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The international community as well as Burma’s pro-democracy movement have welcomed the initial contacts that have taken place between the ruling State Peace and Development Council (SPDC) and Aung San Suu Kyi, secretary-general of the National League for Democracy (NLD). Burma’s state-controlled radio and newspapers have also toned down their anti-NLD and anti-Suu Kyi rhetoric, and some opposition activists have been released from detention.
Both advocates of sanctions, and those who support the ‘quiet diplomacy’ of ASEAN’s ‘constructive engagement’, claim that their respective approaches to the political impasse in Burma prompted the junta to talk to Suu Kyi and to make other concessions.
But there are clearly other, perhaps more important factors that have forced a change in the Burmese military’s way of handling the country’s problems. One is the deteriorating state of the economy, and the other is the crucial – but also controversial – role that Malaysia has recently come to play in Burma.
Foreign aid has been cut since the suppression of the bloody pro-democracy movement in 1988, and foreign investment – which came mainly from other countries in the region – has dried up in the wake of the Asian economic crisis. The regime claims a GDP growth rate of 10.9% last fiscal year (1 April 1999-31 March 2000), but a mission from the International Monetary Fund (IMF), which visited Burma in August 2000, found serious discrepancies between the government’s statistics and the claimed economic progress. The real growth figure is likely to be more in the order of 2-5%. At the same time, the government claims that inflation has been brought down to 3.59% from 30% in fiscal 1998-99, while estimates by Western embassies in Rangoon put the figure at 20% or more.
More alarmingly, the value of the Burmese currency plummeted to 430 kyats to the dollar in January 2001, down from 375 in the beginning of 2000. In mid-February, it has fallen to about 500 to the dollar. This dramatic drop has been caused partly by rising oil prices, but also by a rush for ‘real dollars’, as the government’s dollar-denominated Foreign Exchange Certificates have lost their dollar parity. The value of the FECs on the black market is no more than 270 to the dollar, where it should be equal to a dollar, as investors and private businessmen have become aware of the fact that the government lacks foreign-exchange reserves to back up the FECs. A Western embassy in Rangoon estimates that $400 million-worth of FECs have been printed, while Myanmar’s foreign-exchange reserves stood at $340 million in August according to the IMF. Since then, more dollars have been spent and almost no foreign exchange has come into the country.
In order to solve this problem, the government can either demonetise the FECs, and thereby cause the collapse of many private enterprises, which depend on them to trade with the outside world, or buy up the FECs at a reduced rate, for instance 100 kyats per FEC. But that would also undermine the vitality of many local businesses. A third, more desirable option is to attract a sudden and large inflow of foreign exchange – and that is where Malaysia comes into the picture.
Malaysia’s own reserves of natural gas are running out, and with political uncertainty in neighbouring Indonesia, Myanmar’s gas fields in the Andaman Sea have attracted the interest of the government in Kuala Lumpur. Yedana gas field in the Gulf of Martaban is being exploited by Total of France and America’s Unocal in cooperation with the state-owned Myanmar Oil and Gas Enterprise and the Petroleum Authority of Thailand.
But Thailand, which signed the contract with the Myanmar government before the crash of 1997, is in no hurry to buy gas from Myanmar. But there is another somewhat smaller gas field south of Yedana: Yetagun off the coast of Tavoy and Mergui in southeastern Myanmar. Initial estimates at Yetagun show gas reserves of about 1.5 trillion cubic feet, compared to Yedana’s recoverable reserves, which are certified at 5.8 trillion cubic feet.
But the Yetagun reserves are sufficient for Malaysia’s immediate needs, and observers note that the country’s prime minister, Mahathir Mohamad, spent a week ‘vacationing’ near Yetagun in early January this year. His ‘vacation’ in an area where there is no known resort or major hotel coincided with a visit to Myanmar by the special envoy of the UN Secretary General, Razali Ismail, who is believed to have initiated the talks between the SPDC and Suu Kyi. Razali, a Malaysian diplomat, represents the UN and not his country when he goes to Myanmar, but Rangoon-based analysts emphasise that he is very close to Mahathir.
Senior officials in Thailand say that Malaysia has used its oil company Petronas as a "gateway" for opening the dialogue in Rangoon, promising investment in exchange for an appearance of political progress in Burma. Malaysia has also become a conduit for foreign consumer goods entering the country following a near-closure of the Thai border in the wake of cross-border problems and even fighting between Thailand’s and Myanmar’s armed forces.
If this theory is correct, the prospects for substantial political change in Myanmar are minimal. First of all, the Myanmar military, which has been in charge under various guises since 1962, is not expected to make any concessions that would threaten its monopoly on power. Secondly, it would not be in Malaysia’s interest to see another government take over in Rangoon when an important deal has been made with the present regime.
It is uncertain to what extent Suu Kyi and the NLD are aware of the games being played behind their backs. No details about the contents of the talks have been released by either side, but Suu Kyi is believed to have concentrated her efforts on easing the plight of Myanmar’s estimated 1,700 political prisoners rather than regional diplomacy and investment issues.
WATCHPOINT: When the smoke has cleared, it may be business as usual in Rangoon.
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