| Burma’s
economy has been in steady decline since 1962. Although
Burma was once the “rice bowl” of Asia,
it is now ranked as one of the worlds’ 26 “Fragile
States” by the World Bank. The military dominates
nearly all aspects of the economy. Two companies, the
Union of Myanmar Economic Holdings (UMEH) and the Myanmar
Economic Corporation (MEC), dominate key industries.
MEC funnels revenue from private enterprise into defense
spending. The UMEH provides opportunities for secondary
incomes for military personnel and their families. Other
groups, like the SPDC-controlled “people’s
organization”, the Union Solidarity Development
Association, are extensively involved in business. The
junta’s military spending is exorbitantly high,
estimated at 40% of public spending, as are other gratuitous
expenditures, such as SPDC ceremonies, festivals, and
inspections tours. |
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The junta regularly
reports economic growth in double figures, but the
Asian Development Bank suggests that “sluggish”
might be more accurate, propped up by oil and gas
revenues.
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Since 1993 the junta has drastically overvalued its
currency at 6.23 kyat to US$1, facilitating a black
market rate that fluctuates between 1,250-1,350 kyat
to US$1. |
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Inflation was in double digits in 2005 and 2006 after
a relatively stable 2004. It first soared after a decision
to increase fuel prices by more than 900%, then rocketed
higher following the move of the capital to Naypyidaw,
and 10-fold salary increases to public servants in effect
1 April 2006. |
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According to SPDC surveys, the proportion of people
living under the poverty line increased from 23% in
1997 to 32% in 2001. However, in 2005 the UN suggested
it could be “more than 30%, and higher in Chin
State (around 70%) and Eastern Shan State (approximately
52%). |
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An increase of between 15-20% in food prices would leave
more than half the population under the poverty line.
Most people have an income is estimated of less than
US$200, but the price of an average meal is about US$0.45. |
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| The junta frequently
changes the rules for foreign trade, attempting to maximize
foreign exchange by limiting imports and promoting exports.
Taxes change arbitrarily, and private companies can
only export under the authorization of trade bodies
who generally receive an 11% commission on transactions.
Trade is controlled through the Myanma Foreign Trade
Bank. Before importing, traders must first purchase
goods from a list of priority items, and the export
of key commodities was banned in 1998. In March 2002,
the SPDC revoked the licenses of all foreign trading
firms. In early 2004, they banned the export of rice
and other primary commodities without informing the
producers who had already entered into contracts with
foreign firms. |
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Exports primarily go to Thailand (45%), India (12%),
China (7%), Japan (5%) and Malaysia (3%) and are mostly
raw commodities – gas and oil, gemstones timber,
pulses, and fish. |
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Imports mostly come from China (28%) Thailand (22%),
Singapore (18%), South Korea (6%) and Malaysia. They
are primarily machinery and transport equipment, mineral,
base metals and manufactures, fabrics and electrical
machinery. |
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Burma has enjoyed a trade surplus since 2002-03, mostly
gas exports. Official data for foreign trade grossly
understates imports, because of black market and unrecorded
border trade. |
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Trade, including border trade, remains a relatively
small proportion of GDP at around 1-2%. |
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A huge black market exists for nearly all commodities,
in particular drugs, guns, gems and minerals, timber
and people. |
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| The
junta continues to aggressively pursue sources of foreign
capital in China, India and Russia. Most investors have
to enter “joint venture” contracts with
state-owned firms. |
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Foreign investment is concentrated in “extractive”
industries – US$142.6 million in oil and gas out
of a total of $158.3 million in 2004/5, compared to
$35 million in 2005/6 out of a total $35.7 million.
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There is limited interest in other sectors, deterred
by consumer boycotts, the threat of international sanctions,
and the poor business environment. This includes inadequate
infrastructure, economic mismanagement, ad hoc policymaking,
a fragile banking system, weak domestic demand and poor
transport links. |
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Most investment comes from Singapore ($1.572 billion),
Britain (US$1.431 billion), Thailand ($1.341 billion),
Malaysia, and Hong Kong. |
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| Opposition groups
have called on foreign investment to be suspended, to
be deferred in favor of future, democratic, state-partners.
The US and the EU have both imposed economic sanctions
when it became clear that diplomatic engagement was
unable to ensure delivery of genuine reform. Sanctions
have been criticized by some for their impact on the
general population. However, this overlooks the institutional
characteristics of the Burmese economy. The informal
sector, which is largely village-based, focuses on subsistence
agriculture and represents the majority of the population,
has little connection to international trade. In contrast,
the formal sector, which is dominated by the SPDC and
concentrated in highly lucrative sectors such as mining,
petroleum, logging, manufacturing, finance and banking,
is more reliant upon access to the international market.
Claims over mass factory closures have been overstated,
and deliberately ignore the closures that resulted from
the banking crisis that occurred in early 2003. |
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Under the Burmese Freedom and Democracy Act of 2003,
the US banned all imports from Burma, as well as US
financial services to Burma. |
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The European Union extended its visa ban and assets
freeze, suspended all non-humanitarian aid and development
programs and strengthened enforcement on their existing
arms embargo. |
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Consumer boycotts have also had some impact, with several
companies withdrawing from Burma, or deciding not to
invest in Burma, citing concerns of human rights abuses. |
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| 54% of domestic
production is agriculture, and 60% the country’s
population is employed in agriculture. Foreign investment
in agriculture is negligible. The junta has also failed
to invest in agricultural, and fertilizer, farm machinery,
and even fuel, are unaffordable for farmers. Additionally,
the SPDC withholds export licenses to growers in order
to keep down the price. However, the restrictions are
occasionally lifted in order to obtain foreign exchange,
with the result of highly volatile domestic prices and
unstable incomes for growers. The Myanmar Agricultural
Produce Trading (MAPT) controls the rice market. Villagers
report being forced to sell rice to the MAPT at below
market prices. |
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Despite an economy dependent upon agrarian produce,
the junta refuses to establish long term standards and
assurances for land ownership. Land and agricultural
products are frequently confiscated by the military
for its own supplies.
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Huge areas of land have been cleared of traditional
cropping to make way for physic nut and jatropha plantations
for biofuel, with the intention of reducing the import
of US$200 million diesel and crude per year. |
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In Arakan State, rice is being smuggled from Bangladesh
in order to offset shortages. In some areas, rice and
paddy are periodically confiscated, forcibly sold or
prevented from being traded; forcing starving communities
to relocate. |
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The visit of WFP chief Jim Morris to Burma in August
2005 drew attention to the anomaly of widespread malnutrition
in the country, especially Arakan State, during a time
of rice surpluses. |
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| There is a fundamental
distrust of the banking system in Burma. The SPDC triggered
a banking crisis in February 2003 when it closed a dozen
private banks. A run on deposits led the SPDC to cap
withdrawal limits to 50,000 kyat per week and temporarily
cancel 'account transfer transactions,' further debilitated
the economy. The banking system is monopolized by the
regime. Of the few existing private banks, half of them
are owned or controlled by members of the military and
their cronies, and are money laundering mechanisms. |
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The state-run Myanma Foreign Trade Bank, the Myanmar
Investment and Commercial Bank, and the Myanmar Economic
Bank are the only institutions that handle foreign exchange
transactions in Burma. Monetary policy is haphazard
and irrational, and is sustained by money laundering
from the drug industry.
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Drug money finances infrastructure projects and joint
venture projects. The regime has a very real interest
in maintaining the trade, and drug traffickers are actively
courted by the SPDC as businessmen and investors. They
represent some of the most prominent business tycoons
in Rangoon. |
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Transparency international Corruption Perceptions Index
consistently ranks Burma amongst the worst offenders. |
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| There is potential
for a strong tourism industry in Burma, and the junta
is desperate for the foreign income that it could bring,
and frequently launch new campaigns to increase arrivals.
Official statistics show that there were nearly 600,000
tourist visits to Burma in 2006, bringing US$105 million
to the country. The numbers were up slightly from 2004’s
657,000 visits. However, it’s thought that around
60% of arrivals in Burma are “day visitors”
crossing the border from China and Thailand, spending
their time in Chinese-owned casinos and brothels, offering
little opportunity for income returns to the wider economy. |
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Many of the large hotels, airlines, and tourist attractions
are fully or jointly owned by the regime or are private
businesses owned by regime members.
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Myanmar Hotels & Tourism Services (MHTS) manages
state-owned hotels and tour operations including Myanmar
Travels & Tours. |
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Minister for Hotels and Tourism, Maj-Gen Saw Lwin, admitted
that 12% of the earnings of private tourist enterprises
fund the regime. |
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| Burma is rich
in natural resources, and most of the junta’s
official income comes through exports of oil, gas, teak
and gems. After the Foreign Investment Law was enacted
in 1988, the Myanmar Oil and Gas Enterprise (MOGE) began
entering into production sharing contracts with multinational
oil companies and production and profits skyrocketed.
All foreign enterprises are in joint ventures with state-owned
enterprises. However, there is no evidence that communities
where the discoveries have been made will derive any
direct benefit from the project. |
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In cooperation with the MOGE, a consortium of Indian
and Korean corporations have been exploring the Shwe
gas fields off the coast of Arakan State, since their
discovery in late 2003. On their own the Shwe fields
are expected to hold one of the largest gas yields in
Southeast Asia and could well become the military regime’s
largest single source of foreign income. They have an
estimated gas reserve of 10-14 trillion cubic feet,
and an income of US$580-824 million per year or US$12-17
billion over the life of the project for the SPDC. However,
it is feared that the ethnic population will be negatively
impacted, as the Shwe gas project provides an excuse
to further militarize and exploit the frontier areas
of Arakan and Chin States.
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Numerous agreements have been signed between China and
Thai companies and the SPDC for the construction of
hydropower dams on the Salween River. Damming the river
poses a threat to the livelihoods of all local ethnic
communities all along the river that passes through
Karen, Karenni, Mon and Shan States. |
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Highly profitable logging of teak continues between
Wa, Kachin and Shan communities and Chinese businesses.
The proliferating logging industry, both legal and illegal,
has not only had devastating environmental consequences
but also has caused the displacement of villagers as
well as the use of forced labor. The logging industry
is controlled by the Myanmar Timber Enterprise, and
is staffed primarily by retired military officers and
has full jurisdiction over forest conservation and exploitation. |
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Economic Holdings (40% ownership is with the Defense Ministry’s
Directorate of Procurement, 60% junta cronies) receives,
amongst other things. 60% of the sale of gems from companies
it leases out to. Biannual gem sales bring in around US$100
million in revenue. |
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Despite massive natural gas resources, 83.9% of energy
consumption is traditional fuel (Thailand: 17.7%). Electricity
consumption per capita is 126 hours (Thailand: 1,896) |
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Only 5% of the population has access to the electricity
network at all.
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The new capital has been blamed for diverting already
unpredictable supplies away from the commercial center
Rangoon. Residents and businesses face regular blackouts
despite huge outlays, and developments in regional areas
have only served to supply military bases. |
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For every 1,000 people in Burma, there are
o eight telephone mainlines (compared to neighboring
Thailand’s 107);
o two mobile phone subscribers (Thailand: 430); and
o one internet user (Thailand: 109). |
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