BKK POST,Feb:11,1998. Economic mala

[suriya@xxxxxxxxxxxx]

Economic maladies expose fiscal flaws
Asia's financial fumble has pulled the rug out from under Rangoon's recovery               
Rangoon, AFP

     A sia's financial storm has exposed the faultlines in Burma's fragile economy, forcing the ruling junta to switch its focus from boosting political control to urgently tackling economic woes, experts say.
 
    "The economy is clearly in crisis," one foreign expert here said.  "Burma's difficulties are not directly linked to the regional turmoil, but the extra stress has thrown the existing problems into relief."
     
    While the firestorm which has devastated Asia's most thriving economies has not hit Burma directly, it has wiped out expected regional funding, on which the military gov- ernment had been banking.
     
    "The fact of the matter is that the Asian countries which have been investing in and assisting Burma no longer have the money to pay for their own bills, let alone somebody else's," another analyst said.

    The financial crisis has seen direct investment vanish from the region - notably the Association of Southeast Asian Nation (Asean) which Burma joined in July, hoping it would help bring prosperity.

     Plans to move garment and other goods factories from the more developed Asean nations into Burma, which lags far behind its neighbours economically, have been scrapped, while direct investment has been frozen.

     A massive 39 percent of proposed investment projecs here are from Asean countries and  are unlikely to materialise in the forseeable future, diplom ats said. 

   . Total foreign direct investment for the year to March 1997 stood at  US$6 billion, but only 40 to 60 percent has been disbursed, investment commission officials said.
  
     Construction of a plush twin-tower hotel in central Rangoon has been halted  by the Thai unit of French hotelier sofitel, while stricken South Korea's Daewoo group has halted or suspended its 35 industrial projects here.
   
     In addition, tourism from the region is falling away as once-flush Asians find themselves out of pocket.
   
     The unwelcome surprise has come at a time when Burma is battling a range of basic economic problems which have been festering for years amid a lack of economic knowhow among the ruling generals.

    The country's foreign reserves have been  run down to levels which foreign experts estimate will cover only a few weeks' imports, showing up  Burma's yawning trade deficit of  $631 million in 1995-96.
 
     Burma  late last year closed its borders with Thailand, China and India for trade to curtail irmports which were boosting the value of the US dollar against the local currency, the k ,yat, and draining reserves.

     The move -- coupled with the arrests of black market currency traders - saw the kyat soar by more than 30 percent in January amid a plunge in other regional currencies.

     In addition, sanctions imposed by the United States and other countries are hitting hard, repelling foreign investment, pressuring firms already operating here to pull out and blocking vital financial assistance from the World Bank and International Monetary Fund.

     The generals had hoped that opening up slowly to the outside world-- particularly Asean -- would help ease the country's lack of economic expertise and its shortage of funds to build crucial infrastructure.
  
     But the crisis has dashed hopes of Asian assistance, while support from the rest of the world has been all but ruled out by international outrage at the government's human rights abuses.
   
     The deepening crisis and the fear of social unrest have prompted the authorities to publicly shift their attention to economics.

     "We are prepared to face all the hardships and know it won't always be easy, but Burma has survived isolation and hardship before and cartainly do so again," a senior government official proclaimed.