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Burma: Military Rule Impedes Economic Growth
By Soe Myint
>From "Asian Affairs" Weekly Magazine (February 1999)

Burma with its abundant natural resources and 46 million population is the
largest country on the mainland South-East Asia but one of Asia's poorest
countries It is a country with a long coastline of 2832 kilometres and its
dense forest covers more than 50 per cent of the total land area.
According to official data available, the country had an active labour
force of about 17.96 million in 1996-97. Its main foreign exchange
earnings (46 percent of export earnings) have traditionally come from
rice, beans and pulses.
A military junta, which came into power in 1988 by a coup after killing
thousands of peaceful demonstrators, rules the country. The regime, now
called the State Peace and Development Council (SPDC), opened the
country's economy by reversing the economic policies of the previous
Governments. It introduced a liberal foreign investment code and
sanctioned a broad range of private enterprises. In November 1988, it
promulgated the Foreign Investment Law. According to the law, foreign
investors can incorporate their enterprises on a 100 per cent ownership
basis.
A foreign investor who is joining with local investors must contribute at
least 35 per cent of equity capital. According to data from Burma's
Ministry of National Planning & Economic Development, up to the end of
December 1997, the Government has permitted 293 enterprises from 23
countries. The total foreign capital participation is estimated to be
$6615.53 million with United Kingdom, Singapore and Thailand being three
largest foreign investors. Oil and Gas sector contributes the largest
amount of foreign investment in the country at $2295.92 million as of
December 1997.
Even though the Government-controlled newspapers praise the ruling
military regime for "achieving all-round progress in developing the
nation, including its economy," the country's economy is in a poor state.
Despite rosy Government figures, the economy is ailing and the people are
suffering hardships, the economy is ailing and the people are suffering
hardships. Independent analysts say that inflation is at least 50 per cent
for domestic goods and more than a 100 per cent for imported goods
The military junta's drive to attract tourists has failed. Political
unrest and "boycott Burma calls" by the democracy activists have

discouraged the tourists. According to official figures, income form
tourism in 1998 actually dropped. Burma's annual GDP is now less than $300
million. The annual income of a person in Burma, renamed Myanmar, may be
$200-300. There are only 4.55 telephones per 1,000 in habitants in the
country.
Over the years, new hotels have mushroomed ink the cities such as Rangoon
and Mandalay. But they are in serious trouble with only about 15 per cent
occupancy rates. The Government introduced compulsory Foreign Exchange
Certificates (FECs) in 1993 for the tourists visiting the country. As per
the regulation, a tourist must exchange $300 into FEC upon arrival at the
airport.
The country's currency, Kyat, has collapsed in the wake of the Asian
crisis. The official exchange rate of Kyat is 300 Kyats per US dollar as
of September 1998 compared with 6 Kyats per dollar. Foreign investment has
already declined and plummeted. Official figures show that foreign direct
investment fell more than 53 per cent to $771 million in 1997. Dozens of
corporations including Coca-Cola and Texaco Inc. have already withdrawn
from the country. Upon withdrawing from Burma in 1991, Levi Strauss and
Co. stated "it is not possible to do business in Burma without directly
supporting the military regime and its pervasive violations of human
rights." The United States have slapped economic sanctions on Burma in
1997 prohibiting new investment in Burma because of Burma's continued
human rights violations. The European Union in October 1998 also imposed
visa restrictions on Burma. However, the Chairman of the UNOCAL company,
Reger Beach, said at Asia Society meeting in Houston in August 1998:
"Engagement is the answer, not isolation. I'm very proud that we're in
Myanmar (Burma). We've done a lot of good work there and they've learned a
lot from us." UNOCOL Company entered a $1.2 billion joint venture with
Burmese Government along with France's Total and Thailand's PTT to explore
offshore gas. It is called Yadanar Gas Field and South East Asia's first
cross-border pipeline project. It is estimated that Burma's earnings from
the Yadanar field will be $2.873 billion in nominal terms over the
expected life of the field up to the year 2030. And the Government wants
to rely on these gas exports to come out of the current economic downturn.
Burma's foreign exchange reserves are estimated to be as low as
two-to-three weeks of country's imports - perhaps $150 million. Official
figures show that prices have increased by 45 per cent. But this is an
underestimate. The Government's budget deficit swelled to seven per cent
of the GDP in the fiscal year 1998, which ended in March. Power cuts are
common even in the cities. While people live by candle light at night, the
Government struggles with power problem. It has signed a $250 million
contract with China to help construct a new power plant.
The country is at serious risk of defaulting on its external debts, which
are mostly owed to Japan. Price of rice shot up more than 25 per cent in
1998 and the Government had to cut its regular rice supply to army units.
Prices of other staples like cooking oil have skyrocketed in the past

years. Worse is that Burma cannot get funds from international lending
agencies such as World Bank, International Monetary Fund and Asia
Development Bank due to the opposition of United States and European
countries.
But, the Government still claims that the Asian financial crisis and US
economic sanctions have had no affect on the country's economy. Some
observers say that there could be come unexplained sources of income of
the Government, particularly from the narcotics industry as Burma is
world's leading opium producer.
US Congressman Tony Hall, who visited Burma in January 1998, warned of
humanitarian crisis with the spread of HIV, hunger and illiteracy in the
country. The Congressman called for "increased world wide humanitarian aid
to Burma." However, pro-democracy groups within and without the country
say that international humanitarian aid must be routed independent of the
military regime. The exiled Government, namely National Coalition
Government of the Union of Burma (NCGUB), says the military regime is
using more than half of its budget on maintaining the military and less
than 3 per cent on health and education combined together.
In 1995, Japan lifted its ban on economic aid to Burma, which it imposed
along with US after the 1988 military crackdown on the people's uprisings.
It decided to extend loans of 2.5 billion yen to improve the Rangoon
airport. Burmese democratic groups around the world strongly opposed the
Japanese move when that country invited Burma's military official, Brig.
Kyaw Win to Japan in January.
Meanwhile, Burma is still a stumbling block for economic co-operation
between Association of South East Asian Nations (ASEAN) and European Union
(EU). Burma became a member of ASEAN in July 1997. The 13th ASEAN-EU joint
co-operation committee, which was to be held in Thailand in January 1999,
was postponed indefinitely over the EU's strong opposition of Burma being
invited to the meeting. In November 1997 too, the meeting was postponed
after ASEAN insisted on Burma's participation as an observer in the
meeting. The EU has been a strong opponent of Burmese military junta since
after it came into power in 1988.
In December 1998, the United Nations and World Bank reportedly held out an
offer of $1billion or more in aid to Burma if the regime opens a dialogue
with opposition National League for Democracy (NLD) and its leader Daw
Aung San Suu Kyi. The NLD won a landslide victory in the 1990 general
elections but the junta has never implemented the result. Both the
Government and opposition NLD have not responded on this proposal.
Government-run newspapers, however, wrote, "Burma can't be bought with
American dollars." The Wall Street Journal wrote in December 1998, quoting
Stuart P. Larkin, an independent analyst based in Rangoon, that "the
regional economic crisis will continue to affect the economy (of Burma)
for another one or two years". The newspaper has predicted a poorer
economic situation in the years to come.

Soe Myint is a Burmese Journalist 
living in exile in India

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