Subject: BurmaNet March 2, 1997 Date: Sat, 01 Mar 1997 21:20:11 -0800 (PST) From: strider@igc.apc.org Reply-To: Conference "reg.burma" To: Recipients of burmanet-l ------------------------ BurmaNet ------------------------ "Appropriate Information Technologies, Practical Strategies" ---------------------------------------------------------- The BurmaNet News: March 2, 1997 Issue #654 Noted in Passing: The British are coming to us quietly and saying: "Well, you understand we have to be tough on Burma for public consumption. But don't worry... - senior ASEAN official (see: ASIA TIMES: EU "COMMON POLICY") HEADLINES: ========== KNU: CLARIFICATION OF THE KNU POSITION NATION: ARMY HALT PLAN TO FORCE BACK REFUGEES BANGKOK POST: NO KAREN REFUGEES FORCED BACK BKK POST: NO PLACE TO CALL HOME NATION: BURMA 'REGRETS' INCIDENT ASIA TIMES: MYANMAR SHRUGS OFF EU THREAT ASIA TIMES: EU "COMMON POLICY" LOST IN MYANMAR KYEMON: DISINFORMATION AND RFA ASIA TIMES: GAS DEALS TO FUEL REFORMS IN MYANMAR ECONOMY ASIA TIMES: MYANMAR'S MASSIVE KYAT DEVALUATION THAT THAILAND TIMES:A THAI LEADING FIRM CHOSEN TO CONSTRUCT ---------------------------------------------------------------------------- ------------ KNU: CLARIFICATION OF THE KNU POSITION March 2, 1997 KAREN NATIONAL UNION Clarification of the KNU position with regard to the failed cease-fire negotiations with the SLORC March 2, 1997 The Karen National Union (KNU) willingly entered into peace negotiations with the State Law and Order Restoration Council (SLORC) four times between December 1995 and November 1996. Throughout the duration of these talks, the KNU was determined to resolve the existing political problems through political dialogue. But political dialogue was not on the SLORC's agenda. The KNU requested the SLORC time and time again to avoid reverting to military means. The KNU stated that after a cease-fire agreement was signed there must be political dialogue concerning the ethnic nationality situation, affairs of the Union and peace maintenance. The SLORC refused to negotiate under these terms, and repeatedly demanded that we first renounce armed struggle, enter the legal fold, and participate in the National Convention as mere observers. Under the SLORC military junta, the terms "renounce armed struggle" and "enter the legal fold" mean total surrender, while the SLORC then have the probable option of resorting to military means to destroy the KNU. As the Burmese military has used such tactics in the past, and as there is no insurance that the SLORC would not resort to such tactics again, the KNU cannot agree to these terms. Following the adoption of a new constitution, bearing in mind that the KNU could have no official input into the National Convention and therefore into the writing of the constitution, the KNU was to surrender its arms. The SLORC also demanded that a demarcation of territory take place, and that the KNU must cooperate with its Border Areas Development program. Following the fourth round of negotiations, the KNU wrote to the SLORC on December 31st, 1996, requesting a fifth negotiation meeting in order to clarify these matters. On the 6th of February 1997, the peace-negotiating team originally dispatched by the SLORC sent a disrespectful and unofficial reply to the KNU, listing suggestions for how to proceed with further peace discussions. No deadline was given for a reply, nor a date set for the fifth round of talks. Four days later, on February the 10th 1997, the SLORC offensive against the KNU was launched. At present the SLORC's massive military offensive is continuing throughout the KNU-controlled area, causing more than 20,000 civilian refugees to flee into Thailand's border areas. Many thousands of Karen and Burmese displaced people remain trapped inside Burma as the SLORC troops have attempted to cut off access to the border. These displaced people are in grave danger, and many families have been separated causing much suffering to the refugees who survived the hazardous journey to the border. The refugees in camps in Thailand are in a precarious security situation due to attacks on the camps by the SLORC army and its followers. We are also concerned about the safety of civilian refugees who have recently been repatriated into war zones. If the SLORC continues to refuse to resolve the political problems through peaceful political means, and continues its military offensive against the Karen people, the KNU is faced with no alternative but to defend itself through armed struggle. Therefore the fighting shall continue, unless the SLORC can be brought back to the negotiating table. ************************************************************* NATION: ARMY HALT PLAN TO FORCE BACK REFUGEES March 1, 1997 CLEARLY furious with direct criticism from the US, Army Chief Gen Chettha Thanajoaro yesterday ordered an abrupt halt to the relocation and repatriation of thousands of Karen refugees. Relief workers, however, said that over 2,300 refugees at Pu Nam Rawn in Kanchanaburi's Muang district and about 3,000 at Htee Lay Pai in Sangkha Buri are in "grave danger" and in urgent need of relocation to safer sites due to the close proximity of Burmese army troops to their shelters. They added that refugees at Pu Nam Rawn, who are living about three kilometers from a Burmese army outpost, have decided to move deeper into Thailand today, despite the absence of permission from the Thai Army. The refugees, mainly women, children, the elderly and the disabled, have repeatedly requested, without success, the 9th Army Division's help for the relocation. On Thursday, Thai paratroopers clashed twice with patrolling Burmese troops close to Pu Nam Rawn but there were no casualties. In Htee Lay Pai, three columns of Burmese troop have attacked Karen rebels about two kilometres from a Buddhist temple where the refugees are taking shelter. The workers said no more than half of an original 3,000 exiles remain at the temple as most have had fled in fear. Thai authorities have refused to let the remaining refugees at Htee Lay Pai move deeper into Thai territory, arguing that the temple is already on Thai soil. But workers said the camp is obviously situated in Burma as it is located beyond the Mae Ka Sa stream marking the border. After strong international protest and criticism, particularly in a letter yesterday from a senior US Embassy official, Gen Chettha said he had ordered a halt to the Army's plan to relocate or send home Karen refugees in the Kanchanaburi area. He was obviously angered by a strongly-worded letter sent to him by Charge d'Affairs Ralph Boyce which said Chettha was responsible for ordering the forced repatriation of about 900 refugees on Tuesday and Wednesday. In the letter, Boyce said that on behalf of the US government, he wanted to express grave concern over the reports that "the 19th Division, acting on your order, has forcibly repatriated 900 unarmed Karen women and children" to Burma. The US diplomat said he was concerned that refugees at Pu Nam- Rawn "are to be returned in the coming days" and disturbed to hear that another group of about 200 unarmed civilians had also been forcibly sent back by the 9th Division on Feb 25. Boyce urged Chettha to accept the refugees while the Burmese offensive against the Karen National Union (KNU) was being carried out and to permit unarmed civilians, men and women, to stay sufficiently away from the border to ensure their safety. He also asked that relief agencies be permitted access to provide humanitarian aid. Chettha yesterday insisted that no refugees were forcibly sent back to Burma, saying, they all "voluntarily wanted to return" home. He said he would not explain or respond to international criticism of the incident, as the refugee affair was an internal matter of Thailand. He expressed strong disappointment that "his good will and good intentions" in sending refugees to a safe area was counterproductive and taken in a negative light. "We [the army] do everything out of goodwill and good intention. Otherwise, why would I have proposed relocating refugees [in Tak province] 10 kilometres deeper into Thailand?" he said. In late January, three Karen refugee camps were attacked by Burmese and Rangoon-backed renegade Karen intruders who also burned down two of them. Prime Minister Gen Chavalit Yongchaiyudh yesterday also denied that refugees had been pushed across the border into Burma, saying Thailand had received thousands of new arrivals but rejected only 10 or 20 who were armed KNU troops. He said he believed those who were pushed back were probably armed. "Usually we [Thailand] welcome to civilians but not armed troops," he said. ***************************************************************** BANGKOK POST: NO KAREN REFUGEES FORCED BACK March 1, 1997 Mongkol stands by human rights policies Supreme Commander Gen Mongkol Ampornpisith yesterday denied the armed forces had forcibly repatriated Karen refugees to Burma. His denial came on the same day the US State Department insisted Thailand immediately stop their forcible return, calling the situation "very difficult and tragic." However, the supreme commander said he stood by human rights policies which state that refugees should not be forced to return to war zones. His stand was also reiterated by Prime Minister Chavlit Yongchaiyudh who on his return from Malaysia insisted that Karen civilian refugees would not be forced back into Burma, although he said he would not allow Thailand to be used as a base for armed resistance by Karen rebels. The premier said US and Amnesty International criticisms of Thailand were base on inaccurate reports. Supreme Commander Gen Mongkol said, "We have not done what has been widely alleged. Instead, we are continuing with humanitarian aid to Karen refugees." He said women, children and the elderly fleeing the Burmese government's offensive against the Karen National Union (KNU) would be given shelter and aid. However, armed men would be pushed back across the border unless they agreed to be disarmed. "Our armed forces' policy on the matter is quite clear. We will not interfere in Burma's internal affairs," said the supreme commander. He added that it was the Thai government rather than the United Nations that had had to pay to look after the refugees. As for the allegation that the government had changed its policy toward the Karen following a meeting on Thursday between Army Commander Gen Chettha Thanajaro and his Burmese counterpart Gen Maung Aye, Gen Monkol said Burma had stated that it wanted to take back the refugees but only as long as they wanted to return. He said they would be sent back once the situation returned to normal. National Security Council Deputy Chief Kachadpai Burusphat said he disagreed with a UN High Commissioner of refugees proposal that it take over responsibility for the refugees in several camps along the border. He feared more refugees would flow into the camps and illegal immigrants would use them as bases. Yesterday the Army's secretary-general Maj Gen Pongthep Thespratheep also dismissed reports that the 9th division in Kanchanaburi province had forcibly repatriated refugees. In fact the Army commander's proposal that refugees be moved a further 10 kms into Thailand revealed the government's humanitarian approach. ***************************************************************** BKK POST: NO PLACE TO CALL HOME February 27, 1997 Thousands of young Karen become a source of cheap labour along Thai-Burmese border Sutin Wannabovorn, Hauy kalok Refugee Camp, Reuters "Brother, please don't blame me for using child labour," the owner of a coffee shop near here joked to her customer as he peered curiously at the 12-year-old Karen girl serving him water. The little girl is among thousands of young Karen refugees from camps along the Thai-Burmese border trying to earn a living by offering themselves as cheap labour in nearby towns. "I allowed two of them to work here because I felt pity for them," the owner said. Their houses were burned down recently during fighting between the Karen their enemies, she said. In Mae Sot near the Burmese border, another Karen girl working at a restaurant said she hoped to save enough money to buy proper documentation to allow her to stay in Thailand forever. "When we have enough money, we can buy an identity and go to Bangkok," said the Karen girl, adding that many of her friends had disappeared from the camps after bribing Thai officials for identity cards. To the young refugees in the camps, the chances of returning home to their native Karen state look as remote as democracy coming to Burma, whose military government has been criticised for a range of alleged human rights abuses and suppression of pro-democracy forces. Most young refugees jump at the chance to leave the spartan camp conditions for the bright city lights, refugee official say. Many eventually become maids for wealthy Thais, waitresses and even prostitutes, they said. Thai narcotics police raided a brothel in Bangkok last year and rescued 17 Karen girls, police said. "Nobody wants to go back to Burma, especially the young people," the Karen girl at Mae Sot said. The Karen National Union (KNU), formed in 1948 to fight for greater autonomy from Burma's central government, is among the oldest rebel groups in the world. This month the KNU, which has launched lightning attacks against Burmese troops inside Burma, were counter-attacked and their mobile jungle bases destroyed. In 1995, a Buddhist faction split from the mostly Christian KNU. The Democratic Karen Buddhist Army (DKBA) linked up with Burmese government troops and drove the KNU out of most of its previously secure strongholds. So far, more than 60,000 Karen refugees have fled the fighting between the KNU and Burmese troops to shelter in camps set up by the Thai authorities just across from the Moei River border. Another 30,000 refugees are scattered across the jungles. Pak Kah, 45, said his future looked bleak and could nor see peace returning to his Karen homeland. "Look, this is all I have left," he said pointing at the loin-cloth he was wearing. He was speaking in the burned out remains of his home in the refugee camp, which was torched by a friend who turned foe a few weeks ago. Pak Kah was among the first group of more than 2,000 refugees, mostly family members of the KNU, who fled Wangkha camp inside Burma to Thailand in 1984. His fate has been the same as that of thousands of other living in the camps which have since 1995 been regularly attacked by DKBA guerrillas. "I will rebuild the living shelter here and will never go back to Burma, as long as there is still no peace and democracy there," said Pak Kah. Many other refugees interviewed at the camps also said hope to return to Burma had already evaporated from their souls. "We will continue to live and die in Thailand. Nobody wants to go back to Burma any more, especially the young children. They don't even know Burma," said Si Da Hea, 35, who has been living in this camp for a decade and has had three children in that time. Ei Moo, 17, who accompanied her family during the 1984 evacuation from Burma said she rushed back from Mae Sot where she worked as a maid to help her family after rebels torched their home in the camp. "While the parents live in the camps, the children go out and work in the city," said Ei Moo. The refugees constantly live in fear of attacks by the DKBA and lead an unsettled life. "We are appealing to the Thai Government to provide more security for the refugees in the camps," said Mary On, vice-chairman of Karen Refugees Committee who acts as the Huaykalok camp leader. (BP) ******************************************************* NATION: BURMA 'REGRETS' INCIDENT March 1, 1997 SEOUL- Burma has expressed "regret" over the peremptory expulsion of a South Korean MP from Rangoon airport and denying him access to South Korean diplomats, the foreign ministry said yesterday. Burma's ambassador to Seoul described the denial of embassy access to opposition MP Kim Sang-woo as a "mistake", and said the authorities involved will be officially reprimanded, according to foreign ministry spokesman Lee Kyu-hyung. The MP, who had previously urged South Korean companies to pull out of Burma until democracy was restored, was manhandled by Burmese security personnel at Rangoon airport when he flew there with a valid visa on Feb 6, and forcibly bundled on a return flight to Bangkok. ******************************************************* ASIA TIMES: MYANMAR SHRUGS OFF EU THREAT February 26, 1997 (slightly abridged) Stephen Brookes, Yangon A growing movement within the 15-member European Union to close its markets to farm imports from Myanmar will have no real effect on the Southeast Asian country's economy, agriculture officials in Yangon said on Monday. The EU's Executive Commission last week called for Myanmar to be stripped of preferential trading benefits in agriculture because of concerns over Yangon's record on human rights. The commission, which can propose legislation but not make law, has requested the EU Council of Ministers to revoke Myanmar's General System of Preferences (GSP) status for agriculture. Such a revocation would put Myanmar exporters at a severe disadvantage in the European market, effectively closing it to them. The council has not yet acted on the request, and Myanmar officials seemed unconcerned about the threat. "It wouldn't really affect Myanmar, since we export very little to the European Union," said Mya Maung, head of the Agriculture Ministry's Department of Planning. "Most of our exports go to China, Indonesia, the Philippines and other Asian countries." Some 46 percent of Myanmar's exports are of agricultural commodities, but few of these go to Europe. According to official statistics, out of 1.04 million tonnes of rice exported in financial year 1994/95, only 30,000 tonnes went to EU member states. Rice exports to Asia, by contrast, amounted to 734,000 tonnes, and 277,000 tonnes were exported to Africa. Rice is Myanmar's main foreign currency earner. Both commodity production and exports to Asia were expected to rise, said Mya Maung. Asian investors are starting to invest in substantial agricultural projects, most of which will be producing for the Asian export market. South Korea's Daewoo plans to set up a 12,140-hectare rubber plantation in a joint venture with the government. Thailand-based Sutec is negotiating for a similar amount of land for a sugar plantation and Kee Aun of Singapore is leasing 10,926 hectares for paddy cultivation. Moreover, Japan's Marubeni Corporation announced plans in December to produce rice for livestock feed in Myanmar in a US$1.5 million joint venture with the Ministry of Agriculture. And in January, Thai multinational Charoen Pokphand (CP) announced plans to set up a wholly-owned subsidiary, Myanmar CP Livestock, to run animal feed manufacturing facilities, livestock breeding farms and chicken farms. The company's output will be sold on the domestic Myanmar market. "We're inviting investors to come in to develop sugar, cotton, rubber, palm oil and other products," said Mya Maung. "Sugar has huge potential - we're negotiating with the Chinese to set up sugar refineries," he said, noting that the country wanted to increase its total annual sugar exports of 30,000 tonnes. Tensions have been rising between Yangon and the EU over the past year. In a largely symbolic move, the EU imposed visa restrictions on members of the ruling State Law and Order Restoration Council late in 1996. Myanmar's expected anticipated entry into the Association of South East Asian Nations later this year was a subject of contention at a recent meeting of ASEAN and EU foreign ministers in Singapore. (AT) ********************************** ASIA TIMES: EU "COMMON POLICY" LOST IN MYANMAR February 26, 1997 Elizabeth Pisani, Asia Times ASEAN countries are losing no sleep over how the European Union will react when Myanmar becomes a full member of the group. The United Kingdom and France, they say, have given private assurances that they will keep relations smooth. "Absolute nonsense,"said British Foreign Minister Malcolm Rifkind. Other UK officials described such reports, which come from a number of Southeast Asian capitals, as "concerted ASEAN disinformation". And yet officials from the European Commission, the EU's executive body, also report that, to their fury, Paris and London are smoothing the feathers of the members of the Association of Southeast Asian Nations, ruffled by Europe's fierce public objections to the admission of Myanmar. "The commission must have been intoxicated by ASEAN to believe that," said an official from France, which strongly denies that it is breaking ranks with its European partners on the issue. True or not, the very fact that the reports are in circulation illustrate how suspicious European nations are of one another when it comes to relations with Asia. It shows, too, that ASEAN is increasingly willing to believe that the EU does not speak with a single voice on foreign policy. European nations began their present public assault on Yangon in the middle of last year, when a Danish honorary consul, who was a close associate of democracy movement leader Aung San Suu Kyi, died in police custody in Myanmar after being arrested on charges of owning an unregistered fax machine. Denmark led a call for economic sanctions. It was opposed by Britain, which favored a ban on high-level contacts with Yangon. This ban eventually became the basis for a "common position", agreed by all 15 EU members. It was followed by public condemnations by the EU of some of Yangon's worst violations of human rights. But the protests have become increasingly muted in recent months, a time when the EU has been agonizing over the future of its relations with ASEAN. Now it has become apparent that Southeast Asian leaders will not jump in response to European public opinion and will in all likelihood go ahead and admit Myanmar, along with Cambodia and Laos, before the group's 30th anniversary in July. And Europe is beginning grudgingly to admit there is nothing it can do about it. It is Britain, until now a vocal opponent of the Yangon government, that is leading the shift to accepting that Myanmar will soon be a part of the ASEAN landscape and must be dealt with as such, according to Asian and European officials from several countries. "The British are coming to us quietly and saying: "Well, you understand we have to be tough on Burma for public consumption. But don't worry too much about the common position, really we support you and we'll take care of it", said a senior official from an ASEAN foreign ministry. British officials have expressed shocked at such accusations. "We have made it clear that it is up to ASEAN to choose their members and is not a matter for us," one UK diplomat said. "But that said, we certainly didn't say anything along the lines of: "We'll see you right, boys". Officials elsewhere in the EU were rather less shocked when they learned from their counterparts based in Asia that - at least according to ASEAN nations - Britain and France were wriggling out of the common position on Myanmar. "It tells you all you need to know about our hopes for the CFSP," said one official from the Netherlands EU presidency with a weary shrug. The Common Foreign and Security Policy was one of the goals enshrined in the Maastricht Treaty on European Union. Europe is still a very long way from reaching that goal. A common position seems to be that formal "Common Positions" are fine until a member state feels it might be able to steal a march on its partners. Another example of Europe's foreign policy disarray in Asia comes from the ASEAN Regional Forum. The EU is represented at the ARF by a six-month revolving troika consisting of the country that currently holds the EU presidency together with its predecessor and successor. Last year Britain and France outraged their partners by applying for separate seats in the security grouping. Some see this as reason enough for those nations to try to curry favor with ASEAN members over the admission of Myanmar. Britain, for one, denies this, saying it considers its ARF application to be moribund. ASEAN has told EU members to sort out among themselves what they want - the EU or its two United Nations Security Council members - on the ARF. They cannot have it both ways. An ASEAN diplomat said his office was less surprised by France's private assurances over Myanmar than by Britain's. First, French oil company Total has an enormous joint-venture investment with Yangon and US oil company Unocal to build a gas pipeline across the country. Second, human rights abuses in Yangon do not rate highly on the French public's list of concerns. France this week stalled EU foreign ministers considering suspending trade privileges for Myanmar for at least a month, saying it did not think trade and politics should be mixed. But French officials have said that should not be construed as support for Yangon. ************************************* KYEMON: DISINFORMATION AND RFA February 18, 1997 ( SLORC press: translated from Burmese, abridged) Po Hmat The People's Republic of China was the first to oppose and condemn the abnormality of RFA. Myanmar [Burma] also expressed its dissatisfaction over RFA on 1 February. The reason why Asian countries dislike RFA is because it is just a name change for the West's Radio Free Europe which penetrated and interfered in the internal affairs of East European countries leading to their downfall. Radio Free Europe, Radio Liberty also known as Radio Liberation, Radio Jose Marti, Radio Swan, VOA, BBC, 4th June Broadcasting Station, and the [Burmese] expatriate radio station in Norway are all controlled by the American Central Intelligence Agency, the CIA. There is a rightist group of influential Americans in a small town of Santa Fe, Texas, the United States of America known as the Santa Fe group. The group includes bankers, industrialists, arms manufacturers, rightists, and militarists. Their finances are strong with the backing of the Bank of America. The group is also being manipulated by the CIA. The Santa Fe group has vowed to bring down leftist governments of socialist countries far from the United States, North, Central, and South America. There is a section called FBIS, Foreign Broadcast Information Service at CIA headquarters. It is under CIA's secret international interference activities department. This section produces a daily collective report of the world's broadcasts. Simultaneously, it compiles and distributes articles to be used by CIA-influenced broadcasting stations, television stations, and magazines. The CIA [personnel] disguised as diplomats from around the world also send reports to that section. FBIS editors are all CIA officials. ****************************************************** ASIA TIMES: GAS DEALS TO FUEL REFORMS IN MYANMAR ECONOMY February 14, 1997 (abridged) Vissuta Pothong in Bangkok Myanmar will earn enough from its natural gas deals with Thailand to start a stock market and eliminate its currency dual exchange regime by 1998, the governor of Myanmars central bank said on Thursday. Asked when he would abolish the dual- exchange rate, Governor Kyi Aye said: "By the end of the year 1998 when we start selling gas to Thailand, and we will have enough hard currency." The combined gas deals for the Yadana and Yetagun offshore fields will generate annual revenue of US$600 million for 30 years and provide "the cushion for intervention in the stock market", Kyi Aye said. Myanmar would establish a stock exchange at the same time as the dual-currency rate was eliminated, he told Asia Times in an interview. The central bank governor said an already-drafted securities and exchange law would be passed within two months, paving the way to develop Myanmar's capital markets. The over-the-counter market, Myanmar Securities Exchange Center, is a joint venture between Japan's Daiwa and a state bank in Myanmar. Several Thai banks, including Bangkok Bank, have shown an interest in joining in the establishment of the Myanmar Stock Exchange, the Thai diplomat said. The current account deficit remained large in 1995-6, with imports totaling 8.33 billion kyats and exports amounting to 5.4 billion kyats. Official figures for imports are not thought to include major military purchases. The US embassy in Yangon, in a critical report last June on the black economy, alleged that drug exports alone appeared to be worth as much as all legal exports. ******************************** ASIA TIMES: MYANMAR'S MASSIVE KYAT DEVALUATION THAT NO ONE NOTICED February 25, 1997 Stephen Brookes When Southeast Asia's central bankers got together in Bangkok in mid-February for their annual meeting, Myanmar took the occasion to note that its dual exchange rate policy could be scrapped as soon as hard currency earnings started coming in from natural gas deposits currently being explored by foreign energy companies. Kyi Aye, the governor of the Central Bank of Myanmar, explained to his colleagues and reporters during the 32nd annual meeting of Southeast Asian Central Bank Governors that revenue from the gas sales would bring in foreign currency for the country's international reserves and improve its balance of payments situation. This, he said, was related to the government's exchange rate policies, and in particular its maintenance of the dual exchange rate. But economic analysts in Yangon discounted Kyi Aye's Bangkok remarks, noting that a de facto devaluation of the Myanmar kyat has in fact already taken place, almost invisibly. The wide disparity between the official exchange rate of 5.8 kyat to the United States dollar and the unofficial rate of about 165 to the dollar is often cited by critics of the country's economic and investment prospects as a key barrier to potential foreign investors. But most observers in Yangon say the official rate has become largely meaningless. Set Maung, a senior economic advisor to the government and a key architect of what he calls the "stealthy devaluation" of the kyat, has claimed that the official exchange rate has become completely irrelevant. "We did it so gingerly that people just woke up and found out we were in this parallel economy," he said. "The official rate is not applicable - go anywhere, look at the prices. Prices are converted at the parallel rate. Even if we officially declare a depreciation, there will not be any effect on the market." Business people and analysts in Yangon concur - as, surprisingly, does Washington, traditionally one of the Myanmar government's staunchest critics. According to a US State Department economic report on Myanmar released last year, "All external sector transactions, all intra-private sector transactions, and all but a small volume of non-tax transactions between public and private sectors, of both internationally tradable goods and services and of financial flows, now occur at prices fully reflecting the parallel market exchange rate." So, how does a country effectively devalue its currency so massively, with almost no one noticing? The "stealthy devaluation" of the kyat began soon after Myanmar's ruling State Law and Order Restoration Council (SLORC) took power in late 1988 and began opening up the economy to the outside world. The kyat was officially pegged to the International Monetary Fund's Special Drawing Rights (SDR) currency basket. The official rate was about 8.5 kyats to 1 SDR and the black market rate was 54 to the US dollar. Set Maung recalls that Yangon, aware of the big gap between the market exchange rate and the official rate, knew that something had to be done to redress this potentially disastrous financial situation. The plan that emerged involved a gradual rise in the prices at which the government sold official imports and state-produced exportables to the domestic market, and a loosening up of restrictions on foreign currency ownership. Under the previous regime, most private citizens were not allowed to own foreign currency, so those earning hard currency through trade or from working abroad had no legal way to use it. In 1990, Set Maung explained, the government started changing that by allowing people to hold foreign exchange accounts. But there was still a problem: Account holders were required to change 25 percent of their foreign exchange into kyat at the official rate, amounting to a hefty tax. "We were starting from scratch when we took over," said Set Maung of the Myanmar government's early currency policies. The economy was in tatters and foreign currency reserves were zero. We needed to get some for the government needs. But previously, exporters were not allowed to retain any foreign exchange at all, so this was an improvement on the previous situation." At that time, foreign exchange held in Myanmar had to be kept in designated bank accounts, from which it could be withdrawn only to pay for imported goods. As a result, foreign currency earners began selling their accounts to traders, at the market rate. As the practice spread, the government moved to the next step of its incremental plan to narrow and eventually reduce the exchange rate gap: Bringing domestically deposited foreign earnings into the legal national money supply. To do that, in 1993 Yangon introduced foreign exchange certificates (FECs) pegged to the US dollar - a form of "halfway" hard currency modeled on the system used for many years by China before being abandoned on January 1, 1994, when that country's dual exchange rates were unified. Smiling, Set Maung admitted that SLORC simply copied the Chinese model, but he added that the Myanmar government thought it could improve on it. The FECs proved widely popular, especially with tourists, who no longer had to change dollars at the official rate. (Well-informed travelers to Myanmar used to bring in whisky and cigarettes to sell on the black market, simply to obtain currency). Widely-traded illegally at the market rate, FECs soon began fetching an even higher price than US greenbacks, since holding actual foreign currency is still illegal in Myanmar. And in December 1995, the government started licensing private FEC exchanges, to shift the money exchanges above ground. For the most part, the FEC and the dollar have traded against the kyat within one percentage point of each other. Other factors have influenced the exchange rate as well, such as the fact that the country's Telecommunications Ministry insists on being paid in FECs - not kyat - to install a domestic telephone line. When the fees for new lines came due last April, demand for FECs soared and the price rose accordingly. Set Maung said he believed the ministry made a mistake: "The government needs foreign exchange, and ministries are trying to get some from other places. Sometimes they get it from the local people." For traders, the exchange rate has been a key issue. Until recently, imports were evaluated on a cost, insurance and freight (CIF) basis and taxed at the official exchange rate - making customs revenues relatively low. But then the IMF arrived and ruined the party, according to Set Maung, advising the Myanmar government it was losing a lot of money by using the official rate. "But what about prices?" he pointed out. "If we switch to the market rate, commodity prices will go up, there's going to be cost-push inflation." The solution, he said, was to shift from evaluating imports CIF to evaluating them at the higher market value, then reducing the customs rates while imposing them at the parallel kyat rate. "We are just changing over to a new system using this market rate," he said. The net result, he said, has been higher revenues and a more realistic system. So why doesn't Myanmar simply devalue the kyat now? Inflation, currently running at an estimated 20 percent to 30 percent, remains a key concern, as does the low level of foreign exchange reserves. While no official figures are available, analysts estimate the government has no more than three months' worth of reserves, and last year restrictions were put on imports of some nonessential goods. Moreover, the government still supplies imported commodities to civil servants at the official exchange rate - in effect, a huge subsidy designed to offset relatively low salaries. If the government stopped doing this, it would have to raise salaries, Set Maung pointed out. But it does not want to put more money into the economy for fear of fueling inflation. Eventually, he stressed, this discrepancy will be phased out." According to some analysts, the most significant roadblock to an actual devaluation of the Myanmar kyat is simply the uncertainty involved. "A foreign exchange regime should depend fundamentally on purchasing power parity, but generally it doesn't happen that way," Set Maung said. "There is panic buying, speculative buying, hedging. Because of things like this, currencies don't settle at proper par value. Look at what happened in Mexico with the peso [in December 1994]. As soon as they started the depreciation of the currency, which was due, they went into a tailspin. The United States had to step in." The specter of a Mexican-style tailspin haunts the Myanmar government, and is keeping it from fully floating the kyat until it has either enough foreign reserves to support an official devaluation, or a guarantee from international lenders. Set Maung acknowledged that Yangon did not have sufficient foreign exchange reserves to support the kyat. At the same time, he added, the US government would not likely come to SLORC's aid, as it did in Mexico, so naturally the effect on Myanmar would be worse. "We need a cushion", he said, "either from the IMF or from our own foreign exchange reserves. So that's why we're staying quiet, and just letting this de facto situation stay on." (AT) *********************************** THAILAND TIMES:A THAI LEADING FIRM CHOSEN TO CONSTRUCT ROAD LINK TO BURMA (abridged) February 25, 1997 by P Pongpipattanapan and Seri Clinchan KANEE MON, Burma: A Thailand based construction company has won the bid to construct a 95 kilometer road worth more than one billion baht from Thailand to Burma. The constructor source interviewed in Kanee, an area controlled by the New Mon State Party on the opposite side of Kanchanaburi province, said on Sunday that the Burmese government has granted the concession to construct the road linking the Three Pagodas border check-point in Kanchanaburi province with Thanbusayat port in Burma, which is controlled by the New Mon State Party. The two lane road, to link Thailand with the port on the Gulf of Mataban, will be 95 kilometers long in length and will cost more than one billion baht. Also planned is a deep sea port. These two projects will cost 2.5 billion baht and the deep-sea port will be able to handle large container ships. The source was unable to disclose the name of the winning company for the construction of the port as it is listed on the Stock Exchange of Thailand (SET) and may have its operations affected. The deep sea port project will also include the construction of an international port area, bonded warehouse, and community services. It will take only 20 hours from the Three Pagodas border checkpoint to Rangoon by using the new road, the source said. An Italian firm AER Map Ltd, will be responsible for surveying the construction area and design the construction route together with PAE (Thailand) Plc. "Whether or not the Three Pagodas border checkpoint will be re- opened depends on the Thai government. If it is re-opened, economies along the Thai-Burmese border will improve," the source said, adding that the Three Pagodas border checkpoint has been closed for several months after Burmese government troops opened fire on minority Mon civilians. Presently, Italian-Thai has invested in the construction of a deep- sea port in Tavoy which includes a road from Bongtee border checkpoint to Sai Yok Noi district, Kanchanaburi province. *********************************************