The military destruction of Burma's economy (1)

by David Arnott


This is a slightly updated version of an article which originally appeared in French in the Autumn 1997 issue of Relations Internationales et Strategiques, a journal widely read in French government and military circles. The research and writing were done in May and June 1997. Clearly a lot has happened in Burma since then, including the widespread floods that destroyed a large proportion of Burma's paddy crop, the re-constitution of the junta (now called the State Peace and Development Council -- the SPDC), and the further decline of the economy and the value of the kyat -- a process exacerbated, though not caused, by the financial crises in the region.

In my view the most significant feature of the reconstituted junta is that the regional commanders, brought into the SPDC, seem to be retaining their commands. This may

be seen as an attempt to consolidate the different elements of the armed forces and discourage further fragmentation of the country into fiefdoms ruled by the regional commanders and others, a possibility touched on in this article. Power in the re-constituted junta is also much more centralised.

No major revisions of the article seem necessary. A few alphabetically-marked updates are added to the endnotes.

5 February 1998

"States are weak because of the fragile nature of the civil society upon which they have been built, their undeveloped institutional structures, which are often unable to contain and channel political tensions, and their problems of poverty and economic adjustment. These weaknesses can lead to breakdowns of law and order, to secessionist movements, to outright civil war. The most susceptible states combine structural weaknesses with a regime which is divisive in representing only one part of the community."

Lawrence Freedman, "War", Oxford 1994, p359


The Burmese military's linked objectives, expanded military control of the country and large-scale international investment to pay for it, are mutually incompatible. Following their suppression of the 1988 Democracy Movement, the generals decided to increase the size of the armed forces from 186,000 to 500,000 in order to have a permanent military presence in most parts of the country. This involved up to US$2 billion of arms imports, mainly from China, a large recruitment drive and a reordering of the military command structure. Lacking the necessary funds to pay for military expansion following the failure of the previous regime's economic autarchy (and/or seeking a credible source of income to launder the revenues from Burma's illegal exports, mainly heroin), the junta opened the country to international investment, but the increased militarisation of the state and the military's continued stranglehold on the main sectors of the economy impeded the economic liberalisation and institutional reform needed by investors. In the civil war, the enhanced capacity of the re-armed and enlarged Burma Army allowed it to move from a strategy of seasonal combat to one of occupation.

However, lack of discipline and the low level of soldiers' pay have led to the army living off the land, destroying the local economy, carrying out massive violations of human rights, further alienating the local population and creating refugee flows to neighbouring countries. The combination of a sinking economy, a large, badly-paid army and a tradition of warlordism could lead to a break-up of the country into a number of fiefdoms run by regional commanders and ethnic chiefs. Such a scenario should be taken seriously by the Tatmadaw, the neighbours and the international community.


The massacres conducted by the Burmese Armed Forces (the Tatmadaw) in 1988 led to the suspension of international aid and development assistance, with the result that in early 1989, foreign currency reserves were reported to be down to US$9 million. At this point the new incarnation of military rule, the State Law and Order Restoration Council (SLORC) decided to reverse the previous policies of isolation and neutrality and "turn to foreign sources to obtain the means of enforcing law and order and to compensate its major constituency, the Tatmadaw'"(2) The decisions in question were:

1) To seek substantial arms imports from China in order to secure military rule by strengthening the Tatmadaw and further militarising the state. This also involved a large-scale recruitment drive, significant adjustment of the command structure of the armed forces and the reorganization and extension of military control in districts, townships and villages. The target was a force of 500,000 to allow a permanent military presence in most parts of the country;

2) To pay for this undertaking by opening the country to international investment. The neighbours came for fish and teak; oil companies paid for exploration rights and SLORC sold off part of Burma's Tokyo embassy. The quick money from these sales saved the virtually bankrupt regime from its immediate financial problems, but there was no major investment except in hotel building and the offshore oil and gas sector. Here, discoveries by European and US companies of large offshore deposits of gas, which Thailand has contracted to buy, promise substantial long-term revenues. However, the proposed pipeline to bring the gas to Thailand crosses Karen and Mon territory, where insurgencies still continued, thus increasing the pressure on SLORC to end the civil war. The lack of enthusiasm on the part of investors was due in part to the low level of human and physical infrastructure, the continuation of the civil war, but primarily to SLORC's refusal or inability to liberalise more than the fringes of the economy, which remained dirigiste, with the principal sectors remaining firmly in military hands.

These linked projects, of strengthening military rule and attracting investment, proved incompatible. Not surprisingly, it was the former which prevailed; and now that the fish and teak are sold off, "Visit Myanmar 96 Year"(3) has fallen flat, no substantial investment is in sight and the gas revenues are not due to come on stream until 2001, the economy is once more in crisis. The bulk of the army is hardly paid, and to a large extent, lives off the land, further alienating the civilian population.

The de facto alliance with China implied by SLORC's massive arms acquirements and the increased Chinese presence and investment in Northern Burma(4) and, reportedly, access to naval and electronic monitoring facilities, is opposed by many Burmese civilians, as well as groups within the armed forces who have spent much of their career fighting Chinese-backed troops. Burma's growing dependence on China is also a matter of concern to India and the ASEAN countries, which see China as a commercial and military threat, if not now, then in a 20- or 30-year time scale. This is one of the reasons why India and the ASEAN countries are interested in consolidating their mutual relationship. The invitation to Burma to join ASEAN and the newly-formed BIST-EC (Bangladesh-India-Sri Lanka- Thailand Economic Cooperation [a]) are in part intended to prevent Burma falling further into the Chinese sphere of influence and thus threatening Burma's (geographical) bridge function between ASEAN and India. An unknown factor with regional and international implications would be China's reaction to a major disintegration in Burma. Such a disintegration is one of the possible results of the deepening economic crisis, combined with a large, poorly-paid and badly-disciplined army and the tendency of the regional commanders to turn their command areas into personal fiefdoms.


In 1988 the Tatmadaw numbered 186,000. Following a visit to China by Burmese defence officials in 1989, an arms deal of $1.4 billion was signed in mid-1990, and one for $400 million in 1994. The arms thus purchased allowed a major expansion of the armed forces, whose strength is currently estimated at 380,000, with the stated goal of being a well-equipped force of 500,000 by the end of the decade. SLORC's intention to establish military control throughout the country, and thus be able to dispense with the need to rule by consent, is indicated in the following extracts from Andrew Selth's 1996 book, "Transforming the Tatmadaw" (5):

"The first and most important priority for the SLORC after the 1988 massacres was to consolidate its grip on government. As a longer term goal, it was determined to put into place all necessary means to ensure that the Tatmadaw would remain the real arbiter of power in Burma. To achieve these aims, the armed forces needed to be large enough and strong enough to answer any future challenge to military rule.." p129.

"Under the rubric of "non-disintegration of the Union", the SLORC has made renewed efforts to exert military control over the country, and turn it into a highly centralised, ethnically Burman-dominated(6) state, commanded by the armed forces or its servants. On this basis, any future distribution of power or allocation of civic responsibilities to minority ethnic groups seems bound to be an essentially token gesture. Real power will continue to reside in Rangoon and be exercised through regional military commanders and pliant civilian administrators. To ensure that this system works effectively, and to guard against any upsurge of irredentism, the SLORC envisages a permanent military presence in almost every part of the country. ... the implementation of such a policy, however, demands much greater manpower and resources." pp132-33

"[T]he rapid expansion and modernisation of the armed forces after 1988 seems to have been based primarily on the fear that it might lose its monopoly of political power. The "Tatmadaw's" recruitment campaign and arms procurement programme seem aimed above all else at preventing, or if necessary, quelling, renewed civil unrest in the population centres. Efforts to defeat ethnic insurgent groups in the countryside have also been part of the regime's continuing determination to impose its own peculiar vision of the modern Burmese state upon the entire country. Yet, "by relying on armed force to guarantee the countrys unity and stability, the regime has mortgaged Burmas vast and diverse political economic and social resources to continued dependence on military strength" p154 [emphasis added].

And of the command style of the Tatmadaw Selth writes "...[T]he Burma Army has largely rejected its British (and British Commonwealth) traditions and relies instead on the styles of command and instruction which it learnt from the Japanese during the Second World War. This approach emphasises centralised control, rigid discipline and unquestioning obedience to orders, rather than the encouragement of innovation and initiative, or attention to matters of personnel welfare..." p62



Apart from hotel construction in the cities, the military sector, and the flourishing business in opium and heroin(7), the economy is crumbling throughout the country. The ratio of market to official currency exchange is now about 50 to 1(8) and SLORC's money presses have been working overtime (money supply has more than tripled since 1988). Rice prices have more than quadrupled since 1988, and refugees from the Delta (the richest rice- growing region), quote the impossibility of feeding their families as a major reason for their flight. Light industry has been virtually destroyed by cheap imports from China. There is an increasing polarisation between urban and rural areas, with reports of starvation coming from the border regions. The hoped-for investment has not materialised, apart from teak, fish, gas, jade and gem extraction, hotel building and the trade in opiates, none of which assists genuine development.

The fundamental cause of these and other problems is that the structures, priorities, ideology and lack of competence of SLORC rule are incompatible with a modern economy and the needs of investors. Poor physical infrastructure is one deterrent to investment; other factors are that unlike Singapore, Indonesia and other economically successful Asian countries, the military has failed to institute the necessary institutional reforms; there is a diminishing level of human infrastructure, closely related to the lack of investment in education; and defence spending, at an estimated 50% of Government disbursements, is both ruinous to the economy and a major political obstacle to multilateral and bilateral financial assistance.

A country of great promise

Burma is a country of immense potential in terms of energy (gas and hydro-electricity), minerals (it has large reserves of copper, gold, tungsten, nickel, and other precious, strategic and industrial metals, in addition to a wide variety of gems and jadeite) and agriculture (it was once the main rice exporting country in the world); and up to a few years ago it had the largest hardwood reserves of any country in Asia. Of its human resources, Khin Maung Kyi writes that "When Myanmar (then known as Burma) attained its independence in 1948, international agencies identified it as one of the most promising regional candidates for economic take-off. Its modern technical and university education system, high rate of literacy, well-trained civil service and a cadre of educated middle class, basic infrastructure, and a well-run legal system were considered as good ingredients for Myanmar's expected take-off."(9).

The economy in a state of collapse

In 1987, after twenty-five years of incompetent military rule, Burma was granted Least Developed Country (LDC) status by the United Nations. Japan, Burma's major ODA donor, had halted major new projects in 1986 (two years before the suppression of the 1988 Democracy movement) largely because, as Donald Seekins comments: "Japan's powerful Ministry of Finance...was increasingly concerned that more government funds not be
poured into a country that by the late 1980s was unable to pay back its foreign debt, approximately US$5.0 billion. Burma had sought Least Developed Country status from the United Nations in late 1987 in order to gain shelter from its international creditors"(10). The Japanese Ministry of Finance was unwilling to countenance "loan funds tossed into the black hole of the Burmese economy ..." (11) (emphasis added).

The black hole is still alive and hungry. According the Economist Intelligence Unit's report on Burma for the 1st Quarter of 1997, "The trade deficit soared in the first five months of 1996, traditional exports stagnated and imports surged. Private-sector exports have been languishing. The current account deficit is likely to have widened sharply, and reserves have slumped"(12); the Nikkei Weekly reports that "[a]ccording to a report released by the International Monetary Fund, the country's foreign-currency reserves had plunged to $183 million as of August last year [1996] from $663 million a year earlier"(13); in 1996 SLORC defaulted on its rice export commitments and on payments for oil deliveries, and in June 1997 was reported to be putting pressure on foreign corporations doing business in Burma to act as guarantors for loans from foreign banks (14).

In this country rich in energy, minerals and agriculture, which was once the largest rice exporter in the world, "[a]n estimated 40 percent of the population lives below the poverty
line..." according to the Asian Development Bank (15), and "[t]he real incomes of many urban Burmese, including government employees, have declined..."(16)

Development is concentrated in the main cities

A major reason for rural impoverishment, with high levels of malnutrition, infant and maternal mortality rates and other indicators, reported by UNICEF and other international organisations, is the transfer of resources to the city, either by way of draconian paddy procurement policies (17) or by extortion by officers and men of the occupying army.
See the following section on the Civil War for other factors.

Economist Stefan Collignon writes that "In terms of political economy, there are many indications that the SLORC has attempted to pacify the political situation after 1988 by improving the living conditions in the cities where the potential for unrest was greatest. But if there are signs of economic improvement, they seem to have taken place partly because of slightly better growth, partly at the expense of rural areas. This involved a strategic shift over the previous "Burmese Way to Socialism" which had achieved a remarkable degree of equality between rural and urban living conditions: the UNDP indicator for rural-urban disparity in access to water, sanitation and child nutrition services (67%, 87%, 93% respectively) is significantly higher than for other low human development countries and above the aggregated values for LDCs and all Developing Countries."(18)

In a 1997 paper for the European Institute for Asian Studies, Collignon wrote that "Foreign visitors arriving in Burma often notice a visible improvement in apparent signs of wealth in
the major cities, particularly Rangoon and Mandalay, since 1988. This is manifested in the substantial construction boom between 1988 and 1991, although it has somewhat faltered since then. However, as soon as one leaves the larger cities, the situation becomes different. Poverty is widespread and infrastructures like roads and railways are derelict. In fact, despite apparent improvements, sustained economic growth is still not taking place."(19)

Reasons for the low level of investment

In 1989, SLORC opened the country to international investment. However, as Khin Maung Kyi notes, "Investment laws, rather hurriedly passed in the early stage, were followed by the formation of a few private banks and state-sponsored joint-venture corporations, but long-term foreign direct investment in manufacturing or agribusiness areas has not come
in. Institutional development measures such as the establishment of a civil service with a fair degree of efficiency and responsiveness, the legal administration system to dispense impartial justice, and development and training of manpower for the next phase of growth were neglected or sidelined"(20).

Collignon lists some of the major obstacles to investment -- "Economic liberalisation since 1993 has slowed down and even, at times, been reversed:

* Importers are required (and receive preferential licenses) to import designated "priority" goods in amounts equivalent to one fourth of their total imports or more.

* The SLORC refuses to comply with the exchange rate regime precondition of an IMF staff monitoring program, i.e. a simple market-determined exchange rate.

* As the investment ratio has declined, forced prison labour and uncompensated people's "contributions" to state construction projects have increased (Department of State, 1996)

* No large State Economic Enterprises (SEE) have been privatised.

* Most SEE monopoly privileges continue to dominate Burma's economy.

* Fundamental macroeconomic disequilibria persist and distort the incentive structure of the private and public sector."(21)

He notes in his 1994 paper that "[T]he only attractive opportunity for foreign investment are projects of very high short-term profitability, normally linked to the exploitation
of natural resource rents (forests, oil etc). The absence of a properly functioning monetary economy creates the conquistador economy

Writing in 1991, David Steinberg, a former consultant to the World Bank, looks at some of the political-economic obstacles to investing in Burma: "Political and economic pluralism
depend on complex and alternative centers of power -- political, economic, regional, institutional, or personal. Within those territories controlled by the state ... since 1962 only one institutional center of power has been allowed to develop: the Tatmadaw...The military not only control the state administrative apparatus, ruling under martial law (the military have ruled by decree for fifteen of the twenty-nine years (23) since the coup of 1962), they have staffed and effectively militarized' the bureaucracy, established themselves at the socio-economic pinnacle of power, eliminated or controlled non-military approved avenues of social mobility (education, the sangha (24), labor and mass organizations and businesses), developed an elaborate set of institutional perquisites and rewards of office, controlled internal sources of information, and (as many charge) have dominated the informal and illegal economy and its fruits"(25).

Khin Maung Kyi makes a similar point: "Military participation in the administration will not be conducive to the development of an independent and efficient civil service, given the habit of the Myanmar military to want to do things its own way. As it is, since the abolition of the old administrative system in the 1960s the administration has functioned only at the beck and call of the power-holders and their agents. Administrative impartiality, the strict rule of law, or the reliability and predictability of administrative actions have lost their relevance. This overwhelming control will not further the re-emergence of an efficient, impartial, and consistent administrative system that is surely needed for an open market economy.(26)

Comparisons with economically successful East Asian countries

In his important 1994 paper in "Asian Affairs", "Myanmar: Will Forever Flow the Ayeyarwady?" Professor Khin Maung Kyi, Burma's most distinguished contemporary economist (27), compares Burma's economy with that of several economically successful Asian countries, including Indonesia: "In successful East Asian states the government usually restricts itself to providing basic services and maintaining law and order and stability. The direction of the economy is guided according to long-term objectives but the operation of the economy is left to the private sector with a minimum of interference from the government....

"Myanmar's military has had no experience of running the country under relatively pluralistic or permissive circumstances. It has been used to operating as a stern disciplinarian or a top-down decision-maker. Going by the experience of successful East Asian countries, power-sharing among different elites, relatively free flow of information, rational economic decision-making, an efficient bureaucracy, and an impartial and effective legal system are deemed to be basic ingredients of all-round development....

"In Myanmar since 1962 the role of top civil servants whose experience could be very useful even under the new circumstances, had been down-graded and many of them replaced by loyal cadres who subscribed to the new socialist order. The continuity of the judicial tradition has also been disrupted because only elected representatives could serve as judges under the socialist regime. All this is in sharp contrast with the situation in Indonesia where the military rulers co-opted intellectuals, economists, and other professionals into the ruling group from the outset. In fact, the so-called Berkeley Mafia, a group of able economists, reputedly engineered the Indonesian modernization-cum- development process. It is difficult to envisage the Myanmar military to radically change its mind set, given its history of "absolutism" or the tradition of "we alone can do" doctrine."(28)

Stefan Collignon presents a shocking comparison of the export performance of Burma and Thailand: "While high performing countries, like Thailand, have persistently increased their export and import shares as a consequence of their export promoting development strategy, Burma's share has steadily declined since the early 1980s....official exports amounted to 2% of GDP in 1994, the lowest in the world (World Development Report 1996) (29) (emphasis added)

On the physical infrastructure Khin Maung Kyi states: "As regards conditions for the rapid growth of the economy, the importance of appropriate physical infrastructure cannot be overstated. The existing stock of physical infrastructure is so limited and dilapidated that large-scale international official development assistance (ODA) will be needed. Likewise, technological development and training will require an equally large dose of investment. Retraining adult workers technically and training and educating the youth need time to
take effect. Without these improvements, large inflow of private entrepreneurial resources may not materialize."(30)

Disproportionate Defence Spending

In 1996, the US Embassy in Rangoon issued its annual Country Commercial Guide, accompanied by a more technical report, "Foreign Economic Trends". One innovation made in the 1996 reports was to adjust the statistics to take into account the different exchange rates used in official and unofficial financial reports: of defence spending, the "Guide" states that "Under the SLORC, defense spending appears to have grown both in real terms and as a share of central government operating expenditures. In FY 93/94 and FY 94/95, defense operating disbursements appear to have constituted at least half of total central government operating disbursements, despite the absence of any evident external military threat and the successive pacification of most ethnic insurgent groups."(31)

"Burma's economic growth may continue to fall well short of its potential so long as defense spending remains high and continues to be funded disproportionately by implicit or explicit taxes on the external sector (32).


The Economist Intelligence Unit, in its report for the 1st Quarter of 1997, predicts that: "Over the next two years, in the absence of movement towards liberalisation, growth will
slow from recent levels and inflation will remain high.(33) p3

In his 1997 paper Collignon states that "The SLORC is under significant economic pressure: it cannot make ends meet, foreign exchange reserves are running out and economic growth is steadily faltering. The economic bond fire of recent years may have allowed the SLORC to stabilise its rule, but this will not last. Either it will change fundamentally, or it will be confronted with a new public uprising -- as history has shown consistently."(34)

There will be no substantial economic progress in Burma under the present system and priorities. Such progress requires massive assistance for infrastructure development, on a scale which can only be provided by World Bank, IMF, ADB, UNDP and Japanese funding. Most of these multilateral and bilateral sources were cut after the massacres of 1988 (35), and are unlikely to be renewed while the black hole phenomenon persists and until there is a significant and irreversible political process leading towards higher levels of popular participation at all levels of government.


The enlargement and re-equipment of the Tatmadaw has had important implications for the civil war. Apart from neutralising the threat of popular uprisings in the cities, SLORC's major military objective is the defeat of the ethnic insurgencies. Some of these began shortly after Independence and were to a large extent fueled by the "vigorously assimilationist policies" of Burmanisation, in the words of Clifford Geertz(36). These policies took on a religious colour with U Nu's 1962 declaration of Buddhism as the State religion, a move which alienated many of the non-Buddhist groups, for instance the Christian Kachin. Attacks on non-Burman groups have been made at various moments in Burma's history, including the present, when the regime feels a need to invoke the phenomenon of "bonding by exclusion" in order to unify the Burman majority against a religious, ethnic or political scapegoat. One of the "Tatmadaw's" principal justifications of its continued rule is that it is preventing the disintegration of the Union.

Until 1991 the "Tatmadaw's" main military strategy against the ethnic insurgents was to conduct seasonal campaigns against their various armies, then return to barracks during the rainy season. Now, using all-weather roads built by Thai loggers or forced labour, and arms and other military equipment from China, the enlarged Tatmadaw can stay in the field
throughout the year and hold onto territory it has captured. This has favored a strategy of occupation in which the main victims have been the non-Burman civilian populations. The
social and economic life of millions of people has been radically dislocated by this strategy, resulting in a rate of suffering and deaths far greater than during the earlier period of combat. In its major offensives of 1994/95 and early 1997, the Tatmadaw succeeded in capturing most of the fixed bases of the Karen National Liberation Army (KNLA), which has retreated from a strategy of holding territory to one of guerrilla warfare, which could continue into the next generations.

As well as fighting the insurgents directly, the Tatmadaw uses a variety of counter-insurgency methods which target the non-Burman civilian populations, though without any "hearts and minds" component. The main practice is a form of strategic hamletting known as the "Four Cuts"(37), to cut the insurgents off from any funds, intelligence, food and recruits which the villagers might provide. This tactic involves the dispersal or forced relocation of scattered villages to military-guarded "big villages" where they can be used as a pool of forced labour(38) for military or infrastructure purposes, or indeed for the commercial activities of individual army units or officers (for instance the digging and stocking of fish ponds or the planting of orchards). In some areas where the destruction of villages seems to have no such labour purpose, and villagers are simply killed (see Karen Human Rights Group report, below), the goal could be to terrorise the villagers into leaving that area, or to put pressure on the insurgents to surrender.

1996 was a particularly devastating year for forced relocations, with at least 100,000 villagers forcibly relocated in Shan State alone (39), and 30,000 in Kayah (Karenni) State where, theoretically, the insurgents have a cease-fire with SLORC. The destabilisation or destruction of village life is also achieved by economic sabotage (e.g. burning crops or rice barns, killing animals, taking farmers from their fields for forced labor) and terror. Villagers forced to leave their home region suffer malnutrition and sometimes starvation when, as often occurs, they are forbidden or unable to grow crops in the relocation zones. Weakened by malnutrition and forced labor, those relocated to lower areas often fall ill and die because they have no resistance to the local diseases. Recent reports from Karen State and Arakan speak of mass starvation as a result of forced relocation, army destruction of food stocks and other practices. Some observers speak of a "North Korea" type situation. The following extract from a recent Karen Human Rights Group report suggests something of the scale and flavour of these activities :

"Destruction of All Hill Villages in Papun District"

"Since the beginning of 1996, SLORC has launched campaigns in many parts of Burma to forcibly move or wipe out all rural villages which are not under the direct physical control of an Army camp. In February/March 1997, SLORC began a campaign to obliterate all villages in the hills of Papun District, northern Karen State. The initial wave of village destruction was carried out through March 1997, but since the beginning of June 1997 SLORC patrols have stepped up their efforts to destroy all signs of habitation and food supplies wherever villagers had managed to rebuild. KHRG has compiled and confirmed a list of 68 villages which have been completely burned and destroyed and 4 more which have been partially burned. These are all Karen villages, averaging about 15 households (population 100) per village. This list is by no means complete, and right now SLORC patrols continue to burn villages in the area.....

"..... On arrival near a village, the troops first shell it with mortars from the adjacent hills, then enter the village firing at anything that moves and proceed to burn every house,
farmfield hut, and shelter they find in the area. Paddy storage barns are especially sought out and burned in order to destroy the villagers' food supply. Any villagers seen in the villages, forests, or fields are shot on sight with no questions asked. The troops bring porters with them from Papun and other towns, but if they need more porters they take any villagers they catch, and they have already taken many women and men, some aged over 65, for this. However, the objective is not to catch villagers, as in several cases they have surrounded villagers in field huts and then simply opened fire instead of trying to catch them. The patrols seem to have no interest in interrogating the villagers, only in eliminating them. Villages very close to Papun and Meh Way have been ordered to move to Meh Way or to Army camps near Papun, such as Toh Thay Pu, but the vast majority of villages have been given no orders whatsoever, they have simply been destroyed. Most of the villagers in the area say they do not even understand why SLORC is doing this, and that they think SLORC is just trying to wipe out the Karen population. KNLA [Karen National Liberation Army] troops are not based in any of these villages, and have never yet been in a village when it was attacked."

".....Every new patrol that comes around forces the villagers to flee yet again and build new shelters elsewhere. Heavy monsoon rains began in mid-June and will continue until October, and moving and building are very difficult. Malaria and other fevers, diarrhoea, dysentery, and other diseases are widespread and the villagers have no medicine whatsoever. Many children and the elderly have already died. The villagers have very few belongings left and little food. Most of them have managed to plant at least a limited rice crop in intervals between SLORC patrols and they are desperately relying on this crop, although many do not have enough rice to last them until they can harvest it in November/December. If the crop fails or if SLORC interferes with it, the villagers admit they do not know what they will do and the area will certainly be in a state of emergency."

"......Making the situation worse, SLORC is trying to build a military supply road straight across the northern part of the area, from Kyauk Kyi in Pegu Division (in the Sittang River valley of central Burma) directly eastward to Saw Hta on the Salween River, which forms the border with Thailand. They have burned and destroyed all villages along the route and have been constructing the road with bulldozers under heavy military guard. They have already pushed the road most of the way through by working from both ends, though the KNLA has now temporarily stopped the road construction by destroying the bulldozers. SLORC cannot capture enough villagers in the area to use them for forced labour on this road, but the fact that they are using bulldozers instead of bringing in forced labour from elsewhere makes it apparent that they are in a hurry to complete this road. The main purpose of the road will probably be to support a new offensive along the Salween River to gain complete control of the river and all adjacent territory along the border with Thailand. This offensive, which is expected to begin after the rainy season, would cut off and contain the Karen forces in Papun District, block off the further escape of refugees to Thailand and allow further sweeps through the area to wipe out the civilian population. It would also pose a major security threat to Thailand, as SLORC would probably follow it up with attacks on Karen refugee camps in Thailand's Mae Sariang District, and may also decide to begin claiming pieces of Thai territory east of the Salween River." (40)

Those with no other choice try to take refuge in neighboring countries; if they can reach the border, that is, which is becoming increasingly difficult as SLORC extends its control. The official Burmese refugee population in Thailand has been growing over the past years, and after the fighting in Karen and Shan States in 1996/97 is now at an all-time high of about 114,000 [d], with several hundred thousand more living in Thailand as "illegal immigrants". These figures do not include those internally displaced within Burma, but in its Human Development Report of 1994, the United Nations Development Programme (UNDP) estimated that "between 5% and 10% of the population has been displaced, either within Myanmar or to neighbouring countries". Since Burma's population is about 46 million, this means 2.3-4.6 million people.

The medium-term goal of SLORC's civil war strategy is to force the insurgents into cease-fires. There is a particular urgency in this since SLORC is pinning much of its hopes for a steady income on the various commercial projects on its borders with Thailand, China and India. The gas pipelines underway to Thailand from the Yadana and Yetagun fields in Burmese waters are a major project which would be extremely sensitive to guerrilla attack. There is also agreement in principle for a section of the Trans-Asian Highway to run from Mae Sot in Thailand, to Rangoon (41) and ambitious Thai/Burmese projects to build a road from Thailand to Tavoy, extend the port there and develop its seaboard, which could integrate this part of Burma into the Thai economy and provide Thailand with a port on the Indian Ocean. These undertakings would go ahead much more easily, and in the case of the Tavoy project, attract much more investment, if the ethnic insurgents in the area had agreed not to conduct acts of sabotage.

A major problem with this purely military approach is that the cease-fires which have been concluded so far have been just that: temporary cease-fires. Most of the groups involved have kept their arms and continue to administer their areas. There have been no real peace talks or political discussions regarding the long-term relationship of the groups with Rangoon, and the agreements could break down at any time, as they have with the Karenni, for instance, who are currently fighting SLORC, although they agreed a cease-fire in 1995 which was broken after a few months by SLORC. Similarly, the Wa, formidable, Chinese-trained fighters, have clashed with SLORC troops on numerous occasions since they agreed a cease-fire in 1989. Cease-fires without political agreements are particularly fragile (and expensive, since they require a permanent Tatmadaw presence, which is extremely costly in financial and political terms). With the exception of the Karenni (Kayah) and possibly the Chin, none of the organisations of the ethnic groups is demanding secession, and have agreed to remain within a federal Burma, but SLORC has never agreed to discuss such issues.


Most of the early warning signs of radical destabilisation are present in Burma. These include: an economy in serious decline; disproportionate military expenditure; a large and badly-disciplined army; widespread human rights abuses; increasing polarization of income both within the cities and between urban and rural areas; environmental degradationand civil war; and increasing malnutrition and reports of deaths from starvation.

The decision by the military leaders in 1988 to opt for military solutions to political problems, abandon the attempt to govern by balancing the internal forces of the country, and instead to seek military and financial inputs from outside the country to impose their order on the Burmese people, has gone badly wrong. The expected financial inputs have not materialised to any substantial degree. Having stripped and sold the country's immediately disposable assets, and its money-making projects such as rice export and the Tourist Year having failed, SLORC is once more approaching insolvency. Unless SLORC can bring itself to move away from the military option it chose in 1988, and engage in genuine three-way negotiations with the political opposition and the organisations of the non-Burman ethnic groups, and together request international assistance, further economic deterioration and serious destabilisation of the country seem inevitable. One scenario would be disintegration into a generalised pattern of the warlordism already practised in the border regions by regional commanders and the chiefs of certain ethnic groups and militias. The implications of this scenario should be taken very seriously indeed by the Tatmadaw which claims to be maintaining national unity, as well as by the neighbours and the international community.


The above analysis may be read as implying that foreign direct investment, multilateral loans and development assistance are relatively benign. However, there are some people, including figures in the Burmese leadership, who are not all enthusiastic about surrendering Burma to the embrace of the IMF, the World Bank and transnational corporations. An alternative view might be that long-term stability for Burma could best be achieved through Gandhian, village-based economics, rooted in the Buddhist values of limiting desire and consumption (E.F. Schumachers Buddhist Economics, let us not forget, was based on his experience in Burma). Such an approach has certain parallels with some of the more positive aspects of Ne Wins ill-conceived and ill-fated Burmese Way to Socialism, and could possibly provide common ground between the NLD and some elements in the military. But thats another story.



(1) The main issues concerning what to call the country are political rather than linguistic. In 1989 the military junta changed the official name of the country to "Myanmar", which is what the country is called in written Burmese, the language of the largest ethnic group, the Burmans. Other ethnic groups, which feel oppressed by the perceived policies of cultural,
economic and political assimilation by the "big race" Burmans, see the change of name as yet another example of Burmanisation. The British name for the country, "Burma", though given by the colonial power, had in time become ethnically neutral. Another objection to "Myanmar" voiced, among others, by Daw Aung San Suu Kyi, whom one can argue has
the mandate of the Burmese people, is that the junta, lacking legitimacy, had no right to change the name. For these reasons, and because the term "Myanmar" does not enjoy wide international usage, the present article uses "Burma".

(2) Donald M. Seekins, "Playing With Fire: Regime Survival and Burma-China Relations" "Asian Survey", June 1997

(3) An attempt to attract 500,000 tourists in the 1996/97 tourist season

(4) Drawing much of this part of Burma into the yuan economy

(5) Andrew Selth, "Transforming the Tatmadaw - the Burmese Armed Forces since 1988" Australian National University, Canberra, 1996

(6) "Burman" refers to the Burman ethnic group, which makes up half to two thirds of the population, while "Burmese" indicates citizens of the country.

(7) This article does not discuss this trade, which the US State Department considers equal in value to all other Burmese exports combined, nor the Burmese military's involvement in
it. However, an accessible introduction is contained in the "Nouvelle Observateur" of 5-11 June 1997 and various reports issued by the Observatoire Geopolitique des Drogues. The most thorough study is Bertil Lintner's "Burma in Revolt, Opium and Insurgency since 1948", Oxford and Bangkok, 1994.

(8) The kyat fell from 185 to 280 Kyat to the US$ from late June to mid July 1997, following the floating of the Thai Baht, with predictions of a further fall in value [b].

(9) Khin Maung Kyi, "Myanmar: Will Forever Flow the Ayeyarwady?" "Southeast Asian Affairs", 1994. Professor Khin Maung Kyi was formerly Professor of Economics at Rangoon University and Professor of agri-business at the University of Pertanian in Malaysia. He is currently a private consultant and a senior Fellow at the National University of Singapore.

(10) Donald M. Seekins, "The North Wind and the Sun: Japan's response to the political crisis in Burma, 1988-1996" (unpublished conference paper)

(11) ibid

(12) Economist Intelligence Unit, "Myanmar (Burma)", 1st quarter 1997 (henceforward, EIU) p3

(13) "The Nikkei Weekly", 31 March 1997

(14) "Far Eastern Economic Review", 5 June 1997, "Loan Squeeze"

(15) Asian Development Bank Economic Report on Myanmar, November 1995 pvi

(16) US Embassy Rangoon, Burma, Country Commercial Guide, Burma. July 1996 (henceforward "CCG") p8

(17) In a 1995 report, the World Bank states that: "Substantial gains in economic efficiency would ... result if the ban on private-sector exports of paddy and rice were eliminated, and the scope of government paddy procurement were reduced. Reforming these paddy policies would help to reduce poverty and enhance equity because they imply large income transfers from the rural poor to the urban elites (including the military) (emphasis added - DNA) ("Myanmar: Policies for Sustaining Economic Reform", World Bank Report No.14062-BA, October 16, 1995, p xiv)

(18) Stefan Collignon, "Miscarried Reforms", European Institute for Asian Studies (EIAS), 1994 p3

(19) Stefan Collignon, "The Burmese Economy and the Withdrawal of European Trade Preferences" A report written at the request of the European Institute for Asian Studies (EIAS) March 1997 (henceforward EIAS) p4

(20) Khin Maung Kyi, op cit

(21) EIAS op cit p11

(22) Stefan Collignon, "Miscarried Reforms", op cit, p9

(23) Steinberg is writing in 1991. We should therefore read "twenty-one out of the thirty-five years".

(24) The ordained monkhood (DNA)

(25) David Steinberg, "Power, Economy, and Democracy in Myanmar/Burma: The Donors' Dilemmas". Paper given at the seminar "Myanmar/Birma: Das Ringen um Demokratie und Frieden mit den Mindenheiten, Schloesschen Schoenberg, Hofgeismar, Germany, March 22-24 1991

(26) Khin Maung Kyi, op cit

(27) ibid

(28) Khin Maung Kyi, op cit

(29) EIAS op cit p12

(30) Khin Maung Kyi, op cit

(31) CCG p30

(32) ibid p10

(33) EIU op cit, p3

(34) EIAS op cit p16

(35) In fact, Japan ceased major government assistance in 1986, since it found that Burma was an economic "black hole". See Seekins,"The North Wind and the Sun" op cit

(36) Clifford Geertz, "The Interpretation of Cultures", London 1973, p287

(37) See Martin Smith "Burma: Insurgency and the Politics of Ethnicity" London 1991, p258 and passim; and Martin Smith, "Ethnic Groups in Burma" London, Anti-Slavery International, 1994, p46

(38) Forced labour is one of the best-documented violations of human rights in Burma. Reports or condemnations of forced labour have been made by the UN General Assembly, the Commission on Human Rights, the International Labour Organisation, the European Commission and human rights organisations. The US State Department's "Foreign Economic Trends: Burma" of July 1996 calculates the degree to which forced labour contributes to the Burmese economy.

(39) There is a large literature on forced relocations in Burma. See, for example, Shan Human Rights Group,"Uprooting the Shan" Chiang Mai, Thailand, December, 1996; Green November 32, "Exodus, an update on the current situation in Karenni", Mae Hong Son, Thailand, August 1996; Karen Human Rights Group, "Forced Relocations in Karenni" Thailand, July 1996; updated February 1997; See also various reports by Amnesty International, Human Rights Watch/Asia, US State Dept. Country Reports.

(40) Karen Human Rights Group Information Update, Thailand, June 25, 1997.

(41) "Thailand Times" 22/June/97


David Arnott,

Geneva, 18/7/97

(5 February 1998)

[a] Burma is now an ASEAN member, and BIST-EC, a Thai initiative, is now, with the inclusion of Myanmar, called "BIMST-EC"

[b] By January 1998 the Kyat was reported to be oscillating in the range of 350-400 Kyat/US$. By March 1998 it was hovering around the 300 mark.

[c] Although the description of these countries as "successful" must be reviewed in the light of the current financial crisis in the region, it is clear that Burma's economic collapse is much more serious by most economic indicators.

[d] Currently over 114,000.