ECONOMY

Burma is a land of immense economic potential, rich in natural resources and with an educational tradition still strong despite years of government neglect. During British colonial rule from the 1820s to 1948, infrastructure was built to tap Burma's vast agricultural and mineral wealth, and the country became one of the world's leading rice exporters. A period of steady growth under a democratic government followed independence, but the military-dominated regime installed after an army coup in 1962 crippled economic growth by pursuing the isolationist "Burmese Way to Socialism" for over a quarter century.

Increasingly desperate economic conditions and years of repression sparked massive pro-democracy demonstrations in 1988. The army crushed the uprising and took direct power as the State Law and Order Restoration Council (SLORC), pledging economic reforms and free elections. In November 1997, the SLORC renamed itself the State Peace and Development Council in hopes of improving its international profile. By any name, the generals have allowed neither democracy nor a true market economy. Army-run companies dominate most trade and industry. Massive forced labor is common, and environmentally damaging policies are pursued for quick profits benefiting only the junta.

Economic liberalization is bringing some changes. Long-sleepy Rangoon now bustles with construction, consumer goods, and even traffic jams. But this superficial development touches few people. For the majority of Burmese, who are small farmers in rural areas, there is virtually no benefit. There is only a thin patina of prosperity, and little development is directed towards building long-term productive capacities. Severe inflation is driving down buying power and living standards for most people.

Today, military spending soaks up at least 40% of Burma's estimated public sector spending, and the junta continues to expand its army despite an absence of external enemies. The Burmese currency, the kyat, is overvalued by over 8,000%. Officially pegged at six to the U.S. dollar, it was worth about 500 per dollar on the open market in early 2001. Urban inflation has run as high as forty percent per year. The projected government deficit is dangerously high. State enterprises, especially those controlled by the military, dominate local and joint venture investments. The Union of Myanmar Economic Holdings Company (UMEH) is run by the Defense Ministry's Directorate of Procurement and engaged in almost all joint ventures with foreign companies. The U.S. State Department's 1999 "Country Commercial Guide" for Burma estimates that narcotics may be the country's leading monetary export, and drug profit laundering is believed to seriously influence the economy. Local investment in hotels and real estate is linked to families of major heroin traders. These narco-traffickers are allies of the junta and exercise increasing influence in Burma's economic affairs.

This financial and economic mismanagement distorts the local economy, raising doubts about long-term progress. Political instability and the absence of the rule of law is another serious concern. Western consumer boycotts, and a lack of international finance (including International Monetary Fund and World Bank loans, export credits, and investment protection insurance), blocked due to continuing human rights abuses, compound lingering uncertainties over the regime's commitment to free markets. The 1997 US ban on new investment in Burma and the 1997 Asian economic crisis together sharply reduced capital inflows. While official figures show over $10 billion in foreign investment approved since 1988, probably only about fifteen to twenty percent of that has reached the country through 2000, mostly in the petroleum sector.

While city dwellers face fierce inflation and widespread unemployment, the junta's agricultural policies are also creating grave problems. Farmers are forced to double and treble crop rice. They must then sell a quota of their harvest to the state at far below market prices. The regime exports the rice at world market prices and pockets the difference. These policies not only penalize farmers and distort the market economy, but they are also environmentally very dangerous. Growing additional rice crops and using harsh fertilizers will eventually destroy soil fertility, damage water supply, and open rice lands to pestilence traditionally avoided by crop rotation.

Overall, the Burmese junta shows little concern for the environmental impact of its policies: Clearcutting of valuable hardwoods is wiping out rainforests and destroying the habitat of ethnic minority people as well as endangered animals. Commercial overfishing has stolen the traditional livelihoods of thousands of fishing families. There has been no independent assessment of the environmental impact of the exploitation of natural gas in the Gulf of Martaban and of the construction of a natural gas pipeline across southeastern Burma by the U.S. company UNOCAL and France's TOTAL.

Economic "development" is proceeding without public input, reliable economic data, or official accountability. Thousands of people have been expelled from their homes to make way for infrastructure projects. Many more have been conscripted as laborers on road and railway construction in the gas pipeline region and other projects. To flee such abuse, or simply to seek even basic employment, hundreds of thousands of Burmese are today refugees and illegal immigrants in neighboring countries and much farther afield. Democratic rule and respect for human rights will not necessarily guarantee the best path to sustainable development. But public debate on the country's priorities would assure that the devastation of Burma's environment and the exploitation of its peoples will not continue unchallenged.