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BP: BURMA
August 8, 1998
BURMA
Tough choices for
junta as its economy
sinks fast
The rice crops have failed, inflation is
rising, essential goods are disappearing
and the people are becoming restless. Ten
year's on from the demonstrations in
which thousands of Burmese died the
country's junta has some difficult choices
to make.
Anuraj Manibhandu
Ten years after the violent suppression of Burma's pro-democracy
uprising, the country's military leaders are under growing pressure to
liberalise as the nation's economy goes from bad to worse.
The most telling sign of its parlous state is the low level of Burma's
foreign exchange reserve, which, according to international financial
institutions, now stands at about US$100-150 million - the equivalent
of about one month's import. One analyst said this a sixth of what was
considered "prudent."
Another indicator of Burma's hard-up economy is the rapid decline of
the national currency which gathered speed after the Thai baht began
its downward spiral last July. In less than two years, the exchange rate
has dropped three-fold, from 100-120 kyat to the dollar in December
1996, to latest reports of 350 kyat to the dollar.
Added to this is the damage done to rice crops by floods over the
past two years. This has weakened the performance of the country's
third ranking foreign exchange earner (after pulses and prawns), as
well as undermined its self-sufficiency in food.
Foreign Ministry figures show the yearly volume of rice exports
dropping from one million tonnes in 1994-95, to 120,000 tonnes in
1996-97.
Not least of Burma's troubles is the drop in investment from its Asian
neighbours. They previously dominated foreign enterprises in the
country but are now crippled by their own financial problems at home.
Moreover, attempts to solve some problems are spawning others.
One is the attempt to shore up foreign exchange levels by restricting
border trade with China and Thailand. This has worsened the shortage
of essential goods, for which Burma largely depends on Thailand, and
has heaped inflationary pressure on the economy.
Thai border traders say their income has been slashed by half since
Rangoon abruptly closed three border checkpoints and slapped
stringent controls on Burmese importers last November.
Faced with simmering discontent due to its economic problems and
being unable to turn to the IMF for help, the leadership now has to
ponder its political options, says a Burma-watcher.
"The key question in the debate is whether they should go back to
isolationism and a subsistence economy, or begin liberalising in order
to secure help," he added.
Japan, which recently gave $1 million (41 million baht) in grant aid
intended for Rangoon general hospital, and wrote off two billion yen in
debt, has given the State Peace and Development Council some hope.
But Tokyo has also made clear that it still wants the SPDC to move
towards dialogue with the opposition National League for Democracy
of Aung San Suu Kyi.
In this regard, China, which has tremendous foreign affairs reserves
and is not demanding such a condition, might be a more attractive
option. The junta would not need much to recharge the economy, and
it would not be a problem for China to make available to Burma $100
million the analyst noted.
The catch however is what China seeks in reciprocation from Burma -
access to the Indian Ocean - and this might be much more costly.
Pending a political decision, the junta's ability to keep social unrest at
bay is being stretched. Whether this ability holds depends largely on
the Burmese people's tolerance. The question is whether this limit
should be tested or whether the junta and the NLD should make a
new move to end their 10 years of political confrontation.
© Copyright The Post Publishing Public Co., Ltd. 1998
Last Modified: Sat, Aug 8, 1998
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