BP: BURMA

[suriya@xxxxxxxxxxxx]

                                             August 8, 1998 


                                  


                       BURMA 

 Tough choices for
 junta as its economy
 sinks fast

 The rice crops have failed, inflation is
 rising, essential goods are disappearing
 and the people are becoming restless. Ten
 year's on from the demonstrations in
 which thousands of Burmese died the
 country's junta has some difficult choices
 to make. 

 Anuraj Manibhandu 

 Ten years after the violent suppression of Burma's pro-democracy
 uprising, the country's military leaders are under growing pressure to
 liberalise as the nation's economy goes from bad to worse.

 The most telling sign of its parlous state is the low level of Burma's
 foreign exchange reserve, which, according to international financial
 institutions, now stands at about US$100-150 million - the equivalent
 of about one month's import. One analyst said this a sixth of what was
 considered "prudent."

 Another indicator of Burma's hard-up economy is the rapid decline of
 the national currency which gathered speed after the Thai baht began
 its downward spiral last July. In less than two years, the exchange rate
 has dropped three-fold, from 100-120 kyat to the dollar in December
 1996, to latest reports of 350 kyat to the dollar.

 Added to this is the damage done to rice crops by floods over the
 past two years. This has weakened the performance of the country's
 third ranking foreign exchange earner (after pulses and prawns), as
 well as undermined its self-sufficiency in food.

 Foreign Ministry figures show the yearly volume of rice exports
 dropping from one million tonnes in 1994-95, to 120,000 tonnes in
 1996-97.

 Not least of Burma's troubles is the drop in investment from its Asian
 neighbours. They previously dominated foreign enterprises in the
 country but are now crippled by their own financial problems at home.

 Moreover, attempts to solve some problems are spawning others.
 One is the attempt to shore up foreign exchange levels by restricting
 border trade with China and Thailand. This has worsened the shortage
 of essential goods, for which Burma largely depends on Thailand, and
 has heaped inflationary pressure on the economy.

 Thai border traders say their income has been slashed by half since
 Rangoon abruptly closed three border checkpoints and slapped
 stringent controls on Burmese importers last November.

 Faced with simmering discontent due to its economic problems and
 being unable to turn to the IMF for help, the leadership now has to
 ponder its political options, says a Burma-watcher.

 "The key question in the debate is whether they should go back to
 isolationism and a subsistence economy, or begin liberalising in order
 to secure help," he added.

 Japan, which recently gave $1 million (41 million baht) in grant aid
 intended for Rangoon general hospital, and wrote off two billion yen in
 debt, has given the State Peace and Development Council some hope.
 But Tokyo has also made clear that it still wants the SPDC to move
 towards dialogue with the opposition National League for Democracy
 of Aung San Suu Kyi.

 In this regard, China, which has tremendous foreign affairs reserves
 and is not demanding such a condition, might be a more attractive
 option. The junta would not need much to recharge the economy, and
 it would not be a problem for China to make available to Burma $100
 million the analyst noted.

 The catch however is what China seeks in reciprocation from Burma -
 access to the Indian Ocean - and this might be much more costly.

 Pending a political decision, the junta's ability to keep social unrest at
 bay is being stretched. Whether this ability holds depends largely on
 the Burmese people's tolerance. The question is whether this limit
 should be tested or whether the junta and the NLD should make a
 new move to end their 10 years of political confrontation. 



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