Floating The Kyat: A First Step In Fighting Corruption In Burma (Myanmar)

On April 2, one day after its Parliamentary by-elections, Burma (Myanmar) floated its currency, the kyat. This is an important first step in normalizing the country's investment climate and curbing corruption. For years, the official kyat exchange rate has been more than 100 times lower than the black market rate, which has led to endless headaches for organizations operating in Burma, as well as for Burmese citizens.

The distortion of the kyat also made it easier to hide corruption. According to Sean Turnell, a leading expert on the Burmese economy, officials recorded revenues at the official exchange rate -- which undervalued them by nearly 200 percent when the black market exchange rate is taken into account -- and spirited away the remainder.

Floating the kyat will slightly enhance transparency, and will decrease the everyday annoyance of conducting business in Burma, but more reforms are needed to address corruption. Transparency International ranks Burma as one of the most corrupt countries in the world, followed only by North Korea and Somalia.

Such corruption certainly affects the business community. A local newspaper recently reported evidence of corruption in six key ministries, including in relation to the awarding of a valuable copper mine concession. Corruption extends well beyond business into many aspects of society, with payments routinely required to obtain passports, good grades, or government jobs. These are minor symptoms of a culture of corruption that has become endemic and will take significant efforts to address.

The Burmese government has begun to publicly acknowledge the prevalence of corruption and the need to address it, but the formula to do so is not clear. A senior Burmese government official noted that petty corruption arises in part due to the gross underpayment of civil servants, which has made it challenging for many...