BURMA-ECONOMY: Under Shiny Surface, Rusting Rangoon is Going Bust

By IPS Correspondents Reprint | | Print |

Analysis - Simrin Singh

RANGOON, Nov 5 1996 (IPS) - Five years after Burma’s military regime opened up Rangoon’s long isolated economy to foreign investment, the roads in the capital are clogged with Japanese cars while numerous new five star hotels dot the city skyline.

But behind the apparent signs of prosperity, observers say a grave economic crisis confronts the country, which, with an annual per capita Gross Domestic product (GDP) of between 200 and 300 dollars, is still one of the poorest in the developing world.

Also after the initial rush, enthusiasm among foreign investors is tapering off due to deep structural problems, lack of infrastructure, low level of skills and the push by pro-democracy campaigners for a global boycott of trading with the harsh dictatorial regime.

The clearest indicator of growing disenchantment among foreign investors came last month when Singaporean Prime Minister Goh Chok Tong surprised observers by questioning Burma’s preparedness to become a member of the Association of South-East Asian Nations (ASEAN).

While Goh was referring to the ability of the Burmese economy to integrate into the ASEAN Free Trade Area (AFTA), which is due to become a reality by 2003, observers say that he is also articulating unhappiness among Singaporean investors about the slow pace of change and growth in Burma.

Singapore is today ASEAN’s biggest investor in Burma (also known as Myanmar), and the second largest in the world, after Britain, the former colonial power. According to Burmese government estimates, by the end of May 1996, approved Singaporean investments totalled 606.38 million dollars.

Of the seven members currently comprising ASEAN — Brunei, Indonesia, Vietnam, Thailand, Malaysia, the Philippines and Singapore, only the latter four have invested in Burma, with total investments by May 1996 amounting to 1,346.44 million dollars.

“ASEAN investors who expected quick returns in the Burmese economy are showing signs of alarm and Western companies are under pressure from human rights groups back home to boycott operations here,” says an Asian diplomat based in Rangoon.

The reasons for panic among a majority of investors who put in more than 655.63 million dollars up to May 1996 in Burma’s nascent tourism and hotel sector are quite obvious.

Despite the military regime’s attempts to open up the country to tourism, continuing repression by the military and strong international boycott campaigns, have kept hotels empty and promises to continue to do so.

The launch this November of ‘Visit Myanmar Year’ is proving to be a non-starter and desperate attempts to convince international tourists and tour operators to visit the country are not likely to make much of a difference, say observers.

Dissident Nobel Peace Prize winner and leader of the National League for Democracy (NLD), Aung San Suu Kyi, whose party won the 1990 elections with an overwhelming majority but continues to be denied power by the regime, has repeatedly asked tourists not to visit Burma because of continuing repression.

The arrest in late October of U Kyi Maung, senior member of the National League for Democracy (NLD), and of hundreds of students protesting police brutality, has further worried Westerners, and this will undoubtedly have an impact on tourist arrivals.

“Only money,” says U Kyi Maung, deputy chairman of the NLD, speaking about the change of position in ASEAN, “could convince these people about whether it is wise to place their bets on an unpopular regime with a record of brutality and economic mismanagement,” he told IPS in a recent interview.

Other than the hotel and tourism sector, investors from 19 other countries have put most of their money into the oil and gas, real estate development, mining, fisheries and manufacturing sectors. Smaller amounts have gone into transport, industrial estates and agriculture.

On the consumer items front, public pressure in the United States and Europe has already forced Carlsberg, Heineken and Apple computers to pull out of the country.

Pepsi has also partly pulled out, but is still producing through a Burmese company with a franchise, while oil giants TOTAL from France and UNOCAL from the United States, face heavy criticism from shareholders because of reports of the use of forced labour and other human rights abuses at their operations.

Other than the oil and gas and hotel and tourism sectors, huge amounts of money have poured into real estate development.

Desperate for foreign exchange to pay for its defence spending, estimated to make up more than 50 per cent of the government’s budget, military rulers are seen to be selling off prime areas of land in Rangoon at give away prices.

Old buildings are being demolished all over the city and swanky new highrises are taking their place.

The majestic British colonial parliament house building where Aung San Suu Kyi’s father, General Aung San and his colleagues were assassinated in 1947 was also up for sale, but the Singaporeans are reported to have convinced the regime that it should be maintained as a national heritage site.

Of further concern to foreign investors is a damning report on the Burmese economy brought out by the U.S. embassy in Rangoon earlier this year.

In part, it says that “the (Burmese) economy is characterised by declining foreign investments, rising and potentially unserviceable debt, soaring deficits, rampant military spending and increased reliance on income from drug trafficking”.

According to the report, although official figures claimed a GDP growth rate of 8.2 per cent, real GDP growth in 1994 was at best four per cent. The report also says that though pledged foreign investment is rising, the actual inflows fell from 9.3 per cent to five per cent of GDP between 1991 and 1994.

Not surprisingly, many investors have been extremely astute about the situation, and few have been willing to put their money down in fixed assets.

Large business houses, such as the President’s Park group from Bangkok, for example have preferred to maintain a minimal presence in Rangoon, do small time trading and wait and see.

“We need greater security before deciding on investing,”, says Alavbir Sachdev, managing director of Modern Trading Ltd., President’s Park group. “Especially with regard to land ownership procedures and export licences. And in order to give us that the regime must first reintroduce the constitution.”

Since the military regime took over power in 1988, it has been holding a national convention to draw up the constitution. The NLD withdrew from the convention last year after accusing the generals of not following democratic procedures and trying to hijack the constitution for their own purposes.

Without the approval of the NLD, the constitution will neither be acceptable to most Burmese nor to the international community.

Things are not much better on the domestic economic front with the foreign exchange crisis fuelling inflation, which according to unofficial estimates, is as high as 40 per cent.

Trading of dollars is rampant on the black market, where the kyat is 170 to the dollar, while the official rate is a ridiculously low six kyat. Unable to stop the illegal trade in foreign currency in December last year, the regime established an “official unofficial” exchange centre where dollars can be freely traded at the unofficial rate also.

While government propaganda publications say that Burma is today the cheapest country in the region to live in, local people will hear none of it. Average monthly government salaries are around 1,000 Kyat (six dollars), while rice costs 100 kyat (60 cents) a pyi (1.5 kg).

The United Nations Children’s Fund (UNICEF) has estimated that a family of five needs to spend about 2,000 kyat (12 dollars) a month on rice alone. For most, vegetables and fruits are unaffordable while meat is an absolute luxury.

Accommodation costs are also exorbitant, with a one-room apartment in Rangoon costing a minimum of 10,000 kyat (58 dollars) a month.

Most of these prices rises have taken place over the past four years, since the economy has been liberalised, and various food, social security and medical subsidies withdrawn.

As a consequence, corruption has become a means of survival for people, and is endemic in the country. Rations of food and other consumer goods purchased by government employees at subsidised rates are sold on the blackmarket.

Various goods purchased from across the porous Thai, Chinese and Indian borders including much-needed pharmaceutical products, are also sold on the black market, at exorbitant prices.

Low purchasing power has however also hit demand for goods in the market.

Shop owners complain that they are unable to sell their wares, even though prices are less than in neighbouring countries, and cannot import new items because over the past few months the regime has clamped down on import licences in order to prevent valuable dollars from flowing out of the country.

For all the present day economic woes, a recent issue of the regime’s official mouthpiece, ‘The New Light of Myanmar’, ironically criticised U Nu, the first elected prime minister of Burma, for economic mismanagement during his 1953-57 rule.

“Foreign exchange reserves dropped, the government withdrew import licences, traders began to hoard goods and the price for goods rocketed sky-high,” the paper commented.

“Profiteering exploiters increased; in other words economic insurgency arose. Thus the rate of murders, robbery, lootings and kidnappings increased as did the incidence of prostitution, theft, bribery and corruption…” it went on.

Such criticisms, say observers, are ironic in that they tell the sorry tale of the present economic situation in Burma.