Myanmar: Mixed Messages


Frank Milne

Myanmar's economy continues to deteriorate, despite official claims of annual growth rates of 8 percent over the past 5 years, and improved export performances in the first months of 2001. Foreign investment has further declined even from the reduced levels of 2000, as has crude oil production. The kyat continues to lose ground against the US dollar, falling at one point in the last quarter to over 800, but a government purge of money changers and stringent new controls on the foreign exchange certificated system (now fixed at kyat 495 to US$ 1) has brought the black rate back to around 650. Galloping inflation and shortages of basic commodities like rice, cooking oil and petrol are hitting local consumers hard.

A curious sidelight is cast on Myanmar’s economic priorities by the current negotiations with Russia to purchase on a cash or barter basis a 10 MW nuclear research reactor. The reactor would not have any military potential, but even this limited project would seem beyond Myanmar's capacity to support in view of the run-down state of its infrastructure and tertiary education sector. A more significant purchase from Russia was 10 MiG 29 jets, at a cost of US$ 130 million, with $40 million down and the balance over 10 years.

One ray of sunshine in an otherwise bleak outlook for the Government was the Japanese government's decision in April to resume a suspended aid commitment of US$ 28 million to upgrade a hydro-power dam. A Keidanren delegation held discussions in Rangoon in late May on trade and investment. Both moves were apparently intended to encourage the government-National League for Democracy (NLD) dialogue.

The dialogue between the government and Aung San Suu Kyi (ASSK) appears still to be progressing, though very slowly. The UN envoy, Malaysian Razali Ismail had further talks with the government and ASSK in June. No early breakthrough is in prospect, though Razali later expressed confidence that the transition from military rule could take place in the next two to four years. Some recent positive signs are the release since May of several groups of NLD elected members, and permission for the NLD to reopen 19 of its offices in the Rangoon division. In addition the government back-tracked on its earlier refusal to cooperate with the ILO and agreed to receive an ILO mission in September to verify action being taken to end forced labour. While there has been speculation that Aung San Suu Kyi's non-appearance at the Martyrs' Day commemoration indicates that the talks with the government are going badly, it seems more likely that she declined to appear in public at their invitation until her freedom of movement is fully restored. Meanwhile the government appeared to be preparing organisations under its control for political action.

After months of increasing tension between the two countries, marked by border clashes in February and exchanges of insults in the press and official protests, the visit of Thai Prime Minister Thaksin to Rangoon on 20 -21 June marked at least a temporary relaxation, with reiterations of traditional friendship and undertakings to cooperate to suppress the cross-border drugs trade. Thailand indicated that the projected reopening of border crossings (the Tachilek - Mae Sai crossing has now opened) could be accompanied by tariff concessions for Myanmar exports, and the lifting of controls on exports to Myanmar. Thai press comment remains sceptical about the durability of the thaw in relations, and in particular about the will or ability of the Myanmar government to control the United Wa State Army, the principal producer of the drugs flowing into Thailand.

WATCHPOINT: Is the government easing the pressure on the NLD just to buy time with the international community, or is it seriously pursuing the negotiations?


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