Uncertainty still haunts Myanmar

LONDON: Ten years after Myanmar's military authorities violently suppressed anti-government demonstrations, the country appears to be entering a period of renewed economic and political uncertainty. The economy is in its worst condition since the late 1980s, when similarly declining living standards led to massive public demonstrations. Food prices are rising quickly as a result of speculative hoarding and the destruction of crops by widespread flooding in summer 1997. In addition, Myanmar's currency has fallen from approximately 170 kyat to the U.S. dollar in early 1997, to 380 kyat to the dollar on Jan. 26, 1998.

Only a few years ago, the economic and political situation appeared more promising. The lifting of many economic restrictions, and the introduction of government initiatives to bolster foreign trade and investment, resulted in a small boom in Yangon and Mandalay. Tourism was actively encouraged for the first time in decades, and a significant number of foreign firms began establishing offices in Myanmar with a view to future expansion. Furthermore, foreign oil companies signed expensive exploration agreements with the government, and a number of large new hotel projects were launched.

The government also began taking serious steps towards ending the country's 50-year-old civil war. In 1989, the Burma Communist Party (BCP), the Army's most important military foe, collapsed following an internal revolt. As a result, the 20,000-strong BCP force was splintered into four separate ethnic-based militia. In order to prevent the emergence of an alliance between these new groups and urban pro-democracy forces, the State Law and Order Restoration Council (SLORC) concluded cease-fire agreements with former BCP troops.

The failure of the communist putsch allowed the Army to focus its attention and military strength on other ethnic-based insurgencies. By 1995, it had succeeded in securing cease-fires with all insurgent groups except the Karen National Union. For the first time in more than 30 years, negotiations were begun aimed at achieving an overall settlement to the armed conflict.

From a position of strength and confidence, the SLORC also started to release political prisoners. Furthermore, in early 1995 it convened a face-to-face meeting with the leader of the National League for Democracy (NLD), Aung San Suu Kyi. Although all forms of political activity were severely restricted, it was hoped that a meaningful dialogue might begin between the military and the pro-democracy political parties.

Neither an economic nor a political recovery has materialized. Little, if any, progress has been made toward achieving a settlement with either the various armed opposition groups or with the NLD. Although there seems little likelihood of a return to full-scale warfare, the presence of large rival armies along Myanmar's border areas has impeded economic development. Moreover, it has increased the economy's dependence on lucrative narcotics production and trafficking.

The release of Aung San Suu Kyi on July 10, 1995 and other important opposition figures has failed to lead to a meaningful dialogue between the military and pro-democracy politicians. Initial meetings in 1994 between Aung San Suu Kyi and SLORC generals were not followed up, and more recent attempts to hold lower-level discussions have not succeeded.

Government initiatives to draft a new constitution have also stalled, and more than one year after student demonstrations took place in Yangon, all the universities remain closed.

Foreign confidence in Myanmar's economy has diminished precipitously, and many, if not most, major potential investors have withdrawn their funds from the country. The government's much vaunted Visit Myanmar Year -- a 1997 initiative aimed at winning vital tourist revenue -- was a failure, and the occupancy rates of newly built foreign hotels are less than 20 percent.

Furthermore, factories are being closed, and the rapidly weakening kyat has made foreign consumer goods -- including basic commodities imported from China -- unaffordable for many members of the population.

Yangon's real-estate market has also collapsed, with house prices falling by as much as 50 percent over recent months. Severe flooding destroyed most of the 1997 harvest and there is a possibility that this will lead to food shortages in the near future.

Much of the looming crisis is the result of continued poor government. At both national and local levels, all significant decisions are taken by senior military officers, many of whom, even by the government's own admission, are routinely involved in corrupt activities. And, the regular rotation of senior military officials often results in new commanders arbitrarily reversing existing economic policies.

Regional factors have also compounded the economic situation. For example, Thailand's recession is expected to lead to the return of more than half a million Myanmar citizens that are currently working -- often illegally -- across the border. As a result, the country's already high rates of unemployment and under-employment will increase. The decision by members of the Association of Southeast Nations (ASEAN) to terminate investment in Myanmar is at least partly due to the region's more general economic contraction.

In addition, government expenditure on health and education are at their lowest levels for decades, and university closures have accompanied the continued migration of educated citizens.

At least two major disagreements have emerged within the military's senior ranks. The first to be revealed publicly was over the issue of corruption. Relatively 'clean' officers are frustrated by the fact that several generals have used their positions vastly to enrich themselves and their families through fraudulent business deals. There is no independent judiciary in Myanmar, and there are no legal or other institutional checks on military officers.

The second is between relative hardliners -- led by the Vice- Chairman of the new State Peace and Development Council (SPDC), Gen. Maung Aye -- supporting unqualified Army rule, and reformists favoring a degree of accommodation with the opposition. The latter group -- centered primarily within the powerful Directorate of Defense Services Intelligence (DDSI), led by Khin Nyunt -- views continued dialogue with the opposition as essential to further economic reform, and perhaps to allowing eventually a degree of civilian control over the state's policy- making apparatus. The reformists' vision is of a more enlightened authoritarian state, as opposed to a free-market democracy.

On Nov. 15, 1997, in the most important military reshuffle since 1988, the SLORC was officially replaced by the SPDC. While the SLORC's four most senior members gained top positions in the SPDC -- which also includes younger regional commanders -- the next 16 highest ranking military officers were not included in the new governing body. Instead, they were given positions in an advisory group which never met and which was abolished on Dec. 11, 1997. Four of these generals were then placed under house arrest, and many of their supporters in the military are reported to have been imprisoned.

The government claims that the officers have been detained on charges of corruption, but it denies that the former generals are under house arrest. Those apprehended certainly include the regime's most blatantly corrupt officials. While the popular reaction to these moves has been generally positive, it remains unclear whether the arrests and the reappointments represent a change in the balance of power between political hardliners and reformists. The net result appears to be a decisive shift in favor of Khin Nyunt. However, no new policy decisions have been taken, underlining perhaps the uncertainties within the new ruling group.

The role of Myanmar's 86-year-old 'strongman' Gen. Ne Win in the unprecedented overhaul of senior military officials is also mysterious. He formally retired from government in 1988, but is widely believed to continue to wield a great deal of influence behind the scenes. Most observers believe that his consent is needed before any major political decisions can be taken, and that the reshuffle must have had his explicit backing. Ne Win is thought to support Khin Nyunt and it may have been Ne Win's intervention that allowed the intelligence chief to oversee the arrests of the four generals.

The influence of international actors is also unclear. China remains Myanmar's principal foreign patron. Since the BCP's collapse, Beijing has worked to expand its bilateral diplomatic, military and economic ties with Myanmar. There are few indications that China is rethinking its support for the military regime, or that it is placing any pressure on Yangon to introduce economic or political reforms.

On the other hand, Western governments have increased diplomatic and economic pressure. Yangon is regularly condemned at UN meetings, and Western powers, led by the U.S., have suspended all substantial bilateral and multilateral assistance. On April 22, 1997, for instance, the U.S. imposed additional sanctions prohibiting new direct investment in Myanmar by U.S. companies, a move which further undermined investor confidence.

Myanmar's admission into ASEAN on July 23, 1997 increased the desire in Southeast Asia to improve Yangon's international standing and normalize its relations with the West. ASEAN governments -- most notably the Philippines and Thailand -- have quietly tried to press the regime to introduce greater economic change and political accommodation. If the SPDC is more reform- minded than the SLORC, intensified ASEAN efforts over the next year might finally result in a much-needed breakthrough. If the SPDC continues to adopt a hardline stance, however, the economic situation may worsen, producing greater political uncertainties.

-- IISS