Loan Squeeze, from FEER, June 5, 19

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Subject: Loan Squeeze, from FEER, June 5, 1997

Far Eastern Economic Review
June 5, 1997

"INTELLIGENCE"

Loan Squeeze

The military junta in Rangoon is putting pressure on major foreign
corporations doing business in Burma to act as guarantors for loans from
foreign banks.  Sources in Rangoon say that Mitsui of Japan is in the
process of agreeing to become guarantor for a loan of $150 million which
will be channelled through the Bank of Tokyo.  This is the first time since
1987 that commercial loans to Burma have been guaranteed by private sources,
rather than a foreign donor country.  It indicates that Rangoon is facing an
acute shortage of foreign exchange, and that its official growth figures
have been inflated.  A recent confidential report form Burma's Central Bank
states that the provisional growth rate for 1996-97 will be 5.8%,
considerably lower than the official figures of 8%09%.  The report also says
that the growth rate is declining: it was 7.5% in 1994-95 and 6.9% in
1995-96.  Until last year, foreigners and locals invested in the hotel and
real-estate sector, causing an inflow of foreign exchanges and relatively
high GDP growth figures.  Both those developments are now more or less over.

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