Economic Progress of Burma Bumps Against Junta's Politics

More democracy required to encourage foreign investment

A BURMESE woman named Ma Ohn Khin lets sift through her fingers the substance that in some ways is the key to economic prosperity and political stability in most of Asia: rice. Squatting in a market on the outskirts of Rangoon, the sweat beading on the brow of her round face, Ms. Ohn Khin explains the pace of inflation in Burma (also called Myanmar). Her customers often buy the smallest bulk measure used here, the amount that fills a condensed-milk can. These days a can's worth of the lowest quality rice costs 7 Burmese kyats (about 6 cents). A year ago, it cost half as much, around 3-1/2 or 4 kyats. Although the government says consumer prices rose 24.1 percent last year, food prices have doubled at the roadside market where Ohn Khin sells rice. A potato seller says that a quantity of potatoes that now costs 25 kyats sold for 12 a year ago. Lemons and eggs have doubled in price. After Burma's ruling military junta, the State Law and Order Restoration Council (Slorc), took power in September 1988, the generals began dismantling a notoriously inefficient socialist economy and welcoming foreign investment. In recent months, the regime has been asserting that the stability it offers is necessary for ''the proper evolution of the market-oriented economic system,'' according to its manifesto of political, economic, and social objectives. But the regime's management of the economy is raising some contradictions: * Burma's economy is growing, but many poor people and salaried workers have watched their living standards erode because of inflation. * As in Vietnam and China, the Burmese regime is trying to modernize and invigorate its economy by introducing free-market reforms, while maintaining a tight grip on power. The regime says it must maintain stability for the sake of economic development, but at least one Rangoon consultant says the best thing for business would be ''real freedom.'' Food prices are rising because foreign businesses are using the kyats they earn in Burma to buy grains, beans, and other commodities, which they can export for hard currency. The supply of rice has further tightened because the government has cut back on the rice allotments it used to give to civil servants, according to diplomats in Rangoon. The bureaucrats used to sell their allotments on the black market, but no longer. Thus Ohn Khin's assessment of the economic reforms: ''For poor people there's no difference. Life is getting harder.'' ''It isn't only that their easy way of life is gone and they're having to struggle,'' says one foreign diplomat in Rangoon, describing the effect of inflation on many Burmese, ''but they also see some people really, really having it good.'' He adds that he recently came across the first Porsche he has ever seen in Burma. Several opposition leaders interviewed here late last month, all of whom insisted on anonymity, criticized the impact of economic reforms on the poor and said it would complicate the regime's attempt to stay in power. In most Asian countries, few things move people to protest more quickly than a jump in the price of rice. But the junta appears unbothered, despite double-digit inflation dating back to 1987. Deficit spending and inflation, says one government economic adviser, are necessary to ''pump prime'' a limp economy wrecked by decades of socialist state planning. By introducing some elements of choice into the marketplace but not into the political arena, the regime is generating an internal contradiction that opposition political leaders are watching with interest. As one of the government's opponents observes, ''The market economy is the democratic way - the consumer can choose anything he wants.'' This dissident says inflation may translate into support for the political opposition led by Aung San Suu Kyi, the Nobel Peace Prize laureate released from six years of house arrest on July 10. ''The situation is getting tighter and tighter,'' he adds. ''I think the government has to talk to Aung San Suu Kyi.'' Ms. Suu Kyi has called for dialogue on the restoration of civilian rule since her release, but the government has not yet responded. Burma's military government rules the country in the name of stability. When the generals took over in 1988, they said they were acting to save the country from chaotic politics, insurgencies, and communism. Throughout its history, Burma has been riven by ethnic separatism and discord. The military has fought many rebel groups to a standoff, partly because Chinese and Thai support for some of these insurgents has dwindled or stopped altogether. So the regime has gradually tended to justify its imposition of stability as necessary for economic development. But the regime's version of stability is not necessarily the one most conducive to the kind of open economy the generals say they want to create. For example, one Rangoon lawyer and business consultant advises his foreign clients to open an office in Burma, but to hold off on major outlays. ''Why should they make big investments here?'' he asks. ''There's no security. There's no stability.'' This underlying concern about the country's political evolution is one reason most of the foreign investment in Burma so far has been in extractive industries like forestry and energy, or in service industries that earn hard currency such as tourism. As of the end of March, non-Burmese companies had spent $1.4 billion to develop Burma's oil and gas resources and $568 million in the tourism sector, but just over $170 million in manufacturing. An economist at a Burmese bank notes that the level of repression and political control is such that there is no immediate threat of social disruption. ''If you're thinking in terms of riots and political turmoil, that's out,'' he says. But at the same time, he finds the regime too restrictive in its policies. Although it has allowed 15 private-sector banks to open, the regime appears reluctant to let these bankers form joint ventures with foreign financial institutions. The economist says he would like to team up with a foreign bank so his employees could learn the business faster. The regime has said it will consider joint ventures, but has not specified any requirements that the Burmese bankers must meet in order to win approval for a joint venture, the economist says. ''It depends entirely on subjective judgments.''