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BurmaNet March 2, 1997




------------------------ BurmaNet ------------------------
"Appropriate Information Technologies, Practical Strategies"
----------------------------------------------------------

The BurmaNet News: March 2, 1997
Issue #654 

Noted in Passing:

		The British are coming to us quietly and saying: "Well, you 
		understand we have to be tough on Burma for public consumption. 
		But don't worry...  - senior ASEAN official 
		(see: ASIA TIMES: EU "COMMON POLICY")

HEADLINES:
==========
KNU: CLARIFICATION OF THE KNU POSITION 
NATION: ARMY HALT PLAN TO FORCE BACK REFUGEES
BANGKOK POST: NO KAREN REFUGEES FORCED BACK
BKK POST: NO PLACE TO CALL HOME
NATION: BURMA 'REGRETS' INCIDENT
ASIA TIMES: MYANMAR SHRUGS OFF EU THREAT
ASIA TIMES: EU "COMMON POLICY" LOST IN MYANMAR
KYEMON: DISINFORMATION AND RFA
ASIA TIMES: GAS DEALS TO FUEL REFORMS IN MYANMAR ECONOMY 
ASIA TIMES: MYANMAR'S MASSIVE KYAT DEVALUATION THAT 
THAILAND TIMES:A THAI LEADING FIRM CHOSEN TO CONSTRUCT 
----------------------------------------------------------------------------
------------

KNU: CLARIFICATION OF THE KNU POSITION 
March 2, 1997

KAREN NATIONAL UNION

Clarification of the KNU position with regard to the failed cease-fire 
negotiations with the SLORC

March 2, 1997

The Karen National Union (KNU) willingly entered into peace negotiations 
with the State Law and Order Restoration Council (SLORC) four times between 
December 1995 and November 1996.  Throughout the duration of these talks, 
the KNU was determined to resolve the existing political problems through 
political dialogue.  But political dialogue was not on the SLORC's agenda.  

The KNU requested the SLORC time and time again to avoid reverting to 
military means.   The KNU stated that after a cease-fire agreement was signed 
there must be political dialogue concerning the ethnic nationality situation, 
affairs of the Union and peace maintenance.  

The SLORC refused to negotiate under these terms, and repeatedly demanded 
that we first renounce armed struggle, enter the legal fold, and participate in 
the National Convention as mere observers.  Under the SLORC military junta, 
the terms "renounce armed struggle" and "enter the legal fold" mean total 
surrender, while the SLORC then have the probable option of resorting to 
military means to destroy the KNU.  As the Burmese military has used such 
tactics in the past, and as there is no insurance that the SLORC would not 
resort to such tactics again, the KNU cannot agree to these terms.  

Following the adoption of a new constitution, bearing in mind that the KNU 
could have no official input into the National Convention and therefore into
the 
writing of the constitution, the KNU was to surrender its arms.  The SLORC also 
demanded that a demarcation of territory take place, and that the KNU must 
cooperate with its Border Areas Development program. 

Following the fourth round of negotiations, the KNU wrote to the SLORC on 
December 31st, 1996, requesting a fifth negotiation meeting in order to clarify 
these matters. 

On the 6th of February 1997, the peace-negotiating team originally dispatched 
by the SLORC sent a disrespectful and unofficial reply to the KNU, listing 
suggestions for how to proceed with further peace discussions.  No deadline 
was given for a reply, nor a date set for the fifth round of talks.  Four days 
later, on February the 10th 1997, the SLORC offensive against the KNU was 
launched.

At present the SLORC's massive military offensive is continuing throughout 
the KNU-controlled area, causing more than 20,000 civilian refugees to flee 
into Thailand's border areas.  Many thousands of Karen and Burmese displaced 
people remain trapped inside Burma as the SLORC troops have attempted to 
cut off access to the border.  These displaced people are in grave danger, and 
many families have been separated causing much suffering to the refugees who 
survived the hazardous journey to the border.  The refugees in camps in
Thailand 
are in a precarious security situation due to attacks on the camps by the SLORC 
army and its followers.  We are also concerned about the safety of civilian 
refugees who have recently been repatriated into war zones.

If the SLORC continues to refuse to resolve the political problems through 
peaceful political means, and continues its military offensive against the
Karen 
people, the KNU is faced with no alternative but to defend itself through armed 
struggle.  Therefore the fighting shall continue, unless the SLORC can be 
brought back to the negotiating table.

*************************************************************

NATION: ARMY HALT PLAN TO FORCE BACK REFUGEES
March 1, 1997  

CLEARLY furious with direct criticism from the US, Army Chief Gen
Chettha Thanajoaro yesterday ordered an abrupt halt to the
relocation and repatriation of thousands of Karen refugees.

Relief workers, however, said that over 2,300 refugees at Pu Nam
Rawn in Kanchanaburi's Muang district and about 3,000 at Htee Lay
Pai in Sangkha Buri are in "grave danger" and in urgent need of
relocation to safer sites due to the close proximity of Burmese
army troops to their shelters.

They added that refugees at Pu Nam Rawn, who are living about
three kilometers from a Burmese army outpost, have decided to
move deeper into Thailand today, despite the absence of
permission from the Thai Army. The refugees, mainly women,
children, the elderly and the disabled, have repeatedly requested, 
without success, the 9th Army Division's help for the relocation.

On Thursday, Thai paratroopers clashed twice with patrolling
Burmese troops close to Pu Nam Rawn but there were no casualties.

In Htee Lay Pai, three columns of Burmese troop have attacked
Karen rebels about two kilometres from a Buddhist temple where
the refugees are taking shelter. The workers said no more than
half of an original 3,000 exiles remain at the temple as most
have had fled in fear. 

Thai authorities have refused to let the remaining refugees at
Htee Lay Pai move deeper into Thai territory, arguing that the
temple is already on Thai soil. But workers said the camp is
obviously situated in Burma as it is located beyond the Mae Ka Sa
stream marking the border.

After strong international protest and criticism, particularly in
a letter yesterday from a senior US Embassy official, Gen Chettha
said he had ordered a halt to the Army's plan to relocate or send
home Karen refugees in the Kanchanaburi area.

He was obviously angered by a strongly-worded letter sent to him
by Charge d'Affairs Ralph Boyce which said Chettha was
responsible for ordering the forced repatriation of about 900
refugees on Tuesday and Wednesday.

In the letter, Boyce said that on behalf of the US government, he
wanted to express grave concern over the reports that "the 19th
Division, acting on your order, has forcibly repatriated 900
unarmed Karen women and children" to Burma.

The US diplomat said he was concerned that refugees at Pu Nam-
Rawn "are to be returned in the coming days" and disturbed to
hear that another group of about 200 unarmed civilians had also
been forcibly sent back by the 9th Division on Feb 25. Boyce
urged Chettha to accept the refugees while the Burmese offensive
against the Karen National Union (KNU) was being carried out and
to permit unarmed civilians, men and women, to stay sufficiently
away from the border to ensure their safety. He also asked that
relief agencies be permitted access to provide humanitarian aid.

Chettha yesterday insisted that no refugees were forcibly sent
back to Burma, saying, they all "voluntarily wanted to return" home. 
He said he would not explain or respond to international criticism of the 
incident, as the refugee affair was an internal matter of Thailand.

He expressed strong disappointment that "his good will and good
intentions" in sending refugees to a safe area was
counterproductive and taken in a negative light. "We [the army]
do everything out of goodwill and good intention. Otherwise, why
would I have proposed relocating refugees [in Tak province] 10
kilometres deeper into Thailand?" he said.

In late January, three Karen refugee camps were attacked by
Burmese and Rangoon-backed renegade Karen intruders who also
burned down two of them.

Prime Minister Gen Chavalit Yongchaiyudh yesterday also denied
that refugees had been pushed across the border into Burma,
saying Thailand had received thousands of new arrivals but
rejected only 10 or 20 who were armed KNU troops.

He said he believed those who were pushed back were probably
armed. "Usually we [Thailand] welcome to civilians but not armed
troops," he said.

*****************************************************************

BANGKOK POST: NO KAREN REFUGEES FORCED BACK
March 1, 1997
Mongkol stands by human rights policies

Supreme Commander Gen Mongkol Ampornpisith yesterday denied the
armed forces had forcibly repatriated Karen refugees to Burma.

His denial came on the same day the US State Department insisted
Thailand immediately stop their forcible return, calling the
situation "very difficult and tragic."

However, the supreme commander said he stood by human rights
policies which state that refugees should not be forced to return
to war zones.

His stand was also reiterated by Prime Minister Chavlit
Yongchaiyudh who on his return from Malaysia insisted that Karen
civilian refugees would not be forced back into Burma, although
he said he would not allow Thailand to be used as a base for
armed resistance by Karen rebels.

The premier said US and Amnesty International criticisms of
Thailand were base on inaccurate reports.

Supreme Commander Gen Mongkol said, "We have not done what has
been widely alleged. Instead, we are continuing with humanitarian
aid to Karen refugees."

He said women, children and the elderly fleeing the Burmese
government's offensive against the Karen National Union (KNU)
would be given shelter and aid. However, armed men would be
pushed back across the border unless they agreed to be disarmed.

"Our armed forces' policy on the matter is quite clear. We will
not interfere in Burma's internal affairs," said the supreme
commander.

He added that it was the Thai government rather than the United
Nations that had had to pay to look after the refugees.

As for the allegation that the government had changed its policy
toward the Karen following a meeting on Thursday between Army
Commander Gen Chettha Thanajaro and his Burmese counterpart Gen
Maung Aye, Gen Monkol said Burma had stated that it wanted to
take back the refugees but only as long as they wanted to return.
He said they would be sent back once the situation returned to normal.

National Security Council Deputy Chief Kachadpai Burusphat said
he disagreed with a UN High Commissioner of refugees proposal
that it take over responsibility for the refugees in several
camps along the border. He feared more refugees would flow into
the camps and illegal immigrants would use them as bases.

Yesterday the Army's secretary-general Maj Gen Pongthep
Thespratheep also dismissed reports that the 9th division in
Kanchanaburi province had forcibly repatriated refugees.

In fact the Army commander's proposal that refugees be moved a
further 10 kms into Thailand revealed the government's humanitarian approach.

*****************************************************************

BKK POST: NO PLACE TO CALL HOME
February 27, 1997

Thousands of young Karen become a source of cheap labour along Thai-Burmese
border
Sutin Wannabovorn, Hauy kalok Refugee Camp, Reuters

"Brother, please don't blame me for using child labour," the owner of a
coffee shop near here joked to her customer as he peered curiously at the
12-year-old Karen girl serving him water.

The little girl is among thousands of young Karen refugees from camps along
the Thai-Burmese border trying to earn a living by offering themselves as
cheap labour in nearby towns.

"I allowed two of them to work here because I felt pity for them," the owner
said. Their houses were burned down recently during fighting between the
Karen their enemies, she said.

In Mae Sot near the Burmese border, another Karen girl working at a
restaurant said she hoped to save enough money to buy proper documentation
to allow her to stay in Thailand forever.

"When we have enough money, we can buy an identity and go to Bangkok," said
the Karen girl, adding that many of her friends had disappeared from the
camps after bribing Thai officials for identity cards.

To the young refugees in the camps, the chances of returning home to their
native Karen state look as remote as democracy coming to Burma, whose
military government has been criticised for a range of alleged human rights
abuses and suppression of pro-democracy forces.

Most young refugees jump at the chance to leave the spartan camp conditions
for the bright city lights, refugee official say.

Many eventually become maids for wealthy Thais, waitresses and even
prostitutes, they said.

Thai narcotics police raided a brothel in Bangkok last year and rescued 17
Karen girls, police said.

"Nobody wants to go back to Burma, especially the young people," the Karen
girl at Mae Sot said.

The Karen National Union (KNU), formed in 1948 to fight for greater autonomy
from Burma's central government, is among the oldest rebel groups in the world.

This month the KNU, which has launched lightning attacks against Burmese
troops inside Burma, were counter-attacked and their mobile jungle bases
destroyed.

In 1995, a Buddhist faction split from the mostly Christian KNU. The
Democratic Karen Buddhist Army (DKBA) linked up with Burmese government
troops and drove the KNU out of most of its previously secure strongholds.

So far, more than 60,000 Karen refugees have fled the fighting between the
KNU and Burmese troops to shelter in camps set up by the Thai authorities
just across from the Moei River border.

Another 30,000 refugees are scattered across the jungles.

Pak Kah, 45, said his future looked bleak and could nor see peace returning
to his Karen homeland. "Look, this is all I have left," he said pointing at
the loin-cloth he was wearing.

He was speaking in the burned out remains of his home in the refugee camp,
which was torched by a friend who turned foe a few weeks ago.

Pak Kah was among the first group of more than 2,000 refugees, mostly family
members of the KNU, who fled Wangkha camp inside Burma to Thailand in 1984.

His fate has been the same as that of thousands of other living in the camps
which have since 1995 been regularly attacked by DKBA guerrillas.

"I will rebuild the living shelter here and will never go back to Burma, as
long as there is still no peace and democracy there," said Pak Kah.

Many other refugees interviewed at the camps also said hope to return to
Burma had already evaporated from their souls.

"We will continue to live and die in Thailand. Nobody wants to go back to
Burma any more, especially the young children. They don't even know Burma,"
said Si Da Hea, 35, who has been living in this camp for a decade and has
had three children in that time.

Ei Moo, 17, who accompanied her family during the 1984 evacuation from Burma
said she rushed back from Mae Sot where she worked as a maid to help her
family after rebels torched their home in the camp.

"While the parents live in the camps, the children go out and work in the
city," said Ei Moo.

The refugees constantly live in fear of attacks by the DKBA and lead an
unsettled life.

"We  are appealing to the Thai Government to provide more security for the
refugees in the camps," said Mary On, vice-chairman of Karen Refugees
Committee who acts as the Huaykalok camp leader. (BP)

*******************************************************

NATION: BURMA 'REGRETS' INCIDENT
March 1, 1997

SEOUL- Burma has expressed "regret" over the peremptory expulsion
of a South Korean MP from Rangoon airport and denying him access
to South Korean diplomats, the foreign ministry said yesterday.

Burma's ambassador to Seoul described the denial of embassy
access to opposition MP Kim Sang-woo as a "mistake", and said the
authorities involved will be officially reprimanded, according to
foreign ministry spokesman Lee Kyu-hyung.

The MP, who had previously urged South Korean companies to pull
out of Burma until democracy was restored, was manhandled by Burmese 
security personnel at Rangoon airport when he flew there with a valid visa 
on Feb 6, and forcibly bundled on a return flight to Bangkok.

*******************************************************

ASIA TIMES: MYANMAR SHRUGS OFF EU THREAT
February 26, 1997  (slightly abridged)
Stephen Brookes, Yangon

A growing movement within the 15-member European Union to close its markets
to farm imports from Myanmar will have no real effect on the Southeast Asian
country's economy, agriculture officials in Yangon said on Monday. 

The EU's Executive Commission last week called for Myanmar to be stripped of
preferential trading benefits in agriculture because of concerns over
Yangon's record on human rights. 

The commission, which can propose legislation but not make law, has
requested the EU Council of Ministers to revoke Myanmar's General System of
Preferences (GSP) status for agriculture. Such a revocation would put
Myanmar exporters at a severe disadvantage in the European market,
effectively closing it to them. 

The council has not yet acted on the request, and Myanmar officials seemed
unconcerned about the threat. "It wouldn't really affect Myanmar, since we
export very little to the European Union," said Mya Maung, head of the
Agriculture Ministry's Department of Planning. "Most of our exports go to
China, Indonesia, the Philippines and other Asian countries." 

Some 46 percent of Myanmar's exports are of agricultural commodities, but
few of these go to Europe. According to official statistics, out of 1.04
million tonnes of rice exported in financial year 1994/95, only 30,000
tonnes went to EU member states. Rice exports to Asia, by contrast, amounted
to 734,000 tonnes, and 277,000 tonnes were exported to Africa. Rice is
Myanmar's main foreign currency earner. 

Both commodity production and exports to Asia were expected to rise, said
Mya Maung. 

Asian investors are starting to invest in substantial agricultural projects,
most of which will be producing for the Asian export market. South Korea's
Daewoo plans to set up a 12,140-hectare rubber plantation in a joint venture
with the government. Thailand-based Sutec is negotiating for a similar
amount of land for a sugar plantation and Kee Aun of Singapore is leasing
10,926 hectares for paddy cultivation. 

Moreover, Japan's Marubeni Corporation announced plans in December to
produce rice for livestock feed in Myanmar in a US$1.5 million joint venture
with the Ministry of Agriculture. 

And in January, Thai multinational Charoen Pokphand (CP) announced plans to
set up a wholly-owned subsidiary, Myanmar CP Livestock, to run animal feed
manufacturing facilities, livestock breeding farms and chicken farms. The
company's output will be sold on the domestic Myanmar market. 

"We're inviting investors to come in to develop sugar, cotton, rubber, palm
oil and other products," said Mya Maung. "Sugar has huge potential - we're
negotiating with the Chinese to set up sugar refineries," he said, noting
that the country wanted to increase its total annual sugar exports of 30,000
tonnes. 

Tensions have been rising between Yangon and the EU over the past year. In a
largely symbolic move, the EU imposed visa restrictions on members of the
ruling State Law and Order Restoration Council late in 1996. Myanmar's
expected anticipated entry into the Association of South East Asian Nations
later this year was a subject of contention at a recent meeting of ASEAN and
EU foreign ministers in Singapore. (AT)

**********************************

ASIA TIMES: EU "COMMON POLICY" LOST IN MYANMAR
February 26, 1997
Elizabeth Pisani, Asia Times

ASEAN countries are losing no sleep over how the European Union will react
when Myanmar becomes a full member of the group. The United Kingdom and
France, they say, have given private assurances that they will keep relations
smooth.

"Absolute nonsense,"said British Foreign Minister Malcolm Rifkind. Other UK
officials described such reports, which come from a number of Southeast Asian
capitals, as  "concerted ASEAN disinformation". 

And yet officials from the European Commission, the EU's executive body, also
report that, to their fury, Paris and London are smoothing the feathers of
the members of the Association of Southeast Asian Nations, ruffled by
Europe's fierce public objections to the admission of Myanmar.

"The commission must have been intoxicated by ASEAN to believe that," said an
official from France, which strongly denies that it is breaking ranks with
its European partners on the issue.

True or not, the very fact that the reports are in circulation illustrate how
suspicious European nations are of one another when it comes to relations
with Asia. It shows, too, that ASEAN is increasingly willing to believe that
the EU does not speak with a single voice on foreign policy.

European nations began their present public assault on Yangon in the middle
of last year, when a Danish honorary consul, who was a close associate of
democracy movement leader Aung San Suu Kyi, died in police custody in Myanmar
after being arrested on charges of owning an unregistered fax machine.
Denmark led a call for economic sanctions. It was opposed by Britain, which
favored a ban on high-level contacts with Yangon. This ban eventually became
the basis for a "common position", agreed by all 15 EU members. It was
followed by public condemnations by the EU of some of Yangon's worst
violations of human rights.

But the protests have become increasingly muted in recent months, a time when
the EU has been agonizing over the future of its relations with ASEAN. Now it
has become apparent that Southeast Asian leaders will not jump in response to
European public opinion and will in all likelihood go ahead and admit
Myanmar, along with Cambodia and Laos, before the group's 30th anniversary in
July. And Europe is beginning grudgingly to admit there is nothing it can do
about it.

It is Britain, until now a vocal opponent of the Yangon government, that is
leading the shift to accepting that Myanmar will soon be a part of the ASEAN
landscape and must be dealt with as such, according to Asian and European
officials from several countries.

"The British are coming to us quietly and saying: "Well, you understand we
have to be tough on Burma for public consumption. But don't worry too much
about the common position, really we support you and we'll take care of it",
said a senior official from an ASEAN foreign ministry.

British officials have expressed shocked at such accusations. "We have made
it clear that it is up to ASEAN to choose their members and is not a matter
for us," one UK diplomat said. "But that said, we certainly didn't say
anything along the lines of: "We'll see you right, boys".

Officials elsewhere in the EU were rather less shocked when they learned from
their counterparts based in Asia that - at least according to ASEAN nations -
Britain and France were wriggling out of the common position on Myanmar. 
"It tells you all you need to know about our hopes for the CFSP," said one
official from the Netherlands EU presidency with a weary shrug. 

The Common Foreign and Security Policy was one of the goals enshrined in the
Maastricht Treaty on European Union. Europe is still a very long way from
reaching that goal. A common position seems to be that formal "Common
Positions" are fine until a member state feels it might be able to steal a
march on its partners.

Another example of Europe's foreign policy disarray in Asia comes from the
ASEAN Regional Forum. The EU is represented at the ARF by a six-month
revolving troika consisting of the country that currently holds the EU
presidency together with its predecessor and successor. Last year Britain and
France outraged their partners by applying for separate seats in the security
grouping.

Some see this as reason enough for those nations to try to curry favor with
ASEAN members over the admission of Myanmar. Britain, for one, denies this,
saying it considers its ARF application to be moribund.

ASEAN has told EU members to sort out among themselves what they want - the
EU or its two United Nations Security Council members - on the ARF. They
cannot have it both ways. 

An ASEAN diplomat said his office was less surprised by France's private
assurances over Myanmar than by Britain's. First, French oil company Total
has an enormous joint-venture investment with Yangon and US oil company
Unocal to build a gas pipeline across the country. Second, human rights
abuses in Yangon do not rate highly on the French public's list of concerns.
France this week stalled EU foreign ministers considering  suspending trade
privileges for Myanmar for at least a month, saying it did not think trade
and politics should be mixed. But French officials have said that should not
be construed as support for Yangon.

*************************************

KYEMON: DISINFORMATION AND RFA
February 18, 1997  ( SLORC press: translated from Burmese, abridged)
Po Hmat

The People's Republic of China was the first to oppose and condemn the 
abnormality of RFA. Myanmar [Burma] also expressed its dissatisfaction over 
RFA on 1 February. The reason why Asian countries dislike RFA is because it 
is just a name change for the West's Radio Free Europe which penetrated and 
interfered in the internal affairs of East European countries leading to their 
downfall. 

Radio Free Europe, Radio Liberty also known as Radio Liberation, Radio Jose 
Marti, Radio Swan, VOA, BBC, 4th June Broadcasting Station, and the [Burmese] 
expatriate radio station in Norway are all controlled by the American Central 
Intelligence Agency, the CIA. 

There is a rightist group of influential Americans in a small town of Santa Fe, 
Texas, the United States of America known as the Santa Fe group. The group 
includes bankers, industrialists, arms manufacturers, rightists, and
militarists. 
Their finances are strong with the backing of the Bank of America. The group is 
also being manipulated by the CIA.  The Santa Fe group has vowed to bring down 
leftist governments of socialist countries far from the United States,
North, Central, 
and South America.

There is a section called FBIS, Foreign Broadcast Information Service at CIA 
headquarters. It is under CIA's secret international interference activities
department. 
This section produces a daily collective report of the world's broadcasts. 
Simultaneously, it compiles and distributes articles to be used by
CIA-influenced 
broadcasting stations, television stations, and magazines. The CIA [personnel] 
disguised as diplomats from around the world also send reports to that section. 
FBIS editors are all CIA officials. 

******************************************************

ASIA TIMES: GAS DEALS TO FUEL REFORMS IN MYANMAR ECONOMY 
February 14, 1997 (abridged)
Vissuta Pothong in Bangkok

Myanmar will earn enough from its natural gas deals with Thailand to start a  
stock market and eliminate its currency dual exchange regime by 1998, the 
governor of Myanmars central bank said on Thursday.

Asked when he would abolish the dual- exchange rate, Governor Kyi Aye 
said: "By the end of the year 1998 when we start selling gas to Thailand, and 
we will have enough hard currency."

The combined gas deals for the Yadana and Yetagun offshore fields will
generate annual revenue of US$600 million for 30 years and provide "the
cushion for intervention in the stock market", Kyi Aye said.

Myanmar would establish a stock exchange at the same time as the
dual-currency rate was eliminated, he told Asia Times in an interview.

The central bank governor said an already-drafted securities and exchange 
law would be passed within two months, paving the way to develop 
Myanmar's capital markets.

The over-the-counter market, Myanmar Securities Exchange Center, is a 
joint venture between Japan's Daiwa and a state bank in Myanmar.
Several Thai banks, including Bangkok Bank, have shown an interest in joining 
in the establishment of the Myanmar Stock Exchange, the Thai diplomat said.

The current account deficit remained large in 1995-6, with imports totaling 
8.33 billion kyats and exports amounting to 5.4 billion kyats. Official figures 
for imports are not thought to include major military purchases.
The US embassy in Yangon, in a critical report last June on the black
economy, alleged that drug exports alone appeared to be worth as much as 
all legal exports. 

********************************

ASIA TIMES: MYANMAR'S MASSIVE KYAT DEVALUATION THAT 
NO ONE NOTICED
February 25, 1997
Stephen Brookes

When Southeast Asia's central bankers got together in Bangkok in
mid-February for their annual meeting, Myanmar took the occasion to note
that its dual exchange rate policy could be scrapped as soon as hard
currency earnings started coming in from natural gas deposits currently
being explored by foreign energy companies. 

Kyi Aye, the governor of the Central Bank of Myanmar, explained to his
colleagues and reporters during the 32nd annual meeting of Southeast Asian 
Central Bank Governors that revenue from the gas sales would bring in foreign 
currency for the country's international reserves and improve its
balance of payments situation. This, he said, was related to the
government's exchange rate policies, and in particular its maintenance of
the dual exchange rate. 

But economic analysts in Yangon discounted Kyi Aye's Bangkok remarks, 
noting that a de facto devaluation of the Myanmar kyat has in fact already 
taken place, almost invisibly. 

The wide disparity between the official exchange rate of 5.8 kyat to the
United States dollar and the unofficial rate of about 165 to the dollar is
often cited by critics of the country's economic and investment prospects as
a key barrier to potential foreign investors. But most observers in Yangon
say the official rate has become largely meaningless. 

Set Maung, a senior economic advisor to the government and a key architect 
of what he calls the "stealthy devaluation" of the kyat, has claimed that the 
official exchange rate has become completely irrelevant. "We did it so gingerly 
that people just woke up and found out we were in this parallel economy," 
he said. "The official rate is not applicable - go anywhere, look at the
prices. 
Prices are converted at the parallel rate. Even if we officially declare a
depreciation, 
there will not be any effect on the market." 

Business people and analysts in Yangon concur - as, surprisingly, does
Washington, traditionally one of the Myanmar government's staunchest
critics. According to a US State Department economic report on Myanmar
released last year, "All external sector transactions, all intra-private
sector transactions, and all but a small volume of non-tax transactions
between public and private sectors, of both internationally tradable goods
and services and of financial flows, now occur at prices fully reflecting
the parallel market exchange rate." 

So, how does a country effectively devalue its currency so massively, with
almost no one noticing? The "stealthy devaluation" of the kyat began soon
after Myanmar's ruling State Law and Order Restoration Council (SLORC) 
took power in late 1988 and began opening up the economy to the outside world. 
The kyat was officially pegged to the International Monetary Fund's Special 
Drawing Rights (SDR) currency basket. The official rate was about 8.5 kyats 
to 1 SDR and the black market rate was 54 to the US dollar. 

Set Maung recalls that Yangon, aware of the big gap between the market
exchange rate and the official rate, knew that something had to be done to
redress this potentially disastrous financial situation. The plan that
emerged involved a gradual rise in the prices at which the government sold
official imports and state-produced exportables to the domestic market, and
a loosening up of restrictions on foreign currency ownership. 

Under the previous regime, most private citizens were not allowed to own
foreign currency, so those earning hard currency through trade or from
working abroad had no legal way to use it. In 1990, Set Maung explained, 
the government started changing that by allowing people to hold foreign 
exchange accounts. But there was still a problem: Account holders were 
required to change 25 percent of their foreign exchange into kyat at the 
official rate, amounting to a hefty tax. 

"We were starting from scratch when we took over," said Set Maung of the
Myanmar government's early currency policies. The economy was in tatters 
and foreign currency reserves were zero. We needed to get some for the
government needs. But previously, exporters were not allowed to retain any
foreign exchange at all, so this was an improvement on the previous situation." 

At that time, foreign exchange held in Myanmar had to be kept in designated 
bank accounts, from which it could be withdrawn only to pay for imported goods. 
As a result, foreign currency earners began selling their accounts to
traders, at the 
market rate.  As the practice spread, the government moved to the next step
of its
incremental plan to narrow and eventually reduce the exchange rate gap:
Bringing domestically deposited foreign earnings into the legal national
money supply. 

To do that, in 1993 Yangon introduced foreign exchange certificates (FECs) 
pegged to the US dollar - a form of "halfway" hard currency modeled on the 
system used for many years by China before being abandoned on January 1, 
1994, when that country's dual exchange rates were unified. Smiling, Set Maung 
admitted that SLORC simply copied the Chinese model, but he added that the 
Myanmar government thought it could improve on it. 

The FECs proved widely popular, especially with tourists, who no longer 
had to change dollars at the official rate. (Well-informed travelers to Myanmar 
used to bring in whisky and cigarettes to sell on the black market, simply to 
obtain currency). Widely-traded illegally at the market rate, FECs soon began 
fetching an even higher price than US greenbacks, since holding actual foreign 
currency is still illegal in Myanmar. And in December 1995, the government 
started licensing private FEC exchanges, to shift the money exchanges above 
ground. 

For the most part, the FEC and the dollar have traded against the kyat
within one percentage point of each other. 

Other factors have influenced the exchange rate as well, such as the fact
that the country's Telecommunications Ministry insists on being paid in 
FECs - not kyat - to install a domestic telephone line. When the fees for 
new lines came due last April, demand for FECs soared and the price rose
accordingly. 

Set Maung said he believed the ministry made a mistake: "The government
needs foreign exchange, and ministries are trying to get some from other
places. Sometimes they get it from the local people." 

For traders, the exchange rate has been a key issue. Until recently, imports
were evaluated on a cost, insurance and freight (CIF) basis and taxed at the
official exchange rate - making customs revenues relatively low. But then
the IMF arrived and ruined the party, according to Set Maung, advising the
Myanmar government it was losing a lot of money by using the official rate.
"But what about prices?" he pointed out. "If we switch to the market rate,
commodity prices will go up, there's going to be cost-push inflation." 

The solution, he said, was to shift from evaluating imports CIF to
evaluating them at the higher market value, then reducing the customs 
rates while imposing them at the parallel kyat rate. 

"We are just changing over to a new system using this market rate," he said. 
The net result, he said, has been higher revenues and a more realistic system. 

So why doesn't Myanmar simply devalue the kyat now? Inflation, currently
running at an estimated 20 percent to 30 percent, remains a key concern, 
as does the low level of foreign exchange reserves. While no official figures
are available, analysts estimate the government has no more than three
months' worth of reserves, and last year restrictions were put on imports of
some nonessential goods. 

Moreover, the government still supplies imported commodities to civil
servants at the official exchange rate - in effect, a huge subsidy designed
to offset relatively low salaries. If the government stopped doing this, it
would have to raise salaries, Set Maung pointed out. But it does not want to 
put more money into the economy for fear of fueling inflation. Eventually, he 
stressed, this discrepancy will be phased out." 

According to some analysts, the most significant roadblock to an actual
devaluation of the Myanmar kyat is simply the uncertainty involved. "A
foreign exchange regime should depend fundamentally on purchasing power 
parity, but generally it doesn't happen that way," Set Maung said. "There is 
panic buying, speculative buying, hedging. Because of things like this,
currencies 
don't settle at proper par value. Look at what happened in Mexico with the 
peso [in December 1994]. As soon as they started the depreciation of the 
currency, which was due, they went into a tailspin. The United States had 
to step in." 

The specter of a Mexican-style tailspin haunts the Myanmar government, 
and is keeping it from fully floating the kyat until it has either enough
foreign reserves to support an official devaluation, or a guarantee from
international lenders. 

Set Maung acknowledged that Yangon did not have sufficient foreign 
exchange reserves to support the kyat. At the same time, he added, the US 
government would not likely come to SLORC's aid, as it did in Mexico, so 
naturally the effect on Myanmar would be worse. 

"We need a cushion", he said, "either from the IMF or from our own foreign 
exchange reserves. So that's why we're staying quiet, and just letting this de 
facto situation stay on." (AT)

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THAILAND TIMES:A THAI LEADING FIRM CHOSEN TO CONSTRUCT 
ROAD LINK TO BURMA (abridged)
February 25, 1997
by P Pongpipattanapan and Seri Clinchan

KANEE MON, Burma: A Thailand based construction company has won the 
bid to construct a 95 kilometer road worth more than one billion
baht from Thailand to Burma.

The constructor source interviewed in Kanee, an area controlled by
the New Mon State Party on the opposite side of Kanchanaburi
province, said on Sunday that the Burmese government has granted
the concession to construct the road linking the Three Pagodas
border check-point in Kanchanaburi province with Thanbusayat port
in Burma, which is controlled by the New Mon State Party.

The two lane road, to link Thailand with the port on the Gulf of
Mataban, will be 95 kilometers long in length and will cost more
than one billion baht. Also planned is a deep sea port.

These two projects will cost 2.5 billion baht and the deep-sea port
will be able to handle large container ships.

The source was unable to disclose the name of the winning company
for the construction of the port as it is listed on the Stock
Exchange of Thailand (SET) and may have its operations affected.

The deep sea port project will also include the construction of an
international port area, bonded warehouse, and community services.
It will take only 20 hours from the Three Pagodas border checkpoint
to Rangoon by using the new road, the source said.

An Italian firm AER Map Ltd, will be responsible for surveying the
construction area and design the construction route together with PAE
(Thailand) Plc.

"Whether or not the Three Pagodas border checkpoint will be re-
opened depends on the Thai government. If it is re-opened,
economies along the Thai-Burmese border will improve," the source
said, adding that the Three Pagodas border checkpoint has been
closed for several months after Burmese government troops opened
fire on minority Mon civilians.

Presently, Italian-Thai has invested in the construction of a deep- sea port in 
Tavoy which includes a road from Bongtee border
checkpoint to Sai Yok Noi district, Kanchanaburi province.

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