Clean bills or bust in Myanmar

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Clean bills or bust in Myanmar

Post by Ericwt on Tue Jul 09, 2013 10:37 pm

YANGON - When traveling in Myanmar, the last thing you want to put in your money pouch is your actual money. Across the country, the slightest tear, stain, corner crease or any imperfection will render a United States dollar-denominated bill unacceptable.

Local vendors examine a bill's mintage year and sometimes even the serial number to ensure that both are acceptable. Bills that don't meet the exacting - sometimes baffling - requirements are refused for transactions.

Sean Turnell, an economics professor at Macquarie University in Sydney and an expert on the Myanmar economy, confronted the discerning monetary situation when on a recent trip to the country he tried to settle the bill at his hotel.

"The serial number of the bill was CB and the belief was, even though this sounds so absurd, the belief was that CB stood for counterfeit bill," Turnell said. "I explained to the young girl behind the counter in one of the top hotels and I said well if it were a counterfeit bill it wouldn't have CB on it. She completely agreed and at one point said 'We really have to get over this'."

Many countries use the US dollar alongside their local currencies or even as their official currency, as seen in Panama, Ecuador, and El Salvador, among others. Countries that employ this kind of currency substitution typically have histories of economic instability, including past bouts of hyperinflation or abrupt demonetizations by the government.

Fearing future instability in their domestic currency, citizens often seek out alternative, safer means of storing wealth. Often this means buying gold; other times it means parking assets in more stable foreign currencies. In Egypt, when the local pound began to depreciate quickly earlier this year, banks there reported a run on US dollars by anxious Egyptians hoping to shore up their savings in a more secure asset. Recent studies by University of Wisconsin-Madison economics professor Edgar Feige estimate that as much as a third of all US currency is held abroad.

Myanmar is no stranger to currency upheaval. With numerous demonetizations of the local kyat, the country has featured a dictinctly erratic monetary policy, sometimes crossing into the bizarre. In 1985, for instance, the country inexplicably introduced new demonitions of notes, including a 75-kyat note, coinciding with the year of the 75th birthday of General Ne Win, the country's then military ruler who was notorious for his belief in numerology.

Two years later, the government abolished the 25, 35 and 75 kyat notes and replaced them with 45 and 90 kyat denominations. Forty-five and 90, numbers both divisible by nine and whose digits sum to nine, were allegedly chosen because Ne Win's personal astrologer had informed him the number nine was "auspicious".

That was not the case for the country's citizens, who saw the move wipe out their savings and result in subsequent economic instability that played a role in nationwide protests the following year, eventually culminating in a coup d'etat.

But while a history of monetary upheaval would help to explain Myanmar's desire for dollars as an alternative store of wealth, it does not account for the demand for perfection. In Tanzania, US bills minted before 2006 are rarely accepted and in countries throughout Southeast Asia hawkers might reject a well-worn note. But few if any countries approach US money with the same fastidiousness as the people of Myanmar.

One explanation is the persistent fear of counterfeiting. The newer and cleaner the note, the easier it is to spot possible imperfections and determine if the bill is authentic or not. But a bent corner on an otherwise perfect note would hardly make it more difficult to determine a note's authenticity.

"There hasn't been that much tourism," Feige said. "So if most of the currency coming into the country is in the form of pristine notes from whatever government agencies might be introducing them for whatever purposes, then it would not be uncommon for people to be accustomed to pristine notes. Worn notes might be unfamiliar to them and they just might be more trusting of pristine notes."

For Turnell, who has advised the US Congress on economic sanctions against the Myanmar regime and currently advises opposition leader Aung San Suu Kyi on economic affairs, the practice - however it initially emerged - has philosophical implications that get to the very meaning of what is money.

"People are valuing foreign currency because they're viewing it in the same way they view gold and precious metals and precious stones and that there's some intrinsic value to it," Turnell said. "If you're valuing something because you think it's intrinsically valuable, rather than being a currency decided by local tender and by the law, then the actual physical appearance of the note matters."

Transaction costs take on new meaning when one has to make a big purchase or pay for a half-year of rent up front and each bill must be individually scrutinized for perfection. But at a broader level the economic impact of the practice is still small, according to Lex Rieffel, non-resident Senior Fellow at the Brookings Institution's Global Economy and Development Program in Washington DC.

This may be especially true in an underdeveloped country like Myanmar, which is already confronting a host of other economic and development challenges. "In the case of Myanmar, for example, if the scale of the impact of this practice is considered to be one, the scale of the impact of the lack of trust in the Myanmar kyat and the Myanmar banking system is 50 or more," Rieffel wrote by e-mail.

However, the practice can be a special source of anxiety for travelers who have flocked to Myanmar since the country's recent political reform and opening to the wider world. Only in the past year or so has Myanmar's tourism economy matured beyond anything other than cash. With no access to overseas banks, a traveler who accidentally sat on their wallet and creased all the bills within had little recourse.

Robert Ongcoy, an English educator who works in Ho Chi Minh City, experienced that frustration first hand when he and his girlfriend traveled to Myanmar during this year's Lunar New Year holiday. Before leaving, Ongcoy and his travel companion got a fresh batch of US bills from their local bank and then further whittled them down to the "best of the bunch". But when he arrived at the airport in Mandalay, more than a third of his notes were nonetheless rejected.

While his experience with locals was overwhelmingly positive - "guileless and sincere" - Ongcoy said the demand for pristine notes did present its few moments of tension, such as when one hotel clerk who was giving him change kept trying to pass off the same worn bills.

"It was like the bait-and-switch thing. It was constant," he said. "I basically stayed down there for 30 to 35 minutes watching the guy try to manipulate the bills that he was going to give back to me like an expert card magician."

Ongcoy said that in addition to using a money pouch, he stored his bills in a Ziploc bag to protect them from the humidity or any stray beads of sweat. Other travelers have been seen toting around wooden money boxes or nestling bills safely in the pages of a hardcover book.

Myanmar's financial infrastructure is gradually developing and now includes a limited but growing number of money transfer and credit card options. Some embassies report that not too long ago they were frequently contacted by nationals traveling in Myanmar who found themselves with plenty of money which no one was willing to take.

"I know countless examples where it's happened. And the solution has been tourists among themselves sort of rescuing each other," Turnell said. "There's often a lively trade in kyats and foreign currency from other tourists in the hotel, bailing people out."

With the maturation of Myanmar's financial institutions and the influx of more foreign capital, Turnell predicts that the clean-dollar custom may soon end. "I would say that within five years it will be all over," Turnell said. "That's going to knock a hole in all this, because the hotels and everyone will start to accept payments. It will last a bit the further away you get from the big hotels in [Yangon] etcetera, but I think it will go."

Until then, aside from flexibility, a good hardcover book, and a healthy supply of Ziploc bags, what advice is there for the more than 1 million tourists expected to travel to Myanmar this year when haggling over bills? "You have to stand your ground," Ongcoy said. "You can't be a polite Canadian like me."

David Logan is a writer and educator living in Shenyang, China, on a Princeton-in-Asia Fellowship.

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