Using Purchasing Power Parity formulae (which helps to remove the distortions that exchange rate changes cause), Burma’s per capita GDP comes in at around US$1,200 per annum. Though higher than suggested by using the market exchange rate of the Kyat/US$, it is indicative of the dismal state of Burma’s economy. GDP, or Gross Domestic Product, measures the amount of goods and services produced by a country in a year. It is (an albeit imperfect) indicator of a country’s relative wealth. GDP per capita tells us how much goods and services are created per person. By way of comparison, a country like Australia has a per capita GDP of around US$22,200, while Thailand has a per capita GDP of US$6,400. Burma is one of a handful of nations classified as ‘least developed’ by the World Bank.

The large fluctuations in Burma’s GDP in terms of US$ is due primarily to the collapsing exchange rate of Burma’s currency, the Kyat, against the US dollar. Shocking to note is that, in terms of US$, Burma’s GDP is less than its total amount of external debt!

Because of the military regime’s economic mismanagement, Burma sells much less exports to the world than it takes in of other countries’ imports. This means that Burma runs a very large trade deficit each year (exports less imports). In 2000, this deficit amounted to over 24 percent of GDP. This is not sustainable.

Burma’s external debt arrears (debt and interest due but which has not been paid) is a very large proportion (over 35% in 2000) of the total debt that it owes to foreign countries. This arrears, as well as Burma’s political isolation, means that the country will not receive any assistance from the World Bank or other multilateral agencies unless there is far-reaching political and economic reform.

The summary table above clearly demonstrates the near-worthless state of the Kyat. Though ‘officially’ pegged by the regime at around 6.5 to the US dollar, it trades on the ‘blackmarket’ at a rate that, at latest estimate, is over 700 to the dollar. Burma’s exchange rate is yet another economic indicator of a country in socio-political distress.

The numbers in the table above are dire, and nor can any improvement in Burma’s economic situation be expected while ever the present military regime remains in place. Sorely needed economic aid to Burma from multilateral institutions, as well as from significant bilateral donors, is dependent upon significant political reform. In recent months there have been few changes to economic policy in Burma, and little to suggest the regime understands the predicament the economy is in. The regime is presently fixated on boosting agricultural production by bringing as much land as possible under cultivation. An attempt to achieve self-sufficiency in food and in so doing bring about political stability, it is a goal that is greatly compromised by a lack of capital and access to key inputs – fertiliser, seeds, technological advances – that will allow for intensive growth. Other critical economic problems in Burma – the misaligned and chaotic exchange rate arrangements, the large trade and budget deficits, monetary financing of government spending, a small and weak financial system, foreign debt arrears, high inflation, substantial hidden unemployment and underemployment, weak taxation and revenue collection systems – all seem to be beyond the regime’s competency to address.

Political reform therefore remains the essential requirement for an improvement in Burma’s economic prospects. Political reform, especially the establishment of a government led by the National League for Democracy (NLD), would bring with it the promise of an end to Burma’s international isolation, a resumption of aid and an end to international consumer and investment boycotts. The international goodwill that would accompany the resumption of democracy in Burma would greatly aid the process of economic reform that the country so desperately needs.

(Source: UNDP Human Development Report 2000, and BEW calculations)

Thailand has been chosen for comparison with Burma in this table because of the nations’ shared history, long border, similar population size and resource endowment. Also, and though not without considerable problems of its own, Thailand provides a not unreasonable example of ‘what might have been’ in Burma. Perhaps surprising in the data of these selected social indicators is the extent to which Burma trails not a just fast-industrialising country like Thailand, but the record of developing countries generally.

(% of Total Real GDP. Source: IMF & BEW Calculations)

Notes: The structure of Burma’s economy is that of a least-developed country with minimal formal activity beyond agriculture. The stagnation or very slow-growth of manufacturing, transportation, communications, power generation and financial institutions is indicative of the failure of government policy in ostensibly promoting industrialisation. Also notable is the stagnation of trade at a time when global trade grew strongly.

The lack of growth in manufacturing is particularly indictable, given that this is the sector that Burma must exploit if it is to follow in the success of its neighbours. These numbers are consistent, however, with the collapse in investment in the sector noted above, and in following tables.

Though some growth can be expected in the energy sector with the completion of major oil and gas projects, there is little grounds for optimism that the structure of Burma’s economy will change any time soon. All sectors remain constrained by political instability, a lack of access to capital, poor physical and social infrastructure and the deteriorating macroeconomic environment .

The relevant comparisons with the economic structure of Thailand and with developing countries generally are as follows:

(% of GDP. Source: UNDP Human Development Report 2000)

(US$ millions. Source: IMF and BEW calculations)

Notes: There are great problems and many inconsistencies in Burma’s trade data. These numbers, though filtered to some extent by the IMF, understate the true size of Burma’s trade and current account imbalances. Necessarily missing is the very large proportion of Burma’s trade that takes place via informal networks – from smuggling and ‘border’ trade, to the tendency to under or overstate exports and imports to minimise tax and to circumvent exchange controls. Of course, data on Burma’s very large surplus in the trade in illicit drugs is also missing.

The bulk of ‘private transfers’ in the table comprises remittences from Burmese workers overseas. The number shown here is not large (for example, the tiny ‘state’ of Somaliland has remittances of around US$500 million per annum), and probably greatly understates the funds sent into Burma by workers and expatriates via channels that deny the scrutiny of the regime.

The EIU reports (February 2000) that Burma’s military regime has recently imposed new restrictions on imports, with individual traders limited to importing goods worth up to Kt1 million per month. These restrictions are in addition to others imposed in 1998 that limit imports to prescribed ‘essential’ items.

The US and Canada exclude Burma from their generalised preference schemes (GSP) that favour the exports of developing countries. Of course, Burma is also subject to consumer boycotts in many countries.

(US$ millions. Source: IMF, EIU)

Notes: The composition of Burma’s exports and imports is not unremarkable for an economy at its stage of development. Notable is the minor role played by rice in Burma’s exports – this from a country that was once known as the ‘rice bowl of Asia’.

(As % of total exports and imports. Source: IMF, EIU)

Notes: The extent of Singapore’s ‘engagement’ with Burma is very obvious in this data. Likewise is the absence of industrial countries from outside Asia. Burma’s political isolation from Western countries is unlikely to change the composition of its trading partners in the absence of political reform.

(In US$ millions. Source: IMF and BEW calculations)

Notes: Data on Burma’s external finances are as unreliable as any aspect of its dealings with the outside world. What is notable in the above, however, is the paucity of Burma’s International reserves relative to its large external debt. Burma’s debt arrears, on top of its political isolation, means that it is not likely to be the recipient of multilateral assistance in the near future.

The bulk of Burma’s external debts are in the form of official bilateral loans from other governments (mostly Japan). No substantial new loans have been made in some time though, as noted above, Japan is looking for any excuse to start lending again. Burma also owes a substantial amount, in the form of loans and matured bonds, to international banks.

(In US$ millions. Source: IMF and BEW calculations)

Notes: Foreign direct investment is very low relative to other countries in the region. In 1998, the peak of FDI into Burma, the relevant figures for other countries in the region were (US$million):

As noted earlier, in April 1997, the United States barred all new investment in Burma by US companies. Many other countries have a general policy of discouraging investment in Burma.

(In US$ millions. Source: IMF)

(% of GDP. Source: IMF, BEW calculations and estimates)

Notes: Burma’s fiscal situation is dire. As is clear from the above, Burma’s rudimentary revenue collection regimes have been weakening in recent years. Coupled with continuing heavy spending on defence, this has resulted in large budget deficits (the difference between spending and revenue). As shall be examined below, these have largely been financed through the simple expedient of monetisation (that is, simply printing money to cover the shortfall).

The extraordinarily low (and falling) levels of government spending on education is striking – and promise nothing but a most pessimistic reading of Burma’s future under the present regime.

As noted earlier the defence numbers greatly understate the true extent to which the armed forces in Burma extract resources from the economy.

(Source: IMF and BEW calculations)

Notes: On display in the data above is the extent to which the military regime is the primary recipient of the resources generated by Burma’s financial system. That 69% of credit created in 2000 went to the government is an extraordinary testimony to the regime’s exhaustion of Burma’s economy. It is also indicative of the weakness of the private sector.

The very large growth of currency on issue reflects the regime’s resort to monetisation for financing its spending.

The data for ‘average inflation’ understates the accelerating costs of many items in Burma, the excess demand for which is often expressed via the informal (blackmarket) economy. Even these understated inflation numbers, however, make nonsense of the reported interest rates on deposits and loans. Burma’s banking system, in short, cannot be functioning in a way that can be remotely considered rational.

In April 2000 the regime announced that it was granting a five-fold pay increase for all government employees. A move that gives some indication of the extent of the under-reporting of inflation in Burma, it’s also an act that will only exacerbate the underlying problem since it will require the printing of even more Kyat or FECs.

(000’s of Hectares. Source: IMF and BEW calculations)

(000’s of tonnes. Source: IMF and BEW calculations)

(Kilograms per hectare of harvested area. Source: IMF and BEW calculations)

Notes: As in so many other sectors of Burma’s economy, stagnation is the rule in agriculture. The data above indicates some increases in total output for various commodities, but it is clear that such advances come from extensions to the amount of land under cultivation, rather than via greater efficiency. This is in contrast to agriculture in much of the rest of the world, where efficiency gains approximating those of the ‘green revolution’ have been routinely recorded over the 1990s.

The EIU reports (February 2001) that the military regime is currently trying to encourage investment in agricultural-processing businesses such as cotton textiles and edible oils. The results, it suggests, are mixed – not least because of Burma’s unreliable power supply and the high (local currency) costs of imported inputs.