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Fin Times: $$Burma, Sick, Sicker

Burma - the sick man gets sicker ("It's all there for the taking...")
Financial Times-Ted Bardacke,   Tuesday, April 29,1997

(with chart Burma Foreign investment by country, source Burma Investment
Commission; photo Aung San Suu Kyi with supporters 'Aung San Suu Kyi has
long advocated trade sanctions)

The day after a prohibition in Burma was announced, the heads of several
oil companies operating in the country sat down to dinner at one of 
Rangoon's new luxury hotels. They were salivating -- but not because of
the succulent lobster on offer that evening.

Instead, they were discussing how to carve up exploration rights held by
US companies, rights the US companies will most likely have to give up
under the new rules -- the climax of a campaign whose most distinguished
advocate has been Burma's democracy leader Ms Aung San Suu Kyi.

In the absence of the US companies, "It's all there for the taking. No
project will not be taken up,"says an executive with a Malaysian

His comment echoed the opinion of the Burmese business community, and
that of the miitary government, which has said: "Myanmar (Burma) has
opened the doors to outside investments and its abundant natural
resources will benefit all those who come to invest."

"We can only feel sorry for the US companies, because they will not get
a second chance to invest in Myanmar if opportunities are taken over by
companies from nations with consistent forgin policies."

Yet outside the oil and tourism sectors, international companies are
hardly rushing to invest in Burma, scared off by poor infrastructure, a
cumbersome dual-exchange rate system and the threat of consumer boycotts
in the west.

A trickle of Asian and European investment to replace the potential lost
flows from the US is not enough to prevent a sick economy deteriorating
even further. Inflation, tamed over a year ago, is now running at more
than 30 % and the price of rice has doubled in less than a year. 

Without a 'one-shot' devaluation of the currency by 99%, coupled with
structural reforms, economic growth will fall to 4 % (from 6.1%) by the
year 2000, the current account deficit will rise 14%, and foreign
exchnage reserves, now at their lowest since the military junta took
office in 1988, will cover just over one month's imports, the
International Monetary Fund predicts.

Debt service arrears accumulate, with over $1.5 bn outstanding at the
end of the last fiscal year. Exports have stopped growing, as rice
shipments, once expected to be the cornerstone of Burma's export drive,
have virtually stopped. 

Local businessmen and economists say what is keeping the economy moving,
and the shelves and showrooms stocked with expensive foreign goods
despite an offical ban on non-essential imports, is the dudal benefits
of inflows from the underground economy and smuggling, which US
sanctions can do nothing about.

With the miitary signing ceasefires with ethnic groups operating along
Burma's borders, proceeds from gems, jad and heroin which these groups
control are now being invested inside Burma, rather than in Thailand,
Taiwan and Hong Kong as was previously the case.

In fiscal 1995-96, about $442m of hard currency not accounted for in
official investment figures flowed into the country, reversing previous
years of net unrecorded outflow, according to figures from the IMF and
the World Bank.

Murch of this is being spent on supposedly restricted imports. An active
secondary market is operating in special import privileges for favoured
investors; the government's own social organisation, the United
Solidarity and Development Association, routinely imports cars from
neighbouring countries. Trading companies bring goods across from
Thailand by truck and from Malaysia by boat.

A key componet of this system is the ability to settle accounts
overseas. In a side street in downtown Rangoon, an Indian broker offers
to take kyat (the Burmese currency) at below the black market rate in
Rangoon and provide hard currency to any bank account worldwide, even in
the US.

The broker thinks his business, which relies on the continued muddling
along of the Burmese economy, is risk-free. "I can help people do
business as long as this government can't get along with its own people
and the rest of the world", he says.

Burma Foreign investment (country ranking )

			Total to
		1996-97		1995-96		
		$m		$m

UK		1.304.7		792.5
Singapore	1.215.1		603.8
Thailand	1.026.8		421.1
United States	582.0		241.0
Malaysia	447.3		227.2
Japan		192.0		119.8	
Australia	40.0		30.0	
China		28.7		5.6
Germany	15.0		--
Denmark	13.3		13.3

(source: Burma Investment Commission)