Myanmar, Burma - Economic analysis of government policies, investment climate and political risk.

THE

McKEEVER INSTITUTE

OF

ECONOMIC POLICY

ANALYSIS

MYANMAR (BURMA): Economic Policy Analysis

This site presents an analysis of the Myanmar government's economic policies compared to a revised list of 34 economic policies as prepared by a student (who remains anonymous on the advice of MIEPA) with the McKeever Institute of Economic Policy Analysis (MIEPA) in December of 2005.

MYANMAR (BURMA): UPDATED Economic Policy Analysis, November 13, 2008

The following update appeared in the San Francisco Chroinicle of Novermber 13, 2008.

In Burma, business ventures start with military

Daniel Pepper, Chronicle Foreign Service

Thursday, November 13, 2008

(11-13) 04:00 PST Hpakant, Burma -- Located in dense jungle hills, this jade mining town is a prime example of the nation's business climate.

The northern town of 20,000 residents is connected to the outside world by a single crumbling road, a bone-crushing 16 hours to the closest transport hub during the rainy season. Ancient hulking trucks putter along in the mud, some stuck for days. Like a cruel joke, red road signs announce: "The Government has arranged for road repair from each company in Hpakant," meaning companies with lucrative government contracts are expected to pay for highway upkeep even though the military regime takes a hefty profit from each venture.

In Burma, residents call this business as usual.

More than 450 private companies and some 100 joint ventures operate in the area, the majority of which are owned by Burmese with Chinese heritage, according to Sai Joseph, 34, a gregarious family man and manager of a midsize jade company.

"There are only a few wealthy people in Burma - those who get in with the political people, the authorities who have power," said Joseph. "This is a good chance to get rich."

All of Burma's big-ticket industries are based around natural resources, including oil, natural gas, timber and mining. In essence, the country is run like a mafia, from the languid tea shops of Rangoon to this remote jungle area of Kachin state, where the mining town of Hpakant is located and provides much of the world's jade.

In 2007, sales of natural gas brought in some $3 billion, while teak and other lumber earned about $480 million. The jade industry earned an estimated $400 million.

"You name it and they (military) have figured out a way to flip it and make money out of it," said a former Western diplomat who asked not to be named. "If a businessman wants to do something - build a hotel, import cards, export lumber or get a government contract - he hooks up with an army officer who can influence the decision. There are some outright cash payoffs, but mostly it works on favors in kind."

Shining a light

Uncovering information about the regime's business deals is notoriously difficult. But in September, Earth Rights International (ERI), a Thailand-based environmental and human rights organization, released a report detailing the investments of 68 Chinese multinationals in 88 hydropower, oil, natural gas and mining projects.

Pieced together from a range of Chinese companies and government Web sites and news sources, the report aimed to raise awareness for the nation's 48 million inhabitants, who are kept in the dark on government's dealings and a global movement to pressure the military into making reforms.

"The Burmese regime has successfully convinced these companies that nothing will compromise its grip on political power," said Matthew Smith, a project coordinator with ERI. "This is a conviction the regime doesn't hesitate to demonstrate, as we've seen through its political imprisonments and violent treatment of dissent."

The report showed that Burma's generals continue to thrive off their relationship with China, evidenced by new air-conditioned supermarkets and shopping malls, packed with Chinese-made goods in major cities like Rangoon and Mandalay - products only a few Burmese can afford. Signs of conspicuous consumption are evident by a small group of multimillionaires whose wealth stands in direct relation to their proximity to junta leader Senior Gen. Than Shwe and other top generals.

Many pro-democracy exiles regard China as the linchpin for meaningful change, which may be hope prevailing over logic. China is the largest supplier of military equipment to Burma and is a crucial veto on the U.N. Security Council to stifle harsher economic sanctions by the international community.

In Hpakant, jade businessman Joseph estimates that there are as many as 3,000 mines set among a series of denuded hills slowly eaten away by heavy machinery. Green plant life bursts forth where it can, but most earth is an excavation site, undulating for miles into the distance.

What was once depicted as a scene out of "Dante's Inferno" - the few outsiders who had visited jade quarries here described thousands of half-naked men, women and children clawing at rocks - is now a largely mechanical process characterized by large yellow Caterpillar and Volvo backhoes and industrial-size dump trucks. A few mines still employ human diggers, and weeks before I visited Hpakant, one mine collapsed killing 20 people.

The jade trade

Just before the start of the Beijing Olympic Games, President Bush signed into law the Burma Jade Act, adding Burmese jade and rubies to a long list of restricted goods. Even though such prominent jewelers as Bulgari and Tiffany & Co. have gone along with the ban, jade sellers in the crowded outdoor markets of Rangoon told me they are doing landmark business thanks to China, India, Thailand, Singapore and Arab gulf states.

Like many business activities, the military junta takes a hefty percentage - 50 percent of profits from private companies and 80 percent from joint ventures - leaving jade miners destitute and diseased (HIV is believed to be rampant among miners, though exact statistics are impossible because international aid groups are not allowed in Hpakant).

But jade mines are a prime example of how the military regime co-opts even its enemies. Burma is home to more than 130 ethnic groups, and some continue to fight for an independent homeland. For years, some of these rebel groups financed their armed struggle through the sale of opium and jade.

Militants to middlemen

Kachin rebels, one of the most formative armed forces and mostly an animistic hill people, once mined jade illegally to buy guns. But after signing a cease-fire with the military regime in 1994, they have become "middlemen for the state's revenue generation, much of it semi-legal and all designed to prop up military rule," said David Matthieson, a researcher for Human Rights Watch.

Engaging in business rather than war with the military junta is tacit acknowledgement that real power is determined by proximity to the ruling generals.

"Without having personal ties with high-ranking personnel in one way or another, no businesses could survive or expand," said Win Kyaw Oo, a former journalist who is now in the private import business.

Change comes, if slowly, to Burma

Despite an economic growth rate of 5.5 percent in 2007, resource-rich Burma remains one of the world's poorest nations. The country ranks 132 out of 177 countries in the United Nations' Human Development Index. It is tied with Somalia for being the world's most corrupt country, according to Transparency International's 2007 rankings.

Burma is also known around the globe for government repression.

The military junta's use of detention and torture has been denounced even by the neutral International Committee of the Red Cross. The nation's most famous champion of democracy, Nobel Peace Prize winner Aung San Suu Kyi, has been under house arrest for most of the past 19 years, and more than 2,500 political prisoners languish in prison, according to Amnesty International. At least 900 have been locked up in the past year, and 14 pro-democracy activists were given harsh prison sentences on Tuesday.

Yet, Burma is also a nation where change is occurring - albeit at a snail's pace.

In recent years, Internet cafes have more than tripled in major cities and are even sprouting in backwater towns carved out of the jungle. In the afternoons, young people gab on G-talk and check their profiles on Orkut, Hi5 and Friendster. Signs posted openly explain how to circumvent government censors through proxy servers and Web sites such as www.yoyahoo.com and www.bypassany.info.

The music of Zayar Thaw, a well-known hip-hop artist who was jailed this year, is an increasingly dominant genre of choice among many young Burmese.

Access to the Internet and to satellite TV is further eroding the regime's monopoly on information, a giant step in a nation where people once solely relied on crackling shortwave radios for a connection to the outside world.

E-mail Daniel Pepper at foreign@sfchronicle.com.

This article appeared on page A - 17 of the San Francisco Chronicle

To read the MIEPA analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

To learn more about MIEPA, click here Return to MIEPA's Home Page

A Myanmar native who currently [December 2005] lives in San Francisco, has completed a study of his/her home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Myanmar is shown below. The ratings herein are based on the following rating scale:

RATING SCALE

5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2005. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

Return to MIEPA's Home Page

Myanmar

Comparison of Myanmar's economic policies to MIEPA criteria as prepared by a native student of Myanmar studying in the US in December of 2005.

RATING SUMMARY

POLICY NUMBER      RAW SCORE   ADJUSTED SCORE    POSSIBLE   PERCENTAGE

        1               0.5           1.5             15.0        10 %

        2               0.5           1.5             15.0        10

        3               0.5           1.5             15.0        10

        4               0.5           1.5             15.0        10

        5               0.5           1.5             15.0        10

        6               1.0           3.0             15.0        20

        7               1.0           3.0             15.0        20

        8               1.0           3.0             15.0        20

        9               1.0           3.0             15.0        20

        10              1.0           3.0             15.0        20

        11              2.0           6.0             15.0        40

        12              1.0           2.0             10.0        20

        13              1.0           2.0             10.0        20

        14              2.0           4.0             10.0        40

        15              1.0           2.0             10.0        20

        16              1.0           2.0             10.0        20

        17              1.0           2.0             10.0        20

        18              1.0           2.0             10.0        20

        19              1.0           2.0             10.0        20

        20              1.0           2.0             10.0        20

        21              1.0           2.0             10.0        20

        22              1.0           2.0             10.0        20

        23              1.0           2.0             10.0        20

        24              1.0           2.0             10.0        20

        25              1.0           2.0             10.0        20        

        26              1.0           2.0             10.0        20

        27              1.0           2.0             10.0        20

        28              1.0           2.0             10.0        20

        29              1.0           1.0              5.0        20 

        30              1.0           1.0              5.0        20

        31              1.0           1.0              5.0        20

        32              1.0           1.0              5.0        20

        33              4.0           4.0              5.0        80

        34              5.0           5.0              5.0       100

   TOTAL               40.5          77.5            375.0        20.7%
                      =====        ======            =====        =====

Return to MIEPA's Home Page


INDIVIDUAL POLICIES

1. Freedom from internal control: 0.5

Myanmar citizens are not free from positive or pro-active control by government agencies. People are not allowed to travel anywhere as they want to go with in the country. They are support to report to the government agencies before they leave the city and where you are staying.

Source: personal

2. Freedom of speech: 0.5

Citizens are not able to express themselves freely. There is a lot of restriction from the government. People are not allowed to write any bad thing about the government. The government control all source of communication such as telephone, internet, magazine, books, newspaper, and else.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

3. Effective, fair police force: 0.5

A police force is not perceived as fair by all members of a community allows all members to share a sense of responsibility for the society’s future. People are not treated equally, rich people are allow to do almost anything they want and the police will not do anything about it. All they have to do is give the police some money and they will get away from the crime.

Source: personal

4. Private property: 0.5

There are laws that protect private property in conformance with local practices but the government fails to enforce those laws. The Judge decided what is right and wrong. There are no clear court protected rights, for any one in the country. The government can take away private property and make them as public.

Source: personal

5. Commercial banks: 0.5

Most of the people in Burma didn’t have a bank account, the use cash to pay for their bills because they didn’t trust the Banking System in Burma. The banking crisis started in February 2003 with the collapse of more than a dozen deposit-taking companies. (None had licenses to actually take deposits.) Their owners had used depositors' funds to build up their own diversified business interests. Depositors went unpaid and a panic ensued. Source: http://www.burmatoday.net/newsarchive_03/news_030321_banking_theage.htm

6. Communication System: 1.0

Not everyone can effort to have phone in their houses because of the price they couldn’t effort to pay every month. Even the small business cannot effort to have more than one phone line. There are only 357,300 telephones main lines in use in 2003 and 66,500 mobile cellular in 2003. There are only 3 Internet hosts and the government control all the access. There is only one newspaper and they are not allowed to write anything they want.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#Comm

7. Transportation: 1.0

According to the 2004 statistic there are 3955 km Railways, 28200 km Highways, 12800 km Waterways and three ports and harbors in Burma. Most of the business used Railroad for the transportation because it is cheaper and safer.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

8. Education: 1.0

According to UNICEF reports, 38% of the children aged 5 to 9 years never enroll in school. Of those who do, less than 30% complete the forth grade. Two thirds of primary school children, primarily in rural areas, leave school for economic reasons either because their parent could not effort to pay for school or they could not effort to feed them. The government has spent only 6.98% of spending on education, which is not enough to even pay for the teacher.

Source: http://www.mizzima.com/archives/news-in-2004/news-in-apr/28-apr04-27.htm

9. Social Mobility: 1.0

The government introduces nominal ‘open market’ reforms that favored military-owned institutions and their political allies; and said “ethnic ceasefire organizations and a new society of a handful of businessmen”. But the government fails to create vocational schools, which is completely useless to the ordinary citizens.

Source: http://www.mizzima.com/archives/news-in-2004/news-in-apr/28-apr04-27.htm

10. Freedom form outside control: 1.0

Burmese citizen are free from control by any citizen or agency of any other country. Also they are not subject to the laws of the home country because there are no laws of the home country. Any one with the high authority can arrest you and put you into the jail for no given reason.

Source: Personal

11. Foreign currency transactions: 2.0

Burmese government required that only the domestic currency be used as money in the home country. All foreign currencies must convert to domestic currency to conduct business. They even have the policy that said if they see foreign currencies with you, you would be arrested. Also the visitors from other country are requiring exchange to the domestic currency.

Source: http://www.atimes.com/se-asia/CL13Ae01.html

12. Border control: 1.0

Burma does not have strong border mainly because of the fighting between Karen rebels and Burmese troops. Also it is world’s second largest producer of illicit opium, due to the lack of government will and ability to take on major trafficking groups and lack of serious commitment against money laundering.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

13. Currency: 1.0

Currency remains one of the most serious impediments in Burma trade because of the lack of government control in black market. The different between official exchange and parallel exchange rates is more than double. The official rate still applies to public sector transactions. As a result, a complex exchange rate system exists, which segments the market for foreign exchange between the private and public sectors, result the shortage of foreign exchange.

Source: http://web.worldbank.org

14. Cultural, language homogeneity: 2.0

There are more than 100 ethnic groups in Burma. According to the CI A world facts book the different Ethnic groups are Burmese 68%, Shan 9%, Karen 7%, Rakhine4%, Chinese 3%, Indian 2%, Mon 2%, etc. Burmese being the main language and minority ethnic groups have their own languages. As far as the Religions there are Buddhist 89% being the main religions; and others are Christian 4%, Muslim 4%, Animist 1%, other 2%.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

15. Political effectiveness: 1.0

Due to the mismanagement of Burmese government cause more problem in political, social and economic development. The government does not have enough funding for the police; mainly there is no security when you go out from the city. Moreover there is not enough money.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

16. Institutional stability: 1.0

The government changes the name of the party every time it is insecure for them but the people in the party is the same as always, no matter if the people voted no for them. The country has remnants of the British-era legal system are in place, but there is no guarantee of a fair public trial; the judiciary is not independent of the executive.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#Govt

17. Honest government: 1.0

Since 1962, Burma has been ruled by military. Democracy revolution started on 1988, and the government decided to run an election. In 1990, pro-democracy parties won more than 80 percent of the vote. But the government refused to recognize the results. Moreover, they decided to put the party leader in house-arrested. The government tries everything that they could to take the power using military forces. They had killed a lot of innocent students, put most of the protester in jail. They government is not honest at all.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

18. Common Laws: 1.0

There is no written law in Burma; it is all depend on the judge if they want to prove it guilty or innocent. The country legal system is not just un-uniform in all parts of the country, but also for all part of the population. There is no fair trail.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

19. Central bank: 1.0

The Central bank of Burma has been played so little part of the economy, other than printing more paper money as the government needed. There are all set of written rules for the central bank but the government fails to enforce it. In February 2003, a major banking crisis hit the country’s 20 private banks, shutting them down and disrupting the economy. In January 2004, the largest private banks remained moribund, leaving the private sector with little formal access to credit. Also government did not take over the crisis.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

20. Domestic budget management: 1.0

Burma has been unable to achieve monetary or fiscal stability, resulting in an economy that suffers from serious macroeconomic imbalances – including inflation and multiple official exchange rates that overvalue the Burmese kyat. In 2004, the inflation rate for consumer prices is 17.2 percent. The government tax is still the lowest in the world.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

21. Government debt: 1.0

The government debt is 6.752 billion dollars in 2004, while the GDP is 74.3 billion dollars, and GDP- real growth rate is going –1.3%.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

22. Economic statistics: 1.0

Most of the time, the government tries to protect them by showing false statistics and yet they have no prove of saying it is right. The government knows that they have to reform the system but when they did it is only benefit for them or the rich people in the country.

Source: personal

23. Protection of public health and safety: 1.0

The government also fails to protect the public health and safety. Prison conditions remained harsh and life threatening, and facilities were Spartan, but prisoners rights continued to improves as a result of efforts by the International Committee of the Red Cross (ICRC), which continued to have regular access. The government continued to forcibly relocate large ethnic minority civilian populations, and conscript child soldiers. Numerous health and safety regulations existed, but in practice the government did not make the necessary resources available to enforce the regulations. Although workers may in principle remove themselves from hazardous conditions, in practice many workers could not expect to retain their jobs if they did so.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

24. High wage policies: 1.0

The government does not allow the workers to form Union. There is no minimum wages, there is minimum age for the worker but the government does not enforce the law. The private company can hair any employee at any time and fire them at any time. There are a lot of under age worker in the country with low wage, as low as 50 cents per day. Most of the worker cannot effort to buy consumer goods.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

25. Environmental protection: 1.0

Myanmar is one of the naturally richest country in Asia. But Myanmar has a lot of environmental problem due to the failure of enforcing the environmental law. The biggest problem is cutting down the rainforests, which is causing serious problem of erosion, floods and landslides. Also the people are not aware about the environmental problem, many people in Burma are not yet see the country environmental problems as very serious. Another reason is shortage of staff and funds, by the fact that the government has more control over the environmental protection agency.

Source: http://www.ibiblio.org/obl/docs/LIOB09-enviromental_and_law_in_burma.htm

26. Strong Army: 1.0

The government spent 39 million dollars in 1997, which is 2.1% of GDP. The government is depending on the treaties from the neighbors. The government is taking a risk on the country always has been attack by revolutionaries or bandits within its borders.

Source: http://odci.gov/cia/publications/factbook/geos/bm.html

27. Foreign trade impact: 1.0

According to the World Bank Myanmar exports rate is 1.0% of GDP and import rate is 1.7% of GDP, which are very low at the official exchange rate. But at the same time export rate is 35% of GDP and import is 60% of GDP at the market exchange rate. The author believe that the true value should be somewhere between those two extremes.

Source: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,menuPK:115635~pagePK:64020917~piPK:64021009~theSitePK:40941,00.html

28. Protection of foreign currency earning enterprises: 1.0

The government is not just fail to protect the foreign currency earning enterprises, also State monopolizes leading traditional exports including rice, sugar, cotton, petroleum, precious stones and metals. Rice is the cop most extensively covered by state restrictions on production, and exports. The government continues to own all the farmland to procure rice below market prices, and to monopolize the export marketing of all rice except that form private agricultural estate projects. According to the World Bank the farmers are force to sell a significant portion of their rice crop to the state at well below market price.

Source: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,menuPK:115635~pagePK:64020917~piPK:64021009~theSitePK:40941,00.html

29. Management of foreign currency budget: 1.0

The government fails to control the foreign currency budget; in 2004 the real capital transfers is far form zero due to the inflation rate, which is 17.2%. Total export in 2004 is $ 2.137 billion f.o.b. and import is $1.754 billion f.o.b.

Source: http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

30. Layers of collective action: 1.0

Myanmar is run by the military; therefore people are not allowed to elect the government. The government elected school boards, city councils and other leaders for the community. There is not many volunteer in Myanmar because the government restricts the unauthorized outdoor assemblies for more than five people. People are not allowed to form a group or non-profit organization without permission from the government. But at the same time most of the time people were force to volunteer in the government projects or force to donate money if we refuse to go there in person.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

31. Pro business climate 1.0

A lot of times people prefer not to own the business because of the process that they have to go through are not certain or no time limit. Others do not want to deal with the government and their law and restriction. The government has the power to change the laws as they please. Only people who can get support from the government can build a business and those are the people who have a lot of money and they are also supporting the government. That is also the main reason why rich become richer and poor become poorer, which is also a major problem in Myanmar today.

Source: Personal

32. Government enterprises 1.0

Myanmar government already has history of taking over the private industrial which cause a lot of economic problem. According to the www.mapzones.com the government nationalized almost all-large industrial enterprise, the banking system, insurance, foreign trade, and domestic wholesale in 1962-63. A few industrial enterprise and small-scale industry, agriculture, and fishing were left in the private sector.

According to the CIA's fact book ?In February 2003, a major banking crisis hit the country's 20 private banks, shutting them down and disrupting the economy. As of January 2004, the largest private banks remained moribund, leaving the private sector with little formal access to credit.?

Source: http://www.mapzones.com/world/asia/myanmar/economyindex.php; http://www.odci.gov/cia/publications/factbook/geos/bm.html#top

33. International security agreements: 4.0

Since 1987, the World Bank has approved no new lending for Myanmar and it hasn?t get international assistance, even though Myanmar is still a member of the World Bank. In 1996 the government decided to join the Southeast Asian Nations (ASEAN). Myanmar was admitted to the ASEAN in July 1997. Therefore, Burma continues to receive loans and grants from some counties, including the China, India, Japan, Singapore, and Thailand. From all of those countries, China has been the biggest supporter for Myanmar?s military hardware, including tanks, patrol boats and fighter jets, along with military training.

Source: http://www.atimes.com/se-asia/CL13Ae01.html

34. Protection of domestic enterprises from government mandated costs: 5.0

Myanmar has almost no imposes cost on its domestic enterprises. Myanmar has some environmental taxes but it is almost nothing compare to the other countries. Also it has worker safety regulations but the government fails to enforce the laws. The government does not allow unions, therefore, worker did not have the right to organize and bargain collectively. The government set wages in the public sector but in the private sector market forces set wages. The government forces the private company not to pay salaries greater than those of ministers or other senior Government employees, most of the public worker get paid as little as $1 per day.

Source: http://www.state.gov/g/drl/rls/hrrpt/2004/41637.htm

DISCLAIMER

All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.

To learn more about other countries, click to other files here:

Return to MIEPA's Home Page

CONTENTS OF SITE

Return to MIEPA's Home Page list of country studies

Introduction and Policy Recommendations

Winning Essays: There Are Alternatives Project (TAA)

Essay: Balanced Trade: Toward the Future of Economics

Moral Economics

McKEEVER INSTITUTE of ECONOMIC POLICY ANALYSIS

Web address: http://www.mkeever.com

CONTACT MIEPA:

To contact MIEPA, please send an email to this email address:

mpmckeever@earthlink.net

Please place the acronym MIEPA in the subject line.