Burma loses hold on foreign investors
Source : LEE KIM CHEW, Straits Times
FOREIGNinvestors shun Burma because of its bad politics and red tape.
They face many difficulties, from domestic restrictions and corruption to foreign sanctions and consumer boycotts in the West.
New foreign investments approved last year plunged to US$29.5 million (S$50.5) from US$777 million the previous year, down from US$2.8 billion in 1997.
Britain and the US are putting the squeeze on companies to get them out of Burma. Baker Hughes, the giant American oilfield-services firm, pulled out last month.
Pepsi Cola has long gone, the fizz having disappeared after hopes that Nobel peace laureate Aung San Suu Kyi's release from house arrest signaled a change of heart in the military regime came to nothing.
FOREIGN FIRMS LEAVING
THE backbone of Burma's foreign investments, apart from property development and hotels, are the extractive industries.
France's Total oil company is staying put. So, too, is Unocal, which built the Yadana gas pipeline to Thailand. These are the exceptions to the many who have left. Their departure has dashed hopes that Burma's entry into Asean would lead to a revival of the country's moribund economy.
The incomplete building projects in Rangoon stand testimony to the political gridlock that has impoverished the country. Many new hotels have been built, but the small number of tourists trickling into the country is not enough to fill them up.
Brigadier-General David Abel, one of the regime's longest serving economic ministers, is undaunted about the sharp plunge in foreign investments. Things will get better, he says.
He will not reveal where the new investments, if any, are coming from. But he points to what he says are successful ventures, like cigarette company Rothmans, and Tiger beer brewery, in Burma.
Fact is, the successful foreign investors are few and far between.
Singapore entrepreneur Albert Hong's grand plan to turn a part of the capital into an industrial powerhouse remains unfulfilled. He came to Rangoon in 1994 with an ambitious blueprint to develop a new millennium township.
From 140 sq km, the plan got scaled down to 12 sq km. The squatters have since been resettled and land has been cleared, but his consortium has stopped putting money into a project which has no early prospects of economic returns. A Singapore businessman says: "It's a difficult operating environment. There are all sorts of restrictions. Corruption is another enduring problem. You need to have the right connections to make it work."
NTUC Fairprice's dream of building a supermarket chain was rudely shattered when it pulled out of the country in frustration. Its supermarket, set up in 1994 as a Singapore-Burma joint venture to cater to an expatriate clientele and rich locals, was not allowed to import foreign products a year after its opening.
The rules were changed by a government which is perpetually short of hard currencies. So it restricted imports and imposed controls to prevent the outflow of capital.
Said NTUC Fairprice chairman Chandra Das: "We can't import, we can't operate. It's as simple as that. At first, we tried selling local produce, but it didn't work. We had no choice but to close down and cease operations."
This happened shortly after Prime Minister Goh Chok Tong's visit to Rangoon in March 1998. NTUC Fairprice kept a small trading office in Rangoon until it pulled out of Myanmar totally last February.
Not just foreign investors, Burmese businessmen face a tangle of red tape.
The government talks about a free market economy but in reality, it has not moved far from its autarkic and socialist past.
Its fundamental precept is that "the initiative to shape the national economy must be kept in the hands of the state and the national peoples."
BELIEF OF SELF SUFFICIENCY
MANY of Burma's top leaders or their families are involved in business, and the government-owned Union of Burma Economic Holdings, the country's largest company, has complete control over foreign investments.
With foreign capital drying up, more Burmese workers are seeking work abroad. Their flight of professionals and the closure of the universities have left the country bereft of the very skills it needs to put the economy to work.
Said Mr Aung Thien, a businessman: "The only manufacturing plant that is working full time in Burma is the mint. The government has increased the salaries of civil servants by five times. Where is the money coming from?"
There was no word of the pay rise in the official media because the government feared that wide publicity would spark off a new round of runaway inflation. But the news spread by word of mouth, and prices rose in anticipation of the bigger pay packets at the end of this month.
The government had earlier rounded up the rice traders, edible-oil companies, fishery associations, livestock federations, and told them to hold back price increases.
In the past, speculators and profiteers were thrown into prison. Now, it was just a call for cooperation. No threats. Not yet.
The government also opened up new makeshift tax-free markets for vendors to sell meat, fish and vegetables at low prices.
Like much of what the regime does, the tax-free market is a stopgap measure to control inflation, now at running at about 30 per cent. People fear that the prices of essentials will skyrocket when the supplies run out in a few months. There are no shortages now.
So what if laundered drug money fuels the economy. This cash-strapped government, which has built 101 major bridges, 104 dams, 43 hospitals, 350 primary schools and 3,700 miles of road, has few sources of income. It needs all the money it can get to build its way to political legitimacy. Ten years ago, the decrepit Rangoon airport did not have a luggage conveyor belt. Today, its spanking new passenger terminal, beside the old one, comes with electric belts and more -- duty-free shops, air-conditioned tour buses, limousines.
But this is only one side of the picture.
The rich have arrived, but the poor remain desperately poor. The disparity between the privileged few and the swelling ranks of the deprived is more obvious these days.
The World Bank has found much that is wrong with the Burma economy, and it has proposed radical structural reforms, like doing away with the fictitious official exchange rate, reforming state enterprises, and re-ordering the budget priorities to move funds from defence to health and education.
This means a wholesale revamp of the moribund economy.
According to Mr Bradley Babson, a senior adviser of the World Bank, Burma's current policies "will not yield long term stability and development unless it adopts a more pro-people stance."
Current government spending in education as a share of national income is among world's lowest. But the government has rejected the World Bank's findings and its proposal to tie foreign aid to political reforms.
Says Foreign Minister Win Aung: "We've had not received foreign aid for a long time. Everything we did, we had to depend on ourselves. We're not going to cry and ask for help."