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No resumption of World Bank assistance to Burma; the reasons why!

By the World Bank Information Office, 13 October 1995

Information Office
815 Fifteenth Street, NY, Suite 910, Washington, DC 20005
Tel: (202) 393 7342, Fax: (202) 393 7343

Throughout its seven years of iron-fisted rule, the military-run State Law and Order Restoration Council (SLORC) has been claiming economic successes and putting up a pretense that all is well. Yet, today, the SLORC finance minister and his delegation are touring the globe, knocking on the doors of international financial institutions to seek loans and assistance.

When a financial crisis hit Burma in 1988 there was only around US$12 million in foreign currency reserves left in SLORC's coffers. The most logical option left was for SLORC to work with the pro-democracy forces to save the country. But at this critical juncture an inflow of foreign investment seeking quick returns from Burma's natural resources was obtained. SLORC was thus saved from financial disaster. This enabled SLORC to resort to a violent suppression of the people and avoid negotiating with the democratic forces.

A situation not unlike the one in 1988 has arisen again today. Even though it has succeeded in attracting short-term, fast money-making investors to Burma, SLORC has failed to lure long-term investments in the manufacturing sector. The present pattern of foreign investments in Burma are all aimed at making quick returns. Major investors lack the confidence to start labor-intensive and long-term investment in the manufacturing sector because infrastructures in the transport, communications and energy industries are still very poor, the value of kyat against foreign currencies remains unrealistic, business rules and regulations are inconsistent, and corruption and nepotism remain widespread within the military bureaucratic machinery.

SLORC needs massive loans from the World Bank and the other institutions if it is to bring on infrastructural development and devalue the Burmese currency without adverse consequences. The World Bank suspended loans to Burma in 1988 due to the outcry from the international community that had witnessed the brutal and bloody suppression of the democracy movement by the Burmese Army.

SLORC faces an uphill task in trying to build a durable power base. It expects to achieve that goal through tough political control and brutal suppression of dissent and by consolidating a financial base through foreign investment, international economic and development assistance, and financial aid.

SLORC has frequently pointed to its "economic reforms" as an indicator that it is moving toward a free market economy and that the World Bank should take that as a cue to extend it loans. The following facts, however, should be taken into serious consideration if Burma is to become a recipient of World Bank assistance:

No structural changes have been made in the economy permitting it to develop into a true market economy.

Budget disparity remains uncorrected, with the bulk of the budget going to defense expenditures.

Political reforms essential for long-term sustainable economic development have yet to be undertaken.

Labour practices under SLORC grossly violate internationally recognized labor conventions.

Restrictions imposed on academic freedom and the suppression of intellectuals have resulted in the decline of human resources.

Resuming loans to SLORC under these conditions will be premature as it will only strengthen the power base of the Burmese military and will not contribute to long-term sustainable development that benefits the people.

STRUCTURAL CHANGES TO DEVELOP A TRUE MARKET ECONOMY

SLORC claims that the country is being developed through a market-oriented economic policy. The fact, however, is that the country is only partially opened to foreign investors to operate mostly in the form of joint ventures with the State (military). Most state-owned enterprises and co-operatives that existed under the previous Burma Socialist Program government remain under the control of SLORC today.

SLORC's claim of privatization means the transferring of a few factories to ex-military officers and their relatives. There has not been any real attempt to privatize key enterprises, develop private entrepreneurs or to undertake economic liberalization. The state sector today retains direct control over the export of 23 important commodities, including rice, still the country's major earner of foreign exchange. SLORC intends to revive a military command economy behind the facade of an "open-door" economic policy. One glaring example of this is the Myanmar Economic Holdings Company Limited established by the Defense Ministry. This enterprise is involved in all major business contracts and deals.

Another underlying problem associated with investment in Burma is the repatriation of profit earned in Burmese kyat. Because of strict controls by the SLORC's Foreign Exchange Bank, foreign investors are forced to comply with a bartering system. They are made to buy local products and export them as a means of channeling their profits out of Burma. Given the situation, business deals in Burma have unnecessarily become complicated and risky.

In addition, under the new Private Investment Law, only a few selected private companies associated with the military can function and are making profit. Entrepreneurs "without connection" have to go through corrupt officials at different levels and bureaucratic red tape before anything can get done.

BUDGET DISPARITY

SLORC has only concentrated on building up the military and modernizing its weaponry. In seven years of SLORC rule, the army has grown from 180,000 in 1988 to 350,000 today. US$1.4 billion worth of fighter jets, tanks, patrol boats, anti-aircraft missiles, artillery pieces and other arms and ammunitions were purchased from China. Naval bases and radar stations are being constructed on Coco Island and Zadetgyi Island while M21 and M22 machine-gun factories are being constructed in upper Burma with China's assistance. According to a UNICEF report in 1994, SLORC's defense budget increased from 22% of total expenditure in 1980, to 39% in 1993. In the same period, the health sector budget increased from 2% to 3% while the budget allocated for education fell from 2% to 1%.

Furthermore the regime has stated its intention to increase the size of the armed forces to 500, 000 in the near future, with continued upgrading of technical equipment. The cost of this expansion will be enormous relative to the meager resources of the economy. This is the over-riding reason for their desperate attempts to obtain World Bank assistance and the foreign private investment that they will expect as a consequence.

Many social problems have arisen because of that situation. The malnutrition rate has soared in the country, with many cases being detected even in the capital, Rangoon. Yet no effort has been made until today to correct the problem.

Hospitals only have medical staff and nothing else much. Due to shortage of medical supplies, patients being hospitalized are asked to bring in bandages, medicines and whatever they might need during their treatment.

Children with preventable diseases are dying because of the lack of effective primary health care programs. Child and maternal mortality rates are increasing.

In the education sector, the drop-out rate at schools from primary level up is on the rise. Young children and students cannot finish their education because they are compelled to go out and work to supplement the family income.

The educational standard has declined as experienced teachers leave the academic life for jobs that would help them cope with increasing expenses.

Other alarming problems that remain neglected by the SLORC are drug addiction, AIDS, refugees, war victims and environmental destruction.

POLITICAL REFORMS

In his report, "An Agenda for Development," the UN Secretary-General stated that "Democracy and development are linked in fundamental ways. They are linked because democracy provides the only long-term basis for managing competing ethnic, religious, and cultural interests in a way that minimizes the risk of violent internal conflict. They are linked because democracy is inherently attached to the question of governance, which has an impact on all aspects of development efforts."

Democracy as good governance needs to be restored if long- term economic development is to be sustained in Burma, and the opportunity is available to SLORC if it has the interests of the country at heart. Democratic forces led by Daw Aung San Suu Kyi as well as ethnic leaders have offered to work for national reconciliation and the early restoration of democracy through political dialogue. International opinion also supports political dialogue as reflected in resolutions adopted by consensus at the UN General Assembly.

SLORC has so far not shown any willingness to comply with international and internal public opinion. It is bent on legitimizing the leadership role of the military in the country's future political life through its sham national convention.

Without democratic reforms, economic progress will ultimately achieve nothing more than disembodied growth, a source of greater inequity and eventually, social unrest. The widening gap between haves and have-nots under SLORC's rule is leading to social chaos and total devastation of the country.

LABOR PRACTICES VIOLATE INTERNATIONAL LABOR CONVENTIONS

A creative and energetic labor force is another vital requisite for economic development, and hence, conditions conducive to the emergence of that labor force must be created. Workers must be able enjoy trade union rights and labor practices that conform to internationally recognized labor conventions will have to be developed.

The labor situation in Burma has worsened as SLORC has resorted to the use of forced labor in the implementation of infrastructure development projects. The practice directly violates ILO Convention 29 on forced labor.

At the ILO Conference in July, 1995, the ILO Committee of Experts urged SLORC to urgently repeal the offensive legal provisions under the Village Act and Township Act and to bring them into line with the letter and spirit of Convention No. 29; to terminate forced labor practices on the ground, to provide for and exemplary penalties against those extracting forced labor.

It also called on SLORC to adopt measures to guarantee that in law and in practice, workers and employers have the right to join organizations of their own choice and without previous authorization outside the existing structure, and that such organizations have the right to join federations and confederations and to affiliate without impediment. So far, SLORC has not made any effort to reform labor laws and practices.

HUMAN RESOURCE DEVELOPMENT

The development of human resources is vital if a skilled labor force is to emerge in Burma. SLORC cares little about this and often acts against the development of human resources to protect its political power.

Whenever a political movement led by students arises in university campuses, the military responds with brute force, killing, arresting and torturing members of the movement and closing down universities for an unlimited period.

After the 1988 massacre, thousands of students and intellectuals ended up in prisons or in exile. Thousands of students were dismissed from their institutes of learning while thousands of teaching staff were dismissed from their jobs for their involvement in the democracy movement. The 1988 incidents alone had seen a great loss of human resources that is bound to have an impact on the development of Burma in the future.

When universities were reopened in 1991, teachers and professors were made to wear military uniforms and to take refresher courses. SLORC policies and security measures and surveillance methods to control possible student activities were taught to the teachers. Universities in Burma today resemble concentration camps with military informers watching day to day activities.

Students' unions and educational workers' unions that re- emerged on the eve of the Democracy Summer of 1988 have been outlawed since the military coup of 1988.

Since 1988, there has been an exodus of qualified teachers, and the educational standard in universities has declined noticeably. The situation has been made worse by the establishment of new regional colleges and the introduction of a "long-distance learning system" for higher education designed to avoid the concentration of students in major cities.

The departure for foreign countries of other professionals, such as doctors, engineers and economists is also depleting human resources. Restrictions on the freedom of academic expression; freedom of association of professional organizations; and the lack of research facilities and seminars, exchange programs, further studies, and free access to information on advanced technology have also hindered the emergence of a new generation of intellectuals.

CONCLUSION

Without correcting the underlying socioeconomic and political problems that hamper greater popular participation in politics and development, any financial assistance that goes to SLORC today will go to waste as in the popular Burmese saying, "Thae dae yay thun" -- Pouring water in the sand.

The objective of the SLORC regime is emphatically not economic development. They are not fools. They know that genuine economic development leading to a vibrant private sector and a growing middle class will undermine their monopoly of power which is based only on force. It is quite unlike the situation in Singapore or even Indonesia where civil servants and technocrats are able to freely use their expertise in the service of the country. The Burmese military lack the self-confidence to share power with any other groups, such as civil servants or entrepreneurs. The xenophobic and inward-looking "Burmese Way to Socialism" represents their true ideology. The talk of market- orientation and " open door " policies is merely a tactical ploy necessitated by the disastrous failure of their original program. It would be a tragedy if the international institutions and donor community fail to realize this. Their good intentions will only further pave the road to hell for the Burmese people.

Oct 13, 1995.