Eco Report 2008

ECONOMIC REPORT

ECONOMIC REPORT BURMA

BURMA March - 2008

March - 2008

ECONOMIC REPORT BURMA

March - 2008

Published by Copyright © National Council of Union of Burma March 2008

Contact information: MAUNG MAUNG MR. MAUNG MAUNG

([email protected]) MR. DAVID DAVIDOSOLNICK OSOLNICK

([email protected]) MR.AUNG AUNG THIN THIN

([email protected]) MR. IAN IANHOLLINGWORTH HOLLINGWORTH

([email protected]) ffff KO THET MR. KHUN KYAW

([email protected])

www.ncub.org www.ftub.org

Printed in Thailand

Contents: Summary

- - - - - - - - - - - - - - - -- -

1

Burma Facts and Figures

- - - - - - - - - - - - - - - -- -

3

I. Introduction

- - - - - - - - - - - - - - - ---

7

II. Burma Country Profile 2007 Population Workforce Distribution by Sector Informal Sector Employment Unemployment Labor Force Breakdown

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11 11 13 15 17 18

III. Present Status of the Economy Caveat Economic Growth Per Capita GDP Purchasing Power Parity Inflation Standard of Living in Burma

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23 23 23 28 31 32 34

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37 39 41

IV. Structural Reforms

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49

V. Development Divide Development Gap at the National Level Development Gap at the Regional Level

-------------------------------------------------

57 57 60

VI. Future Prospects

-----------------

67

VII. Economic Sanctions Setting the Stage Arguments Against Sanctions Burma is Unique Economic Engagement, Where the Money Goes Pinpointing the Deception Impact beyond Sanctioned Burma

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71 71 72 72 73 74 76

VIII. Conclusion

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83

Annex: Saffron Revolution (a) Golden Revolution

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89

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93

References:

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95

List of Abbreviations:

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97

( Existing situation of wages and consumer spending )

Migrants Contribute National Income Exchange Rate External Sector

(Economic Protests in 2007 for Poverty Alleviation)

: ASEAN Statistics

Co - ordination : Maung Maung, David Osolnick, Aung Thin, Ian Hollingworth Cover and design lay out : Khun Kyaw Ko Thet

Summary: Critical reporting of the existing status of Burma’s economy as the cause for poor development is quite important for pro democratic movement. Burma is heavily dependent on agriculture, which constitutes about half of the economy. Industry accounts for roughly 15% with services and trade making up the rest. Reasons for what has been a colossally failed effort to industrialize will be expanded upon later in one of our policy papers: “The Failure of MNCs - FDI and the State Level Corruption in Burma”. (Expected publication date late December 2008). Suffice it to say, that the principal/agent problem is a large contributor to the economic maladies in Burma, as government officials can become personally wealthy by making policy decisions that are bad for the country. An objective assessment of account performance and trends is naturally made difficult by fundamental weakness in data. The cushion provided by gas exports makes now an opportune time to establish new capital of Kyat Pyay - Nay Pyi Taw, located in central Burma (The dictators are treating it as a Royal City and have included a Zoological Garden which will be housed in a 200 – acre facility). Deforesting has been seen everywhere. The junta also spends heavily on other mega projects like the development of the new capital. Agriculture still suffers from poor technology, and manufacturing is constrained by shortages of capital, lack of access to imported products and a lack of competitiveness with regard to imports from Thailand and China, according to the EIU. The high growth rates of over 7% per year achieved during the Fourth – Year Plan period (1992/93 to 1995/96) were accepted by most observers as there were plausible reasons behind the achievement. Indeed, no one doubted that Burmese economy was doing well. Economic forecasts of the Government’s 5 – year plan for 2006-2010 calls for average GDP growth rates of 10%, to be achieved through higher agricultural production, new gas fields, and increases in hydropower generation. The economy would be fortunate to achieve even half that over the medium term. In addition to the trade and investment sanctions by the United States and some others, the investment climate, outside the energy sector, remains poor for policy and infrastructure reasons. Critical analysis of the status of Burma’s economy lies in composing GDP and its growth in the context of ASEAN development divide (restated from Myat Thein, 2004) and the comparison of GDP among member states. There are no reliable estimates of Burma’s per capita GDP in US $. The progress of ASEAN Economic Community (AEC) and the status of Burma indicate the development gap between rich and poor neighboring countries. The greatest challenge for ASEAN is to narrow the development divide and ensure that Burma, Cambodia, Laos and Vietnam can catch up to the six more developed ASEAN states.

1

Thailand's estimated 1.8 million migrant workers earned $2 billion in wages last year but may have contributed $11 billion, or 6.2 % to the gross domestic product, the ILO (International Labor Organization) has revealed. According to the ILO report - Thailand Economic Contribution of Migrant Workers - the kingdom is getting a better deal off its migrant workers than it is giving them. "If migrants are as productive as Thai workers in each sector, their total contribution to output should be in the order of $ 11 billion or about 6.2 % of Thailand's GDP," said Manola Abella, the ILO's chief technical advisor in Thailand, summing up the report's findings. The total number of migrants in Thailand rose from about 700,000 in 1995 to 1.8 million in 2006, according to the report. Last year about 75% of the migrant laborers came from neighboring Burma, who now represents 5 % of Thailand's total labor force of 36 million. On the other side, it is assumed that – The Military Government of Burma allows its people some consumption space outside the control of the government. And it allows Burmese people a degree of freedom from the state – stated by Prof Sean Turnell, Macquarie University, Australia. Migrant laborers are limited to certain sectors such as agriculture, fisheries, construction and as domestics. Nearly half of Thailand's domestics are now believed to be migrants, said the ILO report. It found that migrants, on average, earn about half the minimum wage and are not eligible for state services such as medical care and education for their children. Burma’s inflation rate will be 30 to 40 % in the next two years, a decrease from the 50% rate of inflation at the end of 2007, after the junta increased fuel prices in mid-August, said the EIU. The Burmese currency exchange rate against the US $ will be 1,400 kyat in 2008, said the EIU, and the US $ will be 1,500 Kyat in 2009. (The EIU is one of the most influential sources of regional analyses among policymakers and intellectuals). The national currency has depreciated and the gap between the official rate and market rate determined parallel exchange rate has come to be wider and wider. The dual exchange rate system in Burma will be analyzed in more detail in our forthcoming policy paper: "The Dual Exchange Rate System and State Level Corruption in Burma". (Expected publication date late December 2008). The fact that the study identifies bad governance on poor monetary policy (which is an appendage of governance among ASEAN countries) as the cause of poor infrastructural development in Burma is quite important. .Chronically high inflation in military dictator ruled Burma has soared to 35% a year, the highest in Asia, while its economy is slowing because of the poor investment climate and business confidence, as already reported by the IMF. The UN also described that most Burmese as struggling to survive, and that worsening hardship and rising prices were at the root of many protests like GOLDEN REVOLUTION in 2007 (see Annex one). A detail analysis of Inflation in Burma will be presented in our policy paper: “Inflation and State Level Corruption in Burma”. (Expected publication date late December 2008).

2

Burma Facts & Figures Age distribution (as % of total population)

GDP (PPP)

♦ ♦

21.26 Billions of US D (2006) (3.00 %) 21.19 Billions of USD (2007) (2.40 %)

GDP

GDP per head (US $ at PPP)

5.3%

15 - 64 years 68.6 %

65 years and over

♦ ♦ ♦

11.95 Billons of US $ [ Current Market Price 2006 ]

$ 439 (2006) 3.9% $ 434 (2007) 3.3% $ 428 (2008) 3.4%

GDP per head

$ 208.6 (US $ at Market Price 2006) $ 2060.1 ( at PPP 2006 ) FDI Inflow 235.9 US $ Millions ( 2005 ) 143.0 US $ Millions ( 2006 )

Source : EIU 2007

26.1%

Source : ASEAN Trade Database 2007

0 - 14 years

Demography ( 2007) Population ( million ) 47.3 ( CIA ),55.4 ( GOM ) 56.5 ( ADB ) 57.28 ( ASEAN ) Population Growth (%) 0.815 % ( CIA ) 2.0% ( ADB ) 2.3 % ( ASEAN) Urban Population 30.6% Males = 23.45 (CIA) Females = 23.90 (CIA) Crude Birth Rate (per 1,000 person) 20 Crude Death Rate (per 1,000 person) 10 Infant Mortality Rate (per 1,000 live births) 76.0 Life expectancy = 64 (female) 58 (male) Adult Literacy = 84.7 % (officially) Religious affiliation Buddhists (85.0 % ), Animists (5.0 %) Christians (4.5 %), Muslims (4.0 %) Hindus (1.0 %) Others (0.5 %) Source: ADB, CIA World Factbook, CSO, UNICEF, WHO , ASEAN Trade Database 2007

East Asia economic growth (%)

2005 2006 2007 2008 ------------------------------------------------------------------------------------------Emerging East Asia 7.7 8.3 8.4 8 .2 Developing East Asia

9.2

9.8

0.1

9.7

5.1

5.4

5.7

5.8

Indonesia

5.7

5.5

6.3

6.4

Malaysia

5.0

5.9

5.7

5.9

Philippines

4.9

5.4

6.7

6.2

Thailand

4.5

5.0

4.3

4.6

10.4

11.1

11.3

10.8

9.4

8.5

8.7

8.4

8.2

8.3

8.2

Korea

4.2

5.0

4.8

5.1

Japan

1.9

2.2

Southeast Asia

Labor Force Breakdown (Burma) Unemployment Agriculture 25%

10%

Industry 2%

Transition economies

Services 8%

China

55%

Source: ADB, 2007

India

Informal Sector

Vietnam

2.0

1.8

Source: World Bank: East Asia Region, October 2007, Dow Jones Newswires

3

Introduction

I. Introduction: Burma, formerly envied by its neighbors in Asia, has seen its economic status fall immeasurably in recent history. In fact, one need only look as far back as 1948 to find a vibrant Burmese economy, with strong prospects for the future. Boasting a stable agricultural base, abundant natural resources, and an enduring export sector, Burma was truly poised to emerge as a premier Asian economy. As the top exporter of rice in the world, Burma had a means of ensuring its long term economic development through cultivating an agricultural product which was demanded the world over. While Burma’s initial post-colonialist trajectory looked promising, the years since 1948 have delivered increasing misery to the majority of its citizens. Inept yet forceful authoritarian leadership has been the genesis of consistent policy missteps and egregious human rights abuses. Since the public uprisings of 1988, the government has changed twice – in name only – to assuage public outrage, but has been consistently worsening in terms of policy choice and human rights violations. In recent years, Burma has changed course from a staunchly isolationist, economically autarkist state to a more market-oriented system. Economies making the progression away from isolation and central direction, to the more market-driven approach are referred to as transitional economies or economies in transition. The rationale and inspiration for economic reform movements is proved not only by the failure of formerly centrally-planned economies (CPEs) to generate growth and sustain development, but also by the success of market-oriented East Asian countries – the newly industrializing economies (NIEs) of Hong Kong, South Korea, Singapore and Taiwan – as well as the next-tier miracles of East and Southeast Asia – Indonesia, Malaysia and Thailand. The reform process started in Burma (renamed Myanmar by the present sham government, the State Peace and Development Council or SPDC on June 20, 1989) and 1 Vietnam in the late 1980s, and a little later in Cambodia and Laos. While undertaking economic reforms, first Vietnam became a member of the Association of Southeast Asian 2 Nations (ASEAN) in 1995. Then, Burma followed suit in 1997 . Then Burma became a member of the ASEAN. According to a number of Burmese scholars and observers, the reasons behind Burma’s decision to enter ASEAN were both political and economic. Politically, Burma joined ASEAN as a way out from its isolation and marginalization by the Western bloc and EU. Economically, Burma hoped to gain from the benefits of economic cooperation with ASEAN members countries. Cambodia was the last of the so called CLMV countries (Cambodia, Laos, Myanmar, and Vietnam) to become a member of ASEAN in 1999 to complete ASEAN 10. Ever since then, ASEAN has come to be 1

For more details of the rationale behind the economic reforms in Burma see Myat Thein and Mya Than, “Transitional Economy of Myanmar: Performance, Issues, and Problems”, 1995. 2 According to a number of Burma’s scholars and observers, the reasons behind Burma’s decision to join ASEAN were both political and economic. Politically, Burma joined ASEAN as a way out from its isolation and marginalization by the Western bloc and the EU. Economically, Burma hoped to gain from the benefits of economic cooperation with ASEAN member countries. 7

viewed as consisting of two tiers: the more developed ASEAN -6, that is, the founding member nations (Indonesia, Malaysia, the Philippines, Singapore and Thailand) plus Brunei; and the less developed CLMV countries. While economic reforms in Burma sound promising, the junta’s predilections for forced labor and unprincipled monetary decisions have mired the Burmese population in an abysmal socio-economic situation. Grinding poverty – exacerbated by runaway inflation rates – has marred the hopes of homespun growth. Many are forced by a depressing lack of options to send a member of their family abroad, as a migrant worker, to send wages back home. Without migrant wages sent home, many could not survive at all in Burma. Today, the ruling SPDC utilizes a simplistic and devastating export system for gaining revenue, with which to keep its military in power, and its populace cowed. Be it natural gas or precious gems (begotten with the toil of forced laborers), or illegal drugs channeled through surrounding countries into international markets, the SPDC finds ample money from export revenues to continue its national reign of tyranny and oppression. Though Burma is moving toward a market-oriented system, the SPDC’s practices are still largely clandestine, exploitive of its own citizenry (for the sole benefit of the military leaders), and functioning poorly. Burma currently finds that “rice production, traditionally a big export-earner, is now barely keeping pace with population growth.”3 While the move to a market economy may hold certain solutions to current problems, there is ample evidence that changes must also occur in other areas of Burma, namely, removal of its illegitimate leadership. The intent of this report is to provide an accurate and fair detailing of the very sparse available data regarding the Burmese economy, with the ultimate goal of imposing transparency upon the murky dealings of a very secretive government. Through extrapolating the origin of the SPDC’s revenue, this report hopes to conclude not only that the SPDC is bolstering the wealth of its leaders ahead of the interests of its own citizens through its economic policies, but reveal also the countries and companies which are complicit partners.

3

“Burma in general disarray; Reform falls victim to military junta's off-the -cuff policy decisions” South China Morning Post (Hong Kong), June 28, 1999.

8

Burma Country Profile

II. Burma Country Profile 2007: PopulationEstimates of Burma’s population for 2006 were at 56.5 million people, according to the ADB (Asian Development Bank), with 30.6% of the population living in urban areas, as of 2005. Graph 1 illustrates the recorded growth from 1990 until 2006, which has held steady at around 2% according to the ADB which receives most of its data from its member countries.

Graph 1

Burma Population

60.00

Population in Millions

50.00 40.00 Population

30.00 Urban Population as a % of Total Population

20.00 10.00 0.00 90 19

95 19

00 20

02 20

03 20

04 20

05 20

06 20

Year Source: Asian Development Bank: Key Indicators/Myanmar 2007

Other sources which derive their data independently of the government of Burma, such as CIA Factbook, maintain that the 2006 population of Burma is around 47 million, or 17% less than the ADB estimate. CIA Factbook explains the reason for the lower figure as “estimates for this country take into account the effects of excess mortality due to AIDS; this can result in lower life expectancy, higher infant mortality and death rates, lower

11

population growth rates, and changes in the distribution of population by age and sex 1 than would otherwise be expected.” The population of Burma is also broken down by age group in Graph 2 and further broken down by age group and gender in Graph 3. Utilizing these two graphs it is expressed that the population aged: 0-14 years old represents 26.1% of the total population with 6.28 million males and 6.08 females; 15-64 years old represents 68.6% of the total population with 16.09 million males and 16.42 million females; and 65+ years old representing 5.3% of the population with 1.08 million males and 1.4 million females.

Graph 2

Burma Population Breakdown

70.00

% of Population

60.00 50.00 40.00 30.00 20.00 10.00 0.00 0 - 14

15 - 64

Age Groups Source: Asian Development Bank: Key Indicators/Myanmar 2007

1

12

ADB, 2007

65 +

Population in Thousands

Graph 3

Population in Thousands

18000.000 16000.000 14000.000 12000.000 10000.000

Male Female

8000.000 6000.000 4000.000 2000.000 0.000 0 - 14

15 - 64

65 +

Age Groups Source: Asian Development Bank: Key Indicators/Myanmar 2007

Workforce Distribution by SectorLooking at the distribution of a nation’s workforce by sector can be helpful, as it provides a snapshot of where the productive members of an economy find themselves. Graph 4 shows a workforce allocation in Burma that has been largely unchanged, as the SPDC’s attempts at industrialization have been largely a failure. One study rightly identifies a lack of infrastructural investment as a key contributor to Burma’s acute inability to spur industrial development. All over the world, firms with access to modern telecommunications services, reliable electricity supply, and efficient transport links stand out from firms without them. As regards the infrastructure, private firms in Burma lack almost everything, compared even to poor countries such as Cambodia and the Lao PDR. Private firms in Burma themselves recognize the bad influence of poor infrastructure on economic activity within the country. The survey indicated that the need to improve an inadequate infrastructure is one of the most important items on the agendas of Burma's businessmen.2

2

Kudo, Toshikiro. Discussion Paper 38: “Stunted and Distorted Industrialization in Myanmar.” Institute of Developing Economies. October, 2005.

13

Graph 4

ASEAN Countries' Workforce % by Sector 2007 0.80

% of Workforce

0.70 0.60 0.50

Agriculture

0.40 0.30

Industry

0.20

Services

0.10 ala ys ia Ph ili p ine Si s ng ap or e Th ail an d Vl et na m

La

sia

os

M

In

do ne

ia

a

bo d

m

Ca m

Bu r

Br u

ne l

0.00

Source: ADB, ASEAN Statistics 2007

It is interesting to note that the study particularly highlights Cambodia and Laos as being comparatively ahead of Burma in terms of infrastructural development which caters to, and thus attracts private industry. Referring back to Graph 4, the 2007 workforce distributions reveal both Cambodia and Laos as having a greater percentage of their workforce devoted to the agricultural sector, than does Burma. It will be interesting to follow the changes in workforce distribution within the three CLMV countries (Cambodia, Laos, Myanmar/Burma and Vietnam) with regard to how quickly Burma is overtaken in terms of percentage of workforce working in industry. While it is always preferable to see a country succeed in its goals, rather than make consistent policy errors, the projection that Burma will be outdone by its CLMV counterparts is likely. Infrastructural investment is a long-term endeavor, which won’t pay immediate dividends. So it becomes particularly ominous when the Institute of Developing Economies study reveals that “little if any progress has been made in improving the infrastructure during the last 15 years. There must be serious faults in either policy or governance for infrastructure development to be so poor in Burma.”3

3

Kudo, Toshikiro. Discussion Paper 38: “Stunted and Distorted Industrialization in Myanmar.” Institute of Developing Economies. October, 2005.

14

The fact that the study identifies governance or policy (which is an appendage of governance) as the cause for poor infrastructural development in Burma is quite important. Reasons for what has been a colossally failed effort to industrialize will be expanded upon later in the policy paper of “Failure of MNCs and the State Level Corruption in Burma” which is going to be issued on late December 2008. Suffice it to say, that the principal/agent problem is a large contributor to the economic maladies in Burma, as government officials can become personally wealthy by making policy decisions that are bad for the country. Informal Sector EmploymentConsistent with the lack of internal transparency is the lack of robust, available data on the informal sector employment in Burma. Despite the internal inconsistencies, there have been attempts to estimate and record the status of the informal sector in Burma, by outside organizations. The ILO (International Labor Organization) had conducted a survey of the informal sector of economies throughout Asia, in a working paper. In the paper, the informal sector was defined for each country, according to its own definition, including the following definition for Burma: A person is said to be employed in the formal sector when he or she is working in public service or in an enterprise which is formally constituted. An individual is said to be employed in informal sector when he or she is giving services or labor which is not formally instituted with formalities.4

The definition laid out above retains a degree of ambiguity which is consistent with SPDC declarations. It would serve the purposes of identifying the informal sector to know explicitly what is meant by “formally instituted with formalities.” The grey-area is quite pronounced in such a classification, as formal sector employees in Burma face many of the same hardships as do employees in informal sectors (e.g. low wages, dangerous work, few if any legal rights, etc.) Despite the unfortunate similarities of the formal and informal sectors in Burma (relative to other developing nations) the fact remains that informal sector analysis within Burma can give a better picture of what conditions labor is facing. That is to say, even though many workers in the formal sector face harsh conditions, it is still comparatively worse for informal sector workers.

4

Shwe, U. H.: Country paper on Myanmar. Presented to an ILO/ARPLA/Turin Centre Regional Seminar on Labour Administration for Urban Informal Sector. Yogyaharta, Indonesia, February 4-8 1991.

15

% of Informal Sector Employment as% 0f Total Employment

Graph 5

ILO Study: Informal Sector Employment by Gender

60.00 50.00 40.00

Men and Women Men

30.00

Women

20.00 10.00 0.00 8 5 4 96 198 199 199 r 19 s a d i a e n s n m i a il n ne i pp Tha Mya In d o Phil

Source: Amin, Nurul. “The Informal Sector in Asia from the Decent Work Perspective.” ILO 2002/04.

Graph 5 illustrates the results from one of the very few surveys of Burma’s informal sector, which was conducted by the ILO. Though this graph does not provide much depth in terms of a range of Southeast Asian nations with which to compare Burma, it does include neighboring Thailand, which will help expand earlier comparisons made in this paper. Burma’s informal sector is larger than Thailand’s as a percentage of total employment, but what is perhaps more telling is the changing distribution of employment by sectors for both. Consider graph 6 which displays Burma and Thailand labor force distributions by gender and sector, as a percentage of all economically active participants, from 1980-1998. Here it is clear to see that Thailand’s economy is making a faster transition from an agriculturally-based economy to a more diversified and industrialized economy. This is no doubt due (in part) to trade liberalization coupled with appropriate infrastructural investment. There is no guarantee that such measures will necessarily reduce the number or percentage of jobs located in the informal sector, in fact poorly planned liberalization of markets can accelerate the formal to informal trend.

16

Graph 6

% Burma / Thailand Labor Force by Gender and Sector

90 80 70 60 50

1980 1990

40 30

1998

20 10 0 en en en en en en en en en en en en e M Wo m re M W om try M Wom try M Wo m es M Wom es M es M r u c c ic y lt s y ltu us us re re rvi rvi str cu ce s tr S erv cu nd nd ltu ltu Se T Se r vi du gri du gri TI cu BI cu e i T n n i A A B I I r r g g T B T B BS TA BA

Source: Amin, Nurul. “The Informal Sector in Asia from the Decent Work Perspective.” ILO 2002/04.

UnemploymentCurrent unemployment in Burma is measured at around 10.4%, which translates to approximately 2.96 million workers. Graph 7 reveals that among ASEAN members, only Indonesia currently has a higher unemployment rate. On the other side, migrant issues among neighboring countries are discussing several times as important things. ASEAN also needed to solve a number of issues to avoid the “ASEAN Way” being a stumbling block. It is needed to be more flexible on the concept of national sovereignty to get people’s welfare. (Thailand’s estimated 1.8 million migrant workers earned $2 billion in wages last year but may have contributed $11 billion, or 6.2%, to the gross domestic product, the International Labour Organization (ILO) revealed. According to the ILO report - Thailand Economic Contribution of Migrant Workers - the kingdom is getting a better deal off its migrant workers than it is giving them. "If migrants are as productive as Thai workers in each sector, their total contribution to output should be in the order of 11 billion dollars or about 6.2 % of Thailand's GDP," said Manola Abella, the ILO's chief technical advisor in Thailand, summing up the report's findings. The total number of migrants in Thailand rose from about 700,000 in 1995 to 1.8 million in 2006, according to the report. Last year about 75% of the migrant labourers came from neighbouring Burma, who now represents 5% of Thailand's total labour force of 36 million. The remainder came from Laos and Cambodia, Thailand's neighbours to the north and east [Bangkok Post, 18/12/2007]).

17

Graph 7

ASEAN Member Unemployment Rate 2007

12.00% 10.00% 8.00% 6.00% 4.00% 2.00% na m Vie t

ila nd Th a

s

ap ore Sin g

ine Ph il

ys ia Ma la

La os

sia on e Ind

dia Ca mb o

Bu rm a

0.00% Br un ei

Unemployment Rate

14.00%

Source: ASEAN Statistics, 2007

Labor Force BreakdownGraph 8 combines information on Burma’s labor force as discussed in the sections above. Aggregating all of the key dimensions of the Burmese labor force helps to better visualize the nature of the economy being analyzed. For instance, the fact that over half of the working population is concentrated in the informal sector (which provides highly competitive jobs, and thus low wages, in the absence of a viable formal sector) is a revealing statistic for why poverty is so rampant.

Graph 8

Burma Labor Force Breakdown Agriculture 25% Industry 2% Services 8% Unemployment 2006 10 % Informal Sector 1996 55%

Source: ASEAN Statistics, 2007

18

Add the unemployed to the informal sector and you have 2/3 of the total Burmese labor force. If you were to add to the unemployed and informal totals the agricultural sector, which consists largely of subsistence farmers, you would now have 80% of the Burmese labor force. That is to say that 80% of people in Burma’s labor force are either unemployed, face wage rate far below a livable standard, or are subsistence farmers who often are denied access to export markets, due to an irresponsible government strategy to keep domestic food prices down, at the expense of impoverished farmers. Industry and services round out the labor force and hold interesting implications in terms of their value to the labor they support, versus their revenue value to the government. In terms of employment, industry and services represents 10% of the labor force or about 3 million workers. With regard to wages, as will be revealed in subsequent areas of this paper, many Burmese workers fail to earn enough money in industry or services to support themselves, let alone a family. Due to the already minimal stake that workers have in the viability of either sector, the upcoming section of this paper discussing economic sanctions will elaborate on how most of the hardships will befall the profligate SPDC, rather than worsen conditions for the already downtrodden workers.

19

Present Status of the Economy

III. Present Status of the Economy: CaveatThough it has been stated to some degree in this report already, it is worth reiterating that most of the data released by the SPDC is suspect at best, as they still function with the tendencies of a centrally-controlled, dictatorial state. An ASEAN statistical workshop put it succinctly stating, “Burma’s Statistical System is basically a decentralized one. In Burma, every ministry has its own planning and statistical units. Those units are compiling their own data independently to serve their own purpose.”1 Therefore, the authors of this paper have made a concerted effort to collect data from a variety of sources, to reveal more about the Burmese economy than members of the SPDC might prefer. Economic Growth One of the frequently cited indicators of economic performance is the rate at which an economy grows as measured by the annual growth of Gross Domestic Product (GDP). Since many economies have adopted open-market strategies, wherein maximizing growth is regarded as the barometer for the strategy’s success, GDP can be viewed as a blunt instrument at best. Since GDP is measured using an expenditure approach, all it really reveals is how much an economy consumes, invests, purchases and its net exports. As a figure it merely reflects the relative speed at which an economy is growing, yet it is really devoid of any specific information. While economic growth does not necessarily guarantee prosperity, or describe the nature of who in an economy is benefiting from the growth, negative growth tends to reveal more about a broken economy. The reasoning here is that macroeconomic policies tend to reflect a largely agreed upon, pro-growth strategy. Thus, when an economy experiences negative growth, there are opportunities to investigate what is malfunctioning.

1

Maung, U Zaw Win. “The Government of the Union of Myanmar.” ASEAN Statistical Classification Workshop Hanoi, Vietnam. 10-14 June, 2002.

23

Graph 9

Burma's GDP Growth

12

Percentage

10 8 6

GDP

4 2 0 2001

2002

2003

2004

2005

2006

2007

-2

Year Source: UNESCAP, Economic and Social Survey of Asia and the Pacific, 2005 Source: Index Mundi: FTUB Compiled Data 2008

Graph 9 gives a linear depiction of Burma’s GDP growth rates from 2001 until the present. The values of 11.3 % and 10 % for 2001 and 2002 respectively are likely inflated values which overstate the performance of Burmese economy. Regardless of how close to accurate the figures for those years are, the real amount of GDP was buoyed by increasing natural gas sales, which does less for public welfare than would industrial production. For 2003-2005, the GDP growth rates of 0, -0.5, and -1.3 respectively, shows an accurate economy-wide readjustment to the banking collapse in 2003, which tightened up credit throughout Burma, stymied private sector growth. The IMF seems to concur with this view when it noted that – the severe contraction in Bank loans is another indicator that is at odds with the officially reported high GDP growth (IMF 2005). It is important to add here that in Burma private sector contributes over 75 % of GDP. Also, 2003 saw an increase in sanctions against garment exports from Burma, brought on by the United States. The large successive upswing in GDP performance in 2006 was again, the product of increased gas sales, particularly to Thailand. Graph 10 compares the 2006-2007 GDP growth rates of all ASEAN members. Compared to the rest of ASEAN, Burma is second to last in GDP growth rates, and its 2007 rate of 3% growth was actually Burma’s second best out of the 5 year (2003-2007) period. Note also, the higher growth rates of the other CLMV countries, which can in part be attributed to their more successful infrastructural development, as mentioned prior.

24

Graph 10

ASEAN Member GDP Real Growth Rates

Growth Rate

12.00% 10.00% 8.00% 6.00% 4.00% 2.00%

Vi e tna m

Th ail an d

Si n ga po re

Ph i li n es

Ma l ay s ia

La os

Ind on es ia

Ca mb od ia

Bu rm a

Br un ei

0.00%

Source: FTUB Compiled Data 2008

Annual growth of GDP in recent years is shown side by side with the plan targets of the Second Five-Year Short Term Plan (1996/97-2000/2001) and Third Five Year Short Term Plan (2001/02) – (2005/06) in Table 1.It is worthy of notes, that up to 1997/98, estimates of yearly GDP growth rates by international organizations such as ADB, IMF, UNESCAP and EIU were the same as official estimates by the Government of Myanmar 2 (GOM) / Burma. Indeed, no one then doubted that Burmese economy was doing well. The high growth rates of over 7% per year achieved during the Fourth – Year Plan period (1992/93 to 1995/96) was accepted by most as there were plausible reasons behind the achievement.

2 Perhaps it is pure coincidence, but from the time – around 1998 – the top leadership came to realize the importance of GDP growth as an indictor of economic performance, Burma’s GDP growth rates have been in double digit figures while China is playing an increasing role in the world economy with 10% to 11% growth rate ( the Economist, September,29, 2007) and India with an average of 8.0% growth rate over the last three years (CIA Factbook) and 9.4% in 2006-2007. India’s GDP is likely to grow 8.7% in 2008.

25

Table 1- Plan targets of GDP Growth and Performance % Year GDP Growth GDP Growth GDP Growth Targets Performance Performance Official EIU/ESCAP 1996/1997 6.1 6.4 6.4 1997/1998 6.4 5.7 5.7 1998/1999 6.2 5.8 4.4 1999/2000 6.6 10.9 4.6 2000/2001 6.6 13.7 5.3(6.2) 2001/2002 11.3 10.5 5.3 (11.3) 2002/2003 12.5 10.0 -2.0 (10.0) 2003/2004 11.3 13.8 -2.7 (0.0) 2004/2005 11.3 12.6 2.9 (3.6) 2006 10.0 3.9 2007 10.0 3.3 2008 10.0 3.4 2009 10.0 3.6 Source- 1) Ministry of National Planning and Economic Development booth at Defence Services Museum; 2) Economist Intelligence Unit (EIU) Country report- Myanmar (Burma) 2005-06 -07; UNESCAP, Economic and Social Survey of Asia and the Pacific. 3) Compiled data from Economic Department, FTUB /NCUB. Economic Department compiled data from various libraries, news from website and for the other lists, look back references. Notes – perhaps it is pure coincidence, but from the time – around 1998, the top leadership came to realize the importance of GDP growth as an indicator of economic performance, Burma's GDP growth rates have been in double digit figures. The Government’s 5 year plan for 2006- 2010 calls for average GDP growth rates of 10% to be achieved through higher agricultural production, new gas fields, and increases in hydropower generation. (ADB Outlook 2007)

Graph 11

Plan targets of GDP Growth and Performance %

14 12 10 8

By GOM

6 4

EIU

2 0 -2 -4 2000

2001

2002

2003

Source: EIU Dec 2007, ESCAP 2006, CSO

26

2004

2005

2006

2007

2008

2009

Economic prospects of the Government’s 5 – year plan for 2006-2010 calls for average GDP growth rates of 10%, to be achieved through higher agricultural production, new gas fields, and increases in hydropower generation. The economy would be fortunate to achieve even half that over the medium term. In addition to the trade and investment sanctions by the US and some others, the investment climate, outside the energy sector, remains poor for policy and infrastructure reasons. One of the few bright spots is the expanding trade relationship with fast- growing neighbors the People’s Republic of China and India. Growth and investment could also be constrained by inflationary expectations. As a number of scholars had pointed out, the good performance was made possible by a number of factors; such as private sector development (and especially the tremendous increase in the production and exports of pulses and beans), strong growth in the agricultural sector due chiefly to the introduction of double cropping of rice with pump irrigation under summer paddy, a sizable inflow of FDI following the introduction of Foreign Investment Law, growth of the nascent tourist industry, and a mini- construction boom. In other words, the observed growth may be the legitimate result of viable, growth-enabling engines. According to official data in the third column of Table 1, Burma has been consistently posting double – digit GDP growth rates since 1999/2000. Unlike in the past however, a number of international organizations came to have doubts about these double –digit GDP growth rates; and more importantly, ordinary Burmese citizens have little to show for them by way of improvements in their standard of living. (There are no reliable estimates of Burma’s per capita GDP in US $. However, according to household expenditure surveys by Central Statistical Organization (CSO), an average household in Rangoon was found to be spending a larger proportion of its total expenditure on rice and food in 2001 (68.36%) than in 1986 (64.93%), which suggests a decline in nutritional quality and standard of living in 2001 as compared to 1986. In general, as incomes rises the share of food declines while there is a corresponding increase in the share of other items such as consumer durables, recreation and so on. In comparison, the share of household consumption on food in Singapore is 14%, in Thailand it is 32% and in Malaysia 37%). As noted in the review of Burmese economy by Asian Development Outlook: An objective assessment of economic development in Burma is made difficult by poor quality data. Often, information is available only with a long lag, is complete, and is difficult to reconcile. Furthermore, many indicators are based on application of outdated statistical standards. 3

The IMF echoes this view as it reports “the data quality, comprehensiveness, and 4 timelines are weak, making it difficult to assess economic developments.” This situation naturally forces us to devote a considerable space to the consideration of Burma’s GDP as it influences the structure of GDP, rates of saving and investment, relative amount of exports and imports and so on. 3 4

Asian Development Outlook, 2003 IMF 2005, Pg 6

27

Note that since 1998/1999, estimates of GDP growth rates by UNESCAP are consistently lower than the official estimates. Estimates of GDP growth rates by UNESCAP also correlate better with the sector growth rates computed by the organization shown in Graph 12. This is because for a developing country like Burma, it is not possible for the agriculture sector to grow at 8% or more per year on a sustained basis as implied by official GDP growth rates. In other words, 3 or 4 % growth rates for the agriculture sector estimated by UNESCAP are much more realistic than the Burma official estimates. Burma GDP Growth Rates and Sector Growth Rates

Graph12 35

Percentage

30 25

Agriculture

20

Industry

15

Services

10

GDP

5 0

20

04

03 20

02 20

20

01

-5

Year

Source – UNESCAP, Economic and Social Survey of Asia and the Pacific, 2005.

Per Capita GDPPerhaps another instance of the inaccuracy of GDP as a descriptive measure (shown by one of its frequently used derivatives) can be found in the use of per capita GDP. While the fundamental idea of dividing a nations net output by the number of its citizens does produce a relatively more explanatory economic variable than does GDP alone, it is none the less a vague proxy to economic health at best. Consider the subsequent series of graphs for a better illustration of this point.

28

Per Capita GDP in Kyats

Graph 13 180000 160000

Burmese Kyats

140000 120000 100000 80000 60000 40000 20000 0 1990

1995

2000

2002

2003

2004

Year Source: ADB http://www.adb.org/Documents/Books/Key_Indicators/2007/pdf/MYA.pdf

Visually, per capita GDP for Burma from 1990 to 2004 appears to express a favorable trend for the citizens of Burma. Having their relative wealth multiplied nearly 49 times in 14 years would be quite a boon, if only it were true of all citizens. Unfortunately, due to poor fiscal and economic policies enacted by the SPDC, many Burmese are simultaneously facing rampant inflation, and stagnant wages. Additionally, there has been a vast overstatement of the worth of the Burmese kyat, as expressed by the official rate. Since 1993 the junta has drastically overvalued its currency at 6.23 kyat to US$1, facilitating a black market rate that fluctuates from 1,250-1,350 kyat to US$1.5 Considering further that the CIA Factbook valued the kyat at 1,280 per US$1 for the year 2006, the use of 1,300 kyat per US$1 as an average is consistent and a fair proxy, given the inconsistent recording of the market value for the kyat.

5

Altsean Key Issues – Economy. http://www.altsean.org/Key%20Issues/KeyIssuesEconomy.htm

29

Graph 14

Per Capita GDP in US Dollars

30000 25000

Per Cap GDP in US $ Official Rate

US $

20000 15000

Per Cap GDP in US $ Market Exchange Rate

10000 5000 0 1990

1995

2000

2002

2003

2004

Year Source: ADB http://www.adb.org/Documents/Books/Key_Indicators/2007/pdf/MYA.pdf

*Note: the use of 1,300 kyat as the average market-determined exchange rate was arrived at by information provided by Altsean Key Indicators – Economy, and FTUB Compiled Data 2008.

Utilizing the above graph, we can compare the official exchange rate – touted by the SPDC – to the market exchange rate which is more reflective of the true diminished value of the kyat. The blue line denoting GDP per capita according to the official rate of exchange in graph 13 resembles the upward progression of the kyat per capita from graph 12. The reason is that the official exchange rate has pegged the value of the Burmese currency to a fixed value relative to dollars, which (though the dollar has also been sliding in value) is a more stable currency. There are no reliable estimates of Burma’s per capita GDP in US $. The pink line, however, is a more accurate barometer for the per capita GDP. The market exchange rate factors in the effects of the exorbitant inflation which has resulted from the economic mismanagement of the SPDC, and the unlivable wages that have spurred the mass exodus of migrant workers to bordering nations in search of unsafe, demeaning, yet higher paying jobs. It is worth mentioning that the authors of this paper first intended the above line graph to be expressed as a column graph, but the market exchange rate values were comparatively so low that no columns could be distinguished! According to the market-determined exchange rate, GDP per capita has improved from $2.87 in 1990 to a paltry $128.61 in 2004. These figures are consistent with the assertion that “an increase of between 15-20% in food prices would leave more than half the population under the poverty line. Most people have an income estimated of less than 6 US$200, but the price of an average meal is about US$0.45.” (For more comparison among ASEN countries with Burma see Annex: Two) 6

30

Altsean Key Issues – Economy. http://www.altsean.org/Key%20Issues/KeyIssuesEconomy.htm

Purchasing Power ParityFor a more robust calibration of living standards in a country, a more revealing measure is purchasing power parity or PPP. Purchasing power parity is “the idea that similar foreign and domestic goods or baskets of goods should have the same price in terms of the same currency.”7 Compared to the per capita GDP discussion above – where we found that a certain number of kyat had a certain value in dollars per the rate of exchange – PPP helps us to determine how much “stuff” a certain amount of kyat enables a citizen in Burma to buy, as compared to someone in the United States (or anywhere) with an equivalent value in dollars (or any agreed upon common currency). Using PPP we are able to determine how much someone in Burma is able to buy, relative to someone in any other country, once the two currencies have been converted into a common currency for comparison. In the first issue of Burma Economic Watch for 2004 Wylie Bradford conducted a comparison of PPP for Burma, as compared to the US and Thailand. While the study concludes in the year 2000 (due to a lack of data released by the SPDC) it provides a cogent example of how the purchasing power for citizens of Burma was greatly reduced between 1980 and 2000. GDP Per Capita PPP

Graph 15 8000

US $

6000

Burma

4000

Thailand 2000

0 1980

1983

1985

1989

1992

1995

1998

Year Source: Bradford, Wylie.“Purchasing Power Parity (PPP) Estimates for Burma.” Burma Economic Watch. 2004.

Graph 15 illustrates the essence of PPP analysis, as it compares Burmese kyat to Thai baht, given their respective worth in a common currency (here international $1, which Bradford explains has “the same purchasing power everywhere as $US1 has in the USA 8 in the year of comparison.” ) While exchange rates merely describe how much of one currency can be obtained for a given amount of another, the PPP analysis depicted in graph 15 shows how much actual buying power citizens in Burma have compared to those in Thailand.

7 8

Abel, Andrew B. and Bernanke, Ben S. Macroeconomics, Fifth Edition. 2005. Bradford, Wylie.“Purchasing Power Parity (PPP) Estimates for Burma.” Burma Economic Watch. 2004.

31

Burma’s purchasing power was consistently diminished relative to Thailand’s, despite the fact that Thailand was not without its own economic hardships, including inflation and the Asian financial crisis of 1997 (which affected more advanced economies like Thailand decisively more than less advanced economies such as Burma, and thus in part explains the modest marginal increase Burma made relative to Thailand from 1997 to 2000). Since Thailand’s inflation over this time period was higher than that of the United States, the comparison of Burma to the US would reveal even lower purchasing power for the Burmese than in the Burma/Thailand graph above. Perhaps even bleaker is that since 2000 Burma has gone on to have numerous years of double-digit inflation, which has only worsened the purchasing power for people in Burma. Inflation According to official data, inflation in the 1990s average around 25 % per annum. The highest rate of 58% was recorded in 2002/03 and the lowest rate of – 1.7 % in 2000/01. Table 2 shows average annual rates of inflation in Burma and other CLMV (Cambodia, Lao, Myanmar, Vietnam) countries along with average annual rates of GDP growth, savings, investment and one of the indicators of financial development – M2/ GDP ratio. Table 2 - Inflation and related variables in CLMV countries ………………………………………………………………………………………… Inflation

GDP Growth Gross Domestic Investment to M2/ GDP (Annual %) Saving GDP ………………………………………………………………………………………… 1991 1998 1991 1998 1991 1998 1991 1998 1991 1998 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 ……………………………………………………………………………………… Cambodia 4.8 3.7 5.5 5.8 7.0 8.5 17.0 19.6 8.0 14.8 Lao PDR

13.8

41.3

6.6

5.8

10.8 15.2

n.a

Myanmar

25.9

25.4

5.9

10.1

12.5 10.0

13.3

22.8 13.3

12.9 18.4 29.6 27.4

Vietnam 4.5 3.5 8.3 6.6 15.8 28.1 23.7 31.6 21.2 45.5 ……………………………………………………………………………………………… Source- International Financial Statistics (IMF) and World Development Indicators (WDI 2006) Notes – the figures are annual average

As in most developing countries, the root cause of inflation in Burma is the budget 9 deficits. As one scholar has observed, the underlying factor behind inflation in Burma is

9

According to the World Bank there could even be inflation – deficit spiral. Excessive reliance on money creation is particularly risky if inflation worsens the deficits, because expenditures keep pace with rising prices while revenues do

32

the fact that the demand for resources by the state by far exceeds the state ability to raise taxation revenue, as a result of which the state finances its spending by the simple expedient of printing money. Moreover, it may be seen from Table 2 that Burma with the highest rate of inflation amongst CLMV countries has the second lowest rate of savings, whereas Vietnam with the lowest rate of inflation has the highest rate of savings. In general, expectation of high rates of inflation encourages consumption but discourages savings and investment. Macroeconomic instability arising from inflation could also prevent a sizable inflow of foreign direct investments (FDIs) needed for development. Therefore, there could be a connection between the variables that we are observing in Table 3. Indeed, according to the results of regressions over the period 1976/77 – 1996/97, Myat Thein found (among other things) the relationship between gross domestic savings (GDS) and consumer price index (CPI) in Burma to be negative and significant.10 With regard to CLMV countries, it is again revealed that Burma is the most erratic economy in the group with regard to inflation rate, which in turn negatively affects investment. Yet again the failure of the SPDC, to make appropriate policy decisions, is abundantly clear. Continuing with the discussion of Burma’s rampant inflation, Graph 16 compares the 2007 inflation rates among members of ASEAN, with Burma yielding the highest rate. Since the long-term goal for Burma is, and rightly should be, to become a strong economic player in Southeast Asia, the economic policy needs to reflect that goal. The frivolous printing of money to fill gaps in the economy will only further destabilize the true market value of their currency, and mire the would-be consumers in a situation where they cannot spend. Much of the investment decision for FDI (in terms of manufacturing or production) is, largely, some combination of wage/productivity. Yet, there are also steep considerations given to a production operation’s ability to supply a robust home market that can provide a perennial customer base. This is an important part of the consideration because picking such locations tends to alleviate the need for export to world markets in times of unfavorable, global macro conditions. Insofar as the SPDC thinks it can continue to attract producers in search of cheap operating costs by keeping workers rights and environmental standards outside of the equation, ultimately, there will come a time when other countries who have fostered homespun markets which will attract FDI projects, and represent more appealing locations to send production. Thus, sustainable macro policies (including not foolishly printing money and crippling consumer buying power) would be a vital first step to curbing inflation, spurring meaningful growth, and encouraging outside investment.

not. This means still more money creation becomes necessary – future worsening the inflationary spiral. - WB 1988, Pg 57). 10 Myat Thein, Improving Domestic Resource Mobilization in Myanmar, ISEAS Working Papers, Economics and Finance No. 1(99), January 1999.

33

Graph 16

ASEAN Member Inflation % 2007

25.00%

Inflation

20.00% 15.00% 10.00% 5.00%

tna m Vie

Ma lay si a Ph i lin es Sin ga po re Th aila nd

La os

Bru ne i Bu rm a Ca mb od ia In d on es ia

0.00%

Source: International Financial Statistics ( IMF, 2007 ) and World Development Indicator ( WDI, 2007)

Standard of living in Burma (Existing situation of wages and consumer spending) It's also a fact that Burma is one of the world's lowest living standards. Formal sector wages in Burma (similar to the informal sector) are insufficient, and by themselves, make living in Burma impossible for many people. Table 3 lists the food and shelter costs facing a family of four, living in the city of Rangoon. With no other cost considerations (e.g. clothing, school fees, healthcare, etc), an average family of four faces a monthly expense of 108,800 kyat, or $83.69 in US dollars. These prices reflect the most basic level of subsistence one can attain in terms of diet (rice with minimal egg) and quality of living residence.

34

Table 3 - Basic Living Expenses for Families in Rangoon No 1 2 3

Particular Rice (2kg) for 4 persons/ day

Amount ( Ks ) 2007 2008 2008 Dec Jan Feb 1000

1000

1000

960

1040

1040

1000

1000

1000

2960

3040

3040

88800

91200

91200

20000

25000

25000

108800

116200

116200

Main Dish for two meals (8 eggs for 4 people for a less expensive alternative to eating meat like pork or others )

Cooking oil and other in sundry necessities Cost for one day of food for a 4 person family

4

Food for a month (family size is 4 persons) 30 days

5

Room for rent in Rangoon for a month ( 1 bed room ) Total Cost for food and Rent for a family of 4 in Rangoon

*Note: The above cost calculations are only for Food and Shelter. It does not include the cost of clothes, school fees for children, healthcare, or any other cost-of-living expenses. Source: The Myanmar Times News Vol. 18, No. 350

While the partial living expenses listed above might not seem overwhelming, consider that most working individuals could not afford to eat and maintain a residence by themselves at those prices, which represent the lowest available means of subsistence. Graph 17 illustrates the monthly incomes of three different private sector wage earning professions, which are representative of most wage earners in Burma. In the private sector, none of the three professionals (carpenter, carpenter foreman, or vegetable seller) earn enough money to support a family of four on the very basic rice and egg diet, plus maintain a livable residence. In fact the highest paid out of the three groups, the carpenter foreman, earns only 55% of what it would require just to feed his/her family and have a room to live in.

35

Burmese Kyats

Graph 17

Private Monthly Wages in Burma

70000 60000 50000 40000

Kyats / Month

30000 20000 10000 0 Carpenter

Carpenter Foreman

Vegetable Seller

Sample Occupations Source: Migrant Dept of FTUB 2008

Graph 18 displays the wages of government workers in Burma, at various levels. Recalling that it requires 108,800 kyat to support a family of four for one month in Rangoon, only a Director for the government is able to successfully clear the most basic living costs, for a family of four. The reason for such stifling living expenses is that wages do not adjust quickly enough in response to inflation. Private Monthly Wages in Burma

Graph 18 160000

Burmese Kyats

140000 120000 100000

Kyats / Month

80000 60000 40000 20000 0 r k k y l er ler ato Bo r t C C d r r nis ran nio n io mi Er d Ju Se A fice f O

Sample Occupations Source: Migrant Dept of FTUB 2008

36

r cto e r Di

Migrants contribute national income for both original and host countries: To cope with exorbitant living expenses, many families in Burma are forced to send one or more member abroad to neighboring countries, as migrant workers. Estimates done in 2003 approximated the number of migrant workers in Thailand at around two million, with the majority having come from Burma. Thailand’s Tak province alone had recorded 200,000 migrant workers from Burma. Since the SPDC has continued its streak of bad policy, macroeconomic instability, forced labor violations, the number of migrant workers leaving Burma has continued to rise. Among the biggest contributory reasons for the dramatic outpouring of migrant workers from Burma to Thailand is wages. Table 4 lists the average daily wages being paid to migrant workers from Burma in the Thai provinces. The wage rates, still below the Thai minimum wage (sometimes by as much as half), is still dramatically more than what could be earned in Burma. "If migrants are as productive as Thai workers in each sector, their total contribution to output should be in the order of $ 11 billion or about 6.2 % of Thailand's GDP," said Manola Abella, the ILO's chief technical advisor in Thailand, summing up the report's findings. The total number of migrants in Thailand rose from about 700,000 in 1995 to 1.8 million in 2006, according to the report. Last year about 75% of the migrant laborers came from neighboring Burma, who now represents 5 % of Thailand's total labor force of 36 million. Thailand has been registering migrant workers since 1992, but many stay unregistered to avoid the relatively expensive and time-consuming process. In 1995, some 45 % of the estimated 700,000 migrants were registered, while only 26 % of the 1.8 million were registered last year. Migrant laborers are limited to certain sectors such as agriculture, fisheries, construction and as domestics. Nearly half of Thailand's domestics are now believed to migrants, said the ILO report. It found that migrants, on average, earn about half the minimum wage and are not eligible for state services such as medical care and education for their children. "What worries the ILO is that migrants are not receiving equal treatment," stated Manola Abella. The ILO called on the Thai government to abide by fundamental principles is dealing with their migrant labor and to make procedures flexible. "If the government were to acknowledge that the Thai economy is likely to continue to employ migrants over the medium term, create mechanisms to involve social partners in development of a transparent migrant policy, and promote cooperation with migrant countries of origin, Thailand could reap the benefits of migration while protecting the rights of migrants in Thailand," concluded the report. { For another one instance regarding one ASEAN member country : millions of Filipinos working overseas sent home US $1.4 billion in December 2007—the most in a single month—pushing total remittances in 2007 to a record US $14.45 billion. The funds accounted for 10% of annual gross domestic product, said Amando Tetangco, the central bank governor. He said the 2007 amount was 13 % higher from the previous year because of "continued demand abroad for

37

Filipino workers and enhanced remittance service provided by banks and nonbank remittance agents." About 8 million of the Philippines' populations of 90 million work abroad, sending money that provides a backbone of the economy. (AP)} Minimum Wage Rates increased for 2008 in Thailand - Mr. Apai Junlaka, the Labor Minister, disclosed on October 15, 2007 that the Ministerial Regulation of Minimum Wage Rate (No. 8) dated on November 12, 2007 proposed by the Ministry of Labor was acknowledged and approved by the Cabinet. The Regulation will come into force on January 1, 2008. The enforcement of the new minimum wage rate will be made in January 1, 2008. The wage-rates detailed as follows; Table 4 – Migrant Workers’ Daily Wages in Thai Provinces Minimum Wage Rate (Baht) 194 193 175 170 165 163 162 160 159 158 157 156 155 154 152 150

149 148 147 146 145 144

Areas Bangkok Metropolis, Nonthaburi, Pathum Thani, Nakhon Pathom, Samut Sakhon and Samut Prakarn Phuket Chonburi Saraburi Nakhon Ratchasima, Chachoengsao, Nakhon Si Ayutthaya and Rayong Ranong Pangnga Krabi, and Phet Buri Chiang Mai Chanthaburi, and Lopburi Karnchanaburi Ratchaburi and Sing Buri Prachinburi, Samutsongkram and Sra Keow Trang, Loei, and Ang Thong Prachuab Khiri Khan,,Lamphun and Songkha Khon Kaen ,Chumphon, Trad, Nakhon Nayok, Nakhon Si Thammarat, Nakhon Sawan, Burirum, Phattalung, Phetchabun, Satun Surat Thani, Nong Khai, Udon Thani, and Uthai Thani Kamphaeng Phet, Chai Nath, Lampang, Sukhothai, and Supan Buri Kalasin, Nakhon Panom, Narathivas, Pattani, Phitsanuloke, Mukdaharn, Yala, Sakon Nakhon, and Nong Bua Lumpoo, Tak, Mahasarakram, Mae Hong Son, Yasothon, Roi Et, Surin and Utaradit Chaiyaphum, Chiang Rai, Pichit , Prae,and Si Sa Ket Ubon Ratchathani, and Amnaj Charoen Nan and Payao,

Source: Migrant Dept of FTUB 2008

Table 5 lists the earlier private and a government sector job depicted in graphs 17/18 and converts their wages into an equivalent amount of Thai baht. Comparing the daily Thai baht column in Table 5 from the workers in Burma to those in Table 4 for migrant workers in Thailand, and the need to migrate becomes quite clear. Out of the sample of jobs in Burma, only the Director level government official earns enough money to support (modestly) a family living in Burma. However, not even the relatively lofty wages of the government Director can match any of the average daily salaries paid to migrant workers in any Thai province. 38

Table 5 – Private and Public Sector Wages in Burma Errand Boy Junior Clerk Vegetable Seller Senior Clerk Carpenter Carpenter Foreman Office Administrator Director

Kyats/Month 15,000 23,000 24,000 27,000 30,000 60,000 80,000 160,000

Thai Baht/Month 400.00 613.33 799.87 720.00 919.77 1999.00 2,133.00 4,266.66

Thai Baht/Day 13.33 20.44 26.66 24.00 30.66 66.63 71.10 142.22

Source: Migrant Dept of FTUB 2008

The fact that many people in Burma cannot even feed their families, let alone consider sending children to school or saving money for unexpected needs, truly explains the mass migration of workers into surrounding countries. “Burma is now the largest source of refugees in East Asia.”11 The need for labor to migrate is very revealing, not just of Burma’s economic illnesses, but of the SPDC’s genuine lack of concern for its own citizens. Despite a clear need for changes in direction, the illegitimate government has allowed Burma’s macroeconomic situation to get progressively worse. Failure to act responsibly in spite of its many opportunities reveals the corrupt nature of the individuals ruling over the people of Burma. The ways in which the SPDC has utilized economic policy to make its generals and their family members rich at the expense of greater social welfare will be explored in subsequent sections of this paper. Exchange RateBurma practices a dual or multiple exchange rate system with the use of strict foreign exchange controls.12 The exercise of foreign exchange controls is to this day based on the foreign Exchange Regulation Act 1947. The official exchange rate of the kyat has been pegged to the IMF special drawing rights (SDR) at a fixed rate of kyat 8.50847 or at approximately kyat 6 per US $ since 1977. Since 2001, the official exchange rate has varied between 5.57 and 6.70 kyats per US$ (8.20 to 7.00 kyats per Euro€). However, the street rate ( black market rate), which more accurately takes into account the standing of the national economy, has varied from 800 kyats to 1350 kyats per US $ ( 985 to 1475 kyats per Euro€). External trade by the private sector is conducted at the much weaker market-valued exchange rate, which is hurt by inflation. (Table 6) 11

Boot, William. “China’s Burma Trade Soars with ‘Cooperative Ties.’” Irrawaddy: Weekly Business Roundup. December 2007. 12 Currently, Burma is conducting 6 categories of exchange rate systems. (1) Foreign exchange coupon (FEC) rate of approximately $1= US 1 $. (2) The official exchange rate of 1US$ = MK 6 , which is pegged to the IMF's " SDR" (3) The market rate of approximately US1$ = MK 1300 (updated 2007-2008) (4) The government rate of US1$ = MK 100 to 200 , used for assessing tariffs and taxes: (5) The government money changer rate of 1$ = MK 250 (6) The illegal and variable “Hundi " rate, this is one method of illegal money changer exchange rates, used by trading houses and, nobody is willing to hold or deal with FEC.

39

FEC (Foreign Exchange Certificate), equivalent to the US$ on a one to one basis, was introduced in February 1993 as an instrument to legalize the market rate and initially in order to promote tourism. The introduction of FEC in effect amounts to partial de facto devaluation of the kyat. However, no changes or amendments were made to the Foreign Exchange Regulation Act (FERA) of 1947. Over the years, the kyat has depreciated and the gap between the official rate and the market determined parallel exchange rate came to be wider. In addition, more and more transactions came to be conducted at the market – determined parallel exchange rates in what may be considered as the dollarization process. At present, the parallel exchange rate of about kyats 1300 to one US $ is over 200 times the official rate; and the volume of transactions in the economy with that rate is estimated to be about 80 - 90 % of the total transactions (based on the share of private sector in GDP). The Burmese currency exchange rate against the US dollar will be 1,400 kyat in 2008, said the EIU, and the US dollar will be 1,500 Kyat in 2009.The EIU is one of the most influential sources of regional analyses among policymakers and intellectuals. (Table 6) Table 6 – Monthly data of Exchange rate in 2007 (kyat: US$) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -------------------------------------------------------------------------------------------------------------------------------------------2007 (official)

5.69 5.68

5.67

5.60

5.61

5.63

5.56

5.56

5.55

n/a

n/a

n/a

2007 (free market) 1,300 1,300 1,270 1,250 1,250 1,250 1,280 1,300 1,350 1,300 n/a n/a ----------------------------------------------------------------------------------------------------------------------------------------------Source: EIU December 2007

As expected by most economists, changes in Burma parallel exchange rates over time (from kyats 42 per dollar in 1988 to the present rate of around kyats 1300 to a $) were found to be determined largely by changes in relative price levels or the inflation differential between Burma and its trading partners. In other words, the percentage depreciation of the parallel exchange rate in Burma is equal to the inflation rate differential between Burma and its trading countries. Then again, changes in CPL, as noted earlier, were mainly caused by increases in money supply, which in turn was caused by budgetary deficits. In the past, on November 10, 1985, 75 kyat notes were introduced, the ODD DENOMINATION ( it can be observed on the cover design of this book) possibly chosen because of Dictator Ne Win’s predilection for numerology; the 75 kyat note was supposedly introduced to commemorate his 75th birth day. It was also followed by the introduction of 15 and 35 kyat notes on August 1, 1986. Only two years later, on September 5, 1987, the military dictator demonetized the 25, 35 and 75 kyat notes without warning or compensation, rendering some 75% of the country’s currency worthless. The resulting economic disturbances led to serious riots (8-8-88 uprising) and 2nd military coup again. On September 22, 1987, banknotes for 45 and 90 kyat were introduced, both of which incorporated Ne Win’s favorite number, NINE. 40

Following the change of the country’s name to Myanmar on June 20, 1989, new notes began to be issued. This time, the old notes were not demonetized, but simply allowed to fall into disuse through inflation as well as wear and tear. On March 27, 1994, 1 kyat notes were issued followed by 200 kyat notes on March, 1990. On March 27, 1994, notes for 50 pya, 20, 50, 1000 and 500 kyats were issued, followed, on May 1, 1995, by new 5 and 10 kyat notes. 1000 kyat notes were introduced in November 1998. In 2003, rumors of another pending demonetization swept through the country, resulting in the junta issuing official denials, but this time the demonetization did not materialize. In 2004, the sizes of the 200, 500 and 1,000 kyats were reduced in size (to make all Burmese national banknotes uniform in size likes American national currency notes) but larger notes remain in circulation. 50 pya, 1, and 5 kyat banknotes are now rarely seen, because of their low value. This is arbitrarily ruling of monetary system in Burma under the military dictatorship controls. (For more in- depth study, it is going to analyze in our policy papers, “The Dual Exchange Rate System & the State Level Corruption in Burma). External SectorBurma has had perennial deficits in the balance of trade and the current account for at least the past decade. For example, during the First Short Term Four – Year Plan Period (1992/93 – 1995/96), and the Second Short Term Five – Year Plan Period (1996/97 – 2000/2003), Burma has had surplus balance of trade (Table 7). This was largely due to exports of Natural Gas to Thailand. Table 7 – Balance of Payments Summary 2001/02 – 2005/06 (US $ million) Year Exports Imports Balance of Current A/C Trade Balance 2001/02 2544 2735 -191 -157 2002/03 3063 2300 763 12 2003/04 2357 2240 117 - 100 2004/05 2928 1973 955 251 2005/06 3558 1984 1574 489 Average annual 12.7 - 3.1 growth Source – 1) Ministry of National Planning and Economic Development; 2) IMF (International Monetary Fund)

As may be seen from the table, yearly export earnings increase from US $ 2544 million in 2001/02 to 3588 million in 2005/06 or by about US $ 1000 million in the course of 4 years. This increase in export earnings must largely be attributed to the discovery and exports of natural gas. Imports on the other hand, decreased from US $ 2757 million in 2001/02 to US $ 1984 million in 2005/06. This is due partly to the government quantitative restrictions on imports, and partly to the weakening of the kyat and domestic demand. As a result, Burma came to have trade surplus from 2002/03 onwards. The trade surplus in fact grew from US $ 763 million in 2002/03 to US $ 1574 in 2005/06. 41

Graph 19 displays the percentage breakdown of Burma’s imports for 2007. China’s growing influence with the Burmese economy is clear as it represents over a third of all Burma’s recorded imports. It is important to note that Burma’s imports are actually much higher, due to unrecorded border trade of military armaments. Regardless, the recorded statistics show that imports are primarily machinery and transport equipment, minerals, base metals and manufactures, fabrics and electrical machinery.13 These imports reflect the absence of consumer durables purchasing, which is consistent with the fact that most consumers in Burma spend the majority of their income on food.

Graph 19

Origin of Imports Purchased by Burma 2007

Malaysia 5% Other 22% China 35% Thailand 22% Singapore 16%

Source: FTUB Compiled Data, 2008

Regarding Burma’s direction of trade, it remained as in the past, very much concentrated with Asian countries. Of the total volume of trade of US $ 5542 million in 2005/06, as much as US $ 4985 million or nearly 90 % of it was with ASEAN plus 3. However, only US $ 2844 million or a little over 50 % of the total was with ASEAN. The SPDC has been generating money from exports (including unrecorded illegal trade, such as drugs) to pay for what are mostly military imports. The majority of the money comes from sales of natural gas, an industry in which the SPDC has consistently used forced laborers, which in turn yields negative net social welfare. As one escaped victim 13

42

Altsean Key Issues – Economy. http://www.altsean.org/Key%20Issues/KeyIssuesEconomy.htm

[name withheld] reported to FTUB, “the [regime] uses us like animals as forced laborers, porters and human shields. I myself was forced by the soldiers to work on the Total/Unocal pipeline.” Graph 20 shows Thailand as the single biggest customer for Burma’s exports. “Burma earned $2.16 billion by selling gas, mainly to Thailand, in 2006, Human Rights Watch estimates. And that amount accounted for half the country’s total exports”14 Referring back to the earlier import discussion, it is clear that the SPDC is using the proceeds from its gas revenues to purchase more military hardware for its army, the Tatmadaw.

Graph 20

% of Exports Purchased From Burma 2007

Japan 5% Other 28% Thailand 49% India 13% China 5%

Source: FTUB Compiled Data 2008

Burma’s leadership finds itself in a very optimal strategic position, as they are able to sell natural gas to either of their mammoth, resource-hungry neighbors. Weapons and military equipment purchases by Burma’s ruling junta, the State Peace and Development Council (SPDC), have substantially increased in recent years as the generals have gained significant earnings from the sale of natural resources to energy-hungry countries in the region. Claiming to have the world’s 10th largest gas reserves, with an estimated 90 trillion cubic feet of natural gas, Myanmar is strategically situated between two of the world’s fastest growing economies. In efforts to meet their growing energy needs, India and China are vying for leverage with Burma’s generals. It comes as no surprise that both countries have been offering attractive military assistance packages to the junta.15

14

Cherian, Thomas. “Asian Leaders, Seeking Myanmar’s Gas, May Go Soft on Sanctions.” Bloomberg. Wednesday November 21, 2007. 15

Black, Michael and Couchaux, William. World Politics Watch: “Myanmar finds willing arms suppliers in energyhungry neighbors.” January 2007.

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Graph 21 illustrates the continuous upward trend in Burma’s natural gas production, which has been the biggest single contributor to their increased exports.

Burma Dry Natural Gas Production

Graph 21 0.4 0.35

Trillion Cubic Feet

0.3 0.25 0.2 0.15 0.1 0.05 0 80 19

82 19

84 19

86 19

88 19

90 19

92 19

94 19

96 19

98 19

00 20

02 20

04 20

Year Source: US Energy Information Administration

Gas and oil production will likely continue to grow for Burma, as the two sectors represented 98% of all Foreign Direct Investment or $471.5 million in fiscal year 20062007.16 Much of this money will be used to increase the volume of gas extraction, and to expand the pipeline network necessary for its transit. The sources of the gas and oil FDI will be discussed in greater detail in the upcoming section on sanctions. Graph 22 reflects the changing dimensions of oil production, consumption, and exports for Burma, from 2003-2007. The abrupt drop in domestic oil consumption, which was highest in 2007, can be attributed to the SPDC slashing domestic fuel subsidies which caused prices to spike dramatically. Almost overnight, consumers faced a 500% jump in the price of fuel, which affected the entire economy, from public transit, to food. Immediately after the fuel price leaped, it was reported that “rice had risen by nearly 10%, edible oils by 20%, meat by about 15% and garlic and eggs by 50%.”17 Considering that the majority of peoples’ income in Burma is spent on food, the dramatic jump in food and commodity prices weighed heavily on consumers. An economist from Burma responded to the increases by saying, “They could hardly afford food before. Now their weekly budget for essential foodstuffs is going to buy even less - their purchasing power has been reduced by more than 25% virtually overnight.”18 16

The Associated Press. “Foreign Investment in Burma Dominated by Oil, Gas, Power.” November 27, 2007. Jagan, Larry. Asia Times: “Fuel price policy explodes in Burma.” Thursday August 23, 2007. 18 Jagan, Larry. Asia Times: “Fuel price policy explodes in Burma.” Thursday August 23, 2007. 17

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Oil Industry in Burma

Graph 22

70000

Barrels Per Day

60000 50000 40000

Oil Production

30000

Oil Consumption

20000

Oil Exports

10000 0 20

03

20

04

20

05

20

06

20

07

Year

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Stuctural Reforms

IV. Structure Reforms: Many economists are of the opinion that structural reforms should accompany stabilization programs (requiring mainly monetary and fiscal adjustments) in order for an economy to achieve sustained development. Indeed, it is this belief which has led IMF to expand its mandate since the early 1980s to promote “structural reforms,” that is, changes in the structure of the economy. Likewise, the WB too has moved beyond just lending for development projects (like roads and dams) to providing broad based support in the form of “structural adjustment loans”. But, as we have seen in the proceeding section, Burma has not even progressed to the stage of achieving stability. It is clear from what has transpired to date that the GOM’s over-riding objective since it took over civil power in 1988, has been to build roads, bridges, irrigation dams and other physical ( and visible) infrastructure and to achieve high rates of growth. If the officially recorded GDP growth rates are taken at face value then one would be led to believe that there is no need for “structural reforms” in Burma. But as we have seen above, the fact that high GDP growth rates are not corroborated by other indicators of development and in the way the problems are linked to one another, Burma in fact needs structural reforms together with usual stabilization measures in order to achieve growth with stability. Indeed, having professed to adopt a market-oriented system, the GOM did initiate a number of economic reforms. Major economic reform measures taken up to 1997 and directly affecting macroeconomic stability and growth may be summarized as follows: 1) Price and Trade Sector Liberalization – liberalization of agricultural trade; liberalization of domestic and foreign trade, allowing private sector’s participation in the business previously under the monopoly of state of Economic Enterprises (SEE’s); resumption of Myanmar’s Chamber of Commerce and Industry, (renamed Union of Myanmar Federation of Chamber of Commerce and Industry –UMFCCI) regularization of border trade. 2) Introduction of Foreign Investment Law - to attract foreign direct investment (FDI),to enhance technical know-how and investments in all sectors except those reserved for the State; issuance of foreign exchange certificate-FEC to promote tourism 3) Tourism sector reforms – allowing private sector participation in hotels and tourism business. 4) Fiscal reforms – taxation reforms to restructure the tax and tariff systems and to streamline tax collecting and customs procedures to be in line with market-oriented system; gradual depreciation of exchange rate for custom evaluation; and more stringent scrutiny of government expenditures to tackle the problem of deficits. 5) Financial sector reforms –establishment of Myanmar Investment Commercial Bank (MICB); building legal framework; restructuring the financial sector; and allowing private sector participation in banking and insurance.

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6) Legal system reforms – the combination of Common Law and Civil Law Legal Systems which Burma already had and which had been kept intact during the past 25 years before 1988 were reactivated with some new legal injection and revocation of the Law of Establishment of Socialist Economic System. 7) Privatization – establishment of Privatization Committee; privatization of cinema halls under the Ministry of Information. As a result, the share of the private sector (including cooperatives) in gross domestic product (GDP) increased from approximately 69% in 1986/87 to 78% in 1996/97, while that of the state sector declined slightly from 31% to 22%. In foreign trade, private sector’s share of exports increases from 36.5% in 1989/90 to 62.9% in 1996/97, while the state sector share correspondingly declined form 63.3% to 34.9% during the same period. And between 1989/90 and 1996/97, the share of private sector participation in total investment in the economy increased form 38.8% to 50.1% while that of the state declined from 60.1% to 49.1%. In addition, there was also a sizable inflow of foreign direct investment (FDI), although it paled in comparison to Vietnam which introduced its own Investment Code only a few months earlier. But as will be seen below, the contribution of GDP by private sector and cooperatives have not progressed beyond 91% since2002/03 (Table 8). Table 8: Structure of GDP by Ownership 1986/87 100 31

GDP State Produced GDP Private Sector 69 and Cooperatives

1996/97 100 22

2001/02 100 16

2002/03 100 0.09

2003/04 100 0.09

2004/05 100 0.09

2005/06 100 0.09

78

84

0.91

0.91

0.91

0.91

Source: ADB 2001: IMF 2006.

The large share of private sector and cooperatives in GDP was mainly due to the large share of the agricultural sector in GDP, which is considered as a private sector. Table 8 fails to show however, recent gains in the share of private sector at the expense of the cooperatives sector. Nonetheless, the data reflects the slow pace of privatization of State Owned Enterprises (SEEs). After the Asian economic crisis of 1997 however, there was hardly any more reforms of significance. On the contrary, government intervention in the market has been on the increase. And the government’s command and control over the economy has become more pervasive. Privatization program continue to languish in limbo. Thus, many scholars see the government as retreating back to old style command economy. In spite of official denial that the impact of the Asian crisis on Burmese economy would be serious, the crisis, as it turned out, seems to have pushed Burma back to the command

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economy and old ways of doing things. To elaborate, the indirect fall out led to drastic decline in the inflow of FDI and exports to ASEAN.1 The value of the kyat tumbled in the parallel market, external imbalances widened, and foreign exchange reserves fell. More importantly, while the actual impact of the crisis on Burma is a contentious issue, as suggested by some, psychologically, the crisis appears to have dampen the enthusiasm for reform and hence, to slowing down the momentum of the reform process. In order to contain further deterioration of the macroeconomic situation the authorities imposed new restrictive measures on foreign trade without warning, such as regulation by the Central Bank which limits foreign remittances of FECs purchased by the kyat to US$ 50,000 per month; replaced the 5 % commercial tax by an extra income tax of 2 % and an 8 % commercial tax (payable in foreign exchange); tightened import controls and suspended the foreign licenses of private banks. No doubt, some of these new restrictive measures were forced upon the government by a shortage of foreign exchange. At the same time, they also suggest a retreat back to the command economy. This is also evident in the way the government tackled the banking crisis of February 2003. Private banking was looked upon by the government as making money with other people’s money, and private banks were subjected to the most stringent 2 conditions to operate. Because of interest rate regulation by the Central Bank, real interest rates remained negative. More importantly, as evidenced by the decline in M2/GDP ratios from 35.0 in 1995 and 28.1 in 1998 to 18.6 in 2004, its financial sector has in fact regressed.3 Political factors may also be responsible for pushing the government, which had changed its name from SLORC to SPDC (State Peace and Development Council), back into its own shell (or bunker). That is, the international pressure exerted by the ban on new investment by the US since May 1997. On the home front, student unrest forced the government to suspend undergraduate classes in 1997, and as it turned out, up to 2000 (comparable to the shut down of schools and universities between 1974 and 1976 during the socialist period). This could also have been a factor in the decision of the government to revert back to its command-oriented approach to the economy. See figure 1.

1

The cumulative amount of FDI approvals during the eight year period between 1989/90 and 1996/97 of slightly over 6 billion US dollars was more than three times the amount of less than 2 billion US dollars in the following eight years between 1997/98 and 2004/05. As argued by a number of scholars, the decline in FDI could equally be due to internal factors such as Burma’s unattractive investment environment (including amongst others, dual exchange rates and cumbersome administrative procedures) as to the Asian crisis. 2 Besides being forced to call back loans on short notice, private banks were also ordered to strictly adhere to two new regulations. As reported in The Myanmar Times, “loans cannot account for more than 80 percent of total deposits,” and the ratio of paid-up capital to deposits must be at 1:7 (The Myanmar Times, July 19-25, 2004). While these two new regulations by the Central Bank may insure against bank runs, they also make legal banking barely profitable (and that in financial terms only). As a result, many became reluctant to take on new deposits, something unheard of in the banking world. The 1:7 ratio has lately been relaxed to 1:10 ratio. 3 In contrast, M2/GDP ratios of Vietnam had increased from 23.0 to 75.2 during the same period.

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Figure 1 Economies in Transition Less Government Intervention (Free Market Economy) Hong Kong* Singapore* (M’97) * (V’97) (M’99) * * (L’02)

(M’87)*

(V’02) *

*(L’97)

(V’87)* (L’87)*

More Government Intervention (Controlled Economy)

M=Myanmar L=Laos V=Vietnam 87,’97,’99, and ‘02=1987, 1997. , 1999 and 2002 Source: Myat Thein, 2004.

“In Figure 1, Burma/Myanmar in 1987 is placed at the right of both Vietnam and Laos, meaning less macroeconomic stability, chiefly but not only because of its lower rate of inflation. As for placing Burma/Myanmar above Vietnam and Laos in 1987 with regard to the degree of government intervention, it is because most would consider the latter two countries to be more socialistic and centrally planned economies. However, for reasons mentioned above, since 1997 Burma / Myanmar has moved further away from transforming its controlled economy into a market economy whereas Laos and Vietnam appears to be continuing their progress towards a market economy.” (Myat Thein, 2004, pp 167-168)

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It is important to note that the observations being made above by Myat Thein and a number of other scholars are not just about stop/go, ad hoc, contradictory policies which Governments with short-term horizons are prone to take. They are concerned with the general direction of policy developments away from the regression of a market-oriented economy and back to the command type of economy. But it is by no means permanent or irreversible. Another turn is now under consideration. In the manner of a sleepy driver zigzagging along the road towards a market- oriented destination, the GOM, according to the latest news report, is once again said to be considering a major restructuring of the economy.4 According to that news report, Burma’s military rulers are planning a major economic reform program which is expected to be rolled out in the next few months. The plans involve liberalizing the economy and attracting more investment into the country. The reforms include privatizing many of the government’s economic entities, improving the government’s tax collection and reforming the banking system.5

In fact, early this year the military government announced that eleven government businesses, including beer, bicycle, cosmetic, glass, soft drink, textile and paint factories in Rangoon and Mandalay were to be privatized. A newly formed Privatization Commission is charged with the responsibility of overseeing the sale of these government companies; and according to the report cited above; nearly a thousand states- owned enterprises are to be partially privatized. For a country transforming its economy from centrally directed command system to a market – oriented system, privatization should (or could) be one of the main pillars of structural reform. Therefore, the latest news, if true, is indeed welcome news. But, before being carried away one needs to ask why the privatization process in the past simply languished in limbo, and why the way the privatization process now may possibly succeed. A number of reasons have been given for the failure of the privatization process in the past.6 (For more details see Myat Thein 2004). But, the main reason may simply be the fact that the military regime, accustomed to direct command and control, was not comfortable with the idea of “ letting go” a large chunk of the economy into the hands of private enterprise.7 In addition, the Privatization Commission itself may not really be aware of the tremendous costs to the country and the society of not privatizing SEEs or privatizing them very slowly. Although a lot of details of the new privatizing plans still remain to be worked out thoroughly, the announcement that the government intends to hold 51% of shares (and that it will act as both operator and investor) strongly suggest that the ‘command and control’ attitude of the GOM has not changed one little bit. And 4

Jagan, Larry. “Economic Reform in Burma?” The Daily Star (Bangladesh). Tue 22 August, 2006. Ibid 6 For details see Myat Thein 2004. 7 Besides the direct budgetary costs, there are indirect costs stemming from budgetary deficits caused by SEEs such as increases in money supply, inflation, hardships for the poor and needy and so on. The fact that the essence of privatization is greater efficiency and competitiveness may also be a forgotten factor. (Myat Thein 2004). 5

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this makes a lot of businessmen very nervous. Add to it, the unpredictable regulatory environment and capricious policy making, there may not be any takers at all. On the other hand, to the extent that the new privatization plans have been prompted by the government’s need to raise finances, especially to fund the building of the new capital at Naypyitaw, the new Privatization Commission (with possible less resistance) may try hander to make a success of it this time around. As mentioned above, the problem this time around could be reluctance on the part of the businessmen in the private sector to work with the government holding 51% of the shares. On other front, propelled perhaps by the realization of impending economic crisis, the GOM is moving forward with plans to set up a number of special economic zones (SEZs) with the assistance of China at Thilawa, and with the assistance Thailand along the Burma/Thai border.

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Development Divide

V. Development Divide: In this section, the report is trying to reanalyze from Myat Thein, 2004 and his comments and future prospects on ASEAN with Burma ( Myanmar) in his study, “Transition Economy of Myanmar, 2007”. The development gap would be defined as “difference in development level between one entity and other or among entities – in terms of quality of life”. Development gap could be expressed from different perspectives- among different geographical areas or different demographical groups (age groups) or different races or ethnic groups or religious groups, countries with different political (or economic) systems, or administrative levels (national, regional, household). Development gap has impact not only traditional security issues (violence, war, etc.), but also on non-traditional security issues (migration, human trafficking, HIV/AIDS, etc.) In other words, development gap has negative impact on human security.1 Here, for the purpose of this study, human development gap in Burma will be analyzed at the regional level (between states and divisions or between ethnic groups); and national levels (urban and rural areas); and within urban and rural areas in terms of economic, social and political aspects. With these concepts in mind, Burma’s development will be assessed. Development gap at the National levelWe begin with a look at the development gap Burma at the regional level within the country. Here what we need to look for, first and foremost, is the development divide between divisions where most Bamar (comprising some70% of total population) are living and states where most ethnic groups (Kachins, Kayin, Rakhines, Shans, etc.) inhibit. According to Mya Than’s study, three divisions and three states are in the higher income group, while four divisions and four states belong to four states belong to the lower income group.2 In other words, it is difficult to conclude that the states where most ethnic groups reside are poorer than the divisions where most Bamars inhabit or the other way round. Hence, we can breathe with a sigh of relief that recent developments do not seem to have (inadvertently or otherwise) discriminated any one group in favour of another. However, what is of interest here is to find those states and divisions, which shares borders with more developed neighbors such as Thailand and China to have higher income than others. As noted by Mya Than, this is presumably because they are better placed to derive higher income from cross-border informal and formal trade. Looking at the poverty headcount index by states and divisions, it may not come as a great surprise that all the state and divisions in higher income group with the exception of Ayeyarwady division, also have lower incidence of poverty (less than the national average of 22.9). The exception from the other end of the income spectrum is the Shan State with a low headcount index of 11.9. 1 Human security has 7 components: economic security, food security, health security, environmental security, personal security, community security, and political security. For details, see Human Development Report 1984. 2 Mya Than 2005. Average monthly household income of kyats 10,000 is used for separating the two groups.

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Next, if we look at the development gap between rural and urban areas, it comes as a bit of a surprise to find that rural areas have less poor people than urban areas-in terms of poverty headcounts and poverty gap (Table 9). Table 9 - Development Gap between Rural and Urban Areas Poverty Estimates for Urban Rural Households by Headcount Index (HI) and by Distribution for Poor Urban Rural Total -----------------------------------------------------------------------------------------------------------------------Headcount Index (% of population) 23.9 22.4 22.9 Poverty Gap (%) 30.4 69.6 100 -----------------------------------------------------------------------------------------------------------------------Source: World Bank, August 1999.

This is consisted with Mya Than’s earlier research findings where Gini Coefficient is less in rural areas (0.41) than in urban areas (0.56) (1985, p.76). This means, income gap within the urban is wider than that of in rural areas. In other words, the gap between the rich and poor is quite large in urban areas than in rural areas. Burma is, in fact, an outlier amongst ASEAN countries in that poverty headcount index is slightly higher in urban areas (23.9%) than in rural areas (22.4%). In this respect, Burma is the only outlier amongst ASEAN countries. The World Bank (1999, p. 13) gave the following reasons for this result: •

Average family size, which is generally correlated with poverty, is approximately the same in rural and urban areas.

•

The cost of food is higher in urban areas, with the cost of the minimum food basket about 16 % higher than in rural areas.

•

The distribution of expenditure (and income) is more skewed in urban areas.

•

National averages for urban and rural household expenditures conceal considerable regional variation; rural poverty rates are significantly higher than average in some states and divisions.

•

Access to subsistence levels of production keeps more rural families out of poverty.

It could also be because high rises, modern supermarkets, classy restaurants and gleaming new apartment buildings in Rangoon, Mandalay and many other urban centers that a casual observer see, are owned by a handful few, while the majority live in less wellfurnished places or urban slums. Then again, huge supermarkets and new departmental stores stocked with all kinds of imported goods cater chiefly to what are locally known as

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3

‘$ earners’, while the majority, the have-nots, just pass them by. Thus, as noted a decade ago by Thein and Than, “many people feel that inequality of income has increased rapidly from the relative equality of earlier years in a short span of time” (Ibid., p. 238). On the other hand, the World Bank’s findings could be some what out of date. This is because the latest increase in the nominal wages and salaries of government servants in April 2006 by 5.5 to 12.5 times the previous levels of pay could close the gap between the haves and have-nots in the urban centers.4 While the increase was very regressive (with the lowest ranked workers wages increasing by about five times as compared to increases in the salaries of high ranking officers by 12.5 times) it must certainly have narrowed the income gap between fixed income earners in government service and those private sectors whose pay tend to increase gradually with inflation. The downside of this move was however the impoverishment of pensioners and the poor (often the forgotten people) who where left out of consideration but who must, like others, face the erosion in their real income from the consequential inflation. Soon after the news of pay hike broke, the prices of basic commodities such as rice, edible oil, meat and fish, other daily necessities as well as fuel were said to have risen by 10 to 25%, according to informal market survey. Another way of investigating the development gap inside the country is by comparing development indicators between rural and urban areas (Table 10). Table 10: Household Access and Ownership Levels in Rural and Urban areas, 1997 (Percentage of Household) Items Urban Rural Total Access Piped water 2 17 19 Sanitation 20 -20 Electricity 10 32 42 Ownership Radio 24 35 59 Car 1 8 9 Motorcycle 1 6 7 Bicycle 38 54 92 Source: World Bank, 1999 August

Thus, the fact that poverty headcount index is lower in rural areas than in urban centers does not mean that rural residents are generally better off. In fact they are worse off alone key dimensions of human development. Moreover, in terms of levels of ownership of basic durable assets (eg, radio, car, motorcycle, & bicycle), are very low. At the same 3

Although there are some domestic dollar earners who work in some foreign companies, the majority are parents of sons and daughters working abroad as illegal immigrants in menial jobs. 4 According to a number of observers, the move was by way of celebration for relocating the administrative capital from Yangon to Naypyitaw (Royal City) in the vicinity of Pyinmana.

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time, levels of access to some basic utilities (eg, piped water, sanitation, & electricity) in rural areas are very low compared to urban areas. Nonetheless, on average, consumption levels estimated by CSO (1999) suggest that they are better able to obtain minimum subsistence needs than are urban households. Development Gap at the Regional levelTable 11 shows the economic gap between Burma and other ASEAN members countries in terms of GDP growth rates and GDP per capita. Before the Asian economic crisis of 1997, old ASEAN member countries with the exception of Brunei were having higher rates of GDP growth than the new member CLMV countries. However, since the crisis this situation was reversed with CLMV countries enjoying higher rates of growth than the old ASEAN countries. This was mostly because, unlike the old member countries, Burma (Myanmar) and other new member countries had relatively minimum impacts from the regional crisis. By 2004 most of the old member countries had recovered from the crisis and were performing as well as the new member countries. As a result, the large per capita income gap between the old members and the new members persisted as in the past. As for Burma, despite the fact that its GDP/cap is the lowest among the grouping, it grew by about 50% between 1996 and 2004. Table11: GDP Growth Rate and GDP Per/cap in ASEAN Country GDP Growth Rate% GDP/ cap(US$) 2004 1996 2004 Brunei 2.9 17,096 13,879 Indonesia 5.1 1,115 1,193 Malaysia 7.1 4,817 4,625 Philippines 6.0 1,184 1,042 Singapore 8.4 25,107 25,207 Thailand 6.1 3,035 2,537 Cambodia 7.7 317 358 Laos 5.5 396 423 Myanmar(Burma) 12.2(5.0)* 109 166 Vietnam 7.7 337 554 Source: ASEAN Finance and Macroeconomic Surveillance Unit (FNSU) Database, 2005.* FMSU Source for its GDP growth rates: Ministry of National Planning and Economic Development, Yangon.

Development trends in the structure of production generally indicate the economic progress of an economy. In general, as the economy develops over time the share of industry in GDP grew and that of agriculture declined. In Burma, paradoxical as it may seem, in spite of high GDP growth rates officially recorded over the past decade, the structure of the economy or the share of GDP by major sectors has remained substantially unchanged (Table 12).

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Table 12 shows the economic structure of ASEAN economies which in turn suggest the development stage of each and every country. Almost all of old member’s economic structure shows that their economies have already changed from the agriculture-depended stage to an industrialization stage and then to services sector dominated stage. Meanwhile, with the exception of Vietnam, all three new members still remain as agriculture-based economies. This reflects the large quality gap in the economic structures between the two groups or the large gap in development levels between these two groups. Table 12: ASEAN Economic structure, 1980 and 2003 Country Agriculture Industry 1980 2003 1980 2003 Brunei n.a 2.1 n.a 58.4 Indonesia 24.4 15.4 41.3 45.0 Malaysia 22.9 8.1 35.8 42.1 Philippines 23.5 19.8 40.5 33.5 Singapore 1.1 0.1 38.8 31.1 Thailand 20.2 10.2 30.1 45.8 Cambodia n.a 36.8 n.a 27.9 Laos n.a 51.3* n.a 23.1* Burma(Myanmar) 47.9 57.2* 12.3 10.5* Vietnam 42.7 22.7 26.3 36.9

Services 1980 n.a 34.3 41.3 34.3 60.0 49.7 n.a n.a 39.8 31.0

2003 39.5 39.6 49.8 46.7 68.8 44.0 35.4 25.6* 32.4* 40.4

Source: ADB, 2002, UNDP 2003. ASEAN Finance and Macroeconomic Surveillance Unit (FMSU) Database, 2005.* For 2001.

Foreign trade plays an important role in economic development of the country and its integration with the region and / or the world. Total foreign trade (exports and imports together) as per cent of GDP shows the degree of the country’s economic openness which can also suggest the development level of the country. According to Table 13, there is a big gap between the new members and the old members in terms of degree of openness as well as that of per capita value of foreign trade. These data also suggest the large development gap between these two groups. Table 13: Degree of Openness and Export per capita: ASEN Country Degree of Openness Exports/Cap (US$) Brunei n.a n.a Indonesia 58.6 231 Malaysia 187.3 231 Philippines 110 479 Singapore 312 28,672 Thailand 94 945 Cambodia 71 62 Laos 65 74 Myanmar(Burma) 32 22 Vietnam 95 151 Source: FEER Yearbook 2000. Note: Some numbers are rounded.

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The level of infrastructure such as airports, seaports, transportations, energy, telecommunication also indicate the level of a particular country and these indicators also can be used in comparing the level of development among groups of countries. Table 14 suggests that there exist bid gaps between the CLMV and the original members of ASEAN. Table 14: Infrastructure in ASEAN Countries (Lowest=1 & Highest=5) Country Airport Seaport Transport Energy Telecoms Brunei Indonesia Malaysia Philippines Singapore Thailand Cambodia Laos Myanmar Vietnam

3.3 3.0 3.1 2.3 4.9 3.1 1.6 1.5 1.6 1.9

3.0 2.4 3.1 2.5 4.9 3.1 1.5 1.5 2.0 2.4

3.3 2.3 2.7 1.9 4.6 1.6 1.81.4 1.5 1.6 1.9

3.6 2.6 2.6 2.2 4.4 2.7 1.4 1.7 1.4 1.9

Source: Tam et al, 2004 quoting Daily Economic News, Taiwan, 14/8/1997

3.5 2.7 3.2 2.7 4.7 3.0 1.4 1.5 1.4 2.2

Average 3.3 2.6 2.9 2.3 4.7 2.6 1.5 1.5 1.5 2.0

Table 15 shows the levels of mass media and information and telecommunications infrastructure of all ASEAN countries. Even at the first glance, it is obvious that between CLMV countries and the old ASEAN members, there are great differences in populations ‘access to information (in terms of newspapers per thousand population, number of radios and TVs per thousand population) and telecommunications technology (in terms of telephone lines per thousand people, number of personal computers and internet users per thousand population). Singapore, Thailand and Malaysia are most advanced countries among the ASEAN members whereas Cambodia, Laos and Myanmar (Burma) are far behind other fellow members. Table 15: ICT Infrastructure of ASEAN Members (per thousand people) Country Newspaper Radios TVs Tel Personal Computers Brunei n.a n.a n.a n.a n.a Indonesia 24 156 136 27 8.2 Malaysia 158 420 166 198 58.6 Philippines 79 159 108 37 15.1 Singapore 360 822 348 562 458.4 Thailand 63 232 236 84 21.6 Cambodia 2 127 123 2 0.9 Laos 4 143 4 6 1.1 Myanmar 10 95 7 5 5.0 Vietnam 4 107 47 26 6.4

Internet Users n.a 420 1,000 141,200 1,950 0.005 0.005 1.0 1.0

Source: FEER Year Book, 1999, World Development Report 1999-2000, Vietnam Investment Review, various issues.

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The most visible indicators expressing the development gap among the nations or between groups are obviously the poverty level and Human Development Index (HDI) – measured in terms of life expectancy, literacy rate and income level. Many of the old member countries, except Philippines, have fewer people under poverty line whereas most of new member countries have more poor people. Regarding ranks in term of HDI index, in general, all new members are far behind the old ones with the exception of Indonesia and Vietnam where Vietnam is ranked two places above Indonesia (Table16). Table 16: Poverty and Human Development Index (HDI) in ASEAN Countries Country Poverty Headcount Index HDI Rank(2003) Whole Urban Rural Country Brunei* n.a n.a n.a 33 Indonesia(1990) 19.6 10.7 23.6 110 Malaysia(1987) 18.6 7.3 24.7 61 Philippines(1991) 49.7 34.2 67.8 84 Singapore* n.a n.a n.a 25 Thailand(1992) 13.1 2.4 15.5 73 Cambodia* 36 25.4 40 130 Laos(1992/93) 53.0 23.9 54.9 133 Myanmar(1997) 22.9 23.9 22.4 129 Vietnam* 37 9.0 45 108 Source: World Bank, 1999, August, 18, Tam et al, 2004, Human Development Report 2005.

Table 17 shows the knowledge gap or education gap between the two groups inside ASEAN. At the secondary and tertiary levels, the new member countries are behind the old member countries in terms of enrolment ratios and expenditure on education as percentage of GDP. At the primary level enrolment ratio and expenditure and expenditure in education, Vietnam is at par with some of the old member countries. Table 17: Educational Enrolment Ratio (% of age group) of ASEAN countries Country Educational Enrolment Ratio Expenditure (% 0f GDP) Primary Secondary Tertiary Brunei* n.a n.a n.a n.a Indonesia(1990) 113 56 11 1.4 Malaysia(1987) 101 64 11 4.9 Philippines(1991) 117 78 35 3.4 Singapore* 94 74 39 3.0 Thailand(1992) 89 59 21 4.8 Cambodia* 113 24 1 2.9 Laos(1992/93) 112 29 3 2.1 Myanmar(1997) 121 30 11 1.2 Vietnam* 114 57 7 3.0 Source: World Development Report 2000, World Development Indicators 2000

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Table 18 shows the gap in health indicators between the two groups of ASEAN member countries. As may be expected, the more development ASEAN 6 generally spend more on health (per/capita US$) and has better health indicators than the new members. That is, they have fewer infant mortality (per 1000 births), longer life expectancy, greater access to improved water resources. Table 18: Health Indicators in ASEAN Country Infant Life mortality (per Expectancy 1000 births) (years) Brunei Indonesia Malaysia Philippines Singapore Thailand Cambodia Laos Myanmar Vietnam

n.a 38 8 31 4 26 86 93 79 31

76.4 66.8 73.2 70.4 78.7 70.0 56.2 54.7 60.2 70.5

Source: UNDP 2001; Human Development Report 2005

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Access to Improved water (% of population) n.a 76 95 87 100 80 30 44 68 56

Health Per/cap US$ n.a 44 189 136 777 349 90 35 81

Future Prospects

VI. Future Prospects: On the basis of the foregoing one cannot but conclude that much greater efforts are needed to improve the economic situation in Burma. The government’s reform measures, selective, partial and some reversed, have not been enough to eliminate deep-seated structural distortions and macroeconomic imbalances. “A renewed commitment to comprehensive reform is needed to position the economy for recovery and growth and to 1 lay foundation for reducing poverty” But, Burma is not the only country that is doing poorly. As a former British ambassador to Burma recently reminded us: “Many other less developed and even better development countries suffer from the same symptoms as Burma, such as poverty, corruption, inequality, unsustainable natural resource exploitation, lack of freedom, and a growing burden of HIV. Many countries are sicker than Burma on some or all of these counts. Treatment for systemic problems is 2 never straightforward”.

Any reflection on the future prospect of such a country as Burma must be conditional. First, it is necessary to know whether the authorities realize as to the true condition of the economy. On the basis of the official media reporting achievements of the GOM, one would not think that the authorities are aware of the poor state of the economy. On the other hand, the objectives of the Third Five – Year Short Term Plan (2001/2002 – 2005/2006) to reduce budgetary deficits, to reduce the inflation rate, to pare down the current account deficit, etc., suggest that the authorities are aware, however vaguely, of the need establish macroeconomic stability and undertake structural reforms. Then again, the Thirty Year Plan (2001/02-2030/31) also indicates that the authorities are quite serious about fixing the economy and catching up with its neighbors. For example, the Thirty Year Industrial Development plan envisages a stage of development in Burma that will: I. be at the same level as fellow ASEAN countries by the end of the second 5 Year Plan; II. be on a similar status as advanced Asian countries, like Japan by the end of the 4th 5 Year Plan; and 3 III. catch up with the industrialized countries by the end of the 6th 5 Year Plan (2030). The words “fixing the economy” in italics above is used by us because there is no way that the 30 year vision of the leadership can be realized simply by a wave of the magic wand and without repairing a badly damaged economy. But then again, recent events cast 1

World Bank, 1999, August, p.9. Vicky Bowman, “The Burmese Patient.” Mimeo. August 2006. 3 Myanmar Industrial Development Committee, Industrial Development of Myanmar: Thirty Year Plan 2001/022030/31. (Yangon, Government of Myanmar, January 2002 [in Burmese]). 2

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serious doubts about the seriousness of the authorities regarding their good intentions. For example, although the budgetary deficit did fall to 2.3 % of GDP in 2002/03, due mainly to increase in various kinds of taxes, it widened again to 6.0% in 2004/05. But this did not deter the government from raising the pay of civil servants by a big chunk or moving its administrative capital from Rangoon to Naypyitaw at great costs. Apart from the usual double- digit GDP growth officially proclaimed, the only other objective of the 3rd 5 Year Short Term Plan achieved was turning the current account deficit into surplus. And that was by pure chance being due to the discovery and sale of natural gas to Thailand. Given the secretive nature of military regimes, past and present, it is possible of course that the planners did not know about the plan to raise the pay of civil servants or the decision to move the administrative capital from Rangoon to Naypyitaw when they were formulating the plans. On the other hand, it is possible that the regime is made up of at least two groups of people with varying degrees of authorities those who see a sick economy as being sick, and those who do not see the economy as sick, but with the former group pretending not to see anything wrong. Whatever may be the case, if the GOM goes on making uncoordinated, ad hoc, erratic, and contradictory policies as in the past, there is little hope for the economy to do well let alone catch up with its neighbors. It is most likely that the economy will hobble along at some 3 to 5 % yearly rate of growth. In such an event, EU style ASEAN Economic Community (AEC) by 2020 (characterized by free of goods, services, investment, capital, and skilled labor) poses a real danger for a backward country like Burma. As noted by one knowledgeable scholar, “It will lead to economic polarization – the most talented and enterprising Burmese people, together with businesses and capital will leave the country to take advantage of better opportunities and higher rewards in the more advanced member countries “(Myint, 2006, p 28). On the other hand, the gas boom could be a silver lining in the cloud. Moreover, the sale of hydro electricity to Thailand in the near future could also be another silver lining. Then also there is also talk of setting up a Special Economic Zones (SEZs) in Thilawa with China, and along the Burma – Thai border with Thailand in the near future. If these bonanzas could be used wisely, then future prospects for Burma do not look all that bleak.

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Economic Sanctions

VII. Economic Sanctions: Until this point, analysis of Burma’s economy has revealed persistent and ubiquitous failure which is largely the result of poor policy. The reasons for such abysmal trends might seem to be that the SPDC has unfortunate luck, or that they are the victims of circumstance, or perhaps, they are simply inept when it comes to matters economic. Undoubtedly, each of the aforementioned reasons might be contributory. However, as the forthcoming section will reveal, the SPDC’s gross mismanagement of the Burmese economy is the result of rational self-interest. Their manipulation of the economy (with wanton disregard for the larger consequences) is driven by their interest in expanding their military might, as well as mulcting great fortunes for their leaders. Through the creation of conglomerate institutions such as the Union of Myanmar Economic Holdings Limited (UMEH) and the Myanmar Economic Corporation (MEC), the generals of the SPDC have found ways to pull money out of the economy, and put it in their pockets. Thus, as it will be revealed, the SPDC sometimes chooses policy that will help them to drum up cash through the UMEH or MEC vehicles, rather than making policy decisions that are best for the economy as a whole. Setting the StageDiscussing the topic of economic sanctions invariably generates impassioned responses from both economic and political camps. For neo-classical economic purists, the idea of sanctions – as compared to the preferred free-market scenario – is diametrically opposed to their institutional thinking. From the political side, though sanctions do not necessarily run contrary to any ideological currents, they are invariably wielded against one group, by another, and thus cause great angst. Fielding the above concerns, it would initially seem tenuous, if not outright suspect, that an economic report would contain a section on the viability of sanctions as a vehicle for economic change. The purpose of any economic research undertaking is (ideally) to present objective information to provide the most accurate and useful tools for the creation of better policy. Thus, it is not the place of an economic research paper to suggest a policy route as it pertains to a political situation, or ideological standoff. Such value judgments are best reserved for those who make policy decisions. However, in the case of a country that is experiencing prolonged economic malaise due to the intractability of a repressive government, an honest and objective assessment (coupled with normative insights) of any policy option becomes germane. Due to the uniquely contentious situation in which the nation of Burma finds itself, many have proposed (and others have opposed) the idea of economic sanctions to elicit change. Where governmental controls might typically provide a remedy, Burma faces increased challenges. If one cannot rely on genuine economic progress to result from a government that systematically misrepresents the interests of its people, then the ordained rules of convention provide implausible and ineffective solutions. The intent of the following section will be to explore the idea of sanctions objectively, with regard to the specific dimensions and needs of the Burmese economy.

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Arguments Against SanctionsWith varying degrees of severity, governments which mistreat or abuse their nations’ workforces exist in every hemisphere of the globe. The stance against utilizing economic sanctions as a means of dealing with this problem commonly takes on a “don’t throw the baby out with the bathwater” approach. The objection is that economic sanctions will hurt workers in addition to the delinquent government, which is the intended target. Another frequently employed argument, with particular salience to Burma, is that economic sanctions will only push an already isolationist-favoring government back into secrecy, and cause greater hardship. This has been the driving argument behind ASEAN’s “constructive engagement” and its more recently touted, though functionally identical “flexible engagement.” The idea is that economic engagement, rather than isolation, will provide the incentive for Burma to listen to outside voices for change. While both arguments present seemingly valid concerns for the welfare of the people of Burma, a closer inspection of the makeup of Burma’s economy and trade habits will likely assuage such concerns. Both of the key arguments against sanctions: 1) that economic sanctions will hurt the people of Burma as well as the corrupt government; and 2) that sanctions would remove much more effective inroads to dialogue, through trade and continued investment, will be addressed. Burma is UniqueWhen making a statement about the effectiveness of economic sanctions, it is important to identify both what the intended target is, and who will be affected in the process. Ideally, sanctions would only reach their intended target, and leave the populace of Burma (who is already being victimized) unharmed. Holistically, this is impossible, yet there becomes an increasing need to make an economizing decision. That is to say, we must ask: what are the net benefits and losses from imposing economic sanctions? If we can do more good than harm, especially in consideration of the long-term benefit of freeing a country of oppressive leadership, then sanctions make economic sense. Mitigating the negative effects of sanctions that would be felt by the citizens of Burma must be a priority. Here it becomes important to point out that economic sanctions will primarily affect the formal sector, while leaving the informal sector largely unscathed. Given the heavier reliance of industries in this [formal] sector on external relationships, sanctions will have a major impact – cutting off access to finance, technology and markets – and thereby severely disrupting operations. It should be noted, moreover, that most of these negative consequences will largely remain confined to this sector alone, with little contamination of the informal sector…...there are few systematic links between the two sectors allowing for the transmission of these negative effects on a wide scale. Further, it should also be pointed out that the burden of such sanctions will not be borne by the vast majority of ordinary people, whose lives revolve around the informal sector. Estimates of the negative effects of sanctions on employment within the formal sector tend to vary considerably, ranging from a low of 75,000 workers (Altsean 2003) up to more than 150,000 (International Crisis Group 2004). While the impact on those affected certainly should not be dismissed lightly, when set against an overall population of nearly 50 million or a labor force of more than 25 million --- (World Bank 2004).1 1

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Oehlers, Alfred. “Sanctions and Burma: Revisiting the Case Against.” Burma Economic Watch, 2004.

Accounting for the high-end estimate of formal sector employment, at 150,000 there would still only be 0.6% of Burma’s workforce affected. Certainly, some informal sector workers will be affected, insofar as their jobs are connected to parts of the formal sector. Fortunately, very few informal sector jobs are connected to the formal sector. Most of the industries in the formal sector are independent of any internal supply from Burma, which would indicate informal sector connectivity. In fact, 98% of all foreign investment in Burma went to the oil, gas, and power sectors in 2006-2007, according to the Ministry of National Planning and Development. Oil and gas investors were largely from the United Kingdom - $240.7 million, Singapore- $160 million, Russia, and South Korea. China also invested $281.2 million, which all went to the power sector. The remaining 1.6% of foreign investment ($12 million) went to fisheries.2 Cutting off all future investment in the energy sectors, and sanctioning that which is currently produced by companies within Burma, will have a devastating effect on the SPDC’s revenue stream. Concurrently, these industries employ very few Burmese people (and according to innumerable ILO accounts, actually force people to work for free), so sanctions would have little negative effect on the population of Burma. Additionally, little if no informal sector connectivity results from this industry presence. Referring to the earlier discussion of Burma’s workforce breakdown, it becomes quite clear that formal sector employment represents a minimal portion of the total workforce. With the informal, unemployed, and subsistence agricultural portions representing a combined 90% of the total workforce (see Graph 8), it is logical to utilize economic sanctions against formal sector industries (such as gas and oil) which represent highrevenue for the SPDC. Economic Engagement, Where the Money GoesMany have argued against economic sanctions on the merit that they remove viable inroads for dialogue and positive motivation which would otherwise exist through investment. “Everybody is entitled to do what they want to do,'’ ASEAN’s Secretary General Ong Keng Yong said referring to Burma. “If you have a problem child in the family, what do you do? Do you send the child to a sanatorium? ASEAN’s tradition is 3 different. '’ The ASEAN approach to dealing with injustices within Burma has always been to maintain viable economic relationships with Burma, ostensibly to maintain a vocal influence with the SPDC. Unfortunately, despite increasing investment and trade with Burma, ASEAN’s economic engagement with the regime has done nothing to spur positive change, and in fact the situation is getting worse. The SPDC continues to utilize forced labor, allow its army to 2 3

“Foreign Investment in Burma Dominated by Oil, Gas, Power.” The Associated Press, Nov. 27, 2007. Cherian, Thomas. “Asian Leaders, Seeking Myanmar’s Gas, May Go Soft on Sanctions.” Bloomburg, 2007.

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abuse and terrorize citizens, and force citizens to work as porters for the military. All of these and many other atrocities are happening in record numbers, despite the recent focus on increased economic engagement. The June 2007 report to the International Labor Conference (ILC) in Geneva documents 3,405 cases of forced labor in Burma only since March 2007. To get a sense of the scale of the problem, consider that the actual number of instances of forced labor will be larger—much larger—than the 3,405 that was documented by an organization which cannot work openly in a police state like Burma. The unfortunate reality is that economic engagement, rather than sanctions, keeps a constant flow of money heading into the SPDC’s coffers. To get a sense of where this money ends up, one need only look at how the regime is spending its revenues. Military spending represented 53.07% of total expenditures in Burma for 2002, which outpaces 4 the next nearest member of ASEAN by over 30%. Compare Burma’s excessive military spending to that of infrastructure, education, and health, all of which languish at or near the bottom among other ASEAN members. Pinpointing the DeceptionClearly, there is no mistaking what purpose the SPDC intends for the money it gains from trade, and outside investment. However, there is still a very critical part of the sanctions discussion which needs to be heard. There remains an inextricable piece of evidence which shows how the SPDC would be dealt an economic deathblow, while regular citizens would mostly avoid harm from the utilization of sanctions. The SPDC has manipulated internal industry and trade through the development of the Union of Myanmar Economic Holding (UMEH), the Myanmar Economic Corporation (MEC), the Union Solidarity and Development Association (USDA), and many other government-contrived, subsidiary groups. “The creation of United Myanmar Economic Holdings (UMEH) and the Myanmar Economic Corp (MEC) allowed the military establishment to lock its claws around whatever new business sectors arose.”5 Through the UMEH, MEC and USDA, the military regime ruling Burma has been able to dictate what companies or individuals are able to export, and has levied high commission fees (around 10%) on both imports and exports. The myriad list of transaction fees, and unofficial bribes from those who had to ‘make a deal’ to gain access to the market place 6 has greatly curbed would-be economic activity. As Daw Aung San Suu Kyi, the leader of the legitimately elected NLD government of Burma has said: 4

Burma sources: Defense Budget 2003-2004, Union of Myanmar, Printing & Publication Enterprise, Yangon, 2003 April. [Note: Calculated estimation based on Statistical yearbook 2002-(state administrative organizations), CSO, Burma & Defense budget 2003/04, Burma by Economics & Research Dept, FTUB] 5 Barnes, William. “Burma in General Disarray; Reform Falls Victim to Military Junta’s off-the-cuff Policy Decisions.” South China Morning Post, June 28, 1999. 6 Special Report: “Ready, Aim, Sanction.” ALTSEAN, November 2003.

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“Burma itself is like a huge prison with the military dictatorship holding the keys and locking us away from freedom. We would like to call on all of you to help us open the door of our prison … Economic sanctions are good and necessary for the fast democratization of Burma. We would like the European Community, the United States and the rest of the world to be aware that sanctions do help the movement for democracy in Burma and …unilateral sanctions are better than no sanctions at all.”7

It is evident that a very small percentage of the Burmese workforce is employed in the formal sector. Concurrently, few citizens would in any way find greater (albeit temporary) personal economic hardships, as a result of outside sanctions against Burma. Most people in Burma find themselves either: in the informal sector; in a subsistencedriven agricultural sector; or simply unemployed. In most any sector, few people can succeed as the SPDC has created such an abysmal market environment. Ironically, the profligate greed of the SPDC has made a perfect storm scenario, wherein the regime actually would receive the majority of the intended effects of economic sanctions. By keeping so many of its citizens out of the formal sector through its own disastrous economic misdealing, the SPDC has effectively made itself a very vulnerable – and almost exclusive – target for economic sanctions. While many might hope for reform from the SPDC, their intent is quite clear, and their agenda is unwavering. In the context of Burma’s eventual economic success, sanctions (as a catalyst for removing the current corrupt regime) are a vital first step. The European Union (EU) has urged the new government of Thailand, which is due to become chairman of the ASEAN group in July, to work with the international community to promote human rights, democracy and peace in neighboring Burma. The EU wants to cooperate with Thailand's government to promote a positive solution in Burma. Thailand, as the next chairman of ASEAN, could play a major role in moving Burma towards democracy and human rights as the group has adopted a new charter promoting both these important issues. Even where Burmese workers have recently lost their jobs on account of US sanctions, most have come to Thailand seeking new jobs like garment factory workers and labor at seafood products. International trade patterns show the importance of Burmese migrants to the Thai national economy. Labor intensive products from SMEs (Small to Medium Enterprises) such as garments and canned food, the majority of which are run by Burmese migrants, form the top ten export sectors of Thailand. (Look back Chapter III, migrant contributes national income account).

7

A quote from Daw Aung San Suu Kyi, the leader of the National League for Democracy, which won over 80% of the vote in the fair elections held in 1990. The NLD was not allowed to take office, as the SPDC refused to hand over power to the rightfully elected government, until such time as it revises Burma’s constitution. The redrafting process of the Burmese constitution has come under great scrutiny because the SPDC has been dragging the process out through a bogus National Convention, wherein only what the SPDC has a meaningful say in the drafting process. Additionally, the SPDC has not hidden the fact that it will use the newest constitution as a means of hardwiring a permanent military presence in the civilian government. Basically, the SPDC’s constitution will ensure that the military always has a controlling stake in the country, and cannot be outvoted, as had happened in 1990.

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Impact beyond Sanctioned Burma (Sanctions are a non –violent method.) “Economic sanctions will not hurt the people of Burma but they will really hurt the corrupt government.” We can analyze this assumption with two hypotheses. The alternative action is foreign military attack, and nobody and no country likes this action. "As one element of our policy to promote a genuine democratic transition, the US maintains targeted sanctions that focus on the assets of regime members and their cronies who grow rich while Burma's people suffer under their misrule," Bush said in a statement. In the past six months (August 2007), the US has tightened existing economic sanctions and levied new sanctions against the dictators and their financial backers. It has imposed an expanded visa ban on those responsible for the most egregious violations of human rights, as well as their family members. Cronyism and corruption have a corrosive effect, disadvantaging innocent Burmese businessmen and entrenching a military group that pursues oppressive and destabilizing politics, the victims of which include pro democracy activists (NLD). The considerable role that Dictator Than Shwe’s family, their inner circle and the Burmese security services exert over the economy, coupled with the absence of a free judicial system and the lack of transparency, concentrates wealth in the hands of certain classes and individuals. In turn, these classes and individuals depend upon this corrupt system for their success and fortune. Particular Burmese business men without these connections are unable to improve their economic standing. Roughly four groups of existing people are clearly marked in Burma: 1) Military authority group - small proportion of country population – grow rich 2) The tycoons –small proportion of country population – grow rich 3) Ordinary businessmen –small proportion of country population – can operate only with uncertainty for the long term and fear for the future 4) The public – majority group - staying with low living standard The new sanctions target the mayor of Rangoon and the ministers of electric power, health, education, industry, labor, science and technology, commerce, national planning and economic development, finance and revenue, telecommunication and construction. These are the ones practicing corruption. For these reasons, the US action and EU action on Trade and Investment sanctions, arms embargoes, travel restrictions, military or naval blockade and the like – which are an essential ingredient of diplomatic pressure, come as the Burmese military economy is vulnerable. Oil production is starting to fall, with revenue from oil exports up till now accounting for as much as half of the military government’s budget. The effects of current sanctions might be insignificant, but only if the regime were economically competent. For nearly a decade sanctions have also targeted several businessmen and business entities close to Dictator Than Shwe and other hard-line military leaders.

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1) Tay Za, the CEO of Htoo Trading Company and the owner of Air Bagan operating with airbus Singapore, Kumming Seoul (2007). Exporting timber and gaining access over to large areas of virgin forest. He created Myanmar Avia Export, Burma’s sole representative of Russia’s export Military Industrial Group known as MAOP and of the Russian helicopter company Rostvertol. When street demonstrations started in late 2007, Tay Za asked his staff to keep an aircraft on standby at Rangoon airport. 2) Htay Myint, the chairman of the Yuzana Company: involved in Agricultural projects and has been accused of confiscating land from farmers and ethnic groups. 3) Khin Shwe, the CEO of Zaykabar Company,who hired a US PR firm, Bain and Associates Inc, in Virginia, in 1997 to promote a favorable international image of Burma. He was also a member of the junta’s National Convention who actively supported the regime’s seven –step “Road Map to Democracy”. His daughter is married to a son of Shwe Mann, the No.3 man in the junta. 4) Tun Myint Naing, aka Steven Law, the son of former drug kingpin Lo Hsing Han, ( Lo Hsing- Han is a key founder of the Golden Triangle opium and heroin trade in the late 1960s and early 1970s and is also wanted in Thailand – for a notorious case involving kidnapping and murder as well as drug trafficking). He is the managing director of Asia World Co.Ltd and Golden Aaron Pte.Ltd., sharing contracts between MOGE (Myanmar Oil and Gas Enterprise) and CNOOC (China National Offshore Oil Company). 5) Chit Khaing, the founder of Eden Group Co, was also involved in building the new capital and his company runs several hotel and construction projects. 6) Zaw Zaw, the director of Max Myanmar, son of Minister Aung Thaung, close friend of the grandson of the Dictator, chairman of Myanmar Football Federation & Tennis Federation. His company was involved in building the new capital, Kyatpyay. He runs IGE Pte.Ltd 7) Kyaw Win , founder and chairman of Shwe Thanlwin Co 8) Nay Win Tun, managing director of Ruby Dragon Jade and Gems Co 9) Aung Ko Win, a former school teacher, closely connected to Maung Aye, the No 2 man in the junta, president of Kanbawza Bank and involved in Kanbawza Hospital as well as agricultural businesses like Myanmar Billion Group. 10) Aung Thet Mann, the owner of Ayer Shwe War Co; son of Shwe Mann, he was awarded the first rice export license to Bangladesh and Singapore. 11) Michael Moe Myint, managing director of Myint & Associates Group Co 12) Serge Pun, Chairman of the multinational SPA Group and Rangoon Yoma Bank. 13) Eike Htun, Owner of Asia Wealth Bank, and Olympic Construction. 14) Maung Weik, founded Maung Weik and Family Co, the biggest importer of steel and gilding glue—used in the building and maintenance of Burma’s many pagodas. He also speculated heavily in the futures markets (beans and pulses) for several years. He stirred up controversy in 2004 with his purchase of 44 acres of Rangoon’s Hlaing Campus (formerly Regional College No. 2). Former university students and faculty were resentful of his plan to build a housing development on the site. 15) Minister Aung Thaung & his son – in control of UMEHL (Union of Myanmar Economist Holding Ltd) since 1994. They also tried to run Myan Gon Myint Co Ltd – investing and controlling import automobile licenses. Automobile prices in Burma are among the highest in the world. A new Toyota Land Cruiser costs around 400 million ks (about US $ 312,000), five times the website list of US $63,000. It is realized that the automobile business is an easy way to make money. The cronies have hard currency and can deal with special ways of importing the Toyota Land Cruiser. High ranking officials getting 150 million ks (US $117,000) for issuing licenses pocket about half that.

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Hypothesis ONE: Sanctions will not hurt the people of Burma We do know that sanctions can have an impact, that they help curtail activity and can help isolate the junta, which is part of getting them to recognize that they need to open up. The junta will never change unless the generals and their families are hurt. Everybody from Burma welcomes any change. Most Burmese people like sanctions because they do not affect them. The gap between the haves and have-nots has grown so wide that there are only two classes in Burma. We should refer back to the definitions of sanctions we gave in paragraph one above. The junta does not understand that military strength, if needed, must be based on economic strength. Sanctions have other uses such as helping to keep fickle international opinion focused on Burma. The regime will resist diplomatic pressures to reform. The last alternative to sanctions is the military strike but we don’t like it because we are people who support democracy and humanitarian programs and like to save innocent lives. Hypothesis TWO: Sanctions really hurt the corrupt government. Banks in Singapore have stopped accepting Letters of Credit (LC) from Burmese banks since the enactment of tough USA sanctions of financial services. A letter of credit authorizes a transfer or withdrawal from one bank to another and is an important method for businessmen to get money out of Burma. The state- run Burmese Banks at the center of the problems include the Myanmar Foreign Trade Bank (MFTB), the Myanmar Investment and Commercial Bank (MICB) and the Myanmar Economic Bank (MEB). The banks are the only institutions that handle foreign exchange transactions in the country. All Burmese citizens and foreign companies who deal in other currencies have to deposit their money in one of these three banks. Those businesses which deal with the dollar have stalled for the time being. Businessmen are trying to find a way out of the problem. The banks like MFTB don’t know what to do, that’s why those businesses have stopped trading. Credit card transactions are also barred, and Burma’s top hotels currently only accept cash. Targeted sanctions should be gradually focused on restricting the access of military, state and crony business enterprises to international banking services, including the holding of foreign bank accounts and the use of the Belgian based SWIFT system for bank transfers. In addition, sanctions should include limiting the access of selected generals and their immediate families to personal business opportunities, health services, cars, shopping and foreign education for their children, including in regional countries. (ICG Report) Another avenue of approach concerns the Yuan (Renminbi), whose revaluation has had a great impact on the Burmese dictators’ foreign accounts. In 1994 the Chinese unified the exchange rates and adopted a managed floating foreign exchange rate regime based on market conditions, but to help its neighbors overcome the Asian bank crisis current at time it fixed the Yuan at 8.28 against the $. This helped anchor the struggling Asian economy.

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Targeted sanctions should be gradually focused on restricting the access of military, state and crony business enterprises to international banking services, including the holding of foreign bank accounts and the use of the Belgian based SWIFT system for bank transfers. In addition, sanctions should include limiting the access of selected generals and their immediate families to personal business opportunities, health services, cars, shopping and foreign education for their children, including in regional countries. (ICG Report) Another avenue of approach concerns the Yuan (Renminbi), whose revaluation has had a great impact on the Burmese dictators’ foreign accounts. In 1994 the Chinese unified the exchange rates and adopted a managed floating foreign exchange rate regime based on market conditions, but to help its neighbors overcome the Asian bank crisis current at time it fixed the Yuan at 8.28 against the $. This helped anchor the struggling Asian economy. On July 21, 2005, China announced that it was de-pegging the Yuan from the dollar and shifting it to a market- based exchange rate regime with a basket of foreign currencies. For these reasons and the fact that the Yuan had become hard currency, the Burmese military now tries to save Yuan instead of $. Because of tightening of sanctions recently, the black market rate for the US $ is fluctuating in Rangoon – falling demand for $ resulting in lower prices for some foodstuffs, such as rice and cooking oil – the falling prices putting more food on Burmese dining tables. Seafood such as prawns and crabs are again affordable for many people. (source from Rangoon business communities). The present section reexamines the above mentioned paragraphs to the context of "Impact beyond Sanctioned Burma". Beyond Sanctioned Burma

1) $ price goes down 1180-ks/$ (source on :26.02.08)

2) Prices of rice, meat and fish go down (source on: 19/12/07)

3) Traveling abroad restrictions & diplomatic pressure

Hypothesis I

Hypothesis II

Ordinary People (No effect)

Military and its Cronies (Directly effect)

Not holding $ Money Nothing to change

Holding $ Money Change of idea for holding FE (Now they wanted to hold Yuan) as Chinese currencies have come to be strong.

Not so bad for survival ( look back at table 3 of this report)

for dream only

Unresponsive to rice price fluctuations because of their tendency to consume luxury and imported goods Further study for their dependent children & effect on their spouses’ daily/weekly shopping abroad

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7) Gems and Jade Trade blocked

Domestic price no change

Export sales $ 300 million for 2006-07 but did not announce for 2007-08. Expected amount $ 150 million

8) Import

nothing

total impact- the dictators like to depend on foreign facilities and medical care – paid for from the national budget.

9) Tourism (Since 1997, when Asian financial crisis hit, 5 star hotels have remained empty)

nothing

totally impact – because key junta associates & their cronies own the top hotels

10) ASEAN/ China India/ Russia

no change

11) UN/INGOs

no change but supporting democracy for the people

12) Military strike Other alternative of Sanctions

not willing

a) non interference policy b) new ASEAN chair could play a major role promoting the new charter a) strong influence of UNSC b) on 11/01/08 the military circulated notes (no permission from ministry of defense, no travel) on INGOs to minimize the conduct of surveys – fearing leakage of true data aggressive and stimulated civil wars already

Notes: 1) Extravagant building while the whole country suffers an acute economic crisis -According to a municipal source from inside Burma on 22/02/08, the municipal department began plotting land, (4,000 plots) for a satellite town for new capital (Extension to be built near the new capital’s Chin village near Ywartaw Township, 20 miles northwest of Kyatpyay Naypyitaw – 80 sq feet is being sold for 2 million ks [$ 1,680] a 100 square foot plot goes for 3 millions ks [2,520 $] and 120 sq ft sells for 4 millions ks [$ 3,360] People are being encouraged to buy plots in the new suburb and are guaranteed proper electricity, water supply and telephone television connections). [Singapore elder statesman Lee Kuan Yew has scrutinized Burma’s military junta, saying decisions such as the building of a new capital from scratch were irrational, The Straits Times news paper reported on 08/01/08. He was speaking it at the dinner hosted by the Institute of Southeast Asian Studies on 07/01/08. Lee also said the military rulers were “people with very fixated minds – quite convinced that they will have the natural resources to weather any sanctions. Building a new capital from ground zero, what I ask myself, what rational government would do this” – The members of ASEAN who could influence them will be Thailand, and beyond that China and India..] 2) They can only withstand sanctions imposed by US and Western democracies because gas revenue in Burma from Thailand was up $ 2.16 billion in 2006. In part due to higher prices globally, revenues are likely to have further increased in 2007 as world prices have surged.

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Conclusion

VIII. Conclusion: As we have seen in the preceding sections, Burma faces a host of challenges for narrowing the development gap at the regional level among ASEAN countries and at the national level among states and divisions. In theory, it is unlikely to narrow the regional gap from the short or medium term perspective. But according to UNDP, the development gap among countries can be bridged, in spite of increasing development gaps among countries in the world (The Human Development Report, 1996). The possibility of narrowing the gap at the national level is more immediately achievable, than at the regional level, by introducing economic reforms, institutional reforms, administrative reforms, human resource development programs, and poverty reduction programs. Once Burma is able to exact political change, and follow up with viable and sustainable economic change, the discussion of strengthened regional integration can begin. To narrow the development gap at the regional level there needs to be not only policy reform, but also strengthened regional integration. For that ASEAN has formulated important programs that could provide the basics for strengthening integration. These include ASEAN Vision 2020, the Hanoi Plan of Action, Hanoi Declaration on Narrowing Development Gap for Closer ASEAN Integration, and Initiative for ASEAN Integration 1 (IAI). Moreover, at the economic ministers of ASEAN’s 10 member nations (August 22-23,2006) the ministers agreed to move the deadline for establishment of the proposed 2 ASEAN Economic Community (AEC) forward by five years to 2015. This means that it has become even more urgent for the CLMV countries, with the possible exception of Vietnam, to liberalize quickly, to restructure their economies, and to develop fast. However, it is vitally important that Burma take the necessary steps to ease itself and its will-be fledgling markets into any sort of regionally or globally integrated systems. Infant industry will be key contributors to very vital economic and class stratification within a reformed Burma. The value of protecting this homespun manufacturing will prove immeasurable. Too much immediate focus on liberalization will likely relegate Burma to ‘bottom of the barrel’ status. In such a scenario, domestic markets, unprepared for steeped international competition will be held down, and never truly have a chance to take-off. To achieve successful development going forward, Burma will have to have meaning political reform, which in turn, needs to follow with appropriate economic reform. Following the latest fashion, the so-called “Barcelona Consensus”, Burma could begin by focusing on one or two binding constraints to development. What constitutes ‘binding constraint’ for Burma is however, a contentious issue. At the top of our list would be “low levels of private investment and entrepreneurship” which in turn is caused by the high cost of finance. As in the decision tree depicted by Hausmann et al., the high cost of finance in Burma is in turn the caused by ‘bad international finance’ and ‘bad local finance’ (Hausmann et al. 2006). Finally, dual (or multiple exchange rate) is the 1 2

For details, see Mya Than, 2005. The Myanmar Times, August 28 – September 3, 2006. 83

underlying factor behind ‘bad international finance’, while ‘bad local finance’ and poor intermediation are amongst the major causes of low domestic savings and investment. As we had seen in the foregoing, the financial sector of Burma, as indicated by M2/GDP ratio, had in fact regressed since 1998; inflation hovered around 25 percent per percent per annum since the late 1980s; savings and investment remain stunted at just over 10 % of GDP; and the dual exchange rate continues to poison the investment environment. The dual exchange rate system in Burma will be analyzed in more detail in our forthcoming policy paper: "The Dual Exchange Rate System and State Level Corruption in Burma". Still some might question the ‘high cost of finance’ given the relatively low nominal rate of interest of around 15 %. To answer this question very briefly, only the privileged few have access to this credit in the formal financial sector while the vast majority of small and medium enterprises (particularly farm family households) have to cope with usurious interest rates of 5 percent or more per month in the informal sector. So, there can be no doubt that the cost of finance and lack of development of financial intermediation constitute one of the most important short-term binding constraints inhibiting the growth of its economy. We believe that the development of the financial sector will have the highest growth payoff. Hence, we would recommend the development of the financial sector as the most important short to medium term reform measure for its economy. But, it should be remembered that while promoting the development of the financial sector, inflation needs to be curbed and dual exchange rates need to be unified as even a strong financial system cannot protect itself against high inflation and inappropriate exchange rates. Then, once some success is achieved it may become more politically feasible to introduce other long-term measures for sustainable development. This, to us, means establishing what may be called the ‘development fundamentals’. These include: (i) (ii)

(iii)

(iv)

(v) (vi) 3

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Political commitment to Development, i.e., (Primacy of economics for the country’s welfare over politics); Good governance, good public administration practicing fiscal prudence, and establishing conditions (such as ledge framework that protects property, enforces contracts) needed to stimulate private initiatives, Continuous investments in both physical and social infrastructures, such as telecommunications, transportation, research and development, education, technical and management training and retraining, and so forth; Consistency of policy, such as freedom from sudden or arbitrary changes in tax system and other forms of intervention that make profit uncertain or precarious: A relatively independent central bank to check excesses and ensure rational monetary policies; and 3 Competent leadership with good character.

Ng Chee Yuen and Sueo Sudo edited, Development Trends in the Asia-Pacific, ISEAS, 1991.

The implication of the above is clear. Sound economic development cannot depend solely on markets or solely on government. Both effective market incentives and social programs supporting health, education, and infrastructure and so on are usually required. That is to say, all persons who are citizens by birth should be insured by the state leaders so that from birth to death, also should regard to whom those are children or, ill or crippled, or incapacitated for work. Over the past year, Burma has seen amazing events unfold. Citizens took to the streets in the ‘Saffron Revolution’ in response to outrageous economic policies which hurt all families. According to the Economist Intelligence Unit, Burma’s inflation rate approached 50 percent at the end of 2007. As energy, food, transportation cost went higher, causing money to loose value daily, people rightly responded with outrage. Yet, one thing remains certain: the fate of Burma’s future cannot be determined by civic activism alone. People left with no better option, took to the streets, risking their lives and the lives of their families to send a message to the world. The message was simply ‘help.’ In an ever-integrating global community, how we respond to the needs of our neighbors will define each of us, as nations, and as individuals. For the people of Burma, the size and might of the SPDC and its army, the Tatmadaw, is too great to make fighting an option. For those around the world, economic sanctions, coupled with political pressure, represents all the ‘muscle’ that is necessary to free a nation from unrelenting brutality and help it to ascend to economic prosperity.

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Annex

ANNEX: One Saffron Revolution (a) Golden Revolution (Economic Protests in 2007 for Poverty Alleviation)

Inflation and unemployment are serious problems and can have devastating consequences if left unchecked. One only has to look at the Great Depression of the 1930s and it was effecting and was leading the Democracies in that period for the United States and Great Britain. The word "maladjustment" has come into popular use to describe economic, political, and moral difficulties that have arisen in Burma until now. The uncertainties of existence are not confined to the poor alone. The people of the middle and wealthy classes are each and every one of them subject to the same uncertainties in Burma today. A protest began on February 22, 2007 in the Thingangyun Township in Rangoon. It was led by a prominent group of about ten and ended peacefully after around seventy minutes. With slogans such as "Down with consumer prices!” it was one of the demonstrations in 2007 to challenge the dictatorship control and its mismanagement rather than its legal right to rule. As well as calls for lower prices, demands were made for improved health, education and better utility services. Protesters were arrested and released after signing an acknowledgment of police orders that they should not hold any future demonstrations without first obtaining official permission. Then, despite this, on August 15, 2007 the Burmese military dictatorship removed subsidies on fuel causing a rapid and unannounced increase in prices. The fuel is sold by Myanmar Oil and Gas Enterprise {MOGE}, a state- owned Fuel Company. The military dictatorship, which has a monopoly on fuel sales, raised prices from about $ 1.40 to $ 2.80 a gallon, and boosted the price of natural gas by about 500%. (While the IMF and World Bank had been recommending the lifting of subsidies for some time to allow for a free market to determine fuel prices, these organizations did not recommend removing all of the subsidies unannounced and without a stepped approach). The IMF reports that Chronically high inflation in Burma has soared to 35% a year, the highest in Asia,{ 50% rate of inflation at the end of 2007 by EIU } while its economy is slowing because of the poor management, poor investment & business confidence, the IMF also reported. In its annual evaluation of Burma’s energy –rich economy, the IMF called the Burmese economy’s medium –term outlook “poor”, forecasting slackening growth of 5.5% in 2007 and 4 % in 2008 where CIA forecasts it as of 3.4%). While Burma’s military rulers claim robust growth of 12.7 % last year, the IMF report called such an expansion "implausible", estimating 7 % growth, driven by rising natural gas exports and government construction projects such as the new capital city. "While the economy is growing modestly, per capita gross domestic product [of about $250] and other indicators of social well-being are significantly below those of other low-income countries in the region, and poverty is widespread", the IMF said in the assessment, a copy of which was obtained by the Financial Times.

89

The IMF team visited Burma in August, 2007 just weeks before mass protests triggered by a sharp rise in the government-set price of subsidized fuel. The report, completed after visited to Burma is not public as the regime has not approved its release by the IMF. The UN says most Burmese are struggling to survive, and that worsening hardship and rising prices were at the root of the recent protests. In its report, the IMF called for targeted subsidies to address "deteriorating social-economic conditions". The IMF said Burma could rein in inflation, and boost growth to 10 % a year, if it undertook reforms such as cutting unproductive state spending, unifying a complicated "multiple exchange rate" system ( see one footnotes 12 in Chapter III), and liberalizing agriculture to give farmers more freedom to grow and sell their crops. This increase in fuel prices led to an increase in food prices. The hikes hit Burma's people hard, forcing up the price of public transport and triggering a knock-on effect for staples such as rice and cooking oil. Pro-democracy activists led the initial demonstrations in Burma's main city, Rangoon. When about 400 people marched on August 19, it was the largest demonstration in the military-ruled nation for several years. Protests continued around the country. Numbers were small, but demonstrations were held in Rangoon, Sittwe and other towns. Soon afterwards, protesters took to the streets to protest the current conditions. In response to the protests, the government began arresting and beating demonstrators. The government arrested 13 prominent Burmese dissidents including Min Ko Naing, Ko Ko Gyi, Min Zeya, Ko Jimmy, Ko Pyone Cho, Ant Bywe Kyaw and Ko Mya Aye and Su Su Nyay. Later the most prominent demonstrator monk, Ashin Gambira aka U Sandawbartha was arrested in Sint Kine Province, where he had been a recluse for 3 months after the crisis. Among the 80 people the junta says it is still holding after the protests are 21 monks, including 27- year - old Ashin Gambira, a leader of the All- Burmese - Monks- Alliance which played a prominent role in the protests. The state newspaper “New Light of Myanmar” reported that these individuals' actions caused civil unrest that "was aimed at undermining peace and security of the State and disrupting the ongoing National Convention. The US condemned the arrest of these dissidents on August 22 with the State Department's acting spokesman stating ".The US calls for the immediate release of these activists and for an end of the regime's blatant attempt to intimidate and silence those who are engaged in peaceful promotion of democracy and human rights in Burma. It was calling on the regime to engage in a meaningful dialogue with the leaders of Burma's democracy movement and ethnic minority groups and to make tangible steps toward a transition to civilian democratic rule. The monks started participating in large numbers after troops used force to break up a peaceful rally in the central town of Pakokku on September 5. At least 3 monks were hurt. They gave the government until September 17 to apologize, but no apology was forthcoming. There were daily protests following the deadline, both in Rangoon and elsewhere, which got bigger by the day. Tens of thousands of monks and nuns were involved. The participation of the monks and nuns is significant because there are hundreds of thousands of them and they are highly revered. The clergy has historically been prominent in political protests in Burma. Their role in the protests has been

90

significant due to the reverence paid to them by the civilian population and the military. After these events, protests began spreading across the whole nation, including Rangoon, Sittwe, Pakokku and Mandalay. The AABBM (Alliance of All Burmese Buddhist Monks) has vowed to continue the protests until the military dictator is deposed. Analysts say the fuel price hikes were the last straw for the monks, who were witnessing the country's grinding poverty first hand. A group called the AABBM emerged to co-ordinate the protests, and on September 21 they issued a statement describing the military government as "the enemy of the people". The group pledged to continue their protests until they had "wiped the military dictatorship from the land of Burma", and called on people across Burma to join them. On September 22, around 2,000 monks marched through Rangoon and 10,000 through Mandalay with other demonstrations in 5 townships across Burma. (There are as many Buddhists monks as soldiers in Burma - an estimated 500,000 of each presently).Those marching through the capital chanted the "Metta Sutta" (the Buddha’s words on loving kindness) marching through a barricade on the street in front of Daw Aung San Suu Kyi's residence. Although still under house arrest, Daw Aung San Suu Kyi made a brief public appearance at the gate of her residence to accept the blessings of the Buddhist monks. In Mandalay, estimated to have 200 monasteries, monks were said to have told people not to join the protests, which ended peacefully. In the initial days of the protests, the public did not appear to be involved - commentators suggested that they were too scared of retaliation. But that gradually changed as the demonstrations grew in size. Footage of one protest showed people lining the route as the monks marched, forming a chain to protect them from any retaliation from soldiers. On September 24, thousands of people responded to a call from the monks and joined a massive protest in Rangoon. Key members of the opposition party, the National League for Democracy (NLD) also joined the protests, after initially distancing themselves from the action. On September 25, the junta threatened demonstrators with military force and placed army trucks at Shwedagon Pagoda, the assembly point for monks leading the protests. Despite this, 5,000 monks and laypeople still marched into the Shwedagon. Civilians formed a human shield around the monks. In all there were 50,000 protesters in Rangoon. Protesters bleeding from beatings by security forces were seen scattering and fleeing in Sule. Security forces were reported to be preparing to use insect spray to crack down on protesters. Eyewitnesses said fire engines and insect spray carrier trucks were seen near Theingyi market in downtown Rangoon At first, the country's military leaders held back, letting the protests continue. But after a week of increasingly large protests, they warned they were ready to "take action". A dawn-to-dusk curfew was introduced and hundreds of troops and riot police moved in to quell further protests. Despite a crackdown on the internet and mobile phone links to the outside world, television pictures showed police using baton charges and tear gas on monks and fellow protesters. At the end of the day, it was reported that the military group formed new regiments to crackdown on protesters.

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On the worst day of violence, September 27, the junta said 9 people had been killed, but the death toll is thought to be far higher. The AABBM recorded that 3 monks died and 9 monks are still missing in this demonstrations. 54 monks and 7 nuns were arrested .The list of these killed, missing or arrested is not complete, however, the Alliance stressed. In the evening, the Burmese state television reported that nine people have been killed in a force crackdown on pro-democracy protestors in Rangoon. It added that eleven demonstrators and 31 soldiers had been injured. The death of Japanese journalist Kenji Nagai on the streets of Rangoon in September demonstration was contributing to the tally. We join with international organizations in referring to the uprising as a Saffron Revolution (a) Golden Revolution (Economic Protests for Poverty Alleviation in Burma). According to sources close to the military dictator Than Shwe, he was directly commanding soldiers after several commanders refused to use force to crackdown on protesters. In an interview with the Financial Times, the UN's representative in Rangoon, Charles Petrie, said, "People came out (to demonstrate) because the pain they are feeling is too much - they are suffering". Petrie was expelled from Burma for telling the truth, which the military dictatorship tried to smother with absurd claims of its own. The authorities maintained that the monks who led the demonstrations were bogus clergy, and even accused the CIA of involvement. Barack Obama, Democratic presidential candidate and Illinois Senator also said the world had witnessed the images of Burmese Buddhist Monks as they courageously and peacefully demands democracy and the Burmese military dictator’s violent response. He was also pleased that the UN had dispatched special envoy Ibrahim Gambari to Burma and he had met opposition leaders. He urges all nations, including the EU and Burma’s neighbors, to cooperate in enforcing the financial sanctions the US has imposed. UN Secretary General Ban Ki-moon said on 10/03/2008 after returning his special envoy from Burma, Ibrahim Gambari, had not been able to achieve as much as he had hoped during his last trip to Burma. Still, he said, the UN would continue to press the military junta to move towards democratization. UN Expert, Paulo Sergio Pinheiro also reported on 05/03/2008 at the 7th session for Human Rights Council that some political prisoners are behind bars as of January 2008 in Burma, as the military junta accelerated rather than stopped unlawful arrests. In economic and social sectors as well, there have been "marked signs of deterioration," stated the study which also denounced "serious violations of medical neutrality". He also urged the junta to release all physically vulnerable political prisoners rapidly, saying it would be seen "as a good - faith gesture that would help to pave the way to democratization and reconciliation." (Dow Jones Newswires)

The year 2007, which saw protests by monks, nuns, students and democracy activists throughout Burma, was a prime example of how inflation causes unrest in Asia. “ - inflation has been a big cause of unrest in Asia many times in the past, most notably the 8-8-88 uprising in Burma and the 1989 Tiananmen Square demonstrations”{The Economist, February 2008}

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ANNEX:Two Table 7

ASEAN Statistics

Gross domestic product per capita in ASEAN, at current prices (nominal), in US dollars as of 30 January 2008 In US$; at current 2002

Country Brunei Darussalam Cambodia

Malaysia

2004

1/

17,157.5

18,707.7

21,863.2

308.4

347.9

390.8

970.4

1,112.9

1,163.0

368.9

424.7

487.3

3,899.5

4,154.7

4,876.7

135.6

219.5

193.3

955.3

971.5

1,039.4

21,098.3

22,066.4

25,355.4

2,020.4

2,264.8

2,604.1

439.8

488.7

555.2

1,211.2

1,333.1

1,468.0

1,546.6

1,693.0

1,868.7

358.1

421.9

460.7

2/

Indonesia Lao PDR

2003

3/

4/

5/

Myanmar

Philippines Singapore Thailand Viet Nam ASEAN ASEAN 5 BCLMV

6/

Sources:

6/

market prices 20061/

2005 25,744.1

30,159.2

450.6

512.2

1,280.5

1,639.4

508.7

612.8

5,250.4

5,890.5

199.4

208.6

1,157.1

1,348.6

26,864.3

29,499.6

2,823.0

3,289.0

637.1

724.4

1,603.7

1,898.8

2,037.4

2,424.2

520.6

588.9

ASEAN Finance and Macro-economic Surveillance Unit Database and ASEAN Statistical Yearbook 2006 (compiled/computed from data submission and/or websites of ASEAN Member Countries' national statistical offices, central banks, and other relevant government agencies IMF World Economic Outlook Database October 2007

Notes Data is computed by dividing GDP in US dollar term with the project mid-year population for a given year. Data in italics means has been revised from previous posting . 1/ Based on rebased/revised series per Brunei Darussalam submission as of 19 June 2007 2/ 2003-2006 data are based on revised series per Cambodia submission as of 16 & 25 July 2007. 3/ 2005 figure is revised while 2006 is the latest official data per Lao PDR submission as of 19 July 2007 (previous figure was based on IMF WEO Database growth rate) 4/ 2002-2004 figures are based on old series while 2005-2006 data are based on rebased/revised series per Bank Negara Malaysia Malaysia website as of 31 May 2007. 5/ GDP data from 2002-2005 is based on fiscal year from April to March of following year. Data for 2006 is derived using growth estimate from the IMF WEO Database October 2007. 6/ ASEAN 5 consists of Indonesia, Malaysia, the Philippines, Singapore and Thailand, while BCLMV is comprised of Brunei Darussalam, Cambodia, Lao PDR, Myanmar, & Viet Nam

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REFERENCES: 1) ASEAN Statistics, 2007. 2) Asian Development Bank (ADB). Asian Development Outlook, 2000 and Preceding Issues. New York & Oxford: Oxford University Press. 3) Associated Press. “Foreign Investment in Burma Dominated by Oil, Gas, Power.” November 27, 2007. 4) Associated Press. “Foreign Investment in Burma Dominated by Oil, Gas, Power.” Nov. 27, 2007. 5) ADB. Key Indicators of Developing Asian & Pacific Countries, Volume XXVI, 1995. New York & Oxford University Press, 1996. 6) Abel, Andrew B. and Bernanke, Ben S. Macroeconomics, Fifth Edition. 2005. 7) Altsean Key Issues – Economy. http://www.altsean.org/Key%20Issues/KeyIssuesEconomy.htm 8) Barnes, William. “Burma in General Disarray; Reform Falls Victim to Military Junta’s off-the-cuff Policy Decisions.” South China Morning Post, June 28, 1999. 9) Black, Michael and Couchaux, William. World Politics Watch: “Myanmar finds willing arms suppliers in energy-hungry neighbors.” January 2007. 10) Boot, William. “China’s Burma Trade Soars with ‘Cooperative Ties.’” Irrawaddy: Weekly Business Roundup. December 2007. 11) Bowman, Vicky. “ The Burmese Patient”, mimeo, August 2006 12) Bradford, Wylie. “Purchasing Power Parity (PPP) Estimates for Burma.” Burma Economic Watch. 2004. 13) “Burma in general disarray; Reform falls victim to military junta's off-the -cuff policy decisions” South China Morning Post (Hong Kong), June 28, 1999. 14) Central Statistical Organization (CSO), Report of 1997, Household Income & Expenditure Survey, Yangon: 1999. 15) Cherian, Thomas. “Asian Leaders, Seeking Myanmar’s Gas, May Go Soft on Sanctions.” Bloomberg. Wednesday November 21, 2007. 16) CIA Factbook. 2007 17) Central Statistical Organization (CSO), Report of 2001, Household Income & Expenditure Survey, Yangon: 2003. 18) Dow Jones Newswire. 19) FTUB Compiled Wage Data, 2007 20) Hausmann, Ricardo. “A New Approach to Economic Reform,” Finance & Development, March 2006. 21) Jagan, Larry. Asia Times: “Fuel price policy explodes in Burma.” Thursday August 23, 2007. 22) Jagan, Larry. “Economic Reform in Burma?” The Daily Star (Bangladesh). Tue 22 August, 2006. 23) Kudo, Toshikiro. Discussion Paper 38: “Stunted and Distorted Industrialization in Myanmar.” Institute of Developing Economies. October, 2005. 24) Maung, U Zaw Win. “The Government of the Union of Myanmar.” ASEAN Statistical Classification Workshop Hanoi, Vietnam. 10-14 June, 2002.

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25) MRT.Team. " Exchange rate between the US $ & Kyats. 1913 -1999", 2002. 26) Mya Than & Joseph L. H. Tan, (ed), Myanmar Dilemmas & Options: The Challenge of Economic Transition in the 1990s, Singapore, Institute of Southeast Asian Studies, 1990. 27) Mya Than 2005. Average monthly household income of kyats 10,000 is used for separating the two groups. 28) Myanmar Time News Vol.18, No.350 29) Myanmar Industrial Development Committee, Industrial Development of Myanmar: 30 Year Plan 2001/2 – 2030/31. (Yangon, Government of Myanmar, January 2002[in Burmese]) 30) The Myanmar Times, July 19- 25, 2004, August 28 – September 3, 2006. 31) Mya Than, Myanmar in ASEAN: Regional Cooperation Experience, Singapore: Institute of Southeast Asian Studies, 2005. 32) Myat Thein, Economic Development of Myanmar: Singapore, Institute of Southeast Asian Studies, 2004. 33) Myat Thein, “An Analysis of Current Economic Situation in Myanmar”, mimeo. June 2005. 34) Myat Thein, “Improving Domestic Resource Mobilization in Myanmar”, ISEA Working Papers, Economics & Finance No. 1 (99), January 1999. 35) Myat Thein & Mya Than, “ Transitional Economy of Myanmar: Performance, Issues & Problems”, In Seiji Finch Naya & Joseph L.H. Tan edited, Asian Transitional Economies: Challenges & Prospects for Reform & Transformation, Singapore: Institute of Southeast Asian Studies, 1995. 36) Myat Thein, “Pattern of Household Consumption Expenditure”, A Rejoinder, mimeo. 5 October 2003. 37) Myat Thein,” Exchange Rate Movements & other Matters”, mimeo, June 2004. 38) Myint , U, “Myanmar Economy: A Comparative View”, mimeo, July 2006. 39) Ng Chee Yuen & Sueo Sudo edited, Developmemt Trends in the Asia – Pacific, Singapore: Institute of Southeast Asian Studies, 1991. 40) Oehlers, Alfred. “Sanctions and Burma: Revisiting the Case Against.” Burma Economic Watch, 2004. 41) Special Report: “Ready, Aim, Sanction.” ALTSEAN, November 2003. 42) Shwe, U. H.: Country paper on Myanmar. Presented to an ILO/ARPLA/Turin Centre Regional Seminar on Labour Administration for Urban Informal Sector. Yogyaharta, Indonesia, February 4-8 1991. 43) Vicky Bowman, “The Burmese Patient.” Mimeo. August 2006. 44) Watkins,Thayer." Political and Economics - History of Burma", San Jose State University. Retrieved on 2006.2007.

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List of abbreviations ADB AP ASEAN CIA CLMV CPI CPEs CSO ESCAP EIU FAO FDI FEC FERA FTUB GDP GOM ICG ILO IMF ISEAS Ks MEB MFTB MICB MNCs MOGE NCUB NIEs PPP SLORC SPDC

Asian Development Bank Associated Press Association of Southeast Asian Nations Central Intelligence Agency Cambodia, Laos, Myanmar, Vietnam Consumer Price Index Centrally Planned Economies Central Statistical Organization, - Burma, - India Economic & Social Commission for Asia & the Pacific Economist Intelligent Unit Food and Agricultural Organization Foreign Direct Investment Foreign Exchange Certificate Foreign Exchange Regulation Act Federation of Trade Unions Burma Gross Domestic Product Government of Myanmar International Crisis Group International Labor Organization International Monetary Fund Institute of Southeast Asian Studies Kyats – Myanmar Currency Notes/Unit Myanmar Economic Bank Myanmar Foreign Trade Bank Myanmar Investment Commercial Bank Multinational Corporations Myanmar Oil and Gas Enterprise National Council of Union of Burma Newly Industrializing Economies Purchasing Power Parity State Law and Order Restoration Council State Peace & Development Council

UMEHL UMFCCI

Union of Myanmar Economic Holding Limited Union of Myanmar Federation of Chamber of Commerce & Industry United Nations United Nations Conference on Trade & Development United Nations Development Programme United Nations Children & Education Fund World Bank World Health Organization World Trade Organization

UN UNCTAD UNDP UNICEF WB WHO WTO

(A brutal military dictatorship)

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Prepared by -

Aung Thin B. Econ (CS), Dip. Ag. Econ (Aus), M.Phil (Economics) [email protected] David Osolnick Researcher on Trade in the US & Developing Countries. [email protected]

Language Editor - Ian Hollingworth Trade Unionist UK [email protected] Publisher -

Maung Maung General Secretary of NCUB General Secretary of FTUB [email protected]

Layout -

Khun Kyaw Ko Thet [email protected] www.ncub.org www.ftub.org