The State of Burmese Economy

under Military Management

by Mya Maung




The present military regime of Myanmar (the new name of Burma), the State Law and Order Restoration Council (SLORC) made up 19 military commanders, staged a counterfeit coup on September 18, 1988 that resulted in bloodshed and killings of thousands of pro-democracy demonstrators against the 26-year military dictatorship of General Ne Win.  It was a counterfeit coup because the same entourage of Ne Win engineered the coup in the name of restoring law and order.  Since then, the SLORC has been claiming positive achievements of democratization and the unprecedented prosperity attained for the citizens of Burma under its management.  The SLORC attributed its economic achievement to the market-oriented economic reforms undertaken in the name of "open-door market economy" of Myanmar.  At the outset, it will be stated that the ostentatious economic reforms introduced from the top in the name of “open-door market economy” have not elevated Burma from its status of being one of the least-developed countries in the world—a status it attained in 1987 under the management of the previous military regime.1


Since 1988, the SLORC has been using the "open-door market economy of Myanmar" claming spectacular economic achievements and other maneuvers to legitimize its illegitimate rule and stay in power; such as drawing up the unconstitutional constitution, lifting the martial law, releasing the opposition leader, Daw Aung San Suu Kyi, from house arrest without consenting to her political leadership and transferring power to her party that won the 1990 election, and attempting to eradicate opium/heroin trafficking.  These maneuvers have persuaded the ASEAN and many outside observers to view the junta as making "positive changes and steps towards economic progress and even democratization." Among those who hold this view are investors from around the world, including U.K. Premier, Total of France, U.S. Texaco, Unocal, and Pepsi Cola officials and a number of lawmakers such as George Archer and Nancy Johnson who were invited by the SLORC to visit Myanmar in 1993.  Others are the New York businesswoman Mariam Marshall Segal (nicknamed by Burmese dissidents as "the shrimp lady" who owned a joint-venture fishing firm with the SLORC and is under indictment for fraud by the Hong Kong-based Peregrine Ltd. at the New York court) and former congressman Lester Wolf.  The latest holders of this view who recommended for the US recognition of the SLORC as the legitimate government of Burma and the resumption of aid are Mya Saw Shin (the daughter of U Tin Htut, one of the framers of The 1948 Constitution of the Union of Burma of the democratically elected civilian government of the late U Nu), Alison Krupnick and Tom L. Wilson in their flimsy report entitled "Burma" or "Myanmar:" U.S. Policy at the Crossroads  published by the Bureau of Asian Research, October 1995.

Military Capitalism and Controls of the Economy


The policy of the so-called open-door market economy of Myanmar or "the Burmese Way to Capitalism" has been adopted and pursued by the junta since 1988 with the primary objective of enlarging the economic base of power to sustain and legitimize its rule.  Except for opening the door of the economy to foreign investors to form joint ventures with more than fifty former state enterprises in key industries, the Burmese economy remains primarily an inefficient command economy with a nationwide black market.  Black/parallel markets riddled with corruption continue to persist due to trade and price controls on the one hand, and because of the foreign capital and foreign exchange controls imposed by the SLORC along with the maintaining of an artificially fixed foreign exchange rate on the other.  When the legalization of border trade was announced in December 1988, 16 commodities were banned from export across the border, including teak, rice, oil and gems.  On October 28, 1991, the list of banned commodities was increased to 23 by the SLORC.  Among them were the four export products with the largest foreign exchange earning power, rice/paddy, teak, oil, and gems, followed by arms and ammunition, antiques, pulses and beans, corn, cotton, coins, rare animals, fish, shrimp, animal horns, leathers, and so on.2


The Ministry of National Planning and Economic Development wit its powerful Myanmar Foreign Investment Commission made up of self-proclaimed military cabinet ministers and the Ministry of Trade are the two main state organs empowered with total control of trade and investment, domestic and foreign.  According to the Foreign Investment Law promulgated on November 30, 1988 and began operating in May 1989, foreign companies may invest and form either wholly-owned or joint-venture firms with a minimum capital of 35 percent in various sectors of the economy.  However, wholly-owned foreign investment is allowed only outside the 12 areas which are reserved for the state under the State Economic Enterprises Law, promulgated on March 31, 1989.  Among them are teak, gems, fishery, postal and telegraph, radio and television, air and rail transportation, oil and natural gas, metals, electricity, banking and insurance, and defense industries.3


The state or defense services controls the key sectors and industries of Burma with nine state-private joint ventures called The Union of Myanmar Joint Venture Corporations No.1, 2, 3 etc. formed at the end September 1990.  They operate in the areas of (1) paddy, rice and rice product trading, (2) trading in papers and printed materials, (3) agricultural products other than rice and paddy trading, (4) construction works, production and marketing of construction materials, (5) fish, shrimp and other  marine breeding and trading, (6) modern hospital, clinic, medicine and medical equipment manufacturing and trading (7) general merchandise trading, (8) general merchandise export and import (9) the formation and supervision of companies and affiliates by the Myanmar Economic Holdings Company Ltd. (Public Joint Venture No.9) with K10 billion capital (almost 10% of Burmas GDP in 1990) under the direct control of the Directorate of Procurement and Ministry of Defence.4 

The Directorate of Trade of the Ministry of Trade controls export and import activities of foreign and domestic companies under strict rules by issuing permits/licenses to import and export on consignment basis.  The obtaining of these permits by both foreign and domestic companies hinges directly upon personal connections, family ties and bribery of the military commanders and corrupt officials.  For example, the foreign oil companies that have invested heavily in Myanmar since 1990 must put up signature bonuses that run as high as $15 million, as in the case of the French Total, to secure their exploration rights  The same is true for domestic companies which must bribe various government officials in order to secure export and import permits.


The entire process of securing joint venture contracts and trade permits is riddled with corruption and bribery that was publicly acknowledged by the Chief of Intelligence Khin Nyunt himself.  As he stated service organizations connected with trade matters such as import and export work, services sector and collection of taxes are taking bribes according to their ranks as we come to know.5 Burmese colloquially call the payment of bribe to government officials as the payment for drinking tea, la-hpet yay bo, or "tea-money" for short.  Burmese say satirically that in the past there used to be only one tea-money (t-money), but now-a-days there are four different t-monies,"t"s or bribes, that a person must pay in cash and in kind to the high-ranking corrupt government officials: money for “tea,” money for “table” (in reference to the cost of dining at a table in an expensive restaurant), money for “television,” and money for “Toyota.” These additional “t”s reflect that the cost of bribery has gone up a great deal in Burma with the galloping inflation rate of over 100 percent reported by the Burmese nationals.



The Myth of Economic Growth


With respect to distorted government reports in the socialist state of Burma from 1962 to 1988, Burmese satirically used to say that “if one wishes to arrive at the real truth or figure of bad news reported by the government, such as "10 people were killed by the security squad in a demonstration," one should multiply the stated number by 10 to obtain the real figure of 100 killed, while good news put out by the government, such as the growth rate of income and output, one should divide it by 10.” In fact, the Asian Development Bank estimated the real GDP growth rate of Myanmar for the fiscal year 1992/93 at 1.2% or one-tenth of the figure reported by the government.6 The unreliability of government reports and shortage of empirical data or information continue to persist in Burma today.


The SLORC has been claiming the phenomenal performance of the “open-door market economy of Myanmar" under its management in the mid-1990s, reporting that the real Gross Domestic Product (GDP) grew by 3.7% in 1989/90, 2.8% in 1990/91, -1.0% in 1991/92, 10.9% (later revised down to 9.3%) in 1992/93, 6% in 1993/94 and 6.8% in 1994/95.  In line with the GDP growth, the per capita GDP was given as Kt1,410 in 1994/95 representing a 4.8% increase from the previous year.7 The claim of 10.9% or the revised 9.3% real GDP growth rate for fiscal year 1992/1993 is grossly exaggerated by virtue of the fact that the deflator used by the government was based upon the underestimated official inflation rate of 30% rather than the two privately estimated inflation rates; between 60% and 90% by foreign analysts and over 100% by Burmese nationals.


Using the conservative estimate of 60% inflation rate, which is double the inflation rate reported by the government, the real GDP growth rates reported by the government would be cut in half to give the adjusted grwoth rates for the period: 1.85% (1990), 1.4%(1991), -2% (1992), 4.65%% (1993), 3% (1994), and 3.4% (1995).  Hence, the annual real GDP growth rate of Burma in the 1990s would average only 2%.  This would also produce a virtually zero growth of rate of real GDP because of the average population growth rate of around 2% for the same period.  The government also reported a per capita income of Kt1,335 or $222.5 at the official exchange rate of $1=Kt6 in 1994/95.8 This suggests that Burma is no longer a least-developed country since its per capita income has climbed above the United Nations’ benchmark of $200.  However, using the average unofficial/black market exchange rate of $1=Kt120 in 1995, Burma’s per capita income was only $11.125.  Further evidence of Burma's continuation as an agricultural economy and one of the least-developed countries in the world can be discerned in the more or less unaltered distribution of sectoral contributions to GDP with the agricultural sector contribution remaining constant at around 38 percent of the GDP and the manufacturing sectors contribution remaining stagnant at below 10 percent of the GDP since 1988—one of the benchmarks used by the United Nations in granting a least-developed country status.


The following charts on the dollar values of GDP at current prices at official exchange rates and black market exchange rates illustrate how different assessments or claims can be made on the value and growth of GDP








































Source: The Ministry of National Planning and Development, The Union of Myanmar, Review of the Financial, Economic and Social Conditions for 1994/95 (Yangon: Ministry of National Planning and Development, 1995), p. 8.


In contrast to the increasing growth pattern and a 5 percentannualgrowth rat of real GDP at more or lessfixed official exchange rate at Kt 6=$1, the use of steadily rising black market exchang rates theopposite pattern of a drastic drop of real GDP between 1990 and 1991and a negative pttern annual growth rate between 1989 and 1995. The reason for the opposite pattern and difference between the two growth rates is due to the sustained deprecition of Kyat relative to dollar in the black market.  This was relfected in the increase in the black market price of US dollar by 200 percent durin the period form Kt60 = $1 in 1989 to Kt120 = $1 in 1995.



Rice Shortages and Escalating Prices


The clearest indicator of the economic plight of ordinary people in Myanmar is reflected in the escalating cost or price of staple diet, rice, that makes up the bulk of the consumption expenditures of a typical Burmese family brought about by inept state policy and control of its output and export.  The Burmese proudly called paddy (the unhusked rice) as the golden fruit, shwethee, whose abundance over and above domestic consumption prior to the military takeover of political power and management of the economy in 1962 was reflected in the fact that Burma was known as the "Rice Bowl of Asia" and the largest exporter of rice to China, India, and other countries.  The export of paddy/rice before the 1962 military coup under the management of the civilian government of the late U Nu annually averaged between one and two million tonnes.  It dwindled to a few thousand tonnes during the 26 years of military rule between 1962 and 1988.  By 1988, the price of rice climbed to Kt15 per pyi  (4.67lb) that was one of the immediate causes of the mass political uprising of 1988.  During the uprising, the protesters against the military regime shouted the slogan: "San tapyi setngar kyat, Sein Lwin gonggo phyat" i.e., "since the price of one pyi of rice is Kt15, we must cut the head of Sein Lwin (the 17-day President General Sein Lwin)." The government report of a 30% increase in the cost of living index since 1988 directly contradicts the fact that in 1995, the price of rice has been reported by the Burmese nationals and private economic journals to climb above Kt100 up to Kt125 per pyi  in December.  That is, the price of rice has risen over 800 percent between 1988 and 1995 to indicate that the average annual increase in the price of rice over the seven years period is over 100 percent to indirectly confirm the private estimate of the true rate of inflation of over 100 percent.


The economic hardship of an average government employee due to inaccessible basic necessities at discount official prices and escalating unofficial prices has compounded further by the government wage policy of keeping the wages more or less frozen.  On March 27, 1993, in honor the auspicious 48th Armed Forces Day, the SLORC issued Notification No. 15/93 to increase the salary and wage scales of public service personnel to be effective on April 1, 1993 "to provide welfare to State service personnel."9 It was reportedly done to alleviate the economic hardship of rising costs of living due to inflation faced by government employees.  This was the second increment of pay scales made by the government, while the first increment was made in April 1989.  The monthly pay scales of government employees was increased from the old minimum-maximum range of Kt450—Kt2,000 to a new range of Kt600—Kt2,500 (US$5—$20.80 at black market rate of exchange of $1=Kt120) to be effective on April 1, 1993.  This represented a 33% raise for the minimum wage earners and a 25% raise for the maximum wage earners or an average wage hike of 30% for all government employees over a four-year period from 1989 to 1993.  The daily wage rate of government workers was also increased from Kt15 to Kt20.


This one-time average wage hike of 30% for all public servants (active and pensioned) did not alleviate the problem of negative real wages.  According to official reports, between 1989 and 1993 the average annual increase of the consumer price index was 30%.  It would require more than 30% wage increase every year or over 120% for the four-year period to keep the real wages constant between 1989 and 1993.  According to private information, prices of basic necessities in the unofficial/black markets in Rangoon and other major cities across Burma have been rising at an average annual rate of over 100% since 1989.  Hence, the 1993 government one-time wage hike of 30% failed to solve the problem of accelerated plunge in real wages that has been occurring since 1988.


Low growth rates of output together with a 40% annual increase of currency in circulation has been the key determinant of the escalating inflation rate in Burma.  The following phenomenal table of gaps between official and unofficial/black market prices in Rangoon and the charts on escalting prices of rice and protein highlight the worsening economic conditions of an ordinary urban family.


The Gaps between Official Prices and Unofficial Prices in Rangoon, 1995


                                                                        Official                 Unofficial*

                                                                        (1995)                   (1995)

First Quality Rice (pyi) (Pawsan Mhway)           Kt10.5                  K87.5

Second Quality Rice (pyi) (Emata)                     Kt6                       Kt65

Ngayan (viss) (Snake Fish)                                Kt90                     Kt260

Ngakhu (viss) (Cat Fish)                                    Kt95                     Kt300

Pazunkyawt (viss) (Shrimp)                               K60                      Kt180

Chicken (viss)                                                   Kt120                   Kt300

Gasoline (gallon)                                                Kt16                    Kt230

US $1                                                               Kt6.252                Kt120

Foreign Exchange Certificate US$1                    Kt6.252                Kt118


*Average prices for the year

Source: Central Statistical Organization (CSO), Selected Monthly Economic Indicators, 1994  (Rangoon: CSO, 1994) and US Embassy, Survey of Selected Retailed Prices in Rangoon, 1994, and private infomation for 1995.





















Source: US Embassy, Survey of Selected Retailed Prices in Rangoon, 1994 and private information of Burmese nationals for 1994-95.























Source: US Embassy, Survey of Selected Retailed Prices in Rangoon, 1994 and private information of Burmese nationals for 1994-95.


In December 1995, the price of top quality rice, Pawsun Mhway, was reported to be Kt66 per pyi (4.67lbs).  Beginning in January 1996, Burmese nationals and economic journals began reporting that the price of Pawsun Mhway  climbed above Kt100  per pyi.  In February 1996, the private Burmese economic journal, Dana, came out reporting that it climbed to Kt136 per pyi  in Mandalay, representing more than a 100 percent jump in two months.  The price of lowest quality rice, Nga Sein, was also reported to climb from Kt40 per pyi  to Kt67 per pyi  to indicate a drastic worsening of living conditions for ordinary people.  The price increase of the first quality rice in Rangoon was even higher, although rice prices in Mandalay historically is higher than the prices in Rangoon.


In short, a highly inefficient command economy with a dual price structure of official and unofficial/black prices has been responsible for the abnormal increases in rice prices.  The private merchants and dealers seem to have been buying and hoarding rice to sell in the black or parallel markets inside Burma and across the border for higher profit, while the state has been stockpiling paddy and rice in government warehouses to export to foreign countries to earn foreign exchange. The consumers may also be buying and hoarding rice in panic to safeguard against the pending social and political unrest, the traditional customary practice of the Burmese people in times of political instability and crises dating back to the days of Burmese kings.  It seems apparent that the major cause of abnormal increases in rice prices has been due to cut in supply for domestic consumption by the state to fulfill the committed rice export of one to two million tonnes by 1996 to drought-affected China and Indonesia.  In March 1996, it has been reported that the government began distributing free rice to government employees at a rate of 14 pyis  for a family man and 12 pyis  for a single man in order to head off the potential runaway inflation and appease public discontent that brought down the previous socialist government in 1988.  Such a stopgap measure is not going to solve the long-run problem of rice shortages and escalating prices.



The Fleecing of Burmese Farmers


For 26 years from 1962 to 1988, the military regime of General Ne Win managed the agricultural sector of the command economy of the Socialist Republic of the Union of Burma by institutionalizing “the advanced purchase of paddy system” with a state monopoly on rice export. By advancing loans to farmers, the government established a system of quotas for farmers to sell their harvested paddy at pre-determined prices to the state buying depots.  Although there has been a number of increases in the offered price of paddy along with the decontrol and recontrol of rice and other agricultural products since the late 1970s, the quota system of procuring paddy from farmers at low prices by the state procurement agencies remains intact in Myanmar today.  In 1987/88, the military regime decontrolled paddy and rice by allowing private traders to trade and export freely.  At the same time, a new  tax system was introduced that required farmers to pay land revenue and agricultural sale taxes in kind.  The liberalization of paddy and rice trade was short-lived and by 1990, private export of paddy and rice was banned.


Soon after the military coup of 1988, the military regime of General Saw Maung renamed the former state buying agency (State Corporation No. 1) the Myanma Agricultural Trading Produce (MATP) and began to offer higher procurement prices of paddy to farmers.  Former buying depots and quota system of delivery to the state were reinstituted.  As in the past, farmers have to meet their quotas of paddy sale to the state according to the credits or cash advances secured for their operation from the state banks.  A farmer who cannot meet the quota is subject to arrest and seizure of his farm by the authorities.  Since then, there are four competing buyers of paddy from the farmers: the state procurement agents of the MATP of the Ministry of Trade, the agents of the State Joint Venture No. 1 (a joint venture between the state and big private merchants), the co-operative agents of the Ministry of Co-operatives, and small independent private merchants.  Each of them purchases paddy at different prices.  The purchase prices offered by the first three state and quasi-state agencies are officially determined at low levels relative to the high prices offered by the independent private merchants who deal in the unofficial/black market. The official offered prices may be as low as 50 percent of the prices of paddy and rice offered by private dealers and merchants.


Athough since 1988/89 the government and the state-sponsored co-operative purchase prices at the state buying depots or farmgates have gone up several times, they remained well below the free market price offered by private traders.  In 1994/95, the private purchase price of paddy was Kt7,688 per ton which was more than double the government purchase price of Kt3,833 per ton.  This unfair procurement and pricing system with state monopoly on paddy and rice export has been largely responsible for the continuing economic plight of Burmese farmers.  In 1994/95, the spread between the export partiy price of Kt12,030 per ton received by the government and the average farmgate price of Kt10,000 after procurement received by farmers was Kt2,030 per ton to underscore the fleecing of farmers by the state for the purpose of export to earn foreign exchange.  According to The World Banks estimate, the total income loss of farmers due to implicit taxation and export ban by the government was over Kt14 billion for traditional paddy output with loss due to export ban accounting for over 70 percent of the total income loss of farmers in 1995.10


The paddy output per acre in the Delta ranges from 60 to 70 baskets.  Most farmers cannot meet their output quota due to the limited supply of inputs for farming such as fertilizers and insecticides sold by the government at low official prices, the amount undercut by the state procurement agents and the forced payment of paddy to the army.  The shortage of inputs sold by the government forces farmers to purchase them in the black market at high prices.  The amount of paddy left over after meeting the state quotas is called wunsah  or “paddy for the stomach.” These wunsah  paddies may be sold to co-operative agents or merchants who in turn mill them and sold them in the unofficial market.  Most farmers are left without wunsah  paddies after all the robbery of their paddy output by the state and co-operative agents.


This process of paddy and rice distribution seething with corruption and swindling the farmers by state officials at the village buying depots across the country explains how and why there has been a widespread shortage of rice for domestic consumption and escalating price of rice in major urban centers of Myanmar.  It should also be noticed that the export of rice is monopolized by the state to earn foreign exchange.  Like teak, gems, opium/heroin, and oil that are banned from private export by the state, there is a thriving black market for the export of rice across Myanmar’s borders.  Majority of rice that flow to the black market came from the independent merchants, the state procurement agents, and the leakage from the state distribution shops.  Like ordinary folks in urban communities, farmers have been forced to buy rice and other basic necessities in the unofficial/black market.  In Upper or Dry Zone of Burma where paddy and rice output has always been low due to natural factors, it has been reported that people have to purchase and consume rice imported from China that is cheaper than the imported rice from Lower Burma.  It has caused resentment among Burmese consumers whose country used to be proudly known as “the Rice Bowl of Asia” as the major exporter of rice to China and India.



Inflation and the State of Burmese Economy since 1988


According to government and its lobbyists, growing direct foreign investment, strong economic growth, and "economic reforms" had fueled the inflation. Normally, economic development tends to be associated with rising prices and ideally, it should occur with a minimum rise in prices.  In most newly industrialized or developing economies of Asia, such as the Asian Tigers and the ASEAN, the rate of inflation tends to be either equal to or slightly higher than the rate of economic growth.  In the case of Myanmar, the rate of inflation has outstripped the rate of growth GDP annually by three to four times to indicate the abnormality and lack of genuine reforms introduced by military managers.  With respect to inflation and the state of the Burmese economy under the military management since 1988, Professor Minoru Kiryu wrote in his Report to the United Nations Development Programme (UNDP):

The recent price increases in Myanmar, however, can not be viewed as a healthy counterpart to economic growth and development.  They instead must be seen as an indication of abnormalities in the economy, and as a stumbling block to stable development.11


He also gave five economic factors responsible for abnormal price increases in Myanmar: supply shortage or stagnation of domestic production, increases in production costs, the increase in money supply, overvaluation of Burmese currency, and dual price structure.  He also added that in addition to these economic bottlenecks, the social factors of distrust in the stability of Burmese currency due to past demonetization measures and the lack of timely and accurate information have intensified the rate of inflation


In March 1996, as rice prices skyrocketed in Rangoon and other cities, General Than Shwe, Prime Minister and Head of the State of Myanmar, called for all-out efforts to bring down production costs by stressing frugality in spending, saying that commodity prices would stabilize and fall only when production and distribution costs fell.  Indeed, his diagnosis is correct in stressing the need for frugality of spending.  In particular, the military regime needs to curb its exorbitant spending on arms procurement from China, Russia, and other countries, state-sponsored cultural, religious, and sport festivals for political distraction, rewards doled out to newly appointed 27 military cabinet ministers out of the 31-member cabinet, 11 military commanders promoted to the rank of Lt. Generals in 1993, more than a dozen military deputy ministers, and hundreds of loyal civilian government officials and enlargement of its armed forces from some 180,000-men in 1988 to 300,000-men in 1995.  The main cause of inflation has been the lack of monetary and fiscal discipline on the part of the government in incurring mounting deficits and financing them by printing new bank notes, including the dollar-denominated Foreign Exchange Certificates (FECs) which are locally dubbed as "the Burmese Dollars."


The military regime has been printing new bank notes and putting them in circulation at an annual average rate of 40.6 percent since 1988 to finance its escalating government deficit (the combined deficit of state administrative organizations and state economic enterprises) that jumped from Kt6.265 billion in 1989/90 to Kt25.917 billion in 1994/95.  That is, for the six years between 1989 and 1995, the government deficit increased by 300 percent or grew at a simple average annual rate of 50 percent.  On March 27, 1994, the Central Bank of Myanmar put into circulation newly denominated bank notes Kt500, Kt100, Kt50, Kt20 and Kt.5 (50 cents) in addition to the existing legal tender notes of Kt1, Kt5, Kt10, Kt15, Kt45, Kt 90 and Kt200.  With the introduction of these new notes, Burma now has 12 different bank notes in circulation.  According to the Minister of Finance and Revenue, Brigadier General Win Tin, the new bank notes were issued "in accordance with the normal banking practices" and for the purpose of "easy handling in line with the market-oriented economic system."12 Government deficit-financing by printing new bank notes is neither a normal banking practice nor a rational monetary action to combat inflation in a market-oriented economy of developed nations.



Foreign Exchange Controls and Dollarization of the Economy


To sustain its grip on political power, the military regime has relentlessly maintained a foreign exchange regime.  Strict foreign exchange regulations and controls are imposed by the newly created Ministry of Finance and Revenue in 1993 with Brigadier-General Win Tin as its minister.  Foreign exchange rate, transactions, and account of all foreign and Burmese companies and nationals are directly controlled by the four main state financial institutions of The Central Bank of Myanmar, The Myanmar Foreign Trading Bank (MFTB), The Myanmar Investment and Commercial Bank (MICB), and The Myanmar Economic Bank (MEB).  The state control of foreign exchange is absolute despite the policy of allowing private companies to open foreign exchange accounts and use them for export and import activities under strict regulations of monetary authorities.  All foreign exchange accounts are required to be kept at zero interest and subject to a flat 10% tax with The MFTB, The MICB and The MEB and four other semi-state or so-called joint state-private venture banks: The Myanmar Citizens Bank, The Co-operative Bank, The Myawaddy Bank or The Military Bank and The Yangon/Rangoon City Bank owned mostly by military families and directly controlled by military directors.


Private citizens have no free access to and use of foreign exchange.  For example, the maximum foreign exchange allowed to a Burmese national for travel abroad since 1989 is limited to $65.  The remittance of foreign exchange from abroad is controlled by allowing the recipient to withdraw on the spot 25 percent of the remittance in kyats  translated at the official exchange rate, while the rest may be kept as a savings account at zero interest with the MFTB or can be redeemed at the official exchange rate.  The use of the residual foreign exchange for purchase of foreign products is allowed with or without a license depending upon the type of import.  Hence, most remittances from abroad are done through black market dealers called hondis  at home and abroad.  Consequently, dollarization of the Burmese economy has been occurring since 1990.

Dollarization signifies the displacement of a country"s local currency by dollars in domestic pricing and trading of goods and services.  This is happening in Burma today in which everyone wants to spend or pass on "bad money," Burmese kyat, to someone else and receive or hold "good money," US dollar, exemplifying Gresham's Law in operation.  The US dollar has been used as a standard of value and a store of wealth in lieu of the kyat  that has become worthless in the eyes of the public.  Since 1988, the Burmese kyat  has become bad money due to a lack of confidence, an artificially fixed exchange rate at about Kt6 to US$1 and strict foreign exchange controls relentlessly maintained by the government.  The black market rate of exchange hovers around Kt120=US$1 to indicate that the official exchange rate is 20 times overvalued.


The dollarization of the Burmese economy was augmented further by the monetization of dollar-denominated certificates.  On February 4, 1993, the Central Bank of Myanmar began issuing the 1, 5, and 10 U.S. dollar-denominated foreign exchange certificates to boost foreign exchange earnings of the state and facilitate the exchange of hard currencies by tourists.  These certificates were decreed to be generally acceptable by any person and used inside Burma only, making them the second or parallel legal tender note or "the Burmese dollar" as they are dubbed in the Burmese economy today.  The Burmese citizens who came to own these certificates can hold them privately or deposit them in foreign exchange accounts with state banks.  The 1993 regulation also required all foreign tourists to purchase a minimum US$200 worth of certificates that cannot be redeemed when leaving Burma.  In March 1994, this minimum requirement was raised to Kt300 to capture more dollars from the tourists. This requirement is a de facto  forced conversion of US$300 into Burmese kyats  at the official exchange rate of Kt6.25 for US$1.  It also amounts to a tax or an entry fee imposed upon visiting Burma.


Due to the maintenance of a foreign exchange regime, huge spreads between the official and unofficial/black market foreign exchange rates of US dollar continue to develop.  The following table and charts indicate the phenomenal spreads between the average black market and official exchange rates for the period of 1988-1996 during which the black market-premium of US dollar jumped from 800 percent to 2,000 percent.



The Average Black Market and Official Exchange Rates of US Dollar

































Sources: US Embassy, Retail Prices of Selected Goods, Rangoon (1988-1994) and private information for 1995-1996.














Balance of Trade and Payments Deficits


In 1993/94, for the 16th year in succession Burma recorded a trade deficit Kt3.695 billion ($606 million at average official exchange rate), which was the largest trade deficit ever recorded since 1977/78.  For 1994/1995, government projected another larger trade deficit of Kt4.344 billion or $737 million (Review 1995: 175).  Since 1988, Burma has been suffering from a chronic trade deficit averaging over Kt2.5 billion ($400 million at official exchange rate of $1=Kt6) a year, along with the worsening terms of trade, and an outstanding foreign debt of over $5 billion.  Using 1985/86 as the base year, the terms of trade since 1988 remains below 100 with a declining trend from 81 in 1989/90 to 47.2 in 1993/94.  However, the government projected that it will improve to 52.4 in 1994/95 (Review, 1995: 176).13 


















Source: Ministry of National Planning and Economic Development, The Union of Myanmar, Review of the Financial, Economic and Social Conditions for 1994/95 (Yangon: Ministry of National Planning and Development, 1995), p. 175.


The cumulative trade deficit since the military coup of 1988 stood at Kt17.1572 billion or $2.8595 billion at the official exchange rate of around $1=Kt 6 in 1994/95. It has been the main source of drain in the foreign exchange reserves of the government.


The current account deficits for the period from 1990 to 1995 are $77.5 million (1990), $526 million (1991), $344 million (1992), $275.4 million (1993), $292 million (1994) and $339 million projected for 1995.  The financing of these persistent current account deficits has been made by the inflow of long-term foreign capital in terms of concessional loans and grants, mostly from Japan and former West Germay, and direct foreign investments from around the world.  However, the financing the current account deficits by these two sources has not been adequate to generate an equilibrium in the basic balance of payments due to the fact that since 1988 all bilateral aid from the West and multilateral grants and loans from international organizations, such as the IMF, the Asia Development, and the World Bank, have been halted.  In other words, Burma faces a serious long-term problem in meeting its external debt obligations and balancing its basic balance of payments.  In the 1990s, long-term capital inflows in the form of foreign direct investments have dominated the capital account of the balance of payments as official financing of current account deficit has become less and less significant.  Most recently, the shortage of bilateral and multilateral loans has been partially made up by the disbursement of a number of new medium-and long-term concessional loans for railway, shipping, and fishery projects provided by China.


As for the external debt, it has grown steadily from $4.221 billion in 1990 to $5.518 billion in 1994/95 with an annual average debt service ratio of 41 percent for the period.14 The majority of Burmas medium-and long-term external debt are concessional loans, accounting for 90 percent of the total external debt, three-fourths of which are bilateral loans with Japanese loans accounting for 75 percent.  As in the past socialist state of Burma, Japan and former West Germany continue to be the largest creditors of Burma.  As of March 1993, the total outstanding and disbursed bilateral debt (including arrears on principal payments and excluding interest payments) was $3.290 billion with $2.44 billion outstanding debt to Japan, $515 billion to former West Germany, and $91.4 million to China.  The outstanding stock of external debt service arrears has also been rising.  At the end of 1994/95, it rose by some $137 million to almost $1.5 billion, over 75 percent of which are owed to Japan.15


The external liquidity crisis of Burma due to insufficient long-term capital inflows continues to persist and is reflected in the overall balance of payments deficit (current account balance + net long-term capital movements + errors and omission) since 1990 with the consecutive deficits of $370 million (1991), $232 million (1992), $279 million (1993), $248 million (1994) and $48 million deficit projected for 1995.16 Hence, it can be inferred as some private analysts suggested that the major portion of financing the mounting licit trade and current account deficits has been made by funds derived from the export of illicit drug or heroin from the Golden Triangle and other contraband to the outside world across the borders of China, India, and Thailand.  To solve the international liquidity crisis, the officials of the military government has been rigorously lobbying and asking for the resumption of loans, grants, and drawing rights without success so far from the two most important multinational lending organizations, the International Monetary Fund (IMF) and the World Bank.


The persistent trade deficit has been the major cause of the decline in foreign exchange reserves.  Foreign exchange reserves reached a high of $454.4 million in 1989/90 primarily due to the investment of more than a dozen foreign oil companies that entered on-shore and off-shore joint-venture oil exploration contracts with the state-owned Myanmar Oil and Energy Enterprise (MOEG).  It was followed by four consecutive years of decline with $297.8 million in 1991, $283.3 million in 1992, $273.4 million in 1993, and $241 million in 1994.  The projected foreign exchange reserves for 1995 was $327.6 million.17


The major reason for the decline in foreign exchange reserves since 1989/90 may be attributed to the military regimes rigorous arms procurement program from the outside world, including the $1.4 billion deal struck with China in mid-1990, and other countries (Yugoslavia, Poland, Portugal, North Korea, and Singapore).  The exact payment in foreign exchange for arms purchases each year is not known and has not been revealed by the government.  Based upon the US Arms Control and Disarmament Agencys report, the average value of arms import by Burma was almost $200 million a year between 1990 and 1993 that represented one-half of the average trade deficit of $400 million a year for the same period.  The most recent arms procurement from China was a package deal struck in November 1994 during the visit of Burma Army Chief of Staff and Secretary No. 2 of the SLORC, Lt. General Tin Oo.  It was reported to be worth $400 million, involving the procurement of helicopters, artillery pieces, armored vehicles, naval gunboats (including three naval frigates), military parachutes, and small arms.18 There are also reports of recent arms procurement through arms brokers from a number of Western countries, including Belgium, Israel, Sweden, Switzerland, United Kingdom, and Russia.



China's Economic Dominance over Burma


The dependency of Burma on imports of foreign-manufactured consumer goods, raw materials, and capital goods has been continuing with no end in sight.  In terms of trade balance by country, Burma has the largest trade deficit with Japan followed by deficits with China and Thailand, while it has trade surpluses with Singapore and India that seem to be dwindling in the 1990s.  However, on the basis of various observations and reports of large shipments of goods, arms, and transport equipment by China across the Yunan border under numerous trade agreements signed between the two countries as well as the flooding of Chinese goods of all kinds in the major cities of Burma since 1988, it may be concluded that China remains the largest exporter of goods to Burma. 

The exact statistical information on the value and composition of imports of Chinese goods across the Bumra-China border, especially the contraband and arms, is not known.  After the legalization of trade with China in 1988, Burma has signed several trade agreements with China.  For example in July 1993 alone, Burma and China signed six new agreements involving trade, transportation, and infrastructure.  Under these agreements, Burma was to sell timber cut in the Kachin State to China across the border, while the Chinese would help construct hotels in Rangoon and a hydroelectric plant at Chin Shwe Haw near the Chinese border. Burma in turn agreed to purchase 30,000 tons of rail, locomotives and spare parts and $2 million worth of motor vehicles and spare parts from China.19 In 1994, four Myanmar state enterprises signed memoranda of understanding with Chinese counterparts from Yunan province to develop the shipbuilding and power sector, involving building of warfs, power stations, and purchase of vessels.20 The value of legal and illegal Burma-China cross-border trade has been estimated to be worth over $1 billion a year.


The primary objective of adopting a policy of so-called open-door economy of Myanmar and subsequent legalization of Burma-China border trade in 1989 by the Burmese military junta has been to attract aid, trade and investments from the outside world, particularly from China, to sustain its illegitimate rule against the wish of the people of Burma. The net consequence of the ostensible free border trade with China has been the Chinese takeover of Upper Burma and the continued existence of parallel/black markets in central Burma and at the border. The Chinese goods and merchants have been flooding the Gem City of Mandalay and other cities in Upper Burma.  The ethnic Chinese merchants and drug warlords are reported to have bought up the real estate and the entire downtown of Mandalay which has become a booming city with new roads, shops and refurbished bazaars.  It has also been reported that many Chinese nationals have become Burmese citizens overnight by purchasing National Registration Certificates (NRCs) from black marketeers and corrupt government officials.  The illegal trading of goods, including opium and heroin, banned by the state to and from China and other neighboring countries has been overlooked by the military authorities.


In effect, the Chinese takeover of Mandalay and northern Burma replicates the economic consequence of the British colonization of Burma by massive importation of Indian, to a lesser degree Chinese, manpower and capital.  The net result was a parallel takeover of land, business, industry, commerce and finance by Indians.  The striking difference between the two types of colonization is that in the case of British annexation of Burma it was imposed by an imperial power that deposed the native rulers after waging and winning the three different Anglo-Burmese wars fought over a span of sixty-one years from A.D. 1824 to 1885.  In the "open-door economy" of present-day Myanmar, the Chinese economic colonization of Mandalay and northern states of Burma has occurred without wars during a short span of five years from 1988 to 1993 welcomed and blessed by a native Burmese government, the SLORC.  The similarity between the two cases is that both the SLORC and Great Britain came to power through force without the democratic consent of the people of Burma.21

Direct Foreign Investment:

Constructive or Destructive Engagement?


Private corporate world and individual governments of both the West and the Asian countries have shown willingness to tolerate continued human rights violations of the military regime by not sanctioning and imposing a total trade and arms embargo against Burma.  Despite verbal rebukes and resolutions passed against the Burmese military regime's human rights abuses by the UN and the US, a multilateral arms embargo has yet to be imposed.  Meanwhile, Burma continues to be a member of the United Nations and the ASEAN has invited and accepted by the SLORC to be a guest at various July meeting of its ministers ever since 1993.  In effect, the clinch constructive engagement followed most ardently by the ASEAN, and to a lesser degree, by the Western democracies has been destructive to the democracy movement of Burma.  The underlying motive of the ASEAN as well as industrially developed Asian and Western countries in entering trade and investment relationships with the Burmese military regime has been economic to establish new markets and exploit untapped natural resources of Burma that the military regime has been putting up for sale to capture scarce foreign exchange and sustain its control of power.  The political motivation of the constructive engagement has been the concern over Chinas increasing military strength and influence over Burma that represents a threat to regional security.


As of March 16, 1994, total foreign direct investments in Myanmar is reported to be $1.056 billion by some 91 foreign companies.  By country of origin, Thailand remained the largest investor followed by the United States, Japan, the Netherlands, the United Kingdom, the Republic of Korea, Australia, Canada, Hong Kong, Singapore, and Bangladesh.  In terms of sectors, tourism has replaced mining as the second most important sector of direct foreign investments in 1994.  SLORC has been launching a rigorous campaign of promoting tourism with the slogan of “Visit Myanmar in 1996” to amass more foreign exchange.  As of June 21, 1994, Abel stated that Singapore overtook Thailand as the top foreign investor, with its $500 million share out of the total foreign investments of $1.23 billion.  Singapore's investments have dominated the hotel and tourist industry that the SLORC has targeted as the largest foreign exchange earner under the rigorous international campaign of "Visit Myanmar in 1996."


As 1995 began, there has been a dramatic rise in foreign direct investment which has reportedly more than doubled, reaching a total of $2.4 billion in February 1995 with significant changes in the ranking of investment by country of origin and by sector.  This dramatic rise was primarily accounted for by an additional investment of Total Oil of France, which owns a major interest in the joint venture project of offshore Yadana Natural Gas Well with the state-owned Myanmar Oil and Gas Enterprise (MOGE), for the construction of the proposed multimillion dollar pipe line to ship natural gas to Thailand by 1997.  France became the largest investor with its investment of $1.05 billion, accounting for 44 percent of the total direct foreign investments of $2.390 billion, to overtake Singapore ($265 million) followed by Thailand ($211 million) and the United States ($203 million).  However, in March 1995 the United Kingdom has replaced France as the largest investor in Burma with 24 percent, followed by France with 17.9 percent, Thailand with 16.1 percent, Singapore with 13 percent, U.S.A. with 8.7 percent, and Japan with 3.8 percent.  The combined investment of U.K., France, and U.S.A. alone accounted for more than 50 percent, while the total Western investment, including Australia, accounted for almost 60 percent of total foreign direct investment.  The combined investment of three ASEAN member countries accounted for more than 30 percent of total foreign direct investment.22


By sector, foreign direct investment in oil and gas continued to top the list with 56.4 percent followed by hotel and tourism with 21.9 percent, fisheries with 9.47 percent, mining with 7 percent, manufacturing with 6.7 percent, and the rest by less than 1 percent in agriculture and transport each.  The majority of investment in oil and gas was made by multinational companies from France, United States and United Kingdom in entering joint venture projects with the state-owned Myanmar Oil and Gas Enterprise (MOGE) and the companies from Thailand and Japan.  The majority of investment in hotel and tourist industry was made by Singapore, Thailand and Hong Kong. 



Conscript Labor Input in Oil and Natural Gas

Joint Venture Projects


Towards the end of 1992 and during 1993, more than a dozen foreign oil companies pulled out of Burma due primarily to no significant finds of onshore oil.  However, the exodus of the unsuccessful foreign oil companies was offset by the U.K. Premier Consolidated Oilfields discovery of gas and condensate at the Yetagun Wildcat Well (Sagarwah  in Burmes) and Texacos offshore natural gas find in the Isthmus of Kra located some 100 miles west of Mergui.  The participating interests in the Yetagun Wildcat Well project are American Texaco (50%), British Premier Petroleum Myanmar (30%) and Nippon Oil Exploration (Myanmar) Ltd.(20%).  In July 1992, the French multinational firm MNC Total S.A. and the Petroleum Authority of Thailand Exploration and Production Public Co. Ltd. (PTTEP) signed an offshore natural gas exploration project with the MOGE estimated to be worth over US$1.2 billion.  The participating interests in this giant offshore natural gas project are Total (52.5%), PTTEP (up to 30%) and the rest belonging to the Unocal of United States with a 15% share option retained by the MOGE.  This concession known as the Yadana Gas Well covers an area of 26,140 square kilometers in the Gulf of Martaban, located some 250 kilometers southeast of Rangoon and 500 kilometers west of the Burmese border town of Three Pagodas Pass across Thailand.  In 1994, the head of the state of Myanmar, Senior General Than Shwe, reported that the Yadana Gas Well have a 6 trillion cubic feet of production potential instead of the initial estimate of some 2 to 3 trillion cubic feet of natural gas deposit.  These two major joint ventures are the only oil and natural gas exploration projects left in operation in Myanmar today.  In 1994, Thailand signed an agreement to be the sole buyer of Burmas natural gas form the Yadana Gas Well by 1997.


The two on-going offshore oil and natural gas joint venture projects are in the geo-politically strategic areas along the Thai-Burmese border and the Gulf of Martaban where the headquarters and population of the two strongest ethnic minority rebel groups, the Karen National Union (KNU) and the New Mon State Party (NMSP) are located.  The control of the areas occupied by these rebels has been a must for the SLORC for the natural gas production and shipment to Thailand.  There are reports of atrocious human rights violations against the Karens and the Mons by the Burmese military, forcefully relocating villagers and using forced labor to build roads and the Ye-Tavoy Railway labeled by the ethnic human rights activists as "the Death Railway." The Ye-Tavoy railway project has been undertaken by the Burmese army for the purpose of building the proposed mutli-million dollar pipeline that would tap the two offshore blocks or joint venture projects mentioned before to ship the natural gas to Thailand.  According to the report issued by the Burmese exiled government, the National Coalition Government of the Union of Burma (NCGUB), since October 1993, as a first phase of the gas pipeline project, the Burmese army deploying 15 new regiments have forcefully relocated local people from "four villages from Ye township, 11 villages from Yebyu and Tavoy townships."


In early 1995 to clear the site of the pipeline, the Burmese junta broke its unilateral cease-fire agreement and mounted an all-out assault to successfully overrun and captured Manerplaw, the central headquarters of the Karen National Union (KNU) and the Democratic Alliance of Burma (DAB) as well as other KNU camps and the All Burma Students' Democratic Front (ABSDF) headquarters at Dawn Gwin.  It has caused the KNU leaders and thousands of Karen and other refugees to take refuge inside Thailand.  In August 1995, for the same purpose the junta broke its cease-fire agreement with the Karenni ethnic rebels and waged war against them, creating more refugees along the Thai-Burmese border.  These refugees in turn are under intensive Thai pressure of forced repatriation and deportation.  Against this background, both groups have been forced to enter into cease-fire talks with the SLORC.


In 1994, evidence of the use of conscript labor surfaced on the international front when foreign journalists reported it with pictures of civilians and prisoners in chain gangs to clean up the Mandalay Palace and dredge the moat.  On September 17, 1994, The New York Tines  reported: "In April 1994 orders were given to clean up Mandalay Palace, including a project to dredge the moat.  Alongside shackled prisoners, two thousands ordinary farmers and city folks were used to work on this giant project." A few fatalities among forced laborers was also reported.  Another foreign journalist, Suzanne Goldberg of London, who visited Myanmar in 1994 wrote in The Guardian:: “Burma’s junta is using a ‘unique form of taxation’ [forced labor and donation] to realize its grandiose dreams in drenching the moat of the old Mandalay’s palace, building international airports at Bassein and Mandalay and 110-mile Ye-Tavoy Railway.”


The powerful intelligence chief, Lt. General Khin Nyunt labeled by dissidents as the "Prince of Darkness," admitted the conscription of uncompensated labor from the people and defended this feudal system of corvee labor as the voluntary "noble deed of merit"  in Burmese tradition performed by the Burmese people.  On November 26, 1994, in the state-run New Light of Myanmar, he accused the "destructive elements" of Myanmar (foreign journalists, radios, neo-colonialists, traitorous expatriates, and armed organizations under foreign influence) of spreading "concocted news" and "unfounded information" of forced labor, "despite full good will of local residents in their contribution of voluntary labor." This justification replicates the one made by malevolent ancient Burmese kings to justify their acts of building gardens, roads, bridges, and pagodas for the atonement of their sins of torture and murder of their subjects.  However, the UN Special Repporteur, Professor Yoko Yokata, reported that “the labor extracted from the people by SLORC is not voluntary and made under various threats of violations of personal integrity rights or property rights.”23 The most brutalized and abused victims of forced labor, portering, and relocation by the Burmese army have been the two ethnic minority groups of Karens and Mons  whose states are the site the proposed multi-million dollar pipeline to ship natural gas to Thailand.


The impressive amounts of foreign direct investment made by countries from around the world in the various sectors of the economy seem to suggest that doing business or investing in Myanmar has been easy and highly lucrative.  In reality, foreign investors face a number of obstacles such as corruption, bureaucratic red tape, foreign exchange control, restricted repatriation of profit, and lack of modern financial institutions and infrastructure.  A successful foreign investment venture inside Myanmar depends directly upon personal connections and contacts with the military or civilian directors in charge of various ministries.  On the surface, the continuous inflow of foreign capital and direct investments may seen highly conducive to the economic growth of the country and welfare of the people of Burma.  In reality, due to the maintenance of trade and foreign exchange regimes by the state, the impact of foreign direct investment has been more negative than positive on the economic welfare of the people.



Forced Relocation and Disparity of Income and Wealth


The SLORC decalred the year 1996 as "The Visit Myanmar Year" to capture foreign exchange from the tourists.  Since 1989, the military junta has been launching the beautification program of Rangoon and other cities across Burma by forcefully relocating and inducing voluntary relocation to new satellite towns.  There are ten satellite towns around Rangoon alone to which almost half a million population has been relocated.  Similarly, satellite towns were created around the famous ancient city of Mandalay in Upper Burma, forcefully relocating the residents to attract and accommodate Chinese and other foreign investors as well as tourists.  The government claimed that most of the evicted were squatters and fire victims who were not allowed to re-acquire their old plots of land.  However, the Burmese nationals reported that among the forcefully evicted were regular homeowners.  The forcefully relocated home owners also reported that the compensation paid for dismantling their homes were well below their market values.  They were also asked to pay for the new plots of land in satellite towns.  If they could not pay, they were moved further away and forced to settle in shabbier satellite towns outside Rangoon division.  Also, the villagers and residents living at ancient tourist sites, such as Mandalay, Pagan, and Amarapura in Upper Burma, were forcefully relocated for the purpose of renovating these sites for tourist attraction.  The massive eviction similar to the style of Pol Pot or Khmer Rouge of Cambodia occurred in 1989 a year prior to the holding of the multiparty elections to disperse and disorient voters in major urban centers.  The political motivation of dispersing potential dissident students was also evident in the creation of a new Rangoon University in 1993 at the new satellite town, Dagon Myothit  or New Rangoon, located far away from the center of Rangoon.


The central feature of the satellite towns created across Burma is that modern homes of military commanders and high ranking government officials are built along the main highways and railway tracks with access to electricity, telephone, and water supply.  On the other hand, the homes of forcefully relocated people are built with traditional bamboo and thatches that are located far away from the main roads with no electricity and water supply.  With respect to this condition, a Burmese political satirist wrote:

Look! The homeless were provided with plenty of "water," yay, and "fire," mee, by relocating them to new satellite towns.  Yes, indeed there are plenty of water supply and fire; torrential flood in the rainy season and innumerable fires in the summer.  This is the bountiful yay  and mee  for the people of Burma.24


Military elites and high-ranking government officials secured low-interest mortgage loans from state banks and building materials at subsidized prices to build two to three homes in the best sections of these new satellite towns.  They would either sell these homes to make abnormal profit or maintain absentee ownership of unoccupied homes and rent them out to foreign businessmen and diplomats to earn foreign exchange.


Like most countries of the Third World, the statistical data on income and wealth distribution in Burma are unavailable.  However, there are private reports on the growing inequality of income and wealth distribution between the Burmese military elites, black market king pins and corrupt civilian officials and the rest of the population.  Apart from basic necessities, the elites have an easy access to modern living such as better housing, automobiles, the best health care with private physicians, the best domestic and foreign education for their children with private tutors, foreign travel, golf, tennis, foreign liquor, television, stereo, video, satellite dish and others.  Modern life-styles and comfortable modern homes of military elite and families living at former colonial residential quarters and newly constructed modern quarters and villas in Rangoon, Mandalay and other cities as well as in new satellite towns, all conspicuously symbolizing the abodes of what the Burmese called Lawki Nateban  or modern Nirvana.



Examples of these heavenly quarters and estates of the military elites are the most famous Ady Road or Maykha Yatethah (home and the well-fortified palace of General Ne Win), the Nawarat Yatethah in central Rangoon (homes of defense service personnel), the Golden Valley or Shwetaung Kyar  No. 1 and No. 2 (homes of high-ranking government officials and other rich folks with political connections), Windamere Road (modern homes of government officials and black market kingpins), the Inyar Myaing, the Parami  and theShwegontaing Ban Yatethah (the comfortable homes of ex-military commanders) and Bogyoke Ywah  or General’s Village, also called Shwe Wut Hmon. at Chinchawn Chan or Kanbawza (the well-fortified villas and homes former president, the late General San Yu, and ex-Revolutionary Council members, and the home of present Intelligence Chief, Lt. General Khin Nyunt).  Other heavenly quarters of military elites and their families in new satellite towns around Rangoon are Ngwe Kyah Yan, Koan Myint Thayah, Palell Myothit, Padamyar Myothit, Shwe Pauk Kan  or Second Dagon Myothit  and Thuwana Myothit.





The ostentatious economic reforms undertaken by the military regime of Burma have not been effective to substantially improve the economic performance and living conditions of the people of Burma.  As The World Bank assessed:

The pace of economic growth is still not rapid enough to compensate for the economic stagnation of the preceding quarter century, and its sustainability is uncertain.  The current reform efforts are, therefore, unlikely to push the Myanma economy to a higher growth path on which the bulk of the population would enjoy substantially better living standards.25


Burma's prospects for sustainable economic growth looks rather bleak due to inept measures and policies of the power-driven military government that has been putting up for sale the depletable natural resources such as forest, gems, minerals, oil and natural gas, and fishery to profit-driven foreign investors.  The ecological rape and depletion of natural resources as well as the cultural depletion under unrestrained tourism to amass foreign exchange signal an imminent debacle for Burma.


The long history of military dictatorship in Latin America and authoritarian or totalitarian rule in the former Soviet Union, the Peoples Republic of China, and the present communist states of North Korea and Cuba accord with the Burmese experience.  It testifies that decades of political stability and discipline maintained under the rule of force do not generate economic growth for the people.  As Daw Aung San Suu Kyi correctly appraises:

A revolution that aims at changing official policies and institutions with a view to an improvement in material conditions has a little chance of genuine success.  Without the revolution of the spirit, the forces that had produced the iniquities of the old order would continue to post a constant threat to the process of reform and regeneration.26


The iniquities in Burma today are; the growing power and wealth of the military rulers at the expense of impoverished masses; the sub-human conditions and plight of hundreds of thousands of displaced refugees stranded along Burma's borders (including over 100,000 Muslim refugees at the Bangladesh border and over 300,000 refugees and illegal immigrants along the Thai border and inside Thailand) reported by private refugee relief organizations and the UNHCR; thousands of Burmese girls and women forced to work as prostitutes across the border in the Thai brothels documented by the Asia Watch;27 some 400,000 people infected with the AIDS virus reported by the UN; millions of forcefully relocated people forced to donate free labor and act as porters and human shields for the military campaigns against the ethnic rebels and bridge and road building projects to accommodate Chinese, Singaporean, Thai, and other foreign investors.


The Burmese junta's approach to development in adopting the East Asian approach that mandates 'stability and discipline' first to promote economic growth and democracy later is not really new in the annals of military dictatorship and authoritarian regimes.  It is state capitalism or mercantilism of the pre-laissez-faire era cloaked under the garb of "a market-oriented economic system" or "an open-door market economy" designed to benefit and empower the central power-holders or "the strong state." So far neither economic growth nor democracy has flowered in Burma.  The yardstick to measure a good government is not economic growth per se but "development of the people, for the people and by the people,"28 and their rights to life, liberty, and pursuit of happiness unfettered by fear and threat of an ominous state.




1. For a detailed study see Mya Maung, The Burma Road to Poverty (New York: Praeger Publishers, 1991).

2. Foreign Broadcasting Information Service (FBIS), Burma, Order No. 12/91,

Washington D.C, October 29, 1991, p. 28.

3. The Working People's Daily, September 11, 1990)

4. The Working People's Daily, May 22, 1991.

5. The Working People's Daily, Rangoon, May 22, 199.

6. Asian Development Bank (ADB), Myanmar  (Manila: ADB, 1993), p. 145.

7. The Ministry of National Planning and Development, The Union of Myanmar,

Review of the Financial, Economic and Social Conditions for 1994/95

 (Yangon: Ministry of National Planning and Development, 1995), p. 11.

8. Ibid. p. 12.

9. The Working Peoples Daily, Rangoon, April 2, 1989, p. 3.

10. The World Bank, Myanmar, Policies for Sustaining Economic Reform, Report No. 14062-BA. (Washington D.C.: The World Bank, October, 1995), pp. 37-38.

11. Kiryu, Minoru, Report to the United Nations Development Programme, Review of Macroeconomy, Privately Published, p. 3.

12. The New Light of Myanmar, Yangon, January 15, 1994.

13. The Ministry of National Planning..., Ibid., p. 175.

14. The World Bank, Ibid., p. 112.

15. Ibid. p., 105.

16. International Monetary Fund, Myanmar: Recent Economic Developments 

(Washington D.C.: IMF, October 11, 1995), pp. 18-19.

17. The Ministry of National Planning..., p. 225.

18. Selth, Andrew, Burma's Arms Procurement Programme, Working Paper No. 289

(Canberra: The Australian National University, September 1995), pp. 5-6.

19.The New Light of Myanmar  July 30, 1993, p. 1.

20.Economist Intelligence Unit (EIU), Thailand and Myanmar, 1st Quarter 1994 

(London: EIU, 1994).

21. See for detail Mya Maung, “On the Road to Mandalay: A Case Study of Sinonization of Upper Burma,” Asian Survey  (Berkeley: University of California, May 1994).

22. See for detail Mya Maung, Totalitarianism in Burma: Prospects for Economic Development

(New York: Paragon House, 1992), p. 207.

23. U.N. General Assembly, Human Rights Questions: Human Rights Situations and Reports of Special Repporteurs and Representatives: Situation of Human Rights in Myanmar,

New York, A/49/594, 28 October 1994, p. 10.

24. Myanmar Foreign Investment Commission, Report on Direct Foreign Investment,

Yangon, May 17, 1995.

25. The World Bank, Ibid., p. xiv.

26. Aung San Suu Kyi, Freedom from Fear and Other Writings 

(New York: Penguin, 1991), p. 181.

27. See Asia Watch and the Women’s Right Project, A Modern Form of Slavery: Trafficking of Burmese Women and Girls into Brothels of Thailand (New York: Human Rights Watch, December 1993).

28. Aung San Suu Kyi, Empowerment for a Culture of Peace and Development, Address to a meeting of World Commission on Culture and Development delivered by Mrs. Corazon Acquino, Manila, 21 November, 1994, p.5.





Mya Maung is professor of finance at the Wallace E. Carrol School of Management, Bonston College, United States.

Preface             ACKNOWLEDGEMENTS            Acronyms and Abbreviations,  Terms and Measurements
Burma at a Glance: Facts and Figures     Ethnic Peoples of Burma     Headlines in Review: Events of 1995
Universal Declaration of Human Rights and Burma