Soldiering on, Regardless

[waterly@xxxxxxxxx]

                               EIU Business Asia

                                 March  10, 1997


HEADLINE:  Myanmar:  Soldiering on, regardless

    Domestic and international relations have been deteriorating since May 1996,
following the attempted disruption of the National League for Democracy
Convention. The decline in civil liberties raises the prospect of a tightened
embargo on  Myanmar  by Western nations. Under these circumstances, the
collective attitude of Asean will be crucial. While virtually all Asean
countries support  Myanmar's  entry to the group to some degree, several are
unwilling to fly in the face of world-wide condemnation. Membership for

 Myanmar  would be followed by some economic as well as diplomatic support,
which would carry the State Law and Order Restoration Council (SLORC) through
1997. However, if Asean sidesteps the issue of  Myanmar  membership, the going
will be tougher, and opposition will rally.
 
General stability
 
SLORC has brought much of the formerly illegal narcotics, gemstone, and timber
smuggling under its own control--and has not suppressed these lucrative
activities. This has been achieved all while pursuing the goal of squashing
armed opposition by ethnic minorities.
 
The cohesion of SLORC depends on former leader General Ne Win who is approaching
87 years. The second generation of military leaders are also losing vitality,
making succession a major issue. Furthermore, with SLORC heading towards its
tenth year of operation and oppression, and the National Convention making
little headway towards the writing of any kind of constitution (even a bad one),
popular frustration continues to grow.
 
Political scene
 
 Myanmar  has built steadily improving relations with Asean nations: firstly

with Indonesia, Singapore and Malaysia, and latterly with the incoming Thai
administration. However, since late 1996, the USA has had legislation enabling
the president to trigger an embargo in the event of large-scale suppression of
democracy in  Myanmar  or renewed detention of Aung San Suu Kyi. The European
Union has legislated some minor constraints, without much sign of real
consensus. Meanwhile  Myanmar  has redirected its trade in more sympathetic
directions--towards Singapore, China and Thailand-- rendering an embargo
ineffective.
 
More disquieting, on the local political scene, is the emergence of the Union
Solidarity Development Association--a storm-trooping brigade, formed initially
to disrupt National League for Democracy activities, but ultimately for
dragooning voters to the polls and preventing a repeat of the 1990 election
disaster for SLORC.
 
Issues for business
 
* Political stability. Whatever its market potential,  Myanmar  remains the most
unstable political environment in the Asia-Pacific, with the possible exception 
of North Korea. Business entrants to  Myanmar  must either go for a quick profit
and have a readily accessible exit strategy or be ready to withstand a political
typhoon. 
* User-unfriendly investment rules. Prospective entrants have found daunting
delays, crushing cost escalation and corruption, a disastrous multiple exchange 
rate regime, as well as other challenges.
 
* International opprobrium. A succession of more than a dozen high-profile brand
holders have been forced to make retreats, the latest being PepsiCo preceded by 
Carlsberg, Heineken and Levi-Strauss.