Foreign Economic Trends ReportSection 3
II. POLITICAL ENVIRONMENT
The political environment is
increasingly unfavorable for U.S. business in and with Burma.
Nature of the bilateral relationship with
the United States
Although legal U.S. trade with Burma
remains small, the value of both U.S. merchandise exports to Burma and legal merchandise
imports from Burma has grown, with garment imports accounting for virtually all legal
merchandise import growth, and with the U.S. running a proportionally large bilateral
merchandise trade deficit. However, the growth of both U.S. merchandise imports and of
American tourism to Burma slowed during the mid-1990s. In May 1997, the U.S. Government
banned new investment in Burma by U.S. firms and nationals. The U.S. Government continues
neither to promote nor to prohibit trade with Burma, except as may be required by law.
However, mounting public concern in the United States and other countries about the
political and narcotics trafficking situations in Burma poses growing
"other-market" political risks for many firms that invest in or buy from Burma,
and has induced many Western firms to restrict their commercial activities in or with
Burma.
American concerns: human rights violations
and narcotics exports
The nature of the bilateral
relationship between the United States and Burma is greatly influenced by concern among
the American public about the GOB's continued violation of human rights, including the
right of people to choose their government, and about the high volume of exports of
narcotics, chiefly opiates, from Burma.
-- Human rights, including the right of
people to choose their own government
The Secretary of State indicated in
April 1995 that any businessperson contacting any U.S. Government officer for information
about doing business with Burma is to be informed of the human rights situation in Burma.
Some of the aspects of that situation that generate concern among the American public are
described by the following selections from the summary of the U.S. Government's 1996
Country Report on Human Rights Practices: Burma, published in January 1997:
The SLORC permitted a relatively free
election in 1990, but it failed to honor the results -- which were an overwhelming
rejection of military rule -- or to cede power to the victorious pro-democracy forces.
Instead, the SLORC attacked the coalition of winning parties and their leaders through
intimidation, detention, and house arrest. In January 1993, the SLORC established the
"National Convention," a body ostensibly tasked with drafting a new
constitution. Overwhelmingly made up of delegates hand-picked by the military forces, the
SLORC has carefully stage-managed the Convention’s proceedings and ignored even
limited opposition views. Despite having no legal mandate, the SLORC appears determined to
draft a constitution that would ensure a dominant role for the military forces in the
country’s political future.
The Government re-inforces its rule via a
pervasive security apparatus led by military intelligence, the Directorate of Defense
Services Intelligence (DDSI). Control is buttressed by selective restrictions on contact
by citizens with foreigners, surveillance of government employees and other private
citizens, harassment of political activists, intimidation, arrest, detention and physical
abuse. The Government justifies its security measures as necessary to maintain order and
national unity, although most major insurgent groups have reached accommodation with the
SLORC in recent years. Members of the security forces committed numerous serious human
rights abuses....
The Government’s severe repression of
human rights increased during 1996, even as increased economic activity fostered the
appearance of greater normalcy. Out of sight of most visitors, citizens continued to live
subject at any time and without appeal to the arbitrary and sometimes brutal dictates of
the military dictatorship. Citizens do not have the right to change their government.
There continued to be credible reports, particularly from ethnic minority-dominated areas,
that soldiers committed serious human rights abuses, including extrajudicial killing and
rape. Disappearances continued, and members of the security forces beat and otherwise
abused detainees. Prison conditions remained harsh. Arbitrary arrests and detentions
continued for expression of dissenting political views. Several hundred, if not more,
political prisoners remained in detention, including approximately 20 Members of
Parliament (MPs) elected in 1990. The judiciary is subject to executive influence, and the
Government infringes on citizens’ rights to privacy.
The SLORC intensified restrictions on basic
rights to free speech, press, assembly, and association. Political party activity remained
severely restricted. Although the authorities recognize the chief opposition party, the
National League for Democracy (NLD), as a legal entity, they detained more than 260 NLD
MPs elected in 1990 in connection with the Party’s Convention in May [1996]. While
most were released shortly thereafter, seven remain in custody. The SLORC’s
relentless harassment of the NLD continued with the arrest in August [1996] and later
conviction of 26 NLD activists on charges of spreading disinformation and threatening the
stability of the State. In September [1996] the SLORC again prevented the NLD from holding
its first All-Burma Congress and detained more than 560 NLD members and supporters, most
of whom they released after questioning. In December [1996], in the wake of student
demonstrations, the SLORC detained more than 200 NLD activists and supporters whom they
accused of aiding and abetting the student protests. At year’s end, more than 147 NLD
activists and supporters who had been arrested during the year remained in detention.
The SLORC restricted the political
activities of opposition leader Aung San Suu Kyi (it held her under house arrest from 1989
until July 1995). Beginning in late September [1996], it prevented her from addressing
public gatherings of her supporters, and confined her to her compound from December 6 to
December 29.
Although more than 220,000 Rohingyas,
Burmese Muslims from Arakan state, who fled to Bangladesh in 1992, had returned by
year’s end, about 33,000 remained in camps across the border. An estimated 10,000 new
asylum seekers entered Bangladesh this year. A few thousand students and dissidents
remained in exile in Thailand. Approximately 90,000 citizens were residing in ethnic
minority camps along the Thai-Burma border, among these thousands of new arrivals driven
out by army attacks in the areas controlled by Karen and Karenni ethnic minorities.
Discrimination against women and ethnic minorities, violence against women, and child
prostitution remained problems.
The Government restricts worker rights and
uses forced labor. The use of porters by the army -- with attendant mistreatment, illness,
and even death for those compelled to serve -- remained a common practice. The military
authorities continued to force ordinary citizens (including women and children) to
"contribute" their labor on a massive scale, often under harsh working
conditions, on construction projects throughout the country. During the year, the military
began using soldiers instead of civilians at certain infrastructure projects, following
the issuance of directives in 1995 to end the practice of forced civilian labor. Child
labor is also a problem.
The SLORC has given no sign of willingness
to cede its hold on absolute power. The generals have continued to refuse to negotiate
with pro-democracy forces and ethnic groups for a genuine political settlement to allow a
return to the rule of law and respect for basic human rights.
-- Narcotics exports
Similarly, the following selections
from the chapter on Burma in the latest annual International Narcotics Control Strategy
Report (INCSR), published by the U.S. Department of State in March 1997, describe some
of the aspects of the narcotics situation in Burma that are of concern to the U.S.
Government:
Burma is the world’s largest source of
illicit opium and, potentially, heroin, as opium cultivation and production in 1996
increased to near record levels. The 1996 crop estimates indicate that there were 163,000
hectares under opium poppy cultivation which could yield up to 2,560 metric tons of opium
gum -- enough to produce 250 metric tons of heroin and satisfy the US heroin market many
times over. Although there were some limited improvements in the Burmese Government’s
counternarcotics performance with regard to drug and precursor chemical seizures, these
efforts fell far short of what is needed to cope with Burma’s burgeoning drug trade.
Burma’s antidrug efforts suffer from a lack of resources as well as the lack of a
strong and consistent commitment....
The bulk of Burma’s opium poppy
cultivation traditionally has been in the mountainous regions of the Shan Plateau... Since
1989, however, cultivation has been expanding to areas under Burmese Government control on
the west bank of the Salween River....
Although the "surrender" of drug
lord Khun Sa and the dismantling of his Mong Tai Army (MTA) [in January 1996] was
portrayed by the State Law and Order Restoration Council (SLORC) as a positive
development, Khun Sa has not been brought to justice and has apparently been granted
personal clemency from prosecution or extradition. He is said by authorities to be under a
form of house confinement in Rangoon and permitted to engage in business activities, but
not narcotics-related activities. Reports suggest, however, that he and his MTA colleagues
continue to be involved in the narcotics trade.
The ethnic drug trafficking armies with
which the government has negotiated cease-fires, such as the United Wa State Army (UWSA)
and the Myanmar National Democratic Alliance Army (MNDAA) Kokang Chinese remain armed and
heavily involved in the heroin trade and have to some extend moved into territory vacated
by Khun Sa’s former MTA.... As part of the SLORC’s efforts to bring the ethnic
groups under its control, it granted leaders of these drug trafficking armies significant
political legitimacy, and several participate in the government’s National
Constitutional Convention. These leaders have exploited their relationship with Rangoon to
expand their businesses -- legitimate and illegitimate -- although their prosperity has
not filtered down to the ordinary people of the ethnic areas.
Money laundering is a growing problem in
Burma, and there is reason to believe that the laundering of drug profits is having a
substantial impact on the Burmese economy. An underdeveloped banking system and lack of
enforcement against money laundering have created a business and investment climate
conductive to the use of drug-related proceeds in legitimate commerce....
Nevertheless, during 1996 and the first
half of 1997, GOB efforts to curtail the production and exportation of opiates increased
substantially, albeit from a low base level. The GOB accelerated both its seizures of
narcotics and its destruction of heroin refineries. It also returned to Thailand a
suspected drug trafficker had jumped bail in Thailand; this individual was subsequently
extradited to the U.S.
During the mid-1990s, U.S. public concern
about the human rights and narcotics trafficking issues described above has grown and has
manifested itself in a variety of ways that directly affect the political risks of doing
business in Burma for both U.S. and foreign firms. Some of these expressions of concern,
through organizations and institutions other than the U.S. Government, are described
below, in the subsection on political factors affecting the business environment.
U.S. Government activities and policies
The major concerns of the U.S.
Government in Burma are human rights, democratization and counter-narcotics performance.
In light of these concerns, the U.S. government has taken the following actions:
The U.S. Government has not had an
Ambassador to Burma since 1990, although it continues to operate an embassy in Rangoon.
The U.S. Agency for International
Development closed its mission in Burma in August 1988, during the GOB's brutal
suppression of Burma's pro-democracy movement, and the U.S. Government has not, for
several years, provided any direct bilateral financial or material assistance of any kind
to the GOB.
The U.S. Information Agency (USIA) operates
an American Center in Rangoon; it maintains a reference center, distributes printed
information about the U.S., and conducts cultural exchanges.
The U.S. Government contributes funding for
grass-roots basic human needs programs administered by the U.N. Development Program
(UNDP), UNICEF, the U.N. High Commission for Refugees (UNHCR) and other U.N. agencies, as
well as for crop-substitution programs administered by the U.N. Drug Control Program
(UNDCP). The U.S. Department of State’s Bureau of Democratization, Human Rights and
Labor Affairs also funds democratization and basic humanitarian assistance programs for
Burmese nationals administered by non-governmental organizations both in Burma and in
neighboring countries. The USG does not in any way fund organizations that advocate or
practice political violence in Burma.
The Voice of America, a U.S. Government
radio service, broadcasts Burmese-language programs that feature information about the
United States. In early 1997, Radio Free Asia, a newly founded private non-profit
corporation, funded entirely by the U.S. Government and given the use of U.S. Government
transmission facilities, began to broadcast Burmese-language programs featuring
information about Burma. Despite some jamming by the GOB, these broadcasts reach a wide
audience in Burma eager for uncensored information.
Due to its inability to certify the GOB as
cooperating in international efforts to suppress narcotics trafficking, the U.S.
Government is obliged by law to vote against any non-humanitarian financial assistance to
the GOB by the World Bank or Asian Development Bank (ADB). Since 1996, the U.S. Government
is also obliged by law to vote against any use of World Bank or ADB funds by the GOB
pending substantial political liberalization. It is also U.S. Government policy to seek to
restrict the GOB's access to non-humanitarian financial assistance not only from these
institutions but also from the IMF, as well as its access to Paris Club debt relief, due
in part to concerns about the GOB's excessive military expenditures, its lack of
macroeconomic transparency, and its violations of human rights including the right of
people to choose their own government.
Due to concerns about the GOB's abuses of
human rights, including workers' rights and the right of people to choose their own
government, and about its failure to cooperate against international narcotics
trafficking, the U.S. Government does not encourage trade with Burma by U.S. firms and
nationals, although it does not prohibit such trade. Since January 1990 or earlier:
-- the U.S. Government does not grant to
imports of Burmese origin the GSP (Generalized System of Preferences) preferences that it
commonly grants to imports from lower-income countries;
-- the Export-Import Bank of the United
States (U.S. EXIMBANK), a parapublic financial institution, does not provide, in support
of U.S. exports to Burma, the preferential financing that it commonly provides in support
of U.S. exports to other countries;
-- the U.S. Overseas Private Investment
Corporation (OPIC), a parapublic financial institution, does not provide any financial
services in support of U.S. investors in Burma; and
-- the U.S. Government, along with a number
of other governments, including the member governments of the European Union, does not
approve licenses to export arms to Burma.
In 1996, the President of the United States
issued a proclamation prohibiting travel to the U.S. by SLORC members, high-level GOB
officials, and other Burmese who formulate, implement or benefit from policies that impede
Burma’s transition to democracy. In 1996 the U.S. Congress and President also enacted
legislation that required the President to ban new investment in Burma by U.S. firms under
specified political conditions, such as widespread repression of Burma’s
pro-democracy movement. In April 1997, President Clinton, finding this condition
fulfilled, announced a ban on new investment in Burma by U.S. firms and nationals that was
implemented by an executive order issued in May 1997.
The U.S. Department of Commerce's Foreign
Commercial Service has no employees in Burma. American Embassy Rangoon does not organize,
participate in, promote, or encourage private participation in any commercial events in
Burma or in the U.S. The Embassy also does not initiate market research reports to
identify commercial opportunities for U.S. businesses. The Embassy's commercial activities
are limited to responding to specific requests for information and assistance, except as
may be required by law and regulation.
However, the U.S. Government is obligated
by its World Trade Organization (WTO) commitments to extend most-favored-nation tariff
treatment to imports from Burma, which is also a member of the WTO.
Private investment, trade and travel.
-- U.S. direct investment in Burma
During FY 90/91 through FY 95/96, firms
legally domiciled in the U.S. appear to have disbursed about US $281 million of foreign
direct investments in Burma in cumulative undiscounted current dollar terms (Table D.6).
This is more than the amount disbursed by firms legally domiciled in any other country,
and almost one-fourth of all disbursed foreign direct investment during the period for
which disaggregation by country is available. However, these undiscounted cumulative
disbursement figures are a poor indicator of current value, especially in the oil and gas
sector, where the relation between investment and returns can be very uncertain. Most
direct investment by U.S.-domiciled firms during the early 1990s was in oil exploration
efforts that failed to discover commercializable reserves.
The value of new realized (disbursed)
direct investment in Burma by firms legally domiciled in the United States declined
steadily, in current dollar terms, from a peak of US $83.4 million in GOB FY 91/92 to US
$16.4 million in FY 94/95, before rising back to US $30.8 million in FY 95/96. In both FY
94/95 and FY 95/96, direct investments disbursed by U.S.-domiciled firms appear to have
been exceeded in value by those disbursed by firms domiciled in the United Kingdom,
France, Singapore and Thailand. However, the figures for the U.K. are authoritatively said
to include subsidiaries, domiciled in such British dependencies as Bermuda and the British
Virgin Islands, of oil and gas multinationals not generally thought of as British firms.
During 1996, PepsiCo, responding to
pressure from consumers in America and elsewhere, divested itself of its investments in
Burma. As of May 1997, only five firms that might be characterized as "American"
were known to have active investments in Burma.
UNOCAL, an energy firm with headquarters in
California, owns 28% of the Yadana Field Consortium, formed to explore and develop the
offshore Yadana natural gas field 60 km. south of the Irrawaddy River delta; a subsidiary
of Total, a French oil and gas parastatal, is the consortium’s operating partner and
owns 31%. Thailand’s hydrocarbons parastatal, PTT, owns 26% of this consortium, and
Burma’s hydrocarbons parastatal, Myanmar Oil and Gas Enterprises (MOGE) owns 15%. The
Yadana field has certified reserves of about 5.7 trillion cubic feet (150 billion cubic
meters) of natural gas. The consortium has contracted to deliver 525 million cubic feet
per day (mmcf/d) to PTT at the Thai border starting in mid-1998, by means of a pipeline
with 900 mmcf/d capacity that is to run undersea from the Yadana field, 346 km. eastward
to the coast of Burma's Tenasserim Division, and about 63 km. overland eastward to the
Thai border; construction of this pipeline started in late 1996. Five Burmese working on
the pipeline were killed in an April 1995 attack by insurgents on a surveying party; in
February 1996, a rocket attack is reported to have been launched near Total's pipeline
project base camp at Kanbauk. At least five GOB light infantry battalions are providing
pipeline project security.
UNOCAL and Total have also joined a
consortium, of which Mitsui of Japan is the operating partner, that contracted with the
GOB in 1996 to use at least 125 mmcf/d of the Yadana field's proven output domestically,
to supply a projected import-substituting urea plant with a capacity of 570,000 metric
tons a year and a large electrical power plant -- a so-called "three-in-one"
project.
In 1996, offshore exploratory drilling by
the Yadana field consortium discovered gas reserves, certified at about 700 billion cubic
feet, in the Badamyar sands structure adjacent to the Yadana field, and in the Sein field
near the Yadana field. Gas flows from Sein and Badamyar could be exported to Thailand
using the surplus capacity of the Yadana field pipeline. In February 1997, UNOCAL and
Total signed a contract with MOGE to explore and develop another offshore area near the
Yadana field, known as "Block M-8;" seismic exploration surveys of this area are
to be conduct before 1999.
In 1996, UNOCAL sold most of its
"downstream" assets in the United States, including its refining and
distribution operations there; whatever its motivation, this had the effect of rendering
UNOCAL immune to Burma-related consumer boycotts in the U.S. In early 1997, UNOCAL’s
CEO moved his office from California to Malaysia.
Another U.S. energy firm, Texaco, is the
operating partner of a consortium, including Britain’s Premier Oil and Japan’s
Nippon Oil, that has discovered proven reserves of natural gas in commercializable
quantities (1.7 trillion cubic feet) in the Yetagun field off the coast of Tenasserim.
This consortium, reportedly now including Thailand’s PTT, signed a contract with the
GOB in February 1997 to export Yetagun field gas by pipeline to Thailand. However, in May
1997, a Texaco official was cited in international press reports announcing that Texaco
was exploring the sale of Texaco’s shares in this consortium to firms not domiciled
in the USA.
ARCO (Atlantic Richfield), another energy
firm with headquarters in the U.S., began exploring offshore for hydrocarbons in Burma in
1995, and reportedly discovered commercializable reserves of natural gas in early 1997.
Two firms with U.S. affiliations are
attempting to discover and/or mine gold and copper in upper Burma. In addition, some
individual Americans of Burmese origin own or operate businesses in Burma.
-- U.S. exports to Burma
According to official U.S. Department
of Commerce (USDOC) statistics, the value of direct shipments of merchandise exports from
the United States to Burma, F.A.S. basis, doubled to US $32 million in 1996, after having
fluctuated between $4 million and 23 million between 1989 and 1995. (See Table D.2.b[3].)
In 1996, most the value of direct U.S. merchandise exports to Burma was accounted for by
shipments of heavy construction machinery, manufactured and directly marketed by a single
U.S. firm, reportedly to the GOB through a trading company owned by UMEH (a military
holding company described in the section on defense, above.) In recent years, machinery
and transport equipment exports consistently accounted for at least two-thirds of the
F.A.S. value of direct U.S. merchandise shipments to Burma; exports of other manufactured
goods and chemicals accounted for nearly all of the rest. Although the U.S. Government
does not grant licenses to export arms to Burma, it does not restrict exports of
"dual-use" goods (that is, goods that may have both civilian and military uses).
Between 1989 and 1995, the proportion of Burma’s UNCTAD-reported imports accounted
for by direct merchandise shipments from the U.S. to Burma ranged from 0.4% in 1992 to
2.7% in 1991 (Table D.2.b[4]).
However, GOB data (Table D.2.a[2]) show
that goods of U.S. origin accounted for between one and four percent of the C.I.F. value
of Burma's recorded merchandise imports every year from FY 89/90 to FY 94/95, except for
GOB FY 90/91, when imports of capital equipment by U.S. firms engaged in oil exploration
efforts caused a surge in imports of U.S. origin. These GOB figures imply that the value
of Burma's recorded imports of merchandise of U.S. origin, C.I.F. arrivals basis, was
about US $109 million in FY 90/91, $26 million in FY 91/92, $37 million in FY 92/93, $45
million in FY 93/94, $17 million in FY 94/95, and $58 million in GOB FY 95/96.
Together, the USDOC export data and the GOB
import data imply that merchandise flows from the U.S. to Burma have in large part been
intermediated as re-exports from such regional commercial entrepots as Singapore. Since
UNCTAD trade data (Table D.2.b[3]) suggest that the GOB has failed to record a growing
share of its merchandise exports in recent years, it seems likely that most U.S.-origin
merchandise arriving in Burma continues to be re-exported from third countries, and that
USDOC’s direct shipments data continue to capture only a minority of U.S. merchandise
exports to Burma. This is consistent with anecdotal evidence from international
businesspeople based in or visiting Rangoon, Burma's largest port.
-- U.S. imports from Burma
Conversely, the customs value of U.S.
imports of Burmese-origin merchandise, shown by USDOC statistics, has greatly exceeded the
F.O.B. value of direct merchandise shipments from Burma to the U.S., as implied by GOB
statistics. This suggests that most merchandise flows from Burma to the U.S., too, have
been intermediated as re-exports from regional commercial entrepots. This, too, is
consistent with anecdotal evidence from businesspeople in Rangoon.
GOB data (Table D.2.a[1]) indicate that the
share of the F.O.B. value of Burma's recorded merchandise export shipments accounted for
by direct shipments to the U.S. increased steadily from 0.2% in FY 89/90 and 0.1% in FY
90/91 to 5.1% in FY 94/95, but declined to 4.7% in FY 95/96, the most recent year for
which GOB direction-of-trade data are publicly available. These data indicate that the
F.O.B. value of direct shipments of merchandise from Burma to the U.S. was about US $41
million in GOB FY 95/96, $47 million in FY 94/95, $26 million in FY 93/94, $12 million in
FY 92/93, $2 million in FY 91/92, and less than $1 million in FY 90/91. Official USDOC
statistics (Table D.2.b[1]) also show that the current-dollar customs value of U.S.
merchandise imports marked as being of Burmese origin has increased rapidly and steadily
since 1989, but at much higher levels than is suggested by the GOB's direct shipments
data, to US $108 million in calendar year 1996, up from $81 million in 1995, $67 million
in 1994, $46 million in 1993, and $17 million in 1989.
Imports of garments marked as being of
Burmese origin accounted for a large and (until 1996) growing share of the customs value
of these imports: US $27 million or 71% in 1992, $30 million or 65% in 1993, $47 million
or 70% in 1994, $65 million or 80% in 1995, and $84 million or 77% in 1996. The customs
value of U.S. imports of garments marked as being of Burmese origin grew, in current U.S.
dollar terms, by 10% from 1992 to 1993, by 56% from 1993 to 1994, by 38% from 1994 to
1995, and by 29% from 1995 to 1996.
Published GOB economic statistics, which
provide figures for less valuable export commodity groups, contain no statistics about
garment exports. Similarly, the GOB press, which frequently spotlights high-growth sectors
and economic success stories, has not publicized Burma's garment production or exports.
However, UNCTAD trade data (Table D.2.b[5]) suggests that garments have been Burma's
fastest-growing major category of legal merchandise exports during the 1990s, accounting
for 8% of known legal merchandise exports in 1995, up from 2% in 1989 and 1990. Comparison
of this UNCTAD data with USDOC import data indicates that about two-thirds of Burma’s
garment exports were ultimately consumed in the U.S. during the mid-1990s.
As of 1996, the number of textile and
garment factories in Burma that were producing chiefly for foreign markets was said by
sources close to the industry to have increased to about thirty. At least one is
controlled and owned by a family whose wealth derives from narcotics activities. At least
sixteen were wholly or partly foreign-owned, mostly by Hong Kong or South Korean firms. Of
these sixteen, most were joint ventures either with Myanmar Textiles Industries, a GOB
parastatal firm, or with Union of Myanmar Economic Holdings (UMEH), a military holding
company described in the section on defense, above.
In the textile and garment industry, as
throughout Burma's economy, no labor unions exist -- not even the government-dominated
unions in place before 1988. Working hours in the industry are said to approach 60 hours a
week. Average shopfloor wages are said to be about 2,500 kyat (less than US $15 at the
market exchange rate) per month. At one garment factory jointly owned by a foreign firm
and UMEH, a spontaneous work stoppage, occasioned by rank-and-file resentment at not
receiving holiday benefits given to management, is reported to have been ended within
minutes by the arrival of a command-grade military officer, who announced that if any
collective work stoppage ever happened again, all individuals participating would be
imprisoned. This was reportedly the first and last labor problem that the enterprise has
experienced.
At the end of 1990, the U.S. Government did
not to renew its textile trade agreement with the GOB due to concerns over GOB violations
of internationally accepted norms of workers’ rights; however, this action clearly
did not prevent the subsequent growth of U.S. imports of Burmese-origin garments.
America's largest labor organization, the AFL-CIO, has advocated restricting U.S. imports
of Burmese manufactured products, such as garments, which have been targetted by an active
and apparently growing "Free Burma" consumer boycott movement in the U.S. This
boycott has induced many U.S. garment distributors to announce that they would stop
sourcing from Burma, and has induced many to stop sourcing from GOB and UMEH joint
ventures in particular. It has helped to slow, but has not halted, the growth of Burma's
garment exports to the U.S. The U.S. Customs Service now allows imported goods of Burmese
origin to be marked "Made in Myanmar," a geographical term relatively unfamiliar
to Americans; during the early 1990s, it required them to be labelled "Made in
Burma" or "Made in Myanmar (Burma)."
Although the U.S. Government's Committee on
the Implementation of Tariff Agreements (CITA) currently imposes quotas on several
categories of garment imports from Myanmar, U.S. law authorizes CITA to restrict imports
only when they threaten to disrupt U.S. markets. The U.S. Government’s already
limited ability to restrict garment imports unilaterally may be further reduced during the
next few years by the phasing-in of World Trade Organization garment trade liberalization
commitments to which the U.S. Government agreed upon joining the WTO in 1994.
-- Travel and migration
According to the GOB/SMEI, the
number of GOB-recorded tourist visits to Burma by American citizens, which increased at an
average annual rate of 89% from 586 in FY 91/92 to 3,942 in FY 94/95, increased by only
42%, to 5,586, in FY 95/96. The growth of American tourist visits to Burma appears to have
slowed further during the first nine months of FY 96/97, when the GOB recorded 3,476
tourist visits to Burma by American citizens, up only 15% from 3,029 during the first nine
months of FY 95/96.
The American share of total GOB-recorded
foreign tourist visits to Burma was 10.2% in FY 90/91, 7.4% in FY 91/92, 5.4% in FY 92/93,
3.1% in FY 93/94, 4.1% in FY 94/95, 4.7% in FY 95/96, and 2.0% during the first nine
months of FY 96/97. However, the American share of recorded foreign tourist arrivals by
sea or air, which generate nearly all of the value of Burma's tourism service exports, was
higher: 9.8% in FY 92/93, 7.2% in FY 93/94, 7.9% in FY 9495, 6.7% in FY 95/96, and 4.5%
during the first nine months of FY 96/97.
The number of American citizens who are
registered with the Embassy as residing in Burma has remained stable since 1995 at about
200; more than half of these are U.S. Government officials and their dependents. Many of
the rest are employed by international non-profit organizations; the resident American
business community is small. American religious missionaries were active in Burma, and ran
many schools, hospitals and clinics, until 1964; since then, the GOB has generally
forbidden foreign non-Buddhist clergy or missionaries to operate in Burma, with some rare
exceptions.
The U.S. Embassy in Rangoon issued about
2,500 non-immigrant and 800 immigrant visas to Burmese nationals in U.S. FY 1996. These
numbers have increased in recent years. The Embassy estimates that there may be around 500
Burmese nationals studying at American colleges and universities, perhaps 15,000 Burmese
nationals with permanent resident status (including political asylum recipients), and
perhaps 20,000 American citizens of Burmese (including Shan, Karen, etc.)
ethnicity. Many Burmese-Americans and Burmese living in America participate actively in
organized efforts to restore democracy to Burma, including efforts to bring external
economic pressure to bear on the GOB. However, individuals with ethnic ties to Burma
appear to constitute only a minority of American nationals and residents engaged in such
activities.
Major political issues affecting the
business climate
In contemporary Burma, one political
issue transcends all others: the thoroughly undemocratic nature of the government, which
is egregious by regional as well as international standards, despite the overwhelming
victory of Burma’s democratic opposition in a 1990 national election, the results of
which the SLORC has refused to honor. The SLORC continues to intimidate political
dissidents and to spread disinformation in order to block any efforts toward increased
pluralism. This issue adversely affects Burma's business climate in at least three
distinct ways:
(1) The undemocratic form of government
contributes greatly to Burma's macroeconomic instability and retards development of a
healthy and educated workforce.
The government's reliance on armed force
rather than popular support is directly related to its high levels of defense spending and
imports (Table G.5). Its lack of the popular support also contributes to its inability to
collect internal revenues effectively, and thus to its reliance on export monopolies for
much of its revenues (Table G.2), and to its reliance on external financing and tapping of
private sector foreign exchange reserves to cover public sector imports and debt service
in excess of public sector foreign exchange receipts. Together, these effects slow growth,
crowd out both legal credit to the private sector and government spending on health and
education, and contribute greatly to chronically large fiscal and BOP deficits, to chronic
double-digit money supply expansion and price inflation, and to restrictions on private
sector imports.
Even more importantly, the absence of any
low-cost mechanism, whereby Burma’s people can replace rulers whose economic
governance has been poor, tends to perpetuate such governance by reducing incentives to
improve it. In Burma as elsewhere, the structure of the market for upper-level government
management services has profound economic consequences. In Burma, there is virtually no
consumer choice in this market, because there is no effective competition among suppliers.
Just as in any other important market, such lack of competition among suppliers tends to
be inefficient in itself, and eventually to introduce inefficiencies into other markets
throughout the economy.
(2) Public concern in the U.S. and other
democracies about the SLORC's suppression of democracy in Burma poses substantial and
apparently increasing "other-market" political risk for firms that do business
in or with Burma. The commercially relevant manifestations of this concern are not limited
to the U.S. Government policies and actions already described above.
Since 1994, adverse publicity and
threatened and actual consumer boycotts have contributed to inducing many U.S. garment
distributors to announce that they would stop sourcing from Burma, and, recently, have
even induced some U.S. firms (e.g., Anheuser-Busch) to announce that they would
stop exporting to Burma. Some of the few U.S. corporations that have invested in Burma
have experienced sustained adverse publicity, consumer boycotts, and repeated
interrogatories and protests by shareholders. Consumer boycotts in the U.S. and elsewhere
contributed to inducing PepsiCo to announce, in April 1996, that it would liquidate its
direct investment in beverage bottling and distribution facilities in Burma, which it had
previously hoped to expand.
Since 1995, eleven U.S. cities, including
San Francisco, Oakland and most recently (in May 1997) New York City, as well as one
California county and the state of Massachusetts, have enacted "selective
purchasing" laws that forbid their governments to buy or lease from, or (in some
cases) to invest pension funds in, any firm, or (in some cases) the affiliate of any firm,
that directly or indirectly buys from or invests in Burma or (in some cases) sells to the
GOB. Similar selective purchasing legislation is reportedly pending in other municipal and
state legislatures, despite questions from some U.S. observers about the constitutionality
of such laws, and questions from some foreign governments about their compatibility with
the U.S. Government’s obligations under the Government Procurement Agreement
administered by the WTO. Since 1996, these secondary procurement boycotts by subnational
governments have contributed to inducing some U.S. firms, including Motorola and Apple
Computer, to stop exporting to Burma’s public sector, and to inducing some other U.S.
and third-country firms to postpone or limit planned or contemplated commercial activities
in Burma. In 1996, a large Japanese firm, Mitsubishi, reportedly failed to win a large
airport conveyance contract from San Francisco’s municipal government because of
Mitsubishi’s commercial activities in Burma.
In third countries, during 1996 or early
1997:
-- The European Union withdrew from
manufactured and agricultural imports of Burmese origin the Generalized System of
Preference (GSP) tariff preferences it accords to imports from most lower-income
countries, on the grounds that the GOB makes extensive use of forced labor. This was the
first instance in which the E.U. had taken such an action with respect to any country.
-- Two European brewers, Heineken and
Carlsberg, abandoned planned investments in Burma in response to politically-motivated
consumer boycotts in Europe and elsewhere; the GOB responded by banning the importation of
Heineken or Carlsberg beer into Burma.
-- An Australian brewer, Fosters,
announced, in response to politically-motivated consumer pressures, that it would stop
exporting to Burma.
-- Former Philippine President Cory Aquino
and South Korean opposition leader Kim Dae Jung led efforts to organize Asians concerned
to promote democratization and human rights in Burma; international conferences in India
and the Philippines called for multilateral economic sanctions against the SLORC.
(3) Although most Burmese now seem
effectively intimidated, and although most leaders of the pro-democratic movement are
committed to non-violence, the GOB's lack of democratic legitimacy tends to increase long-
and medium-term "same-market" political risk.
Unlike many other authoritarian regimes,
Burma's military dictatorship appears to have no identifiable ethnic, regional, religious
or social-class base of political support; it appears to be widely and deeply disliked
among all ethnic groups, regions, creeds and social classes, and even among some groups of
enlisted personnel of the armed forces, as voting patterns in the 1990 election showed.
General Ne Win is about 87 years old, and the allocation of power within the SLORC after
his demise remains uncertain. A June 1994 report of global scope commissioned by the
headquarters of the U.N. Development Program, prepared by an international team of
independent scholars led by Dr. Mahbub ul Haq, identified Burma as one of 17 countries
that have the highest long- and medium-term risk of serious political instability.
Questions about Burma’s medium-term
political stability were intensified during late 1996 and early 1997 by civil disturbances
without precedent since 1988, including: an incident in October 1996 of organized physical
violence against democratic opposition leaders including Aung San Suu Kyi, for which no
one has been arrested; widespread demonstrations by university and high school students in
November and December 1996, in response to which the GOB closed most universities and some
high schools for, so far, half a year; widespread anti-Muslim disturbances with political
overtones in March and April 1997; and two fatal bombings in Rangoon, for which no
individual or group has yet been charged or claimed responsibility, that appeared to
target the same senior member of the SLORC, Lt.-General Tin Oo. Burma’s retired
former dictator, General Ne Win, is now about 87 years old, and the allocation of power
within the military after his demise remains uncertain.
Brief synopsis of the political system,
schedule for elections, and orientation of
major political parties
As the summary of the U.S. Government's
1996 Country Report on Human Rights Practices: Burma, published in January 1997,
states:
Burma continue[s] to be ruled by a highly
authoritarian military regime widely condemned for its serious human rights abuses. The
military Government, known as the State Law and Order Restoration Council (SLORC), headed
by armed forces commander Than Shwe and composed of top military officers, seized power in
September 1988 after harshly suppressing massive pro-democracy demonstrations.... The
judiciary is not independent of the executive....
The Government reinforces its rule via a
pervasive security apparatus led by military intelligence, the Directorate of Defense
Services Intelligence (DDSI). Control is buttressed by selective restrictions on contact
with foreigners, surveillance of government employees and private citizens, harassment of
political activists, intimidation, arrest, detention, and physical abuse. The Government
justifies its security measures as necessary to maintain order and national unity,
although almost all major insurgent groups have reached accommodation with the SLORC in
recent years. Members of the security forces committed numerous serious human rights
abuses.
The most widely supported political party
in the country is the National League for Democracy (NLD), of which Daw Aung San Suu Kyi
is the Secretary General. The NLD won a large majority of the popular vote and an
overwhelming majority of the parliamentary seats in the 1990 election. The NLD is
social-democratic in orientation; since its formation in 1989, it has advocated a more
liberal and open economy than has existed in Burma since independence, as well as greater
state efforts in basic education and health, and a democratic federal system of government
with an independent judiciary and substantial autonomy for ethnic minority regions.
Since 1994, the SLORC has built up a
pro-government mass-line organization known as the Union Solidarity and Development
Association (USDA), to which the GOB has given valuable commercial real estate and
intercity bus transportation monopolies, and, reportedly, exemptions from GOB restrictions
on imports that USDA sells to private importers. Many civil servants, including teachers,
medical personnel, firefighters, as well as members of the general population, are
effectively required to participate in USDA rallies to give an appearance of popular
support for the SLORC's policies.
No elections have been held or scheduled
since the national election of 1990, the results of which remain unimplemented.
* * *
Abbreviations commonly used in this report:
ADB = Asian Development Bank
AM2 = exchange-rate-adjusted recorded broad
money supply
ARGDP = exchange-rate-adjusted recorded
gross domestic product
ARGNP = exchange-rate-adjusted recorded
gross national product
BOP = balance of payments
C.I.F. = cost, insurance and freight
(shipment valuation basis)
CPI = consumer price index
GDP = gross domestic product
GNP = gross national product
GOB = Government of Burma
F.A.S. = free alongside (shipment valuation
basis)
FCD = foreign-currency-denominated
FEC = Foreign Exchange Certificate
FETR = Foreign Economic Trends Report
F.O.B. = free on board (shipment valuation
basis)
FY = fiscal year (April through March, for
Burma)
GSP = Generalized System of Preferences
IMF = International Monetary Fund
MAPT = Myanmar Agricultural Produce Trading
PPP = purchasing power parity
SEE = state economic enterprise
(state-owned firm, parastatal firm)
SLORC = State Law and Order Restoration
Council
UM2 = exchange-rate-unadjusted recorded
broad money supply
UMEH = Union of Myanmar Economic Holdings
UNCTAD = United Nations Commission on Trade
and Development
UNDP = United Nations Development Program
URGDP = exchange-rate-unadjusted recorded
gross domestic product
URGNP = exchange-rate-unadjusted recorded
gross national product
USDA = (1) U.S. Department of Agriculture;
(2) Union Solidarity and Development Association
USDOC = U.S. Department of Commerce
For abbreviations of sources cited in this
report, see the section on "Data, sources and method."
* * *
Appendix: Statistical Tables
Table A: Socio-economic profile of
Burma, June 1996...................................... page 114
Table B.1.a: Unadjusted recorded GDP
composition and expenditure:
in current kyat, based on GOB trade data,
FY 89/90-96/96....................... 115
Table B.1.b: Exchange-rate-adjusted
recorded GNP, FY 89/90-96/97,
in current kyat, based on GOB trade
data................................................... 116
Table B.1.c: Exchange-rate-adjusted
recorded GNP, FY 89/90 - 96/97,
in current kyat, based on UNCTAD
merchandise trade data...................... 117
Table B.2.a: Unadjusted recorded GDP
composition and expenditure:
in current dollars, based on GOB trade
data, FY 89/90 -96/96................... 118
Table B.2.b: Exchange-rate-adjusted
recorded GNP, FY 89/90 - 96/97,
in current dollars, based on GOB trade
data............................................... 119
Table B.2.c: Exchange-rate-adjusted
recorded GNP, FY 89/90 - 96/97,
in current dollars, based on UNCTAD
merchandise trade data.................. 120
Table B.3.a: Unadjusted recorded GDP
composition and expenditure:
in percent of ARGDP, based on GOB trade
data, FY 89/90 - 96/96.......... 121
Table B.3.b: Exchange-rate-adjusted
recorded GNP, FY 89/90 - 96/97,
in percent of ARGDP, based on GOB trade
data........................................ 122
Table B.3.c: Exchange-rate-adjusted
recorded GNP, FY 89/90 - 96/97,
in percent of ARGDP, based on UNCTAD
merchandise trade data........... 123
Table C: Aggregate price indicators, FY
89/90 - 96/97.................................................... 124
Table D.1.a: Recorded balance of payments
(GOB data), FY 89/90 - 96/97................... 125
Table D.1.b: Balance of payments (UNCTAD
merchandise trade data),
FY 89/90 -
96/97..........................................................................................
126
Table D.2.a(1): Merchandise exports by
country of destination,
FY 89/90 - 95/96, GOB
data................................................................... 127
Table D.2.a(2): Merchandise imports by
country of origin
FY 89/90 - 95/96, GOB
data................................................................... 128
Table D.2.a(3): Composition of merchandise
exports,
FY 89/90 - 96/97, based on GOB
data...................................................... 129
Table D.2.a(4): Composition of merchandise
imports,
FY 89/90 - 96/97, based on GOB
data...................................................... 130
Table D.2.b(1): Merchandise exports F.O.B.
by country of destination,
CY 1990 - 1996, based on import data
reported to UNCTAD
by governments of Burma’s trading
partners (dollars)............................ 131
Table D.2.b(2): Merchandise exports F.O.B.
by country of destination,
CY 1990 - 1995, based on import data
reported to UNCTAD
by governments of Burma’s trading
partners (percent)........................... 132
Table D.2.b(3): Merchandise imports F.O.B.
by country of shipment,
CY 1990 - 1996, based on export data
reported to UNCTAD
by governments of Burma’s trading
partners (dollars)........................... 133
Table D.2.b(4): Merchandise imports F.O.B.
by country of shipment,
CY 1990 - 1995, based on export data
reported to UNCTAD
by governments of Burma’s trading
partners (percent)........................... 134
Table D.2.b(5): Composition of merchandise
trade, CY 1989 - 1995:
Embassy estimates based on UNCTAD
data........................................... 135
Table D.3: Services trade, FY 89/90 -
96/97..................................................................... 136
Table D.4: Recorded external medium- and
long-term debt and arrears,
FY 89/90 -
96/97..............................................................................................
137
Table D.5: Cultivation and potential
production and exports of opiates, 1987 - 1996...... 138
Table D.6: Foreign direct investment, FY
89/90 - 95/96................................................... 139
Table E.1.a: Recorded monetary survey:
unadjusted recorded banking system balance
sheet, FY 89/90 - 96/97......... 140
Table E.1.b: Exchange-rate-adjusted
recorded monetary survey, FY 89/90 - 96/97.......... 141
Table E.2: Allocation of the expansion of
adjusted recorded domestic liquidity,
FY 90/91 -
96/96...............................................................................................
142
Table F.1: Unadjusted flow of funds, in
kyat, FY 90/91 95/96 ......................................... 143
Table F.2.a: Exchange-rate-adjusted flow of
funds, in kyat, FY 90/91 - 95/96.................. 144
Table F.2.b: Exchange-rate-adjusted flow of
funds, in dollars, FY 90/91 - 95/96 ............ 145
Table G.1.a: Unadjusted consolidated public
sector budget,
in current kyat, FY 89/90 -
96/97................................................................... 146
Table G.1.b: Unadjusted consolidated public
sector budget,
in percent of unadjusted recorded GDP, FY
89/90 - 96/97............................ 147
Table G.2: Exchange-rate-adjusted public
sector budget,
including only recorded financing, in kyat,
FY 89/90 - 96/97......................... 148
Table G.3: Exchange-rate adjusted public
sector budget,
including apparent as well as recorded
financing, in kyat,
FY 90/91 -
96/97...............................................................................................
150
Table G.4: Unadjusted central government
operating expenditures, FY 89/90 - 96/97..... 151
Table G.5: Exchange-rate-adjusted defense
operating expenditures,
FY 91/92 -
95/96...............................................................................................
152
Tables G.6: Public investment and
uncompensated contributions thereto:
a: Prison labor, FY 88/89 -
94/95.................................................................... 153
b. Local projects to FY
96/97.......................................................................... 153
c. Regional and national projects by
sector, FY 88/89 - 96/97....................... 154
Table A: Socio-Economic profile of
Burma, June 1997
Population: Officially estimated by the GOB
at about 47 million; most recent census in 1983.
Ethnic composition: 60 -70% ethnic Burmans;
indigenous Shan, Karen, Mon, Kachin, Karenni,
Chin, and other minorities concentrated in
border areas; large Indian
minority in lower Burma; small Chinese
minority concentrated in cities.
Population growth rate: Officially
estimated by the GOB at 1.84% a year and declining.
Labor force: Officially 18 million, of
which about 15 million rural; about 11.4 million
employed, about 63% in agriculture, 10% in
trade, 9% in manufacturing.
Literacy: Estimates vary greatly; official
figures have ranged from 80% to 20% since late 1980s.
Land area: 669,000 sq. km, or 167 million
acres, including 80 m. acres of forest and 45 m. of
arable non-forest land, of which 22 m.
acres are sown, 12 m. with rice.
Other natural resources: Hydrocarbons,
teak, jade, rubies, sapphires, manganese, copper, gold.
Government system: Military dictatorship,
since 1962 coup d’etat.
Religions(s): Buddhism is the state
religion. Large Christian and Muslim minorities are
concentrated in non-Burman ethnic groups.
Printing and importation of local-
language Bibles and Korans are restricted.
Foreign missionaries were expelled,
and their educational and health facilities
nationalized, in 1964.
Languages: Burmese (Myanma) is the sole
official language. Minority languages are not taught
in state schools, and publications in them
are rare.
Information: Daily broadcasting and daily
newspapers are monopolized by the government.
All publications are subject to state
censorship. Fax machines and modems must
be registered with the government. There
are no known domestic Internet servers.
Education: The number of children enrolled
in primary schools declined during the mid-1990s. At least two-thirds drop out before
fifth grade. No private multi-subject schools are
allowed despite declining real government
funding of state schools. Most universities
have been closed since December 1996
following student demonstrations.
Health care: Private medical services
limited by state, but government funding declining. AIDS
spreading, blood supply unsafe. Malaria
endemic in border areas and near coasts.
Measurement systems: Non-metric, a mixture
of indigenous and traditional English.
Work week: Monday - Friday.
Fiscal year: April 1 - March 31.
Currency: Burma’s kyat,
officially pegged since 1977 to the IMF’s SDR at 8.51 kyat per SDR,
currently about 6 kyat per U.S. dollar, is
traded legally at about 200 kyat per U.S.
dollar. Currency notes were repeatedly
declared void between 1962 and 1988.
GDP per capita: Perhaps U.S. $200 to $300
per capita on a money basis at the market exchange
rate, including the large unrecorded
economy; perhaps $600 to $900 a year on
a comprehensive purchasing power parity
basis.