s now condensed his insights into a great new book: "Adventure Capitalist: The Ultimate Investor’s Road Trip."
It’s a crisp, beautiful autumn day in Paris…which your Parisian editors are missing.
Shed no tears for them, however. Bill is en route to sunny Delray Beach in Florida; Addison is on his way to pasta e vino in Milan, Italy.
In the meantime, we bring you the latest from your New York editor, Eric Fry:
Eric Fry in lower Manhattan…
– "Manufacturing Index in U.S. Declines to 53.7 as Pace of Expansion Slows," a somber Bloomberg News headline declared yesterday. But an adjacent headline read: "Stocks in U.S. Climb on Earnings Optimism." Despite the second disappointing reading from the nation’s manufacturing sector in as many days, the stock market kicked off the final quarter of 2003 with a spectacular ‘melt-up.’ Investors simply ignored the bad news, as they bought their way to good news: the Dow jumped 194 points to 9,469 and the Nasdaq Composite Index surged 45 points to 1,832.
– Portfolio managers – and other manic investors – trampled over one another in a mad dash to buy back the same stocks they had unloaded in late September. Such are the sophisticated tactics of ‘professional’ money managers.
– Following the timeworn practice known as ‘window- dressing,’ many professional investors dump their worst- performing stocks at the end of the quarter, so as not to show losing stocks on their quarterly statements to clients. These proud professionals don’t want to look like buffoons, after all. Then, on the first day of the new quarter – when no pesky clients are looking over their shoulders – the money managers race back in to the market and gobble up stocks, including, in some cases, the stocks they just sold. Remember, this is professional management…Don’t try this at home.
– While the stock market soared yesterday, bonds, gold and the dollar all fell. In the bond market, the 10-year Treasury note dipped slightly, pushing its yield to 3.98% from 3.94% at the previous close. December gold futures dipped $1.10 to $385.00 an ounce. And bringing up the rear, once again, the dollar fell against all major currencies. Usually, a booming stock market lends support to the dollar. But these days, nothing seems to lend support to the dollar.
– Ironically, yesterday’s disappointing news that the Institute for Supply Management index of manufacturing activity fell to 53.7 percent in September from 54.7 percent in August emerged on the same day that the dollar hit a three-month low against the euro. But wait a minute! Hasn’t Treasury Secretary Snow been touting the weak dollar as a sure-fire cure for the struggling U.S. manufacturing sector? And hasn’t the dollar been tumbling for more than a year? And yet, isn’t the manufacturing sector struggling just as much as it was when the price of a euro was only 83 cents, instead of $1.17?
– Evidently, the dollar must fall even further, if the manufacturing sector is to revive. Not to worry! Help is on the way! It’s clear that our nation’s elected (and appointed) officials will not rest until the manufacturing sector rebounds, or until a dollar bill buys fewer goods and services than a sheet of toilet paper…whichever comes first.
– And just in case the dollar’s value doesn’t erode quickly enough to boost exports and bail out America’s high-cost manufacturing operations, Congress stands at the ready to impose 27.5% across-the board tariffs on Chinese exports into the U.S..
– Either way, Americans lose. Either way, our dollars will lose purchasing power. Either way, we will need to shove a few extra dollar bills into our wallets before heading off to Wal-Mart.
– "Probably no single company illustrates the benefits of sourcing cheap imports from China better then Wal-Mart," says Stephanie Pomboy, editor of MacroMavens. "Importing roughly $12 billion in goods from China (or roughly 10% of our total trade gap with China) the company has been able to maintain margins and increase headcounts. Indeed, since China first pegged the yuan to the dollar in 1994, Wal-Mart has nearly tripled its workforce from 528,000 to 1.4 million today…As the country’s largest employer, what’s bad for Wal-Mart is probably bad for the U.S. overall. If so, the message would seem to be that, by raising input prices and squeezing profit margins, a Chinese re- evaluation will end up costing more jobs than it saves."
– Pomboy’s analysis is more than just idle conjecture. Hot off the government presses comes a report from the U.S. International Trade Commission that tariffs placed on imported steel last year cost the U.S. economy $30 million.
– Is anyone surprised by this finding?…We assume that the tariffs on imported steel rescued a handful of steelworker jobs. But we would also assume that the resulting hike in steel prices led to the dismissal of many workers in various steel-consuming industries. In other words, what’s good for a steelworker may be very bad for an autoworker. And for the economy at large, a steelworker’s job is no more precious than an autoworker’s…unless you happen to be a steelworker.
– It’s obvious to almost every citizen who does not live in Washington D.C. that tariffs do more harm than good. And devaluing the dollar to stimulate economic growth is also a fool’s mission. Maybe ice cream is the answer…
– Many Americans will pay $3.50 for a pint of Ben and Jerry’s ice cream to help subsidize Vermont’s dairy farmers, or to help Ben & Jerry’s save Brazil’s nut farmers…or to help Ben & Jerry’s save almost anything at all. Why not "Tungsten Treat" to save America’s steel workers? Let’s launch a product line for every globally uncompetitive industry in America. Let’s eat our way to prosperity!
– Alternatively, does anyone doubt that Americans would jump at the chance to save Pittsburgh’s endangered indigenous steelworkers by buying 25-cent paperclips or $1 thumbtacks or $200 toasters?
– Paying $3.50 for a pint of ice cream may be a little crazy. But at least the choice to do so is voluntary. And at least the "Ben & Jerry’s" subsidy model is market-based, not governmentally imposed. The steel industry and other select U.S. industries may benefit from a devalued dollar, but the rest of the nation pays the bill in terms of reduced global purchasing power. If Greenspan and Snow have their way, a pint of plain-label vanilla ice cream at WalMart will cost $3.50.