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Isolated Myanmar Gets a Dose of Asian Turmoil --- Growth Declines;
Currency Collapses 
Wall Street Journal; New York; Dec 28, 1998; By Barry Wain; 

Edition: 
                  Eastern edition
Start Page: 
                  A11
ISSN: 
                  00999660
Subject Terms: 
                  Economic conditions
                  Economic growth
                  Currency devaluation
                  Foreign investment
                  Inflation
                  Unemployment
                  International relations
                  Economic conditions
                  Economic growth
                  Currency devaluation
                  Foreign investment
                  Inflation
                  Unemployment
                  International relations
Geographic Names: 
                  Myanmar
                  Myanmar

Abstract:
YANGON, Myanmar -- When Myanmar, formerly known as Burma, joined the
Association of Southeast Asian Nations in 1997, it expected an influx of
foreign
investors and tourists. Instead, it got a dose of the economic turmoil that
has
devastated much of the rest of Asia.

The economy is in a "poor state," according to an Australian Embassy report.
Meanwhile, Stuart P. Larkin, an independent analyst based in Yangon --
formerly
Rangoon -- is pessimistic about the medium-term outlook, predicting higher
inflation
and unemployment and a further decline in the kyat.

Myanmar has been shunned by much of the international community since the
military suppressed a democracy movement and seized power in 1988. The West
and
Japan stopped most aid in 1990, after Aung San Suu Kyi's National League for
Democracy, which swept the general election, wasn't allowed to take office.

Full Text:
Copyright Dow Jones & Company Inc Dec 28, 1998


YANGON, Myanmar -- When Myanmar, formerly known as Burma, joined the
Association of
Southeast Asian Nations in 1997, it expected an influx of foreign investors
and tourists. Instead,
it got a dose of the economic turmoil that has devastated much of the rest
of Asia.

While the country's backwardness insulates it against the worst of the
contagion, it still has been
hit hard. Growth has slowed, the nation's currency, the kyat, has collapsed
and foreign
investment has plummeted.


Power cuts have reduced factory output, gasoline rationing has been
reintroduced, and the cost
of living has soared. Foreign-exchange reserves remain critically low,
despite extreme measures
to conserve them.

The economy is in a "poor state," according to an Australian Embassy report.
Meanwhile, Stuart
P. Larkin, an independent analyst based in Yangon -- formerly Rangoon -- is
pessimistic about
the medium-term outlook, predicting higher inflation and unemployment and a
further decline in
the kyat.

"The regional economic crisis will continue to affect the economy for
another one to two years,"
he says.

Myanmar has been shunned by much of the international community since the
military
suppressed a democracy movement and seized power in 1988. The West and Japan
stopped
most aid in 1990, after Aung San Suu Kyi's National League for Democracy,
which swept the
general election, wasn't allowed to take office.

Ms. Aung San Suu Kyi, a Nobel Peace laureate with an influential following
abroad, opposes
economic and commercial engagement with Myanmar. The country relies heavily
on China for
aid and arms.

Yangon can't obtain funds from international lending agencies to rebuild its
dilapidated
infrastructure. The U.S. last year banned all fresh investment, and it
continues to block assistance
by the International Monetary Fund, the World Bank and the Asian Development
Bank.

The ruling State Law and Order Restoration Council dissolved itself in
November 1997, sacked
14 ministers while retaining the four top leaders and started investigating
some of the ousted
officers and senior bureaucrats for corruption. The replacement State Peace
and Development
Council, or SPDC, announced a renewed focus on economic development.

But the SPDC hasn't been able to persuade most countries that it intends to
restore democracy
and hasn't made much headway in Myanmar's transformation from central
planning to a
market-oriented economy. While the regime began the transition 10 years ago,
critics say its
approach is half-hearted and piecemeal.

The government continues to control the currency and to dominate the nonfarm
economy,
operating companies that account for about 25% of gross domestic product.
Despite tax and
other privileges, state-owned enterprises generally are inefficient and
their collective losses shave
an estimated two percentage points off economic growth.

Only a few of the 69 state enterprises scheduled for privatization in 1995
have changed hands,
largely because private capital is scarce and some ministers have maneuvered
to retain control.

Statistics in Myanmar are notoriously unreliable, not least because the
parallel, or black,
economy is estimated to be as large as the recorded one. While that causes
headaches for
economists, it enables many people to survive through undeclared border
trade, the smuggling of
jade and other precious stones and timber, barter and drug trafficking.

The government's decision to abandon socialism initially sparked frantic
building in Yangon and
the appearance of consumer goods and cars. But critics say it brought little
lasting benefit to the

majority of people. The IMF says real incomes for the year to March 31,
1996, were no higher
than they were a decade earlier. The government couldn't afford its ambitious
infrastructure-spending spree, so it printed money to plug the holes in the
budget, fueling inflation.

The absence of stock and capital markets in Myanmar and the lack of free
convertibility of its
currency has shielded the country from the full impact of the regional
meltdown. But officials say
foreign direct investment fell more than 53% to $771 million in the past
fiscal year from a year
earlier because of the dislocation.

The government still contends economic output grew 6% last year and should
hit 6.5% this year,
but the IMF reckons it expanded only 4% last year and will slow to a "grim"
2.5% in the medium
term, unless there is "a significant policy overhaul."

Credit: Staff Reporter of The Wall Street Journal