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BURMA HUMAN RIGHTS REPORT OCT 95 (6 (r)



Subject: BURMA HUMAN RIGHTS REPORT OCT 95 (6.44-6.58)

/* posted Sat 9 Mar 6:00am 1996 by DRUNOO@xxxxxxxxxxxx
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/* -----------" BURMA HUMAN RIGHTS REPORT, OCT 95 (6.44-6.58) "---------- */

CHAPTER SIX: (6.44 - 6.58)
*************************
The Parliament of the Commonwealth of Australia
Joint Standing Committee of Foreign Affairs, Defence and Trade

A REPORT ON HUMAN RIGHTS AND THE LACK OF PROGRESS TOWARDS DEMOCRACY
IN BURMA (MYANMAR)     October 1995

CHAPTER SIX: ENGAGEMENT OF ISOLATION (6.44 - 6.58)
--------------------------------------------------

Trade and Investment

6.44  The  Country  Economic  Brief  for Myanmar produced by the Australian
Department of Foreign Affairs and Trade warns that statistics  in  relation
to  Burma  need  to  be  treated with caution. They are neither precise nor
complete and should be seen as  guide  only.  They  rely  on  the  official
exchange  rage  of  6 kyat to $US1 which is considerably different from the
unofficial rate of 80 kyat to $US1 - 120 Kyat to  $US1.  According  to  the
World Bank, Burma's total external debt in 1993 was $US5.5 billion, half of
which,  $US3  billion, was owed to Japan and $US700 million to Germany. The
weak foreign exchange position made it difficult for Burma to  service  its
debt [34].

6.45  Assessing  trade statistics presented particular difficulties because
of the overvalued exchange rate and because a substantial part  of  Burma's
trade  is unrecorded, especially in relation to illegal cross-border trade.
Nevertheless the terms of trade appeared to be deteriorating. Since 1985-86
the terms of trade declined  by  47.6  per  cent.  The  trade  deficit  had
expanded from $US616 million in 1993-94 to $US724 million in 1994-95.

Table 6.2: Trade Deficit 1994-95

        ------------------------------------
               Year         Amount
        ------------------------------------
              1993-94       $US616 million
        ------------------------------------
              1994-95       $US724 million
        ------------------------------------

Source: DFAT Country Economic Brief, Myanmar, August 1995. P.14.

6.46  In  1994-95  exports  grew strongly at 12.9 percent: agricultural and
forest products, seafood minerals and gems. The  private  sector  accounted
for  over  50  per  cent  of these exports. Imports, mainly consumer goods,
increased by 15 per cent although the  rate  in  increase  in  imports  was
slower than in 1993-94. Most exports go to Singapore, Thailand, India, Hong
Kong,  China  and  Japan. Most imports come from Japan, China and Thailand.
There is also a very large unrecorded trade with both Thailand and China.

Table 6.3 Balance of Trade 1995-95

    [ Chart unreproducible in this format -- uneoo]

Source: DFAT Country Economic Brief for Myanmar, August 1995.

6.47 Although overall figures are  still  relatively  low,  the  extent  of
'engagement'  with  Burma in trade and investment has been increasing since
economic reforms were carried out in  1988.  The  Government  introduced  a
Foreign Investment Law in 1989-90 which gave tax exemptions and tax relief,
rights  to  repatriation of profits, guarantees against nationalisation and
the right to wholly foreign-owned ventures. To obtain these benefits  there
is  a  minimum foreign capital requirement of $US100,000 [35]. According to
the most recent statistics released  by  the  Government  of  Burma,  Burma
received  $2.9  billion  in  foreign  investment  by  151 companies from 18
countries.

6.48 The United Kingdom is the largest single investor, followed by France,
Thailand, Singapore, the UNited States of America and Japan.  Most  of  the
paid  in  capital was in the oil and gas exploration sector. many companies
which paid in capital in this sector no longer operate in Burma.  According
to  the  DFAT  Country  Brief  this  accounts  for one third of the paid in
capital.  Hotels  and  tourism  accounts  for  the  next  largest   sector,
accounting for $US 568.44 million.

6.49  Investment  is  still  inhibited  by  the  difficulty of repatriating
profits and the continuing controls on foreign exchange.

Table 6.4:   Total Investment in Burma

                --------------------------------------
                         Year            Amount
                --------------------------------------
                         1989            $618 million
                --------------------------------------
                         1994            $1.2 billion
                --------------------------------------
                         1995            $2.9 billion
                --------------------------------------
                Source: Figures released by the Government of
                Burma Investment Commission, August 1995.

Table 6.5:   Major Investment by Country to 1994-95

                         Country          Investment
                         -----------------------------
                         United Kingdom   $632 million

                         France           $465 million

                         Singapore        $456 million

                         Thailand         $418 million

                         United States    $241 million
                         -----------------------------
                  Source: Fibures  released  by  the  Government  of  Burma
                  Investment commission, August 1995.

6.50  The  industrial sector is relatively undeveloped, accounting for 9.36
per cent of GDP and employing only 8.19 per cent of the  work  force.  Most
activities  are  small  scale, equipment is outdated and in poor condition.
Most manufacturing is related to the processing natural  resources.  Larger
industrial concerns are State Economic Enterprises, mostly unprofitable but
responsible  for  the  Government's  foreign exchange revenue. A program of
privatisation has begun. Energy shortages remain severe.

Table 6.6:  Investment by Sector 1994-95

        Sector                  Amount
        ------------------------------------
        Oil and Gas             $1.4 billion
        ------------------------------------
        Hotel and Tourism       $603 million
        ------------------------------------
        Fisheries               $252 million
        ------------------------------------
        Mining                  $182 million
        ------------------------------------
        Manufacturing           $175 million
        ------------------------------------

Source: Figures released by the Government of Burma Investment Commission,
        August 1995.

6.51  In  early  1995  a  number  of  ovetures were being made by companies
involved in tourism. In January, the  London  based  shipping  and  tourism
group,  Eastern  and  Oriental  Express Ltd., signed $35 million package to
operate luxury cruises on the Irrawaddy  River.  The  Government  of  Burma
claimed  that  by  the  end of 1994, the Ministry of Hotels and Tourism had
issued 195 licences to hoteliers and 247 travel agencies had registered for
operation in Burma.

6.52 Examples of other investments taken up in 1994-95 are:

        * a 300 million baht ($12 million) loand made by Thailand to  Burma
        to  repair  the  road  linking  the  Thai-Burmese  border  and  the
        Chinese-Burmese border;
        * a $500 million contract with a Singapore conglomerate,  Singapore
        Technologies   Industrial   Corp,   controlled   by  the  Singapore
        Government, to build an international airport in Mandalay;
        * a$500,000 multimedia project being developed  by  the  Australian
        company,  Pacific  Advanced  Media.  It  comprises CD-ROMs entitled
        Explore Myanmar INteractive,  to  boost  trade  and  investment  in
        Burma;
        *  an  investment and economic cooperation agreement signed between
        Mitsubishi Corp. and the  Burmese  military  authorities  in  March
        1995;
        *  a joint venture agreement signed between the Australian company,
        Pacific Earth Exploration Company and the Burmese  Mining  Ministry
        to exploit Burma's onshore gold reserves.

6.53  Since  the  release of Aung San Suu Kyi, invesetment in some quarters
appears to have accelerated. Many regional countries seem to be taking  her
release  as  a  green  light to increased investment. On 7 August 1995, the
Bank of Tokyo announced the reopening of a representative office in Rangoon
to survey political, economic and financial conditions  in  Burma,  support
Japnese investment and gather information on possible economic cooperation.
It  appears  the Japnese Government is considering a review of official aid
to Burma for the first time since 1988. Daiwa Securities Co. is negotiating
to assist in the setting up of a stock exchange for Burma [36].

6.54 However, problems associated with investment in  Burma  remain.  Those
who  would  counsel  restraint  stress  the  need for substantial political
change as a prerequisite for a more  stable,  transparent  and  accountable
economic  regime.  They  cite an estimated inflation rate of 35 percent for
1994-95, up from 22 per cent in 1993-94, a decline in  real  incomes,  bank
losses  on all loans which are lent at 18 per cent and a greatly overvalued
exchange rate - the dollar will buy 20 times as many  kyats  on  the  black
market  as  at  the  official  rate. These statistics, they say, reflect an
economic system distorted by massive military spending which consumes up to
half the national budget [37],  severely  dilapidated   infrastructure  and
corruption which complicates business arrangements, creates uncertainty and
increases  costs  in unpredictable ways. Such a system, say the critics, is
unable to plan for long-term national development and  squanders  resources
for  quick  turn-around  profit.  As  well, critics argue that the security
situation, despite the  ceasefires,  is  fragile  and  the  maintenance  of
security is achieved with quite unacceptable levels of brutality.

6.55  Illustrative  of  some  of  these  problems is the experience of Thai
logging firms in the last year. They reported 100 million  baht  losses  in
the  concession  areas  opposite  Mae  HOng Son. The companies have claimed
breach of contract and the falsification of documents by Burmese officials.
The argument revolves around which route the companies  will  use  for  the
export of the logs [38]. There have been other significant tensions between
Burma  and  Thailand.  In  August  1995  cross  border trade also fell when
Burmese authorities closed a major  border  checkpoint.  Burmese  merchants
were  forbidden  to  cross  into  the Thai trading town of Mae Sot with the
reported result that about 100,000 workers - truck drivers and porters were
made jobless. The cause of the road closure was believed to be the  Burmese
army offensive against the Mong Tai army of Khun Sa.

6.56  Mr  Peter  Church  for  the  ASEAN  Focus  Group,  although generally
supportive of a constructive engagement policy, told the Committee that  he
saw a number of risks in doing business in Burma. First he noted that while
there  were  the  rudiments of English law it was not a society governed by
the rule of law. Politics overlayed all of it. The bureaucracy  swung  with
the  sentiments  of  the  Generals rather tahn according to the laws of the
country. He cited the recent example of the cessation of approvals for  the
setting  up  of  companies on the basis of one general's statement. Second,
arranging  appointments  with  government  officials  was  difficult.   The
tendency  to  be closed and negative, a result of authoritarianism and long
isolation, was strong. Lastly, and most seriously, he saw the exchange rate
as a great obstacle. Mr Church relayed the typical Government  response  to
concern about investors being able to get their money out of Burma as 'This
will  be  taken  care of in time. There are many ways to get your money out
legally.' However he noted that:

        Despite  all  of  those  assurances,  they  have  not  taken  major
        decisions  in that regard. I think there are major problems if they
        go to the real rate in terms of inflation.  It  would  cripple  the
        poor  in  the  country  who  already have a difficult time. ... The
        Foreign Exchange Certificates (FECs)  work  but  to  a  very  small
        degree.  Most  of  the people we talk to have kyat and they have to
        convert them to white dollars. That means either buying  some  item
        in  Myanmar,  which  is  then exported and sold outside, or finding
        some Burmese who is exporting and who can  give  them  the  dollars
        from outside in exchange for their buying his goods inside [39].

6.57 The DFAT Country Economic Brief lists similar problems. They cited:

        (i) a highly overvalued official exchange rate;
        (ii) rigid customs and other formalities;
        (iii)  excessive red tape often requiring the trivial decisions are
        taken at the top;
        (iv)   poor   coordination   and   cooperation   between   separate
        ministeries;
        (v) corruption amongst officials;
        (vi) poor communications infrastructure; and
        (vii) rudimentary banking services.

6.58  All  this,  according  to  the brief, can make business operations in
Burma very expensive, a slow process and requiring 'careful and imaginative
planning' to overcome the exchange  rate  problems.  Some  companies,  they
warned,  have  found themselves in complicated trade in areas outside their
expertise.

Footnotes:
---------
[34] DFAT, Country Economic Brief for Myanmar, August 1995, pp.14-15.

[35] Exhibit No 17, ASEAN Focus Group, The Myanmar Business Guide, p. 47.

[36] AFP news item, 7 August 1995.

[37] Estimates presented to the Committee have varied between 35 and 50 per
cent. AusAID quoted the UNDP Human  Development  Report  which  shows  that
SLORC  spent  222%  of the combined health and education budget on military
expenditure in 1990/91. AusAID Submission, p. S505.

[38] Report in the Bangkok Post, 4 March 1995.

[39] Evidence, 2 June 1995, pp. 235-236.
------------------------------------------------------------------------
Above materials are reproduction from the findings of Human Rights
Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence
and Trade of the Parliament of Australia, published in October 1995.
Anyone wishing to inquire about the book may contact Ms Margaret
Swieringa, Secretary, Human Rights Sub-Committee, Parliament House,
Canberra A.C.T. 2600, AUSTRALIA.
Best regards, U Ne Oo.
ENDS(6.44-6.58)\