[Date Prev][Date Next][Thread Prev][Thread Next][Date Index ][Thread Index ]

SCMP: Burma in general disarray



South China Morning Post
Business Analysis

Burma in general disarray

WILLIAM BARNES 

The Burmese generals are frightened. They may control one of the biggest
armies in the region but they are terrified of provoking their own
population with stiff price rises. 

The military dares not risk a popular backlash and so even modest attempts
at reform are hamstrung. 

The results of this fear can be bizarre. When the Indian onion crop failed
a year ago, the authorities quickly banned the export sale of onions - and
lost a lucrative selling opportunity - for fear of a price rise. 

Yet this fear does not extend to allowing producers to reap the benefit of
market prices: the authorities retain a monopoly over rice exports, which,
as a result, are predictably dismal. 

Rice production, traditionally a big export-earner, is now barely keeping
pace with population growth. 

The ruling military junta that emerged to pick up the reins of 26 years of
military rule in 1989 - after mass protests - decided to try to buy off or
distract the unhappy population with economic growth. 

Former dictator Ne Win's quasi-socialist central planning was dropped
overnight in favour of a free-market economy. 

"The only problem is the word 'free'," said one foreign banker. 

"The military's instinct and training is to control. This economy is not
free at all." 

The ruling generals do not trust outsiders - and that includes in effect
anyone outside the inner core of the junta - to take important decisions
that they may simply be unable to understand themselves. 

So they harass importers, demand cheap produce from farmers, let potential
investors swing in the wind waiting for official decisions and print money
to fill financial black holes. 

The hard-line army chief, General Maung Aye, is widely  regarded as firmly
on the more inflexible, less worldly side of the regime. 

Yet he is head of the many key committees where economic policy is made on
the hoof. 

Lt-General Khin Nyunt, who represents the relatively sophisticated arm of
the regime, looks after internal
politics, ethnic affairs, health, education and foreign relations. 

General Maung Aye, along with the junta's secretary, General Tin Oo, is
left with responsibility for trade, finance and agriculture. 


This is not a clean divide because the regime rules by consensus and all
the senior men sit on the main councils.

But it does show the ease with which uniformed generals think they can -
often on their own - make difficult economic policy decisions. 

The results can be alarming. Last year, a tax was slapped on exports, a
decision hardly designed to encourage a faltering manufacturing sector. 

"They needed money so they thought, 'The exporters must have money, let's
tax them'. They didn't think it
through," one observer said. 

When a diplomat discovered the trade policy co-ordinating committee under
Gen Maung Aye met every week, he assumed it was merely to pass trade
approvals or something similar. 

He was shocked to discover that no, it actually "made policy" every week. 

When the generals realised in 1995 that palm nut from Malaysia for the
country's famously oily curries was taking up 10 to 15 per cent of the
import bill, they banned the export of domestic sesame seed. 

The decision was reversed only because a key Japanese trading house brought
its chairman to Burma to explain that sesame produces much less oil than
palm nut, so the comparative advantage was in Burma's favour. 

Penny drops. 

The trade was freed up in 1996 and 1997, only for the sesame export ban to
be reimposed last year. 

When a puzzled Rangoon resident asked why, one Japanese executive simply
shrugged his shoulders and said: "They forgot." 

This involvement goes much further than mere policy. 

The creation of United Myanmar Economic Holdings (Umeh) and the Myanmar
Economic Corp (MEC) allowed the military establishment to lock its claws
around whatever new business sectors arose. Military factories dominated
manufacturing during the quasi-socialist era of Mr Ne Win. 

Umeh and MEC are key local joint-venture partners for foreign investors.
Some analysts see them partially as officers' retirement funds and also as
financial hedges against possible political changes. 

An example: Umeh took control of all ruby and sapphire mines from the
ministry of mines in 1995. 

The Myanmar Gems Enterprise, under the ministry, was left with only the
organisation of the annual gems emporium for overseas sales. As a result,
gems supply has fallen because many private mines are said to have gone
"off the map" to wait for a better selling opportunity.

Even sympathetic visitors, such as Singapore Prime Minister Goh Chok Tong,
have privately warned the generals to free up markets, to tackle rampant
corruption and to stop making off-the-cuff policy behind closed doors. 

Middle-ranking officers in the intelligence organisation, the Directorate
of Defence Services Intelligence, appear to be well aware of the
deficiencies. 

Some local economists have been allowed to be quite critical, between the
lines, in recommending what one diplomat described as "sensible" policy
measures in seminars organised by the organisation. 

The top generals' control of the economy could soon be in the international
spotlight. The United Nations is trying to persuade the regime to start
exchanging political liberalisation for advice and money. 


But even if the regime makes sufficient token gestures to unlock some
economic aid, observers wonder how international help can bolster an
economy that bends to the whim of a small coterie of soldiers.