Monday, 20 June 2011

Burma : Economy

Burma is a resource-rich country with a strong agricultural base. It has vast hardwood timber, natural gas, and fishery reserves and is a leading source of gems and jade. Tourist potential remains undeveloped because of weak infrastructure and Burma's international image, which has been damaged by the regime's human rights abuses and political oppression. Due to Burma's poor human rights record, the U.S. imposes a range of economic sanctions, including bans on the importation of Burmese products into the U.S. and the export of financial services from the U.S. to Burma. Australia, Canada, and the EU also impose economic sanctions on the Burmese regime.

Despite Burma's growing GDP due to increasing oil and gas revenues, the regime's mismanagement of the economy has created a downward economic spiral for the people of Burma. The state remains heavily and inefficiently involved in most parts of the economy, infrastructure has deteriorated, and rule of law does not exist. The majority of Burmese citizens lead a subsistence-level existence with minimal opportunity for economic improvement. Inflation, though now relatively low, is caused primarily by public sector deficit spending and the eroding value of the local currency (the kyat) and has reduced living standards over time. Inflation will likely remain a problem.
The military's commercial entities play a major role in the economy. The limited moves to a market economy have been accompanied by a significant rise in crony capitalism. A handful of individuals loyal to the regime benefit from policies that promote monopoly and privilege. State-controlled activity predominates in energy, heavy industry, and the rice trade. The state embarked on a campaign to privatize state-owned enterprises and properties in late 2009. By all credible accounts most buyers of these privatized assets have been those closely connected to the regime: crony businessmen, the military's for-profit business arms, and proxies acting on behalf of military families.
Burma remains a primarily agricultural economy with 50% of GDP derived from agriculture, livestock and fisheries, and forestry. Cyclone Nargis in May 2008 severely damaged approximately 20% of Burma's rice-producing lands, although most of these fields have since recovered. Burma's rice exports hit a near-record high in 2009, but indicators are that 2010 numbers will be much lower as drought, delayed monsoon rains, and a government desire to carefully control domestic rice prices combine to constrict exports. Manufacturing/industry constitutes only 15% of recorded economic activity, and state industries continue to play a large role in that sector. Trade and services constitute 35% of GDP.
Investment from abroad has declined precipitously since 1997 due to the increasingly unfriendly business environment and political pressure, some in the form of sanctions, from Western governments, consumers, and shareholders. However, new investment from regional neighbors, predominately from China, has increased in recent years and is very difficult to quantify accurately. The government conserves foreign exchange by limiting imports and promoting exports. Published estimates of Burma's foreign trade (particularly regarding imports) are greatly understated because of the large volume of off-book, black-market, illicit, and unrecorded border trade. In the near term, growth will continue to be constrained by government mismanagement and minimal investment. Government economic statistics are often unavailable and always unreliable. According to official figures, GDP growth has been over 10% annually since FY 1999-2000. However, the true rate is likely much lower; the Economist Intelligence Unit estimated that the growth rate in 2009 was 1.8% and predicted 2010 growth would be 3.1%. Burma's economic growth results largely from its natural gas exports, which account for over half of Burma's export receipts and foreign direct investment. Natural gas exports will increase significantly once production begins from the offshore Shwe and Shwephyu Fields, estimated to hold 5.7-10 trillion cubic feet of natural gas. Much of the gas from these fields will flow to China's Yunnan Province via a pipeline currently under construction by a consortium of Burmese and foreign partners, with an estimated completion date of 2014. A second roughly parallel pipeline will carry Middle East- and Africa-origin crude oil offloaded by tankers at a port in Rakhine State. Corporations based in China, India, South Korea, Thailand, Russia, Australia, France, and Malaysia have interests in the exploration and development of several offshore and onshore blocks. One U.S. corporation continues to maintain its interests in the energy sector, with an investment that predates U.S. sanctions.
Burma remains the world's second-largest producer of illicit opium--amounting to 5% of the world's total, according to a 2009 UN Office on Drugs and Crime (UNODC) report. Annual production of opium is now estimated to be less than 15% of mid-1990 peak levels. Cultivation has risen for the past three years following a steady decline through 2006, but yields have fallen during that period. Burma is a major source of amphetamine-type stimulants in Asia. Although the Burmese Government has expanded its counternarcotics measures in recent years, production and trafficking of narcotics remain major issues. The Burmese Government has actively pursued mid-level and independent traffickers, but it remains reluctant to investigate, arrest, and prosecute high-level international traffickers associated with ethnic ceasefire groups.
CIA World Factbook (September 2009)
U.S. Dept. of State Country Background Notes (July 2010)
1. World Bank

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