Myanmar

December 2010

Country Report

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Political Risk Services
1-Nov-2010
Global PRS Risk Index. Ranked in ascending order of risk.
11/10 72 92 92 89 89 88 88 88 87 87 87 87 86 86 86 83 83 83 83 83 82 82 82 81 81 80 80 80 79 79 79 78 78 78 77 77 77 75 74 74 74 74 74 74 73 73 73 72 72 72 09 72 95 91 89 89 88 87 83 86 87 88 88 86 83 86 83 83 83 83 83 82 83 83 80 77 80 79 80 79 78 76 78 80 76 77 74 77 76 74 77 77 74 74 76 74 73 77 72 73 69 08 73 96 91 90 90 88 89 84 86 87 88 90 87 84 85 85 82 84 83 84 85 84 83 81 77 80 79 86 79 79 79 76 82 78 79 70 79 76 76 77 77 77 75 79 74 73 76 70 78 67 07 73 96 92 90 91 87 89 85 87 87 87 90 87 81 87 85 83 84 85 84 86 84 81 81 77 84 80 89 82 80 78 75 80 79 81 73 81 77 73 76 78 81 75 79 73 73 80 71 80 66 06 73 96 90 90 91 87 89 84 86 87 86 90 86 81 86 85 84 86 84 84 85 84 80 82 78 82 80 89 82 79 78 70 83 79 80 73 80 76 70 75 78 81 76 79 73 69 79 75 80 67 11/10 72 72 72 71 71 71 70 70 70 70 70 70 70 70 69 69 69 69 68 68 68 68 67 67 67 67 67 67 66 66 65 65 64 64 63 62 62 60 60 60 58 57 56 55 53 53 50 49 48 46 43 09 68 73 72 71 72 70 70 69 70 70 67 68 66 70 67 69 73 69 69 68 70 69 64 67 67 65 66 69 66 65 63 66 61 64 62 63 60 58 59 62 56 58 54 52 51 56 51 49 46 47 43 08 69 73 74 69 74 72 70 72 69 73 69 70 67 72 69 69 70 69 71 65 66 70 65 67 69 66 66 71 64 64 68 68 58 67 58 66 63 63 57 67 52 58 60 51 55 55 54 51 51 47 45 07 67 73 75 67 77 72 70 72 71 73 69 71 67 73 69 69 67 70 73 67 66 68 66 64 70 65 66 68 62 65 68 70 58 68 62 66 63 64 54 68 48 58 61 51 55 53 54 49 51 49 47 06 67 73 74 68 77 71 68 75 71 72 70 71 68 74 72 72 66 73 74 69 64 68 67 61 73 62 64 66 61 65 68 67 58 68 60 66 59 65 58 66 51 58 61 53 62 55 54 52 50 49 44
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GLOBAL AVERAGES 1. Canada 1. Hong Kong 3. Singapore 3. Sweden 5. Austria 5. Netherlands 5. Taiwan 8. Australia 8. Finland 8. Norway 8. United Arab Emirates 12. Oman 12. Slovakia 12. Switzerland 15. Botswana 15. Chile 15. Czech Republic 15. Japan 15. Trinidad & Tobago 20. Belgium 20. Bulgaria 20. New Zealand 23. Germany 23. Uruguay 25. Ireland 25. Kuwait 25. United Kingdom 28. Denmark 28. Malaysia 28. Saudi Arabia 31. Israel 31. Poland 31. United States 34. France 34. Panama 34. Portugal 37. Brazil 38. Costa Rica 38. Gabon 38. Italy 38. Mexico 38. Romania 38. Spain 44. Azerbaijan 44. Cameroon 44. Hungary 47. Congo 47. Greece 47. Nicaragua

47. Peru 47. South Korea 47. Tunisia 53. Paraguay 53. South Africa 53. Zambia 56. China 56. Dominican Republic 56. El Salvador 56. Guatemala 56. Indonesia 56. Jamaica 56. Kenya 56. Morocco 64. Honduras 64. Papua New Guinea 64. Suriname 64. Thailand 68. Algeria 68. Angola 68. India 68. Libya 72. Colombia 72. Egypt 72. Ghana 72. Guyana 72. Philippines 72. Vietnam 78. Bolivia 78. Sri Lanka 80. Kazakhstan 80. Turkey 82. Côte d'Ivoire 82. Russia 84. Haiti 85. Sudan 85. Syria 87. Argentina 87. Bangladesh 87. Ukraine 90. Iraq 91. Nigeria 92. Congo DR 93. Guinea 94. Ecuador 94. Pakistan 96. Iran 97. Cuba 98. Venezuela 99. Zimbabwe 100. Myanmar

PRS Risk Index

1-Nov-2010 • PRI-1

Political Risk Services
1-Nov-2010
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Regional PRS Risk Index. Ranked, within region, in ascending order of risk.
GLOBAL AVERAGES 11/10 72 72 92 83 78 77 74 74 72 70 70 70 70 69 63 49 68 83 81 75 72 71 69 67 67 66 60 53 48 80 89 88 88 87 87 86 82 81 80 80 79 77 77 74 74 72 65 64 73 68 66 65 60 53 09 72 71 95 83 76 74 74 74 69 69 70 70 68 67 62 49 67 83 77 76 68 71 73 64 65 66 58 51 46 81 89 88 87 87 88 86 82 80 80 80 79 77 77 77 76 73 66 65 74 70 65 63 59 56 08 73 72 96 84 78 70 76 77 67 72 69 73 70 69 58 51 67 82 77 76 69 69 70 65 66 64 63 55 51 82 90 88 89 87 88 85 85 81 80 86 79 79 79 77 79 78 68 64 74 66 64 68 57 55 07 73 73 96 84 79 73 73 81 66 72 71 73 71 69 62 49 67 83 77 77 67 67 67 66 65 62 64 55 51 83 91 87 89 87 87 87 86 81 84 89 82 81 81 78 79 80 70 63 73 66 65 68 54 53 06 73 73 96 84 79 73 70 81 67 75 71 72 71 72 60 52 67 84 78 76 67 68 66 67 62 61 65 62 50 83 91 87 89 87 86 86 85 82 82 89 82 80 80 78 79 80 67 64 73 64 65 68 58 55 East Europe Avg. Slovakia Czech Republic Bulgaria Poland Romania Hungary Russia Ukraine MidEast/N. Africa Avg. United Arab Emirates Oman Kuwait Saudi Arabia Israel Tunisia Morocco Algeria Libya Egypt Syria Iraq Iran Sub-Saharan Africa Avg. Botswana Gabon Cameroon Congo South Africa Zambia Kenya Angola Ghana Côte d'Ivoire Sudan Nigeria Congo DR Guinea Zimbabwe East Asia/Pacific Avg. Hong Kong Singapore Taiwan Australia Japan New Zealand Malaysia South Korea China Indonesia Papua New Guinea Thailand Philippines Vietnam Myanmar 11/10 75 86 83 82 78 74 73 64 60 71 87 86 80 79 78 72 70 68 68 67 62 58 50 66 83 74 73 72 71 71 70 68 67 64 62 57 56 55 46 75 92 89 88 87 83 82 79 72 70 70 69 69 67 67 43 09 76 83 83 83 80 74 77 64 62 71 88 86 79 76 78 72 70 69 69 67 60 56 51 66 83 77 73 72 72 70 66 68 67 61 63 58 54 52 47 75 91 89 83 86 83 83 78 73 70 67 69 69 66 69 43 08 77 84 84 84 82 75 76 67 67 72 90 87 79 79 76 74 72 71 70 67 63 52 54 66 85 77 73 70 74 72 67 65 69 58 66 58 60 51 47 75 91 90 84 86 83 83 79 73 70 69 69 69 66 71 45 07 78 81 84 84 80 75 80 68 68 71 90 87 80 78 75 75 73 73 68 64 63 48 54 67 85 76 73 71 77 72 67 67 70 58 66 58 61 51 49 75 92 90 85 87 85 81 80 73 70 69 69 70 66 68 47 06 78 81 86 84 83 76 79 68 66 71 90 86 80 78 70 74 74 74 68 61 59 51 54 67 85 75 69 75 77 71 68 69 73 58 66 58 61 53 49 75 90 90 84 86 84 80 79 73 68 70 72 73 64 66 44

N. & Cent. America Avg. Canada Trinidad & Tobago United States Panama Costa Rica Mexico Nicaragua Dominican Republic El Salvador Guatemala Jamaica Honduras Haiti Cuba South America Avg. Chile Uruguay Brazil Peru Paraguay Suriname Colombia Guyana Bolivia Argentina Ecuador Venezuela West Europe Avg. Sweden Austria Netherlands Finland Norway Switzerland Belgium Germany Ireland United Kingdom Denmark France Portugal Italy Spain Greece Turkey Cent. & South Asia Avg. Azerbaijan India Sri Lanka Kazakhstan Bangladesh Pakistan

PRI-2 • 1-Nov-2010

PRS Risk Index

................................................................................................................................................... 5 Corruption and other Bureaucratic Obstacles ............................ 14 © 2010.......................................................................................................... 3 Current Data.......................................................................................31 Political Players...................................................................... 9 Recent History ....................................... 29 Political Framework Players To Watch......................... ................................................................................................ Inc..................... 2 Highlights .......................................................Myanmar Table of Contents Page PRS Risk Index…………………………………………………………………………………………………… PRI-1 Country Forecast Map.............................. 5 Comment & Analysis ................................................................................................................................................................... 12 Government & Political Conditions.......................................................................... 4 Policies ................................................................................ 4 Legal Framework................................................................................................................................................................................................................. 7 International Agreements...... The PRS Group....... 17 Second Most Likely Five-Year Regime Scenario: Hard-line SPDC (40% Probability) ............... 32 Country Conditions Climate for Investment & Trade Overview ............................................................................................................................................................................................................................................................... 7 Labor Conditions......................................................................................................................................................... 1 Tariff and Non-tariff Barriers ................................................................. 11 Forecast Scenarios Most Likely Five-Year Regime Scenario: Military-Civilian (45% Probability)................................................................................................................................................................................................. 13 Foreign Relations............................................................... 26 Forecast Summary.............................................................................................................................................................................. 8 Background Geography........... 9 Social Conditions............................................................................................................................................................................................................................................................................................................................................................................................................. ISSN: 1097-4873 ................................. 24 Third Most Likely Five-Year Regime Scenario: Divided SPDC (15% Probability).......

India Myitkyina G Bangladesh Bhamo Ir raw addy G China Monywa G G Mandalay G Vietnam Chaulk G Taunggyi Myanmar Bay of Bengal G Akyab Laos G Prome Bago G G Mawlamyine Pathein G ✪ Rangoon Thailand Dawei Andaman Islands (INDIA) G Cambodia Andaman Sea Gulf of Thailand REV2003 Page 2 Map .Political Risk Services Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited.

but the group’s iconic leader.70 0. who was released from house Highlights 15-Dec-2010 • Page 3 .20 At a Crossroads Key Points To Watch…  The country’s first election since 1990 took place on November 7. a military junta that has ruled the country since 1988 and will remain the power behind the throne as Myanmar embarks down the road of “guided democracy”…  The SPDC is wagering that the appearance of democracy alone will be sufficient to shake off Myanmar’s pariah status.4 Current Account ($bn) 0. Myanmar Country Forecast Highlights MOST LIKELY REGIMES AND THEIR PROBABILITIES 18-Month: *Military-Civilian 60% (50%) Five-Year: *Military-Civilian 45% FORECASTS OF RISK TO INTERNATIONAL BUSINESS Financial Direct Turmoil Transfer Investment 18-Month: Moderate (High) D+ (D) C+ (C) Five-Year: Very High D D+ ( ) Indicates change in rating.1 2011-2015(F) 3. Than Shwe. The main opposition NLD has been split by a disagreement over electoral strategy. the chairman of the SPDC. Non-elected seats in both chambers are reserved for members of the military. Export Market C. but several countries in the region.0 13. who will be appointed by Gen.5 9. most notably India.18 0.9 2010(F) 3. and the military-backed USDP won nearly 80% of the vote and large majorities in both chambers of the new bicameral legislature. Aung San Suu Kyi.(D+) D * Indicates forecast of a new regime.Political Risk Services 15-Dec-2010 Reproduction without written permission of The PRS Group is strictly prohibited. KEY ECONOMIC FORECASTS Real GDP Years Growth % 2005-2009(AVG) 3.8 Inflation % 18. appear to be prepared to play the junta’s game…  But it is too early to tell whether the political maneuver will work. Many international organizations and most western governments dismissed the process as a farce.

and how much dissent the generals are willing to tolerate in the interest of ensuring a stable generational transfer of power.0 13.0 0. they may result in a qualitative shift of power from an older generation of uniformed generals to a younger group of officers who.4 0. A hard-line response to a threat to domestic order cannot be taken for granted. will limit the potential for a reduction of impediments to foreign investment…  That said. Economic performance will remain well below potential unless and until international pressure eases.20 -0.13 2. were required to shed their uniforms to stand for office…  How things proceed will depend to a large degree on how far Suu Kyi is prepared to force the issue.18 0. political considerations.0 0. hoping to exploit its nominal reform process in order to obtain a relaxation of the pressures for economic and political change…  International sanctions will remain in place and will continue to bite hard for the foreseeable future. pushing the annual inflation rate into double-digits on average over the forecast period.8 9.2 10. particularly the military’s perception that outside influences pose a threat to its control. while the elections fell short of meeting any standard of democracy. which will require some progress toward the relaxation of political restrictions…  On balance. arrest shortly after the elections.0 1.20 3.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. loose monetary policies and the volatility of the currency in the parallel market will create persistent upward pressure on prices.0 19. it will lobby within ASEAN for permission to take a more gradual approach in easing its trade restrictions.4 9.30 Page 4 • 15-Dec-2010 Highlights . Despite weak domestic demand.7 2. Myanmar will try to live up to its trade obligations as a member of ASEAN. particularly if responsibility for deciding how to respond to the threat were left to the new breed of leaders that will inhabit the government headed by Prime Minister Thein Sein… Political Obstacles Will Hamper Economic Performance  Military leaders recognize that more foreign investment is needed for economic development. real GDP growth is forecast to average less than 4% per year through 2015. Economic Forecasts for the Three Alternative Regimes Military-Civilian Growth (%) Inflation (%) CACC ($bn) Hard-line SPDC Growth (%) Inflation (%) CACC ($bn) Divided SPDC Growth (%) Inflation (%) CACC ($bn) 2010 2011-2015 3. for the sake of appearance.1 3. and supported by Vietnam.4 22. has resumed her effort to generate both domestic and international pressure for more substantive political reforms…  At the same time.22 0.

Political Risk Services
1-Dec-2010

Myanmar Country Forecast
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Political Fact Sheet

CAPITAL: Naypyidaw CONSTITUTION: 1974 (suspended) ADMINISTRATIVE SUBDIVISIONS: 7 states and 7 divisions POPULATION: 2009: 50.02 million AREA: 678,576 sq. km. OFFICIAL LANGUAGE: Myanmar STATUS OF PRESS: completely controlled SECTORS OF GOVERNMENT PARTICIPATION: The government owns and operates all major sectors of the economy except agriculture, which is strictly controlled. CURRENCY EXCHANGE SYSTEM: pegged to the SDR EXCHANGE RATE: 11/22/2010 $1=6.61 kyats ELECTIONS: Three-fourths of House of Representatives members are elected for a maximum fiveyear term; last election, November 7, 2010. Three-fourths of House of Nationalities members are elected for a five-year term; last election, November 7, 2010.

HEAD OF STATE: Chairman, State Peace and Development Council (SPDC), Than Shwe (1992) HEAD OF GOVERNMENT: Prime Minister Thein Sein (2007) OFFICIALS: Maung Aye, Vice Chairman, SPDC Tin Aung Myint Oo, Secretary 1, SPDC Htay Oo, Agriculture & Irrigation Tin Naing Thein, Commerce Thein Zaw, Communications, Posts & Telegraphs Khin Maung Myint, Construction Than Shwe, Defense Lun Thi, Energy Hla Tun, Finance & Revenue Nyan Win, Foreign Affairs Maung Oo, Home Affairs Aung Thaung, Industry Kyaw Hsan, Information Aung Kyi, Labor Ohn Myint, Mines Soe Tha, National Planning & Economic Development Myint Maung, Religious Affairs Thein Swe, Transport LEGISLATURE: The State Peace and Development Council (SPDC) controls the government. A new constitution approved in a referendum held in May 2008 provides for the establishment of a bicameral Parliament, consisting of a 224-member House of Nationalities, in which 56 seats will be filled by military appointment, and a 440-member House of Representatives, in which military representatives will hold 110 seats. The first elections under the new constitution were held on November 7, 2010.

Current Data

1-Dec-2010 • Page 5

Political Risk Services
1-Dec-2010

Reproduction without written permission of The PRS Group is strictly prohibited.

Myanmar Databank
2000-2004 Average 2005-2009 Average
11.73 238 3.9 18.5 1.13 9.8 0.55 4.7 0.96 8.1 -0.41 -3.4 4.10 0.1 16.0 0.55 2.15 2.14 0.01 2.15 31.61 272.7 0.66 11.6 0.70 6.0 11.8 5.61 3.14 2.47 0.29 0.11 0.17 6.17 0.63 1.52 5.0 1122.212 -7.0 49.16 0.8 57 27 30 2.9 88 70 7 23 0 0.25 0.01

2000
10.55 226 13.7 -1.7 1.08 10.2 0.58 5.5 0.95 9.0 -0.37 -3.5 1.99 0.9 15.2 0.26 0.22 0.22 0.01 0.23 14.50 137.4 0.37 15.0 -0.21 -2.0 -8.5 1.66 2.17 -0.51 0.48 0.04 0.29 2.47 0.34 -0.11 -0.6 241.965 -2.2 46.70 0.7 76 36 26 0.7 83 65 14 21 0 0.16 0.01

2001
8.28 176 11.3 21.1 0.85 10.3 0.33 4.0 0.36 4.4 -0.03 -0.4 2.22 1.0 15.0 0.21 0.40 0.40 0.01 0.41 25.62 309.4 0.58 18.0 -0.15 -1.8 -4.7 2.52 2.44 0.08 0.41 0.04 0.25 3.22 0.53 -0.12 -0.6 428.559 -77.1 47.03 0.7 74 30 27 4.6 83 65 14 21 0 0.15 0.01

2002
9.14 193 12.0 57.1 0.96 10.5 0.35 3.8 0.44 4.8 -0.09 -1.0 3.57 0.8 15.2 0.15 0.47 0.47 0.01 0.48 26.29 287.6 0.48 15.6 0.10 1.1 3.2 2.42 2.02 0.40 0.43 0.04 0.19 3.08 0.54 -0.06 -0.4 615.455 -43.6 47.36 0.7 74 30 27 0.7 83 65 10 25 0 0.17 0.01

2003
9.61 202 13.9 36.6 1.06 11.0 0.39 4.1 0.55 5.7 -0.16 -1.7 4.18 0.9 15.3 0.25 0.55 0.55 0.01 0.56 26.93 280.2 0.47 15.0 -0.02 -0.2 -0.6 2.71 1.91 0.80 0.25 0.03 0.12 3.11 0.56 0.00 0.0 802.978 -30.5 47.68 0.7 72 30 27 0.7 83 65 10 25 0 0.18 0.01

2004
9.08 189 3.0 4.5 0.98 10.8 0.36 4.0 0.55 6.1 -0.19 -2.1 3.00 0.8 15.3 0.21 0.67 0.67 0.01 0.68 27.56 303.5 0.51 15.1 0.11 1.2 3.3 2.93 2.00 0.93 0.25 0.04 0.16 3.38 0.57 0.11 0.7 819.040 -2.0 48.00 0.7 70 29 28 4.4 83 70 7 23 0 0.20 0.01

Domestic Economic Indicators GDP (Nominal, $bn) Per Capita GDP ($) Real GDP Growth Rate (%) Inflation Rate (%) Capital Investment ($bn) Capital Investment/GDP (%) Budget Revenues ($bn) Budget Revenues/GDP (%) Budget Expenditures ($bn) Budget Expenditures/GDP (%) Budget Balance ($bn) Budget Balance/GDP (%) Money Supply (M1, $bn) Change in Real Wages (%) Unemployment Rate (%) International Economic Indicators Foreign Direct Investment ($bn) Forex Reserves ($bn) Gross Reserves (ex gold, $bn) Gold Reserves ($bn) Gross reserves (inc gold, $bn) Total Foreign Debt ($bn) Total Foreign Debt/GDP (%) Debt Service ($bn) Debt Service/XGS (%) Current Account ($bn) Current Account/GDP (%) Current Account/XGS (%) Exports ($bn) Imports ($bn) Trade Balance ($bn) Exports of Services ($bn ) Income, credit ($bn) Transfers, credit ($bn) Exports G&S ($bn) Liabilities ($bn) Net Reserves ($bn) Liquidity (months import cover) Currency Exchange Rate Currency Change (%) Social Indicators Population (million) Population Growth (%) Infant Deaths/1000 Persons under Age 15 (%) Urban Population (%) Urban Growth (%) Literacy % pop. Agricultural Work Force (%) Industry-Commerce Work Force (%) Services Work Force (%) Unionized Work Force (%) Energy - total consumption (1015 Btu) Energy - consumption/head (109 Btu)
Note: fiscal year beginning April 1

9.33 197 10.8 23.5 0.99 10.6 0.40 4.3 0.57 6.0 -0.17 -1.7 2.99 0.9 15.2 0.22 0.46 0.46 0.01 0.47 24.18 263.6 0.48 15.7 -0.03 -0.3 -1.5 2.45 2.11 0.34 0.36 0.04 0.20 3.05 0.51 -0.04 -0.2 581.599 -31.1 47.35 0.7 73 31 27 2.2 83 66 11 23 0 0.17 0.01

Current Data

1-Dec-2010 ~ Page 6-7

Political Risk Services
1-Dec-2010

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Myanmar Databank
2000-2004 Average 2005-2009 Average
11.73 238 3.9 18.5 1.13 9.8 0.55 4.7 0.96 8.1 -0.41 -3.4 4.10 0.1 16.0 0.55 2.15 2.14 0.01 2.15 31.61 272.7 0.66 11.6 0.70 6.0 11.8 5.61 3.14 2.47 0.29 0.11 0.17 6.17 0.63 1.52 5.0 1122.212 -7.0 49.16 0.8 57 27 30 2.9 88 70 7 23 0 0.25 0.01

2005
8.87 183 5.0 9.4 1.05 11.8 0.37 4.2 0.53 6.0 -0.16 -1.8 3.65 0.5 16.0 0.24 0.77 0.77 0.01 0.78 28.72 323.8 0.72 16.7 0.59 6.7 13.7 3.79 1.76 2.03 0.26 0.06 0.20 4.31 0.60 0.18 1.2 843.062 -2.9 48.35 0.7 70 29 29 4.3 83 70 7 23 0 0.25 0.01

2006
11.43 235 7.0 20.0 1.09 9.5 0.48 4.2 0.97 8.5 -0.49 -4.3 4.00 0.3 16.0 0.28 1.24 1.24 0.01 1.25 29.91 261.7 0.79 15.5 0.80 7.0 15.7 4.55 2.34 2.21 0.28 0.10 0.16 5.09 0.58 0.67 3.4 1200.000 -42.3 48.72 0.8 64 27 29 0.8 85 70 7 23 0 0.23 0.01

2007
12.21 249 5.5 35.0 1.20 9.8 0.59 4.8 1.07 8.8 -0.48 -3.9 4.23 0.0 16.0 0.50 1.78 1.78 0.01 1.79 31.02 254.1 0.95 13.9 1.00 8.2 14.6 6.28 3.27 3.01 0.30 0.12 0.15 6.85 0.60 1.19 4.4 1300.000 -8.3 49.13 0.8 51 26 31 7.8 90 70 7 23 0 0.25 0.01

2008
12.46 251 0.2 26.8 1.10 8.8 0.63 5.1 1.07 8.6 -0.44 -3.5 4.40 -0.3 16.0 0.98 3.50 3.50 0.01 3.51 33.19 266.4 0.41 5.4 0.45 3.6 5.9 6.99 4.31 2.68 0.32 0.14 0.17 7.62 0.65 2.86 8.0 1200.000 7.7 49.56 0.9 51 26 31 0.9 90 70 7 23 0 0.26 0.01

2009
13.69 274 2.0 1.5 1.23 9.0 0.68 5.0 1.16 8.5 -0.48 -3.5 4.24 0.0 16.1 0.76 3.46 3.40 0.01 3.41 35.22 257.3 0.45 6.4 0.65 4.7 9.3 6.42 4.01 2.41 0.28 0.12 0.17 6.99 0.70 2.71 8.1 1068.000 11.0 50.02 0.9 49 25 31 0.9 90 70 7 23 0 0.26 0.01

Domestic Economic Indicators GDP (Nominal, $bn) Per Capita GDP ($) Real GDP Growth Rate (%) Inflation Rate (%) Capital Investment ($bn) Capital Investment/GDP (%) Budget Revenues ($bn) Budget Revenues/GDP (%) Budget Expenditures ($bn) Budget Expenditures/GDP (%) Budget Balance ($bn) Budget Balance/GDP (%) Money Supply (M1, $bn) Change in Real Wages (%) Unemployment Rate (%) International Economic Indicators Foreign Direct Investment ($bn) Forex Reserves ($bn) Gross Reserves (ex gold, $bn) Gold Reserves ($bn) Gross reserves (inc gold, $bn) Total Foreign Debt ($bn) Total Foreign Debt/GDP (%) Debt Service ($bn) Debt Service/XGS (%) Current Account ($bn) Current Account/GDP (%) Current Account/XGS (%) Exports ($bn) Imports ($bn) Trade Balance ($bn) Exports of Services ($bn ) Income, credit ($bn) Transfers, credit ($bn) Exports G&S ($bn) Liabilities ($bn) Net Reserves ($bn) Liquidity (months import cover) Currency Exchange Rate Currency Change (%) Social Indicators Population (million) Population Growth (%) Infant Deaths/1000 Persons under Age 15 (%) Urban Population (%) Urban Growth (%) Literacy % pop. Agricultural Work Force (%) Industry-Commerce Work Force (%) Services Work Force (%) Unionized Work Force (%) Energy - total consumption (1015 Btu) Energy - consumption/head (109 Btu)
Note: fiscal year beginning April 1

9.33 197 10.8 23.5 0.99 10.6 0.40 4.3 0.57 6.0 -0.17 -1.7 2.99 0.9 15.2 0.22 0.46 0.46 0.01 0.47 24.18 263.6 0.48 15.7 -0.03 -0.3 -1.5 2.45 2.11 0.34 0.36 0.04 0.20 3.05 0.51 -0.04 -0.2 581.599 -31.1 47.35 0.7 73 31 27 2.2 83 66 11 23 0 0.17 0.01

Current Data

1-Dec-2010 ~ Page 6-7

0 7.Myanmar Country Forecast 1-Dec-2010 Comparison: Myanmar Regional Real GDP Growth (2009): East Asia/Pacific China Vietnam Indonesia Papua New Guinea Myanmar Australia Philippines South Korea New Zealand Singapore Malaysia Taiwan Thailand Hong Kong Japan -8 -6 -4 -2 0 (percent) 2 4 6 8 10 Regional Inflation Rates (2009): East Asia/Pacific Vietnam Indonesia Papua New Guinea Philippines South Korea New Zealand Australia Myanmar Hong Kong Singapore Malaysia China Taiwan Thailand Japan -2.0 6.0 2.0 8.0 0.0 Page 8 • 1-Dec-2010 Reproduction without written permission of The PRS Group is strictly prohibited Current Data .0 3.0 -1.0 5.0 1.0 (percent) 4.

5  16.0 5.0 0.6  -7.4  6.0 (percent) 10.0 Economic Performance Profile Country's Ranking Relative to All Countries Covered by Political Risk Services 2005-2009 GDP Per Capita ($) Real GDP Growth (%) Inflation (%) Unemployment (%) Capital Investment (% of GDP) Budget Balance (% of GDP) Current Account (% of GDP) Debt Service Ratio Currency Change (%)  238  3.0 -5.0 15.8  -3.0 NEXT 25% BEST 25% NEXT 25% WORST 25% Current Data Reproduction without written permission of The PRS Group is strictly prohibited 1-Dec-2010 • Page 9 .Myanmar Country Forecast 1-Dec-2010 Comparison: Myanmar Regional Current Account/GDP (2009): East Asia/Pacific Singapore Malaysia Taiwan Hong Kong Thailand China Philippines South Korea Myanmar Japan Indonesia New Zealand Australia Papua New Guinea Vietnam -10.0 20.0  11.9  18.0  9.

other (2%) Page 10 • 1-Dec-2010 Current Data .9% 90% Work Force Distribution Agriculture Industry-Commerce Services Unions 70% 7% 23% 0% Ethnic Groups Bamar (68%).26 0. Rakhine (4%). Shan (9%).9% 49 25% 31% 0.01 as of 2009 Population Annual Growth Infant Deaths per 1. minority ethnic languages Religions Buddhist (89%). Social Indicators Primary Energy Energy Consumption (1015 Btu): 9 Per Capita Consumption (10 Btu): 0. Chinese (3%). Karen (7%).000 Persons Under Age 15 Urban Population Urban Growth Literacy 0. animist beliefs (1%). Muslim (4%). Baptist (3%).Political Risk Services 1-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. Roman Catholic (1%). other (9%) Languages Myanmar.

winning nearly 80% of the vote and large majorities in both chambers of the new bicameral legislature.” The National League for Democracy (NLD). The Rakhine Nationalities Development Party (RNDP) and the Shan Nationalities Democratic Party (SNDP). Non-elected seats in both chambers are reserved for members of the military. Than Shwe. was the NLD’s junta-sponsored opponent in the 1990 elections. In the event. some senior members of the party opted to contest the elections under the banner of the National Democratic Force (NDF). which finished second in the upper and lower house elections. and the opposition is greatly fragmented. was outlawed when it refused to register for the elections to protest the continued detention of party leader Aung San Suu Kyi. the military junta that has ruled the country since 1988 and will remain the power behind the throne as Myanmar follows the carefully crafted “roadmap to democracy. Myanmar Country Forecast Comment & Analysis Political Reforms Lack Substance The country’s first election since 1990 took place on November 7. and its opposition to the SPDC (which is debatable. However. The USDP won 259 of the 330 contested seats in the 440-member House of Representatives.Political Risk Services 15-Dec-2010 Reproduction without written permission of The PRS Group is strictly prohibited. at best) stems largely from resentment over its marginalization by the junta in the two decades since the last election. by extension. to the new government. The NLD called on its supporters to boycott the November vote. Comment & Analysis 15-Dec-2010 • Page 11 . and. both represent narrow ethnic interests. arguing that opponents of the military regime could not afford to squander their only opportunity to ensure at least some semblance of true opposition within the new legislative bodies. the chairman of the State Peace and Development Council (SPDC). and to the surprise of no one. and 129 of the 168 seats up for election in the 224-member House of Nationalities. the military-backed Union Solidarity and Development Party (USDP) won going away. the NDF won just 12 seats in the lower chamber and four seats in the House of Nationalities. the third largest party in both houses. which has formed the main opposition to the junta and was headed for victory in the 1990 election before military leaders intervened and nullified the results. while the National Unity Party (NUP). on the grounds that participation would grant legitimacy to the process. who will be appointed by Gen. respectively.

including the release of political prisoners. Of course. Members of the opposition who cleared that bar were required to pay a $500 fee (or about the average annual income) to register as a candidate. and media coverage of the voting was limited to local reporters who were pre-screened by military officials. the SPDC did not even make a serious effort to disguise what it was doing.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. the group’s iconic leader. there was never any question but that the “civilians” actually wielding power in the new government would be little more than a junior varsity squad of the SPDC. Under electoral rules. Not surprisingly. Indeed. In many respects. has resumed her effort to generate Page 12 • 15-Dec-2010 Comment & Analysis . the process was actually (and rather transparently) a stage-managed event designed to create the appearance of democracy with none of the substance. appear to be prepared to play the junta’s game. The junta has periodically taken steps. The elections are the culmination of a long-term strategy aimed at shaking off Myanmar’s pariah status. Predictably (and justifiably). the opposition parties (including the NUP) alleged that the elections were tainted by rampant fraud. The SPDC is wagering that the appearance of democracy alone will be sufficient to achieve its objective. who was released from house arrest shortly after the elections. However. no one convicted of a crime was eligible to stand for office (or even to vote). Pressure for Real Democracy Will Persist But it is too early to tell whether the political maneuver will work. Thein Sein. although taking the form of an election. As for the elections themselves. Indeed. and then faced harassment from authorities and tight restrictions on public speech and published materials. several countries in the region. many international organizations and most western governments dismissed the process as a farce. held that same post in the SPDC-led regime. many international organizations and most western governments dismissed the elections as a farce. A ban on active duty military officers filling any of the elected seats was intended to give weight to the pretense that power was being transferred to a civilian government. most notably India. no international election monitors were invited to observe the exercise. and. the opposition never really stood a chance. who will be prime minister when the government was installed. aimed at testing just how little ground the regime must surrender in order to win the cooperation of the domestic opposition and an easing of international pressure. given that the USPD is the creation of more than two-dozen generals who only turned in their uniforms in April 2010. However. Aung San Suu Kyi. just as predictably (and justifiably). a restriction that automatically disqualified a large section of the NLD’s leadership. Although the NLD split over electoral strategy.

especially if Than Shwe should die without formally anointing a successor.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. the Chin. However. while the elections fell short of meeting any standard of democracy. the Wa. The truces have held largely because of the threat of harsh government retaliation and promises of additional development in minority-dominated areas. and is rumored to have remained at the helm out of fear that his departure could trigger a destabilizing power struggle within the SPDC. Even so. Since 1989. and the Rohingya—have little in common except a desire for autonomy or independence that fueled armed conflict between rebel groups and the central government dating back to the 1940s. There is still the potential for a battle for supremacy within the SPDC. were required to shed their uniforms to stand for office. but the largest of the groups—the Karen. many of whom live in isolated and mountainous enclaves along the border with Thailand. The elections were reportedly preceded by a rapid sell-off of state assets at bargain prices. Thus. it is possible that responsibility for deciding how to best to respond to the threat posed by pro-democracy activists and a post-election escalation of armed conflict with guerrilla groups fighting on behalf of various ethnic minority communities might be handed to the new breed of (now former) military leaders who will inhabit the government headed by Prime Minister-elect Thein Sein. Ethnic Tensions to Rise in Post-election Period Myanmar is home to about two dozen minority groups. including the Karen National Union (KNU) and Shan State Army-South (SSA-S). At the same time. and how much dissent the generals are willing to tolerate in the interest of ensuring a stable generational transfer of power. the Kachin. Ethnic minorities account for about 40% of the country’s population of 55 million. How things proceed will depend to a large degree on how far Suu Kyi is prepared to force the issue of democratic reform. sanctions have limited the government’s ability to Comment & Analysis 15-Dec-2010 • Page 13 . they may well result in a qualitative shift of power from an older generation of uniformed generals to a younger group of officers who. China. but the sidelining of the reputedly reform-minded Gen. and Bangladesh. Than Shwe has long been reported to be quite ill. the Mon. while six others. the SPDC has secured tenuous truces with 17 minority rebel groups. a hard-line response to a threat to domestic order cannot be taken for granted. India. the Shan. Khin Nyunt back in 2004 all but ensures that the control of the military will remain firmly in the hands of hard-liners. which could be indicative of an attempt by the top generals to line their pockets in anticipation of their departure to the political sidelines. for the sake of appearance. both domestic and international pressure for more substantive political reforms. have remained at war with the government.

reconstitute their forces into a border guard under the command of Myanmar’s military. which made no secret of its displeasure over the flight of 30. and opponents of integration into the BGF forced the issue by launching an attack on the town of Myawaddy.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. citing the junta’s failure to give serious consideration to its demands for greater autonomy and democracy. The United Wa State Party (UWSA). Nearly all of the other cease-fire groups—including the Kachin Independence Army (KIA). apparently in anticipation of a government offensive aimed at convincing the rebel groups that they will face eradication if they refuse to join the Border Guard Force (BGF). especially China. the largest and best-equipped of the ethnic rebel forces. To date. rejected all three options. However. follow through with the promised carrots. only two of the cease-fire groups have agreed to join the BGF. but is also the chief source of arms for the ethnic armies. the junta began to apply pressure on the so-called “cease-fire groups” to proceed toward fuller integration into the political and social mainstream. The prospect of an escalation of guerrilla warfare that could produce a flood of refugees has alarmed Myanmar’s neighbors.000 refugees have fled the area into Thailand. the Democratic Karen Buddhist Army (DKBA) and the National Democratic Army-Kachin. Other minority ethnic groups boycotted the elections. Presumably. Ahead of the 2010 elections. the UWSA gave its response only after receiving the blessing of China. prompting the junta to ban the Kachin and the Wa from registering parties. under the terms of the cease-fire agreement. near the border with Thailand. the second largest rebel force—followed the USWA’s lead.000 refugees into its territory following a crackdown against one of the smaller non-compliant rebel groups in April 2009. and recent developments indicate that at least some of armed groups are prepared to test the government’s ability to carry out a multifront crackdown. and fighting continues around the Three Pagodas Pass. The SPDC presented three options to the guerrilla forces—surrender their arms. Some 20. and the UWSA refused to permit polling to take place within the territory under its control. at least temporarily. In the weeks leading up to the elections. both the UWSA and the KIA were reported to be stepping up both recruitment and training. which is the SPDC’s strongest supporter in the international arena. the DKBA has split over the issue. or transform their organizations into political parties and participate in the 2010 elections. As such. announcing that it preferred to continue. China’s priorities are ensuring that unrest in Myanmar does not lead to stability in its own territory and protecting its investments and access to resources in Myanmar. China can be expected to apply pressure on both sides to show restraint and reach a negotiated Page 14 • 15-Dec-2010 Comment & Analysis .

Foreign Investment May Increase Post-election. China praised the election as “a transition to an elected government. particularly with Thailand. If offensives against Karen separatists spill over the border and result in Thai casualties. Such economic growth as does occur will be fueled by a handful of large energy and infrastructure projects. Italian-Thai Development reportedly signed a deal with the Burmese Port Authority worth $13. Open conflict with such a major regional power could further undermine the country’s international support and weaken its control over the domestic opposition. in part to balance Chinese influence. The lion’s share is destined for Daewoo International’s Shwe offshore gas field and China National Petroleum Corporation’s oil and gas pipelines transporting production from the project across the country to China. The country’s main foreign investors. The country will shrug off western criticism while accepting investment by western companies prepared to deal with the government. some of which view officials in Beijing with suspicion. and steel mills are also planned. a serious military exchange can be expected. the Chinese government does not wield the authority necessary to stifle conflict entirely. China. and the influence of the Chinese varies among ethnic groups. as western sanctions are expected to remain in place and no significant business-friendly shifts in policy are anticipated. which they view as a rival for influence over disaffected minorities. and restrictions on bank lending will hamper investment and Comment & Analysis 15-Dec-2010 • Page 15 . Myanmar’s military leaders do not trust the government in Beijing.2 billion to develop the project. Inflation to Rise In general. However. as well. refineries. Weak growth of output and low prices will limit the contribution of gas production to growth in the near term. the centerpiece of which is to be a deepwater port. Moderate Growth in Near Term. Shortly before the November 2010 elections.” and India is eager to expand its investment presence. foreign investment exploded to $16 billion in the second quarter of 2010. and other ASEAN economies have not condemned the election. A dispute over territory in the Bay of Bengal that holds significant oil and gas potential creates a risk of the periodic flaring of tensions with Bangladesh. Power plants.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. the government announced plans to establish a Special Economic Zone in Dawei. the political transition is not expected to have much of an immediate impact in the economic arena. and appear ready to jockey for investment opportunities in the country’s rich natural resources. According to government figures. settlement of their conflicts. foreign investment appears set to increase. Thailand. The recent escalation of unrest in Myawaddy highlights the potential for domestic conflict to generate tensions with neighboring countries.

when new production is expected to come on line. currency volatility. and the effect of a moderately improved economic situation on private demand. Consumer price increases will be held to 9% in 2010. in combination with wider deficits in the services and income balances. as investment picks up. will shrink the current account surplus. productivity in the agriculture sector and dampen business activity in the commercial capital. The central bank’s policy of increasing the money supply to finance the government deficit will produce high inflation. and is forecast to reach 4% in 2011. real GDP growth is forecast to average just 3. and may even produce a deficit. A large increase in investment-related imports will contribute to a significant narrowing of the trade surplus in 2010 and 2011 that. An increase in gas exports later in the forecast period will have a beneficial impact on the external balances. Page 16 • 15-Dec-2010 Comment & Analysis .8% per year through 2015. However. Yangon. the result of loose fiscal and monetary policies. resulting in average current account surpluses of $200 million per year through 2015. Real GDP growth will accelerate to 3. Gas output will not increase significantly until later in the five-year forecast period. as very low household incomes and a lack of consumer access to credit constrains private spending.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. inflation will push above 10% over the medium term. and while the pace of economic expansion could rise to 5%.1% in 2010. The impact of sanctions on the external balances has been mitigated by higher commodity prices and import restrictions imposed by the government since 2002.

the military-backed Union Solidarity and Development Party (USDP) won nearly 80% of the vote and large majorities in both chambers of the new bicameral legislature.Political Risk Services 15-Dec-2010 Reproduction without written permission of The PRS Group is strictly prohibited.4 CACC ($bn) 0.20 The country’s first election since 1990 took place on November 7. the military junta that has ruled the country since 1988. Than Shwe. including the release of political prisoners.8 Inflation (%) 9.0 13. The junta has periodically taken steps. fully 25% of the seats in both the 440-member House of Representatives and the 224-member House of Nationalities are reserved for military officers who will be appointed by Gen. Than Shwe (or a successor) will also be empowered to declare a state of emergency if “national solidarity” is threatened. The SPDC is wagering that the appearance of democracy alone will be sufficient to Forecast Scenarios 15-Dec-2010 • Page 17 . Myanmar Country Forecast Forecast Scenarios SUMMARY OF 18-MONTH FORECAST Military-Civilian 60% Hard-line SPDC 30% Divided SPDC 10% REGIMES & PROBABILITIES SUMMARY OF FIVE-YEAR FORECAST Military-Civilian 45% Hard-line SPDC 40% Divided SPDC 15% REGIMES & PROBABILITIES Most Likely Regime Scenario 18-Month Forecast Period: Military-Civilian (60% Probability) Five-Year Forecast Period: Military-Civilian (45% Probability) MilitaryCivilian 2010 2011-2015 Growth (%) 3. the chairman of the State Peace and Development Council (SPDC). Under the constitution approved in May 2008. a constitutional provision that ensures the SPDC will continue to play a central role in steering the country down the road of “guided democracy. As the country’s de facto president. 2010.” The elections are the culmination of a long-term strategy aimed at shaking off Myanmar’s pariah status. aimed at testing just how little ground the regime must surrender in order to win the cooperation of the domestic opposition and an easing of international pressure.1 3.18 0. and to the surprise of no one.

while the elections fell short of meeting any standard of democracy. Than Shwe has long been reported to be quite ill. achieve its objective. How things proceed will depend to a large degree on how far Suu Kyi is prepared to force the issue of democratic reform. it is at least as likely that a threat to serious threat to stability will prompt a suspension of the Page 18 • 15-Dec-2010 Forecast Scenarios . many international organizations and most western governments dismissed the elections as a farce. Predictably (and justifiably). Even so. In any case. but the group’s iconic leader. for the sake of appearance. were required to shed their uniforms to stand for office. But it is too early to tell whether the political maneuver will work. The elections were reportedly preceded by a rapid sell-off of state assets at bargain prices. they may well result in a qualitative shift of power from an older generation of uniformed generals to a younger group of officers who. Aung San Suu Kyi. If the sham democracy envisioned by the SPDC is not sufficient to relieve the pressure. and is rumored to have remained at the helm out of fear that his departure could trigger a destabilizing power struggle within the SPDC. several countries in the region. who was released from house arrest shortly after the elections. but the sidelining of the reputedly reform-minded Gen. has resumed her effort to generate both domestic and international pressure for more substantive political reforms. There is still the potential for a battle for supremacy within the SPDC. especially if Than Shwe should die without formally anointing a successor. a hard-line response to a threat to domestic order cannot be taken for granted. which could be indicative of an attempt by the top generals to line their pockets in anticipation of their departure to the political sidelines.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. and how much dissent the generals are willing to tolerate in the interest of ensuring a stable generational transfer of power. the generals and their erstwhile colleagues in Thein Sein’s government may be willing to consider deeper reforms that result in something more akin to the genuine democracy desired by the NLD. Khin Nyunt back in 2004 all but ensures that the control of the military will remain firmly in the hands of hard-liners. However. However. most notably India. Thus. it is possible that responsibility for deciding how to best to respond to the threat posed by pro-democracy activists and a post-election escalation of armed conflict with guerrilla groups fighting on behalf of various ethnic minority communities might be handed to the new breed of (now former) military leaders who will inhabit the government headed by Prime Minister-elect Thein Sein. the combined pressure of heightened domestic tensions and international sanctions cannot be withstood indefinitely. The main opposition National League for Democracy (NLD) suffered a split caused by a disagreement over electoral strategy. At the same time. appear to be prepared to play the junta’s game.

In the latter regard. According to government figures. foreign companies must obtain a permit to trade (essentially a business license) from the Ministry of National Planning and Economic Development’s Directorate of Investment Forecast Scenarios 15-Dec-2010 • Page 19 . the privatization campaign that preceded the recent elections was reminiscent of the process that led to the rise of oligarchs in Russia in the 1990s. pointing to the distinct possibility that natural resource development and privatization will entrench powerful interests rather than promote change. but China is expanding its presence in the country. Although 100% foreign ownership is permitted in approved sectors. Reflecting the regime’s fear of foreign influence. Political Considerations a Barrier to Improved Climate for Investment Military leaders recognize that increased foreign investment is essential to the country’s economic development. Other member states of the Association of Southeast Asian Nations (ASEAN) account for most of the foreign investment in Myanmar. despite substantial interest in the country’s oil and gas resources. However. foreign investment exploded to $16 billion in the second quarter of 2010. Foreign investment will undoubtedly increase in the aftermath of the elections. which China. a consideration that will incline the regime to favor investment from countries that are willing to overlook Myanmar’s shortcomings in the area of human rights and to implement policies aimed at promoting domestic investment. new legislature and the reassertion of direct military control. signaling their intention to grab investment opportunities in the natural resources sector. largely owing to the moral and legal disincentives to cooperation with the military regime. The hard-liners within the SPDC are keenly aware of the potential for an expanded foreign (especially western) presence in the economy to facilitate the spread of ideas that pose a threat to political stability. the odds that even the pretense of democratic rule will be maintained for the entire five-year forecast period are less than even. the barriers to foreign investment have been set fairly high. and investment policies will continue to be shaped by purely political considerations as long as the SPDC retains a central political role. India. a factor that along with a growing appetite for energy has stimulated strong interest among investors in India. New foreign investment has declined since peaking in the mid1990s. western countries will steer clear of Myanmar as long as sanctions remain in place. Consequently.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. and the ASEAN countries have generally praised as a step forward. most of it destined for Daewoo International’s Shwe offshore gas field and pipelines being built by China National Petroleum Corporation to transport production from the Shwe project across the country to China.

Supported by Vietnam. dims the prospects for any significant easing of currency restrictions as long as international sanctions remain in place. allowing the country to remain engaged with its neighbors and limiting the isolation created by international sanctions imposed by the US. the centerpiece of which will be a deepwater port. the fragile state of the banking sector will make the government leery of making any revisions to exchange regulations that might be expected to facilitate the flow of imports to the country.5 billion on the back of a surge in gas prices in 2008. which is all but ruled out as long as international sanctions are maintained. still amount to about 10 months of import cover. which poses a significant de facto barrier to investment. hoping to exploit its nominal reform process in order to obtain a relaxation of the pressures for economic and political change. No Easing of Import Restrictions Despite the junta’s suspicions of the outside world. which stood on the brink of collapse as recently as 2003. In addition to economic benefits. the EU. Shortly before the November 2010 elections. and steel mills are also planned. Although the other members of ASEAN will apply pressure for the elimination of this practice. the government announced plans to establish a Special Economic Zone in Dawei.2 billion to develop the project. Nevertheless. and. but the still fragile state of the domestic financial system. Italian-Thai Development has reportedly signed a deal worth $13. and Companies Administration (DICA). Foreign exchange reserves nearly doubled to $3. However. membership provides political advantages. Myanmar will lobby within ASEAN for permission to take a more gradual approach in easing its trade restrictions. Power plants. and the country may Page 20 • 15-Dec-2010 Forecast Scenarios . and other industrialized democracies. despite declining slightly in 2009 as gas prices fell. The impediments posed by high nominal tariff rates are increased by the unrealistic exchange rates used to assess the value of imports. Myanmar will try to live up to its trade obligations as a member of ASEAN. DICA has been barred from issuing new permits since 2002. Some effort is being made to address the inadequate state of the infrastructure. refineries. The improved performance of the export sector has eased pressure on foreign exchange reserves. there is little chance that the government will even slightly ease restrictions on non-essential imports (currently only 20% of all imports) in the absence of a sustained macroeconomic stability. Friction and Flashpoints It is likely that the post-election period will be troubled by a rise in incidents of civil strife and an escalation of armed conflict with ethnic guerrilla groups.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited.

but the largest of the groups—the Karen. Suu Kyi will remain an icon of dissent. citing the junta’s failure to give serious consideration to its demands for greater autonomy and democracy. However. China. under the terms of the cease-fire agreement. which may be directly targeted by opponents of the government. the Kachin. the Mon. Forecast Scenarios 15-Dec-2010 • Page 21 . Since 1989. and recent developments indicate that at least some of armed groups are prepared to test the government’s ability to carry out a multifront crackdown. well be entering a period of chronic heightened political tensions in which the threat of a violent eruption of discontent. the SPDC has secured tenuous truces with 17 minority rebel groups. India. The SPDC presented three options to the guerrilla forces—surrender their arms. even after the installation of a nominally civilian government. or transform their organizations into political parties and participate in the 2010 elections. Ethnic minorities account for about 40% of the country’s population of 55 million. both domestically and internationally. while six others. sanctions have limited the government’s ability to follow through with the promised carrots. reconstitute their forces into a border guard under the command of Myanmar’s military. Ahead of the 2010 elections. Foreign firms are at risk from the effects of the social and economic disruptions. The United Wa State Party (UWSA). Especially vulnerable are businesses engaged in petroleum and other mineral extractive operations. the Chin. Myanmar is home to about two dozen minority groups. The military’s comprehensive intelligence and surveillance system will allow the government to crush most dissent at its onset in Yangon and other key areas. the largest and best-equipped of the ethnic rebel forces. the junta began to apply pressure on the so-called “cease-fire groups” to proceed toward fuller integration into the political and social mainstream. announcing that it preferred to continue. have remained at war with the government. and a brutal crackdown. and the Rohingya—have little in common except a desire for autonomy or independence that fueled armed conflict between rebel groups and the central government dating back to the 1940s. The truces have held largely because of the threat of harsh government retaliation and promises of additional development in minority-dominated areas. many have not. The military will deal with any demonstrations harshly. rejected all three options. many of whom live in isolated and mountainous enclaves along the border with Thailand. and Bangladesh. the Wa. at least temporarily.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. the Shan. will be high. While some members of the opposition have chosen to cooperate with the government. including the Karen National Union (KNU) and Shan State Army-South (SSA-S).

China’s priorities are ensuring that unrest in Myanmar does not lead to stability in its own territory and protecting its investments and access to resources in Myanmar. If offensives against Karen separatists spill over the border and result in Thai casualties. However. prompting the junta to ban the Kachin and the Wa from registering parties. Presumably. The recent escalation of unrest in Myawaddy highlights the potential for domestic conflict to generate tensions with neighboring countries. the DKBA has split over the issue. A dispute over territory in the Bay of Bengal that Page 22 • 15-Dec-2010 Forecast Scenarios . the UWSA gave its response only after receiving the blessing of China. and fighting continues around the Three Pagodas Pass. The prospect of an escalation of guerrilla warfare that could produce a flood of refugees has alarmed Myanmar’s neighbors. Open conflict with such a major regional power could further undermine the country’s international support and weaken its control over the domestic opposition. which they view as a rival for influence over disaffected minorities. some of which view officials in Beijing with suspicion.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. especially China. China can be expected to apply pressure on both sides to show restraint and reach a negotiated settlement of their conflicts. only two of the cease-fire groups have agreed to join the BGF.000 refugees into its territory following a crackdown against one of the smaller non-compliant rebel groups in April 2009. but is also the chief source of arms for the ethnic armies. apparently in anticipation of a government offensive aimed at convincing the rebel groups that they will face eradication if they refuse to join the Border Guard Force (BGF). Other minority ethnic groups boycotted the elections. which made no secret of its displeasure over the flight of 30. the second largest rebel force—followed the USWA’s lead. To date.000 refugees have fled the area into Thailand. In the weeks leading up to the elections. and opponents of integration into the BGF forced the issue by launching an attack on the town of Myawaddy. the Chinese government does not wield the authority necessary to stifle conflict entirely. and the UWSA refused to permit polling to take place within the territory under its control. Myanmar’s military leaders do not trust the government in Beijing. near the border with Thailand. a serious military exchange can be expected. and the influence of the Chinese varies among ethnic groups. As such. both the UWSA and the KIA were reported to be stepping up both recruitment and training. the Democratic Karen Buddhist Army (DKBA) and the National Democratic Army-Kachin. Some 20. particularly with Thailand. However. Nearly all of the other cease-fire groups—including the Kachin Independence Army (KIA). which is the SPDC’s strongest supporter in the international arena.

Gas output will not increase significantly until later in the five-year forecast period. as western sanctions are expected to remain in place and no significant business-friendly shifts in policy are anticipated. In general. currency volatility.1% in 2010. real GDP growth is forecast to average just 3. as well. Such economic growth as does occur will be fueled by a handful of large energy and infrastructure projects.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. and analysis of the country’s economic performance and socioeconomic conditions is distorted by the huge discrepancy between the official and market exchange rates for the kyat. An increase in gas exports later in the forecast period will have a beneficial impact on the Forecast Scenarios 15-Dec-2010 • Page 23 . when new production is expected to come on line. Weakness of Non-energy Sectors Will Hamper Economic Performance The international sanctions imposed on Myanmar are undoubtedly holding economic development well below potential. inflation will push above 10% over the medium term. holds significant oil and gas potential creates a risk of the periodic flaring of tensions with Bangladesh. and while the pace of economic expansion could rise to 5%. A large increase in investment-related imports will contribute to a significant narrowing of the trade surplus in 2010 and 2011 that. in combination with wider deficits in the services and income balances. the result of loose fiscal and monetary policies. although by exactly how much is difficult to determine.8% per year through 2015. Consumer price increases will be held to 9% in 2010. as investment picks up. as very low household incomes and a lack of consumer access to credit constrains private spending. and restrictions on bank lending will hamper investment and productivity in the agriculture sector and dampen business activity in the commercial capital. The impact of sanctions on the external balances has been mitigated by higher commodity prices and import restrictions imposed by the government since 2002. and is forecast to reach 4% in 2011. The central bank’s policy of increasing the money supply to finance the government deficit will produce high inflation. Real GDP growth will accelerate to 3. and may even produce a deficit. the political transition is not expected to have much of an immediate impact in the economic arena. The credibility of Myanmar’s official economic data is a subject of serious doubt. Weak growth of output and low prices will limit the contribution of gas production to growth in the near term. Yangon. will shrink the current account surplus. However. and the effect of a moderately improved economic situation on private demand.

Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. Although Than Shwe has hinted that he plans to depart the scene following the elections in November 2010. Harsh measures would probably be taken against Suu Kyi. and quite possibly the abandonment of the experiment with “guided democracy. resulting in average current account surpluses of $200 million per year through 2015. such as those with China. However. The EU. for example. While ASEAN has a policy of non-interference in the affairs of its members. the outcast status of Myanmar has already created awkward diplomatic situations for other members. it appears that the military hierarchy will continue to be dominated by a faction that opposes meaningful political reform and will play an active role in shaping the policies of the USDP government. external balances. the junta could revert to unalloyed isolationism and an abandonment of all pretenses of civilian influence in political affairs. On that basis. and other neighboring states.20 -0. the ASEAN countries. escalating tensions with Thailand to the breaking point. In such an event.13 The elevation of Shwe Mann to the third-ranking position in the SPDC behind Than Shwe and Maung Aye confirmed suspicions that the sacking of Khin Nyunt in 2004 reflected the consolidation of hard-line control within the SPDC. the sharp increase in repression accompanying this regime’s accession of power would make relations with the ASEAN states more difficult. Such a regime would try to maintain existing international relationships that have proved beneficial.0 CACC ($bn) 0. Second Most Likely Regime Scenario 18-Month Forecast Period: Hard-line SPDC (30% Probability) Five-Year Forecast Period: Hard-line SPDC (40% Probability) Hard-line SPDC 2010 2011-2015 Growth (%) 3. A hard-line regime would be more likely to use the expanded Myanmar armed forces to pursue separatist guerrillas across national borders.” The international response to a tightening of military control and violent reprisals against political opponents would leave the government even more dependent on its own resources. and other elements of the political opposition. This would Page 24 • 15-Dec-2010 Forecast Scenarios .0 1. Suu Kyi might even be deported. the likely response to serious political instability or a dangerous escalation of fighting with armed minority rebel groups would be a tightening of political controls. the NLD.4 22.4 Inflation (%) 9. has frequently refused to meet with ASEAN representatives for trade talks as long as Myanmar is represented on the negotiating team.

Turmoil would initially escalate. The government would launch an intensified campaign against ethnic rebels. but swift military reprisals would prevent a prolonged period of substantial unrest. The comprehensive intelligence and surveillance network would enable the government to head off most demonstrations before they had a chance to get off the ground by using preemptive strikes against opposition leaders.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. the military would act as brutally as necessary to bolster its regime. and military relations with India. political. Foreign Investment Draining Away In response to the likely intensification of international sanctions. affecting even investments from ASEAN countries and in the oil and gas sector. Restrictions on currency and profit repatriation would remain in place. the government would abandon many efforts to attract more foreign investment. This regime would show even more benign neglect toward the organized drug producers and smuggling gangs operating in the country. ruling out any serious compromise with the NLD and showing little concern over international criticism and retaliation. as opposition supporters took to the streets to protest the military’s actions. Relations with China would probably continue to be close and trade between the countries would increase. The heightened sense of insecurity could lead to retaliation against firms from countries against whose governments the regime held particular resentment. and might be tightened further as international sanctions put added pressure on hard currency reserves. Import and export controls would remain in place and even more non-essential goods would be excluded from importation. More Repression Quelling social disturbances would be at the top of the hard-liners’ agenda. In order to avoid a dangerous dependence on the Chinese. spell the end of efforts by some ASEAN leaders to reconcile the differences between the SPDC and the international community. who would most likely have abandoned cease-fire agreements in the face of social upheaval and the government’s failure to live up to its promises for more development in minority areas. Under hard-line command. Criticism from ASEAN members and efforts to abandon the organization’s policy of non-interference in domestic affairs would probably drive the government from the organization. More Turmoil. the government would seek to develop closer economic. Their actions would increase the chances Forecast Scenarios 15-Dec-2010 • Page 25 . Investment would decline even more sharply. Only Vital Trade The tightening of foreign trade sanctions could lead to a halt of all but the most vital foreign trade.

Increasing deficits and shortages caused by sanctions and declining domestic production would fuel a steep increase in inflation. Economic Decline Except for some investment from ASEAN countries.2 Inflation (%) 10. especially Thailand. most investors would abandon the country. as a shortage of foreign exchange would render it unable to meet its repayment obligations. Third Most Likely Regime Scenario 18-Month Forecast Period: Divided SPDC (10% Probability) Five-Year Forecast Period: Divided SPDC (15% Probability) Divided SPDC 2010 2011-2015 Growth (%) 2. would lag. and real GDP growth would average just 1.22 0.30 An eruption of social unrest might give rise to a revived factional battle between the currently dominant hard-line faction of the SPDC and a more pragmatic faction that might be willing to make minor concessions to democracy advocates. which would average $130 million per year through 2015. and little capital available for private-sector development. and military spending would take an even larger portion of the national budget. Inflation would average 22% annually over the five-year forecast period. especially the USWA. The few remaining sources of foreign loans for Myanmar would disappear. Over the long run. especially from industrialized democracies.0 19. Economic growth would stall.7 2. The current account surplus would narrow sharply and fall into deficit as investment declined and economic activity slackened.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. The economy would enter recession as investment dried up and production languished. of more confrontation with its neighbors. would have a low priority.0 CACC ($bn) 0. including a Page 26 • 15-Dec-2010 Forecast Scenarios . the growing wealth and strength of these groups. The government would have little choice but to default on its debt. Debt service payments to foreign lenders. but weak economic activity would contribute to decreased demand for imports that would help to contain the size of the deficit.4% per year over the five-year forecast period ending in 2015. and even key investment opportunities. would contribute to instability and might eventually pose a threat to the military regime. leaving few financial resources for infrastructure and social spending. such as the development of natural gas projects.

as a means of restoring order. However.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. Given the military’s extreme fear of foreign influences. but only up to a point. would only be accepted if absolutely necessary. The government might tolerate this. However. In any case. the reappearance of a government faction that favors limited reforms might bring some restraint to the military’s response to peaceful demonstrations. the government would hesitate to implement a more open trade regime. the maintenance of fairly tight Forecast Scenarios 15-Dec-2010 • Page 27 . However. Myanmar would seek special consideration from ASEAN with regard to reducing trade restrictions. Some easing of import restrictions might be undertaken as international pressure diminished. substantive role for elected civilians in shaping policy. divisions within the junta would provide little room for a significant deviation from the status quo with regard to policy. which would undoubtedly be tied to requirements for deeper political and economic reform. Most Sources of Turmoil Would Persist Some elements of the opposition would reject any cooperation with the military government that fell short of a full implementation of democracy. any such developments would most likely not be satisfactory. conflicts stemming from the drug trade would also continue. Liberalization Only as Needed Few substantive moves in the direction of economic liberalization would be made in the near term. looking for evidence of substantive political reform or additional development aid for minority areas. Little Benefit to Economy Domestic economic conditions might improve somewhat in the short run if the SPDC introduced even modest political reforms. Over the medium term. However. any liberalization that did occur would be too gradual and limited in scope to have much of an impact on economic conditions. there is just as good a chance that a struggle for power within the junta could result in the delay of elections and a prolonged period of policy uncertainty accompanied by a persistent threat of dangerous political instability. Some Trade Improvement for a Time Even if relatively reform-minded military leaders regained their former influence. Ethnic minority and insurgent groups would probably take a wait-and-see approach as the power struggle within the junta unfolded. More desirable from the military’s point of view would be bilateral assistance. In addition. aid from international financial institutions. probably from other Asian sources. a factor that could embolden protesters. and the insurgencies would probably resume. such as China. that would impose few if any requirements for specific reform measures.

except perhaps in projects related to the oil and gas sector. Foreign investors would remain unenthusiastic about investing in Myanmar.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. as a drop-off in investment flows contributed to slower growth of imports. The current account surplus would average $300 million per year through 2015. Excessive government spending. averaging just 2. especially on the over-inflated defense budget. would make inflation difficult to control. Real GDP growth would remain well below potential.2% annually through 2015. Page 28 • 15-Dec-2010 Forecast Scenarios . restrictions on foreign investment and trade would preclude any substantial economic gains over the forecast period. and the rate would average about 19% per year over the five-year forecast period.

Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. indicates forecast of a new regime Forecast Scenarios 15-Dec-2010 • Page 29 . Forecast Summary SUMMARY OF 18-MONTH FORECAST *Military-Civilian 60% Same SLIGHTLY LESS SLIGHTLY LESS Same Same Same Same SLIGHTLY LESS Same Same Same Same Hard-line SPDC 30% MORE Same Same MORE SLIGHTLY MORE SLIGHTLY MORE Same Same SLIGHTLY MORE SLIGHTLY MORE Same SLIGHTLY MORE Divided SPDC 10% SLIGHTLY MORE Same Same SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE Same Same SLIGHTLY MORE SLIGHTLY MORE Same SLIGHTLY MORE REGIMES & PROBABILITIES RISK FACTORS CURRENT Turmoil Investment Equity Operations Taxation Repatriation Exchange Trade Tariffs Other Barriers Payment Delays Economic Policy Expansion Labor Costs Foreign Debt Very High Low High High Very High High High Very High Moderate High High Moderate SUMMARY OF FIVE-YEAR FORECAST *Military-Civilian 45% SLIGHTLY LESS SLIGHTLY LESS Same SLIGHTLY LESS Same Hard-line SPDC 40% MUCH MORE SLIGHTLY MORE SLIGHTLY MORE MORE MORE Divided SPDC 15% MORE SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE Same REGIMES & PROBABILITIES RISK FACTORS BASE Turmoil Restrictions Investment Trade Economic Problems Domestic International Very High High High High High * When present.

0 (percent) 5.0 3.6 0. Myanmar Real GDP Growth Under Alternative Regimes Military-Civilian Hard-line SPDC Divided SPDC 7.4 0.2 0.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited.0 0.0 2005 2006 2007 2008 2009e 2010f 20112015f Myanmar Inflation Under Alternative Regimes Military-Civilian Hard-line SPDC Divided SPDC 35 30 (percent) 25 20 15 10 5 0 2005 2006 2007 2008 2009e 2010f 20112015f Myanmar Current Account Under Alternative Regimes Military-Civilian Hard-line SPDC Divided SPDC 1.2 2005 2006 2007 2008 2009e 2010f 20112015f Page 30 • 15-Dec-2010 Forecast Scenarios .8 ($billions) 0.0 2.0 4.0 0.0 6.0 -0.0 1.

The junta’s lack of seriousness regarding political reform and its indifference to regional concerns over drug trafficking could eventually test the patience of its neighbors. but also a potentially influential source of pressure for change within the country. and won an overwhelming majority of elected seats in both chambers of the legislature. are an important bulwark against the country’s international isolation. The NLD suffered a split ahead of the recent elections. the same position he has held in the SPDC-led regime since 2007. the government can be expected to maintain at least the pretense of commitment to limited democratic governance… Union Solidarity and Development Party: A party founded by more than two-dozen generals who shed their uniforms to stand for office at the November 2010 elections. at the head of the USDP confirms long-held suspicions that those who will hold power within the new political structure are for all intents and purposes nothing more than the next generation of junta leadership in civilian costume… Thein Sein: The founding leader of the USDP will serve as prime minister in the newly elected government. particularly China and its fellow members within ASEAN. Suu Kyi has become an international symbol of both the country’s yearning for real democracy and the military regime’s disregard for human rights. but his age and questionable health status suggest that he is rapidly approaching retirement. and he has tipped the balance decisively in favor of the hard-liners in an apparent bid to limit the potential for a divisive post-succession power struggle. However. Myanmar Country Forecast Political Framework Players To Watch Than Shwe: The SPDC chairman has generally been seen as acting in the role of referee between moderate and hard-line forces within the regime. the USDP received the full backing of the ruling junta. create the potential for significant limits on Thein Sein’s actual exercise of power… Aung San Suu Kyi: A Nobel laureate and the leader of the opposition NLD. and the potential for Than Shwe’s departure to trigger a power struggle among those at the top of the military hierarchy. particularly if an escalation of domestic unrest contributes to cross-border conflict… …more on these and other Players in the Political Players section Political Framework 15-Dec-2010 • Page 31 . Thein Sein. which were boycotted by Suu Kyi’s faction. as long as he remains on the scene. but she was released from house arrest shortly after the elections and she will exploit the generals’ desire to maintain the pretense of democracy to push for deeper political reform… Regional Neighbors: Myanmar’s Asian neighbors. The continued presence of Than Shwe in the near term. The presence of the incumbent prime minister.Political Risk Services 15-Dec-2010 Reproduction without written permission of The PRS Group is strictly prohibited.

Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. most ethnic militias and insurgents had signed cease-fire agreements by 2001. where economic development lags and where the local population is most vulnerable to the military’s arbitrary and brutal rule. The military hierarchy consists entirely of ethnic Bamar. Extreme nationalists among the Bamar (the country’s dominant ethnic group) generally feel that the ethnic minorities are inferior both culturally and socially. Suu Kyi. so the military has been able to deal with them on a piecemeal basis. the Shan and the Karen. The NLD has used the disaffection of ethnic minorities as a tool for building support. The largest ethnic minorities.” which planned to challenge the government’s nullification of the 1990 elections. At times. various ethnic groups have fought each other with at least as much ferocity as they fight the government. these groups are often small and generally not coordinated in their actions. who have excluded members of minority groups from assuming positions of power. are estimated to constitute 16% of the population. Kachin. helped to incite Buddhist mobs to attack Muslims in Arakan state in February 2001. and Chin. While the government has occasionally had to deal with a seemingly overwhelming number of insurgent organizations. which has not been averse to stirring up trouble among and between them. Mon. minorities reside in the seven ethnic minority states of Shan.” looking more like soldiers or policemen in disguise. The ethnic minorities also have a political presence through a variety of parties and front organizations that generally support the mainstream political opposition and its leader. Despite their general support of the NLD. and Rakhine—together make up an additional one-third of the population. Arakan. For the most part. Karen. trying also to garner support by advocating policies that are opposed by the military government but beneficial to minority interests. Lahu. In many cases. Kayah. Political Players Ethnic Minorities The importance of the ethnic minorities stems from their role as the NLD’s base of support in rural areas and their potential to increase turmoil through armed insurrection. Several other minority groups—including the Wa. the NLD invited ethnic minorities to send representatives to its “parliament. Page 32 • 15-Dec-2010 Political Framework . “Buddhist monks. Mon. In 1998. which are for the most part located in border areas. minorities are denied the full rights of citizenship. The extremely nationalistic military leadership generally holds the same view. and they are excluded from careers in the government or military services. The ethnic differences that separate these groups from the majority Bamar population also tend to separate them from each other.

Thai troops killed 13 drug-traffickers and seized 1. economic difficulties have limited the government’s ability to carry out its promises. following the replacement of Prime Minister Khin Nyunt with the less moderate Soe Win in late 2004. More recently. the government has succeeded in reaching cease-fire agreements with all but one of the major guerrilla groups. Since the early 1990s. In December 2003. Drugs have become such an important source of revenue for some insurgent groups that continuing disputes with the government probably stem as much from their desire to protect this business as from any desire to achieve political goals. Many insurgent groups operate in the Golden Triangle border area. Not all of the insurgents have been seeking more rights for ethnic minorities. which is a major source of concern in Thailand. the government has confronted guerrilla armies claiming to represent the interests of virtually every minority group. Insurgent Groups Since independence. the KNU initiated tentative peace talks with the government. instead directing investment funds to Yangon. the military intensified its campaigns against the various guerrilla factions. guerillas representing pro-democracy student groups have taken up arms against the government. these groups have sought greater regional autonomy. the SPDC’s precursor). and traffic volume estimates range anywhere from 70 million to 600 million tablets a year. Most of the methamphetamine in Thailand is smuggled into the country from Myanmar. Political Framework 15-Dec-2010 • Page 33 . these operations have added the equally lucrative business of manufacturing and distributing stimulants. ethnic leaders criticized the process as not satisfying their concerns. facilitated by a major military build-up in troop strength and arms purchases. and the government has done little to fulfill its pledges of economic assistance to border areas.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited.6 million tablets. which has been a major source of opium and heroin in Southeast Asia for many years. for example. However. The government had earlier invited minority groups to participate in the National Convention to draft a new basic law and even permitted debate on the issue of minority autonomy. More recently. Since 1998. The KNU’s forces were decimated by military offensives carried out in 1997 and 1998. Various factions of the Communist Party of Burma (CPB) conducted a lengthy insurgent campaign in the 1950s. Nevertheless. In general. On a single day in late March 2002. and the group has since been capable of waging only low-level guerrilla war against the SPDC regime. the military launched a fresh offensive against the KNU. the Karen National Union (KNU). Nationalist groups have periodically emerged in opposition to the military regime of the day. Following the 1988 emergence of the regime headed by the State Law and Order Restoration Committee (SLORC. however.

who was Thailand’s prime minister at the time.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. Under the terms of this agreement. penetrated into and even briefly held Thai territory before being driven back into Myanmar. In June 2002. The UWSA is a capable military force. which was already tense owing to accusations that Thailand had given tacit support to the SSA-S and other small. A subsequent upsurge in fighting between the SSA-S and the UWSA. including a “drug production city” near the Thai border. the government has also generally allowed insurgents to keep their weapons under these cease-fire agreements. and their drug production and smuggling operations threaten to undermine ThaiMyanmar relations. at times. and that could come back to haunt them. the junta began to apply pressure on the armed ethnic groups to proceed toward fuller integration into the political and social Page 34 • 15-Dec-2010 Political Framework . which looked unfavorably upon the removal of Prime Minister Khin Nyunt. promising limited autonomy and development assistance in return for a cessation of operations against government forces. Attacks on insurgent forces in Shan state spill over the border into Thailand and have provoked clashes with Thai units. Furthermore. The battle caused severe strains in Myanmar’s relationship with Thailand. As plans for elections moved forward. the Myanmar military. and its own electrical power supply. and the Shan United Army. threatening relations between the two countries. the UWSA reached an accommodation with the Myanmar government in 1989. such as banking. Kachin Defense Army. who reportedly enjoyed an especially close relationship with Thaksin Shinawatra. launched an offensive against the Shan State Army-South (SSA-S) to recapture a base in the Golden Triangle region on the border with Thailand. Among the insurgent groups reportedly engaged in drug smuggling or production are the Eastern Shan State Army. the government has typically pursued a policy of negotiated settlements with individual groups. which was alleged to be serving as a proxy for the military. armed breakaway factions operating on the Thai-Myanmar border. but by far the most prominent is the UWSA. The insurgent group routinely disarms government troops before they enter the UWSA-controlled area and have. Formerly an ethnically based insurgent group. working with the UWSA. Although some groups have been brought under control by force. the huge cash flow of the drug trade has enabled them to move into legitimate businesses in Yangon. featuring hotels. the central government was to leave the UWSA alone in exchange for an end to guerilla warfare against the government and for their assistance in defeating other insurgent groups operating in their area. resulted in a renewed escalation of tensions with Thailand. casinos. Smaller groups continue to engage in armed struggle with government forces in the state of Shan. Nonetheless. The UWSA has since turned to drugs as a major business enterprise.

Maung Aye became head of the Trade Policy Council. but questions regarding his broader political support and his lack of international experience dim his prospects for formally rising to the top spot. The dismantling of the intelligence apparatus previously headed by Khin Nyunt has eliminated a base within the government from which other potential rivals for power might emerge. is the most prominent member of the regime’s hard-line faction. Considered to be blunt and forceful in his approach. but seven new cooperation agreements enhanced these ties in December 2001. and it remains to be seen whether he might allow himself to be passed over without a fight. citing the junta’s failure to give serious consideration to its demands for greater autonomy and democracy. but is also the chief source of arms for the ethnic armies Maung Aye (Vice Chairman. Maung Aye’s differences with SPDC moderates are tactical. but most of the so-called “cease-fire groups” refused to comply. In May 2009. It is assumed that the UWSA gave its response only after receiving the blessing of China. leading to the purchase of military equipment. the UWSA rejected all three options. regional commanders. Maung Aye also developed a relationship with India. greatly increasing his influence on economic matters and funding. or transform their organizations into political parties and participate in the 2010 elections. and the commanders of the army’s principal combat force. He is also reputedly opposed to membership in Political Framework 15-Dec-2010 • Page 35 . He has favored a far more aggressive approach to dealing with Suu Kyi and the NLD. Maung Aye is reportedly suspicious of overly close ties with China. reconstitute their forces as a border guard under the command of Myanmar’s military. and is among the top candidates. The SPDC gave the cease-fire groups three options—surrender their arms. to succeed Than Shwe as leader of the junta or any “democratic” regime established under a new constitution. especially its military. at least temporarily. His chief sources of support are army regulars. In 1999. who is also deputy commander-in-chief of the Defense Services and army commander-in-chief. For the most part. announcing that it preferred to continue. SPDC) Maung Aye. Shwe Mann. the light infantry divisions. mainstream. under the terms of the cease-fire agreement.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. He may well be the source of the new requirement that foreign trading companies work with a domestic partner to operate in Myanmar. Maung Aye has taken over many of the day-to-day responsibilities of government from the ailing Than Shwe. which is the SPDC’s strongest supporter in the international arena. He takes a more traditional military view on matters such as guerrilla activities among ethnic minorities and prefers force rather than negotiation to deal with internal unrest. brushing aside concerns about international criticism. an organization with the authority to override all ministries on business and trade matters. along with Gen.

An extensive network of informants operates at every level of society. the army. and both active and retired military personnel manage its extensive economic interests. Singapore. economic. and most overseas expatriate communities have been heavily infiltrated.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. The few civil organizations that are allowed to operate must do so within strict parameters. Union Solidarity and Development Association (USDA) may have as many as 11 million members since membership is mandatory for government employees. subsidized housing for personnel. and society. other than perhaps extreme Bamar nationalism. the military is heavily involved in the overt economy. and political fabric of the country that Myanmar has acquired the attributes of an ideologically based totalitarian state. Military surveillance is pervasive. effectively insulating itself from the rest of Myanmar’s society and creating its own culture—including a health care system that is superior to its civilian counterpart. both controlled by the Defense Ministry. the Myanmar Economic Holdings Corporation. draconian laws regulate who can own and use communicating devices such as fax machines and modems. and a network of military stores that either are unavailable to civilians or prohibitively expensive. The military has repressed most of the usual organizations of civil society and replaced them with its own mass organizations. including close links with China and relationships with India. ASEAN. The military has created for itself a privileged place. but has begun expanding military contacts with neighboring countries. Page 36 • 15-Dec-2010 Political Framework . For example. and Pakistan. These relationships provide a way to overcome the arms embargoes imposed by industrialized democracies and help to reduce outside support for Myanmar’s various insurgent groups. Ltd. The USDA—which has been transformed into the USDP—is used to denounce the NLD and counter its public demonstrations and rallies. a separate educational system. The military establishment does not belong to regional defense or military pacts. ostensibly owing to concern of interference by the regional body in Myanmar’s internal affairs. In addition. (MEH) and the Myanmar Economic Corporation (MEC). Its involvement is mostly handled by two major enterprises. Military intelligence conducts electronic surveillance of communications by phone and the Internet. Military While not espousing a particular political ideology. The principal program of the military’s leaders is one of maintaining the unity of the state. In addition to its reputed involvement in the underground economy of drugs. the military has so insinuated itself into social.

Although improvements and a pay increase of 400% for the lowest ranks may have helped with morale. The disturbances at both schools reportedly stemmed from the poor quality of the food and a new mandate reducing the rank that cadets would receive upon graduation.000 in the mid-1980s. Some officers and soldiers have reportedly been arrested for their association with the political opposition. at least temporarily in June 2002. and in spite of its build-up. and further increases plan to bring the number to 500. The military underwent a major build-up through most of the 1990s. The large build-up in troop strength may also be an attempt to ensure domestic tranquility through overwhelming force. The armed forces have made weapons purchases of about $1 billion–$3 billion from China and other smaller purchases from Israel. prison sentences for others. training has suffered. The number of army troops. Morale problems even at the Defense Services Academy (DSA) led to its closure. and protests at the Military Technology College (MTC) in Maymyo led to the expulsion of about 40% of the student body. enhancing prospects for a coup or large-scale mutinies. and death sentences for a few. This inadequacy has reportedly also led to the use of forced or slave labor to build roads and camps. There are an additional 85. Approximately 20% of Myanmar’s imports are defense-related. Part of the problem is the logistical system. stealing it from local villages—to fend off starvation.000. Many units. Myanmar’s defense budget comprises over 40% of the national budget and accounts for at least 14% of the country’s GNP. the military has had a hard time recruiting. The larger army has meant greater costs for a government that is already struggling with a poor economy. especially in remote areas.000. making the size of Myanmar’s military force second only to Vietnam in Southeast Asia. While this has not generally been sophisticated weaponry. having the arms has greatly increased the combat capability of the armed forces. as demonstrated by its greater success in combating insurgent groups since 1990. the military still suffers significant problems in this regard. Political Framework 15-Dec-2010 • Page 37 . India. They were previously outgunned because insurgent groups could buy weapons on the black market in Thailand.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. estimated at 186. in many cases. which is inadequate to keep troops supplied in the field. and Singapore. Even with conscription. and to move supplies to front line units. Political movements could gain a foothold in the expanded army.000 troops in police and government controlled militia units. especially in the border regions must procure their own food supplies—by growing their own rice or. has now reached about 450. The poor state of Myanmar’s infrastructure complicates the logistics problem.

the SPDC and the military had undergone substantial reorganizations. and the chiefs of the air force and the navy. as part of the fallout from the alleged coup-plotting by former dictator Ne Win’s family. and its success prompted the junta to annul the results. however. but the failure to fill the slots left vacant by the death of Secretary 2 Tin Oo in early 2001 and the dismissal of Secretary 3 Win Myint in November 2001. and apparently lost considerable power in the process. The NLD was outlawed when it refused to register for the 2010 elections to protest the continued detention of party leader Aung San Suu Kyi. The military regime’s repressive tactics and the lack of progress toward achieving the NLD’s goals have weakened the party’s strength. Only two of the regional commanders kept their positions. in most cases. some senior members of the party opted to contest the elections under the banner of the National Democratic Force (NDF). However. fled the country. and the position of each member in the hierarchy. However. Regional Commanders Even prior to government reshuffles in August 2003 and September–October 2004. reassigned to the Defense Ministry in the capital city. made it more difficult to determine who is included in the inner circle of power.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. Top members of the SPDC include Chairman Than Shwe. retired. The NLD called on its supporters to boycott the November vote. Suu Kyi. Until November 2001. had been in detention since 1989. In November 2002. and wide global recognition of the NLD’s political legitimacy ensures that any credible attempt by the SPDC to appease international critics must include a significant role for the party. or been taken into custody. The SPDC formerly comprised 19 members. arguing that opponents of the military regime could not afford to squander their only opportunity to ensure at least some semblance of true opposition within the new legislative bodies. the NLD won 81% of the contested seats in the 1990 elections. army commander Maung Aye. and. Many NLD members elected in 1990 have died. and the sacking of Khin Nyunt in 2004. the Coastal Region Page 38 • 15-Dec-2010 Political Framework . Then. they exercised a great deal of autonomy in their actions and generally had a free hand to operate in their areas as they saw fit. on the grounds that participation would grant legitimacy to the process. by extension. this has reflected extreme pressure from the military government. Despite the fact that the party’s leader. the commander-in-chief of the air force. 10 of the regional commanders were promoted to the rank of lieutenant general. The other 12 positions in the SPDC are held by regional military commanders. National League for Democracy (NLD) The NLD formed one week after the SLORC assumed control of the government in 1988. Many others have openly resigned from the party and renounced its platform. to the new government.

and the commander of the drug-ridden Golden Triangle Region were all removed from their posts. have voiced concerns that Myanmar’s international isolation is unnecessarily hindering ASEAN’s global integration efforts. imposing sanctions on the regime and otherwise trying to discourage their own nationals from doing business in the country. and possibly the abandonment Political Framework 15-Dec-2010 • Page 39 . building individual power bases. Maung Aye. Among these officers is the next group of Myanmar’s senior military leaders. and the regime appears to have now promoted younger officers to these regional commands in order to train them for future needs. commander. For the most part. the EU. police. such measures have largely failed to encourage a relaxation of political controls. at least until the recent changes. and security functions within their own regions. The suspension of support from the IMF and other international financial institutions limits the international financial community’s leverage over the formulation of economic policies in Myanmar. in accordance with the bloc’s principle of non-interference in the internal affairs of member states. ASEAN is in the process of drafting a new organizational charter that is expected to make specific mention of democracy and human rights. resource extraction and property development. ASEAN has taken the approach of constructive engagement. ASEAN has otherwise failed to apply heavy pressure on the military regime.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. However. and road and bridge construction. the regional commanders have been loyal to army Commander-in-Chief Gen. They must approve business contracts. Many of them have gotten rich from their positions. which also give them military and political power. and other industrialized democracies have generally taken a hard-line approach toward the junta. represent the most influential source of pressure for change within the country. Regional Neighbors Myanmar’s Asian neighbors. which includes Prime Minister Thein Sein. markets. will fill prominent roles in the newly elected “civilian” government. The military’s abandonment of the rotation system for commanders assisted regional commanders in acquiring this power. and their backing could be key to determining who will fill the top spots in the military going forward. since they have often remained in the same posts for many years. and while the US. intelligence. Generally. some members. Regional commanders have had wide authority over military. but the recent reorganization has raised questions about loyalty to top leaders. particularly the members of the Association of Southeast Asian Nations (ASEAN). Although Myanmar was pressured to forego its turn chairing the bloc in 2007. notably Philippines and Malaysia. The new breed of leaders.

However. both China and India have competed with one another for favor. Believing that it had terrorized the electorate sufficiently to ensure its continued control. which were accompanied by the adoption of the junta’s current name. claiming that a new constitution was required before civilian governance could be restored. State Peace and Developmental Council (SPDC) The SPDC originated as the State Law and Order Restoration Council (SLORC). SLORC permitted the holding of elections in 1990. the junta annulled the results. Laos. following Khin Nyunt’s unveiling of a “road map” for the democratic transition. but the ascendance of the hardline faction sent a clear signal that. while a competing faction prefers to bolster ties to India. Saw Maung in September 1988. headed by Khin Nyunt. which maintained a position more amendable to the introduction of limited democratic reforms “at some future date. a body established to draft a new constitution in advance of promised elections. Vietnam. and has encouraged Chinese investment and major purchases of arms. of the principle of non-interference. following the failure of two civilian Burma Socialist Program Party (BSPP) governments to contain widespread unrest generated by severe rice shortages. International criticism of rampant corruption within the military regime prompted sweeping changes at the top levels of the SLORC hierarchy. the transition process has continued. and. which includes such democracy-averse nations as Brunei. somewhat less blatantly. Despite the ouster of Khin Nyunt and the purge of his top allies within the SPDC’s moderate faction. to the extent that political reforms are pursued. power within the SPDC was pretty evenly balanced between hard-liners who opposed relinquishing control and a more moderate faction. Singapore. they Page 40 • 15-Dec-2010 Political Framework . But it remains an open question how much pressure Myanmar might face within ASEAN. to the benefit of the junta’s general control and ability to withstand pressure from other foreign quarters. The military government has skillfully played some regional powers against each other. the name adopted by the group of senior military officers who seized power under the leadership of Chief of Staff Gen. The National Convention met for the first time in eight years in 2004. Until 2004. Although that plan met with general approval in international quarters.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited.” Khin Nyunt played a central role in the promotion of the National Convention. when it became clear that Suu Kyi’s NLD had won the elections. One SPDC faction favors closer relations with China. among its members. which was only reinforced when Khin Nyunt and the moderates were sidelined in an apparent bid to forestall a damaging power struggle between would-be successors to SPDC Chairman Than Shwe. As a result. the refusal of the NLD to participate as long as Suu Kyi remained in detention contributed to a high level of skepticism. instead.

and has two sons.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. in Yangon. Suu Kyi returned to Myanmar in 1988 to assist her ill mother. with only mixed success. when Suu Kyi was convicted of violating the terms of her house arrest by allowing an uninvited American intruder who swam across a small lake to her home to reside with her for two days. born on June 19. Suu Kyi helped to found the NLD. Both the US and the EU made clear that any improvement in relations hinged upon the release of Suu Kyi and the participation of her party in any process to introduce democratic reforms. Suu Kyi was detained once again. but she was released from house arrest shortly after the elections and she will exploit the generals’ desire to maintain the pretense of democracy to push for deeper political reform. Although detained under house arrest (1989–1995). Hugh’s College. Bhutan (1972). culminating in a nationwide uprising that demanded a democracy. After living overseas for 28 years. Suu Kyi was assistant secretary for the Advisory Committee on Administrative and Budgetary Questions. Aung San Suu Kyi A Nobel laureate and the leader of the opposition NLD. slightly more than one year after she won her release from an extended period of house arrest. Aung San. After a subsequent military crackdown killed thousands and the SLORC re-established military control. In May 2003. who died in 1999. The NLD suffered a split ahead of the recent elections. After nullifying those results. founder of modern Myanmar. She was drawn into politics by student protests. Oxford. India and St. UN Secretariat. Political Framework 15-Dec-2010 • Page 41 . she led the party to victory in the 1990 elections. 1945. the SLORC introduced a law in 1991 that forced the NLD to expel Suu Kyi and other party leaders facing state charges. Since annulling the NLD’s victory at the 1990 elections. as was made clear in June 2009. who were stripped of their Myanmar passports by the military regime and live in the UK. She was married to a British academic. will be implemented slowly. New York (1969–1971). the SPDC has attempted to sideline Suu Kyi and destroy her party. Suu Kyi has become an international symbol of both the country’s yearning for real democracy and the military regime’s disregard for human rights. Suu Kyi. That was more than the SPDC was willing to concede. is the daughter of assassinated Gen. and received an 18month extension of her sentence. She attended Delhi University. and was the resident officer of the Ministry of Foreign Affairs. which were boycotted by Suu Kyi’s faction. and are unlikely to produce a system of government that can justifiably be described as even moderately democratic. serving as the party’s general secretary.

Than Shwe has generally been seen as acting in the role of referee between moderate and hard-line forces within the regime. SPDC) Than Shwe. the regime released Suu Kyi from house arrest following extended and secret talks. fearing that she would not be allowed to re-enter Myanmar. and he has tipped the balance decisively in favor of the hardliners in an apparent bid to limit the potential for a divisive post-succession power struggle. and her children in the UK. In August 2000. born in 1933. After first extending the period of her detention by retroactively changing the law. assuming that she would never be able to return. During two of her attempted car trips in 1998 she sat in her car protesting police barricades for as long as 13 days. the government responded to calls from UN Secretary-General Javier Perez de Cuellar for Suu Kyi’s release from house arrest by offering to allow her to join her husband. the government officially lifted her house arrest in 1995. Suu Kyi was returned to her home.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. she tried to travel by rail to Mandalay with several NLD colleagues. Suu Kyi tried to travel by car to an NLD meeting in Kungyangon. traveling throughout the country to test the limits of her freedom and build her base of popular support. a British academic. and the others were arrested and detained. as well as the threat of more rigorous international sanctions. but encountered authorities blocking her path. the Nobel Peace Prize (1991). Again in September 2000. She then attempted trips by rail and by car. After she and her party were prevented from boarding the train. even uncoupling her rail carriage from the rest of the train. Suu Kyi persisted in the same activities that had led to her previous detention. but placed heavy restrictions on her movements and prohibited her from reassuming her post in the NLD by a law that requires permission from the electoral commission for a change in leadership. Than Shwe (Chairman. giving up eventually because of dehydration. driving Suu Kyi back to virtual house arrest and her colleagues to house arrest or jail. In 1999. Human Rights Prize (1991). These face-to-face talks between junta leaders and the woman it has harassed. and bullied for years stemmed directly from the efforts of UN Special Envoy Razali Ismail. and until handing the position to Khin Nyunt in August 2003. but faced a police barricade trying to force her group to return to Yangon. she again declined the government’s offer to allow her to travel to her dying husband’s bedside. but his age and questionable health status suggest that he is rapidly approaching retirement. was prime minister. In May 2002. she declined the offer. until riot police ended it. Page 42 • 15-Dec-2010 Political Framework . ostracized. After being freed. He is also the minister of defense. Suu Kyi attracted international attention and has won several awards—including the Sakharov Prize (1990). In 1990. However. a standoff ensued. is the ultimate political authority by virtue of his control of the chairmanship of the SPDC. and the Simón Bolívar Prize (1992). lasting for a week.

the first secretary of the SPDC. He has openly admitted that a day will come when it would be inappropriate for the SPDC to retain its political monopoly. He rose rapidly in rank and became a brigadier general and regional commander in 1983. the government can be expected to maintain at least the pretense of commitment to limited democratic governance. and is a driving force behind the creation of both the National Convention charged with drafting a new constitution and the USDP. also becoming first secretary of the SPDC. Than Shwe has on several occasions in the past shown a decided moderate streak. The presence of Thein Sein at the head of the incoming ruling party confirms long-held suspicions that those holding power within the new political structure are in fact the next generation of junta leadership in civilian costume. Thein Sein was born on April 20. Union Solidarity and Development Party (USDP) The USDP was founded by more than two-dozen generals. Saw Maung. and the potential for Than Shwe’s departure to trigger a power struggle among those at the top of the military hierarchy. Gen. and as long as he remains on the scene. The continued presence of Than Shwe in the near term.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. won nearly 80% of the vote at the elections held on November 7. He was first named as prime minister on an acting basis in April 2007. and was promoted to the rank of general. including Thein Sein. after the SLORC leader unexpectedly announced his retirement. However. the same position he has held in the SPDC-led regime since 2007. he was appointed to the post on a permanent basis following Soe Win’s death in October of that year. Than Shwe replaced Saw Maung in April 1992. The new party. and general in 1990. 1945. That said. He was among the 21 members of the SLORC when it was formed in 1988. create the potential for significant limits on Thein Sein’s actual exercise of power. Soe Win. As he held the rank of lieutenant-general at the time. and 129 of the 168 seats up for election in the 224-member House of Nationalities. Political Framework 15-Dec-2010 • Page 43 . as an interim replacement for the ailing Gen. securing 259 of the 330 contested seats in the 440-member House of Representatives. which received the full backing of the ruling junta. lieutenant general in 1987. who was rumored to be suffering from leukemia. vice chief of staff in 1985. Than Shwe began his military career in 1953 and served mostly in psychological warfare posts. Thein Sein was widely seen as a mere placeholder. 2010. citing health reasons. Thein Sein (Prime Minister) The founding leader of the USDP will serve as prime minister in the newly elected government. and gained influence as a result of his close alliance with the SLORC chairman.

The party has been a source of controversy since its founding in early June 2010.Political Risk Services 15-Dec-2010 Myanmar Country Forecast Reproduction without written permission of The PRS Group is strictly prohibited. owing to claims by the opposition that it was established illegally. Page 44 • 15-Dec-2010 Political Framework . Although the founders of the USDP reportedly shed their uniforms back in April. Thein Sein and others have continued to hold posts within the SPDC regime. The 2008 constitution forbids uniformed officers and/or government officials from the military regime from contesting elections (fully one-quarter of the seats in both legislative chambers have been reserved for appointed military personnel). Despite what appears to be an obvious violation of both the letter and the spirit of the constitution. the head of the Union Electoral Commission (who was appointed by SPDC Chairman Than Shwe) ruled that the party was a legal entity.

S.Political Risk Services 1-Apr-2010 Reproduction without written permission of The PRS Group is strictly prohibited. are promotion and expansion of exports. Myanmar Country Conditions Climate for Investment & Trade Overview Preface U. investors had already withdrawn from Burma due to a hostile investment climate and disappointing returns. and issued an accompanying executive order barring the import of most Burmese products into the United States. According to the State-Owned Economic Enterprises Law. the U. and. has downgraded our representation in Rangoon from Ambassador to Charge d’Affaires. but allow companies invested in Burma prior to May 20.S. acquisition of high technology. jade and precious Climate for Investment & Trade 1-Apr-2010 • Page 1 .S. sale. federal sanctions ban new investment. An active anti-Burma consumer movement in the United States and Europe also put investors’ corporate image at risk. U. Since imposing the investment ban. according to the FIL. many prominent U. development of facilities that would reduce energy consumption. firms to export to Burma. The Cohen-Feinstein Amendment to the Foreign Operations Act of 1997 forms the legal basis for the investment ban. with the exception of village-owned firewood plantations cultivated by the villagers for their personal use. Prior to the imposition of the investment ban. persons from providing financial services to Burma.S. based on the determination that the Government of Burma had committed large-scale repression of the country’s democratic opposition.S. following the military’s crackdown against civilian democracy activists and 1990.S. denies bilateral economic aid and commercial assistance programs. and regional development. Investment Subject to Sanctions. state-owned enterprises have the sole right to carry out such economic activities as extraction of teak and sale of the same in the country and abroad. since 1990. prohibits military sales. Every six months. Openness to Foreign Investment. extraction. Very few companies have elected to do so. exploitation of natural resources that require heavy investment. To attract more foreign investment. law allows U. Current U. In addition. enacted in March 1989. exploration. and seized the assets of certain Burmese entities. by Executive Order 13047. visas to members of the military and senior government officials. exploration. the U. In 2003. 1988. when the military nullified the results of democratic parliamentary elections. On May 20. support for production and services requiring large amount of capital.S. persons or entities in Burma (Myanmar). the Burmese government enacted the Foreign Investment Law (FIL) on November 30. 1997 to maintain their investments. The 2003 sanctions also prohibited U. expansion of employment opportunities.S. and export of pearls.S. with some exceptions. government reviews the sanctions policy. the United States continues to engage in vigorous diplomatic efforts to promote political and human rights reforms in Burma. extraction. and production of petroleum and natural gas. cultivation and conservation of forest plantations. bans the issuance of U. the President signed into law the Burmese Freedom and Democracy Act (BFDA). The United States opposes the provision of international financial institution assistance to Burma. The priorities for foreign investment. Government has found no measurable progress toward political liberalization in Burma and the sanctions have been renewed at each six month interval. The 1997 and 2003 economic sanctions are in addition to a number of other sanctions the United States imposed against Burma in 1988. the President imposed economic sanctions prohibiting new investment by U. 1997.S.

According to the FIL. Potential investors must still work through the MIC. the ruling State Peace and Development Council (SPDC) sharply reduced the MIC’s influence in 1999. some foreign investors have attempted to do business by operating as local firms under the cover of Burmese partners. continue to pose serious obstacles for all potential investors. Companies without export earnings must purchase “export dollars” from another firm at an inflated exchange rate in order to apply for an import license. As with all major political and economic decisions. stones. in theory. although the PM must also obtain clearance from SPDC Chairman Senior General Than Shwe) or the Trade Policy Council (TPC. forcing the closure of several foreign manufacturing firms. so authorities choose the decision-making body on a case-by-case basis. Bureaucratic red tape. which obtains the final approval from either the Cabinet (which is chaired by Prime Minister Lt. can make exceptions to this law. both foreign and domestic. the high-level Trade Policy Council gives final approval for all import and export licenses. Some companies fraudulently transfer money between the accounts of export revenue earners to facilitate this process. The Cabinet and the TPC have the same membership. The government allegedly took this measure to promote local trading firms. there is no evidence that the MIC overtly discriminates against foreign investors. including against foreigners who have tried to evade the directive by listing their company under the name of a Burmese colleague or friend. postal and telecommunications services. This decision has halted most new foreign investment and has disrupted the business of many foreign investors. Once a company has the “Permit to Trade”. however. breeding and production of fish and prawns in fisheries which have been reserved for research by the government. The MIC has granted some exceptions in the areas of banking (for domestic investors only). banking and insurance services. other than those permitted by law to private and cooperative electricity generating services. and exports of metals. and air services. the government no longer allows DICA to issue new permits or renew existing ones for foreign firms. Once the government grants permission to invest. manufacturing of products relating to security and defense. Interested foreign investors still submit proposals through the MIC. Since the government taxes these overseas remittances at a rate of 10%. broadcasting and television services. a foreign company must get a “Permit to Trade” – essentially a business license – from the Ministry of National Planning and Economic Development’s Directorate of Investment and Companies Administration (DICA). 2005. Page 2 • 1-Apr-2010 Climate for Investment & Trade . exploration. “in the interest of the State”. a reversal of the government’s “open door economy” policy came from a verbal directive outlawing the issuance of new “Permits to Trade” and renewal of existing permits for any trading firms owned by foreigners (or owned by both foreigners and Burmese). but it has served only to further distort the local marketplace. chaired by the SPDC Deputy Chairman Vice Senior General Maung Aye). use the permit to get resident visa status. As of August 20. Although the MIC has no power to protect foreign companies. and to obtain new import and export licenses from the Ministry of Commerce. it may. many overseas workers remit their money home through informal networks. Since 2002.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. but some have faced legal action and difficulties in divesting. Companies can also now use account transfers from Burmese seamen and other Burmese workers in foreign countries for exports. The Myanmar Investment Commission (MIC). Due to accusations of corruption within the MIC. arbitrary regulation changes and endemic government corruption. extraction. the MIC must review all potential investment. this discretion lies solely with the Cabinet and senior generals of the ruling junta. In February 2002. to lease cars and real estate. electricity generating services. air transport and railway transport services. The authorities have not published any official notice of this directive but they generally enforce it. Since February 2002. General Soe Win. petroleum and natural gas extraction. and. mining. but it has lost most of its decision-making authority. The government has had a de facto policy in place since the end of 2001 to only issue import licenses to those firms that are export earners.

The FIL allows FDI in a wholly foreign-owned venture or a joint venture with a Burmese partner (either private or state-owned). the government moved Burma’s administrative capital to the newly-constructed town of Nay Pyi Taw.” as well as in “The Burma Gazette.000 for services in cash or in kind. preferring to communicate new rules verbally to interested parties and often refusing to follow up in writing. Sole proprietorships and partnerships are equally acceptable. The government occasionally publishes selected new regulations and laws in the governmentowned daily newspaper. These areas are. though not specified in the law. The minimum foreign investment required in practice. Foreign/Free Trade Zones/Ports The government has set aside 19 “industrial zones. However. These minimum amounts include cash-on-hand requirements in foreign currency (calculated at the official rate of exchange of roughly 6 kyat = US$1. Even omens and fortune-tellers can play a role in their decisions. Ltd. foreign firms have reported that an affiliation with UMEHL or MEC proves useful to help them receive the proper business permits. entering into business with UMEHL or MEC does not guarantee success for foreign partners. the unpredictable nature of the regulatory and legal situation – and irregular enforcement of existing laws – makes investment in Burma extremely challenging without good -. including import/export licenses.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. and labor laws do not impose a major burden on investment. is $500. Nonetheless. the Ministry of Finance and Revenue issued a notification for levying tax on profits gained by transferring assets of the companies conducting business in oil and gas sector as following rates: Profit (a) up to US$100 million (b) Between US$100 and $150 million (c) Over US$150 million Tax rate 40% 45% 50% The Burmese armed forces are involved in many commercial activities via the Union of Myanmar Economic Holdings. The GOB rarely publishes its new regulations and regulatory changes.. The country’s decision-makers appear strongly influenced by their desire to support state-owned enterprises and meet the needs of the military-controlled Myanmar Economic Corporation and Myanmar Economic Holdings. and $300. Ltd. so conducting business has become more time consuming and expensive. (UMEHL) and the Myanmar Economic Corporation (MEC).47% of the market exchange rate). All existing regulations. including those covering foreign investment. To set up a joint venture. must be approved in Nay Pyi Taw. and other major cities. environmental. In November 2005. In June 2006. They do not come with Climate for Investment & Trade 1-Apr-2010 • Page 3 .” Burma’s written health. “The New Light of Myanmar.000 for manufacturing investments. and sometimes muscle out the foreign investor after an investment becomes profitable.and well-connected -. make unreasonable demands. import-export procedures. The FIL requires that at least 35% of equity capital in all JVs and partnerships be foreign-owned. as well as wealthy cronies. provide no cost-sharing. The government regularly issues new regulations with no advance notice and no opportunity for review or comment by domestic or foreign market participants. which is roughly 0. are subject to change with no advance or written notice at the whim of the regime’s ruling generals. Mandalay. licensing.” large tracts of land surrounding Rangoon. but all official transactions. tax. located in a remote valley about 240 miles north of Rangoon. and foreign exchange. Some investors report that their Burmese military partners are parasitic. merely zoned for industrial use.local legal advice. The long-term impact of this move on investment is unknown. however. Transparency of the Regulatory System Burma lacks regulatory and legal transparency.

6 kyat to the dollar is grossly overvalued. the investor can receive the amount to which he or she is entitled in the foreign currency in which the investment was made. Burma’s multiple exchange rates make conversion and repatriation of foreign exchange very complex. The high cost and irregular supply of fuel. and serious electricity shortages add expense and unpredictability to any manufacturing operation in Burma. Smuggling and black market trading continue to flourish. Importers and exporters say it is extremely difficult to obtain necessary business permits without paying for them “unofficially. it is not easy for foreign investors to legally transfer their net profits abroad. including “luxury” items.” The national government’s ongoing move to a new administrative capital in Nay Pyi Taw. Poor infrastructure is a major obstacle to distribution of goods and services. The official exchange rate. The law also provides that. Tariff and Non-tariff Barriers Despite laws promulgated in the 1990s to encourage foreign trade and investment. Burma also lacks an active private financial sector and an independent central bank. any special services or investment incentives. The Foreign Exchange Management Department of the Central Bank of Myanmar must give permission for all transfers abroad of foreign currency. The official rate of approx. and unwritten policy changes make business very unpredictable. but that rate is still significantly overvalued. and provide multiple opportunities for graft. Page 4 • 1-Apr-2010 Climate for Investment & Trade . especially in the border areas. many foreign firms have closed their doors. expected to be approved in 2007. particularly with regard to use of the official exchange rate. which overvalues the currency by more than 20. Private companies do not enjoy the same advantages as well-connected government and military organizations. has added further delays and expense to the approvals process. investors in Burma have a guarantee that they can repatriate profits after paying taxes. though the supply of such items is erratic. The government has imposed a series of restrictive and ill-conceived trade policies that aid crony companies. The government does not offer any financial support to private exporters. The government allows foreign firms to deposit dollars in a state bank for later withdrawal as FEC by the company’s employees. Companies generally unload their kyat earnings as quickly as possible. The government requires foreign companies to use dollars or FEC to pay rental charges and utility and telephone bills (charged at a rate that is often ten times higher than what local firms are charged). is a key impediment to foreign trade and investment. in the face of increasing restrictions and a slow business climate. There are no free trade zones in Burma. Many urban retailers stock imported items explicitly on the prohibited imports list. 230 miles north of Rangoon. many cumbersome restrictions remain. Legitimate commerce suffers and. and ripe for corruption.000%. Frequent. and charges a 10% export tax (8% commercial tax plus 2% income tax). protect moribund state-owned enterprises. and most other business activities. and capture scarce foreign exchange through import substitution. arbitrary. Due to the current shortage of foreign exchange in Burma. The government also issues Foreign Exchange Certificates (FEC) at a fixed rate of 1 FEC=450 kyat via licensed exchange counters. Likewise. The GOB has developed a draft industrial zone law. unannounced.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. upon expiry of the term of the contract. including difficult-to-obtain and restrictive permits required for all imports and exports. License issuing procedures are not transparent. however. Policies Conversion and Transfer According to the Foreign Investment Law (FIL).

when a major banking crisis severely reduced the holdings of the private banking sector. banks severely disrupted the legal foreign trading system. Withholding tax on royalties and interest is 15% for resident foreigners and 20% for non-resident foreigners. MFTB. businesses. the Myanma Investment and Commercial Bank (MICB) and the Myanma Economic Bank (MEB) – are legally permitted to handle foreign exchange transactions. Unofficially. the MFTB and MICB handle most of these transactions.S. The Burmese fiscal year ends March 31. The GOB never permitted these banks to deal in foreign exchange. there have been several cases where the Climate for Investment & Trade 1-Apr-2010 • Page 5 . Legal Framework Expropriation and Compensation The Burmese Foreign Investment Law (FIL) provides a guarantee against nationalization during the “permitted period” of investment. only three state banks . and MICB in the United States. In 2004. U. the GOB would give private banks the right to deal in foreign currency. MEB handles foreign currency transactions in the border trade regions. Private banks held a large share of domestic banking activity until February 2003. The government then requires compliance reports every three months. the GOB has forced a number of foreign firms in various sectors to leave the country because it has not honored the terms and conditions of investment agreements. government restrictions imposed in 2003 on the provision of financial services to Burma by U. tax returns are due by June 30. The MFTB primarily handles foreign currency transactions for government organizations.S. a waiver of customs duties and taxes on imported machinery and spare parts during the period of construction.S. the U. or a waiver of duties on imported raw materials during the first three years of commercial production. if the private banking system is revitalized. investors are also eligible for a number of other incentives including: accelerated depreciation of capital assets. There is no requirement that foreign investors buy or hire from local sources. Although the MIC issues the permission. but the sector remains tightly restricted.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. making the use of letters of credit denominated in U. At the MIC’s discretion. U. and private individuals. while the MICB primarily serves companies and joint ventures. two large Japanese firms voluntarily left Burma after they found they were not able to operate according to earlier investment agreements. companies covered under the Foreign Investment Law (FIL) are entitled to a tax holiday for a period of three consecutive years.the Myanma Foreign Trade Bank (MFTB).S. but foreign investors are an easy target for cash-strapped tax authorities. Under the FIL the Myanmar Investment Commission (MIC) can extend this tax holiday. marine. Performance Requirements Officially. extremely lax. which had long been primarily dollar-denominated. Government also froze the correspondent accounts of MEB. However. Technology transfer is not generally a pre-requisite for investment. before approving an investment the government often requires companies to commit to a certain level of exports. There are no official performance requirements for new foreign investors in Burma. Additionally. along with all other GOB assets and property. it is the TPC and the Cabinet that makes final decisions on these incentives and extensions. but the government does require investors to purchase local machinery and insurance (fire. dollars problematic. In Burma. There is no indication that. and personal liability). In the late 1990s. Tax collection in Burma is. banks no longer offer any trade facilitation or correspondent banking services. There is no evidence that the GOB has taken any action against firms that do not meet their initial export targets. the government allowed some smaller private banks to resume operations. In practice. in practice. with evidence of export results or an explanation why goals were not met. Some traders and government banks have shifted to euros. 2003.S. Any enterprise operating under the FIL or the Myanmar Companies Act must pay income tax at a 30% tax rate. As of July 29.

foreign investors with conflicts with the local government and those whose business has been expropriated. The Attorney General’s Office and the Supreme Court. Burmese criminal and civil laws are modeled on British law introduced during Burma’s colonial period. Dispute Settlement Private and foreign companies are at a major disadvantage in disputes with Burmese governmental and quasi-governmental organizations. trademark. have supreme de facto authority over judicial decisions at the local and state/division level. and courts are not independent to make free and fair decisions. government seized the assets of foreign and local investors without compensation when the particular investment turned out to be very profitable.” According to most accounts. and Division has its own law officers and judges. Page 6 • 1-Apr-2010 Climate for Investment & Trade .Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. by proxy. Foreign investors generally prefer to use the 1944 Arbitration Act. which ended in 1948. Since the military regime closely controls the entire legal system in Burma. An IPR law. ostensibly controls the legal system in Burma. however. foreigners may not own land in Burma. the GOB forced out a Swiss cement importer and distributor ostensibly because the company was not “operating according to its permit. the government confiscated a large brewery that an expatriate businesswoman had made profitable and turned it over to the Ministry of Industry (1) to run. State. A Committee for IPR Implementation. however. and may only rent property on a short-term basis. but neither body is independent of the ruling regime. Protection of Property Rights Burma does not have adequate IPR protection. Previously. There is no bankruptcy law in Burma. and the investor never received any compensation from the government. the top regime leadership). has worked toward approval of a new law. and own a business only with the review and approval of the MIC (and. local arbitration is not reliable. Burma is not a member of the International Center for the Settlement of Investment Disputes. After Burma joined ASEAN in 1997. which allows for international arbitration. The Burmese government usually tries to stipulate local arbitration in all contracts it signs with foreign investors. As the military regime controls all the courts tightly. Foreign companies have the right to bring cases to and defend themselves in local courts. The regional commanders and military authorities at the township. A private entity can establish. In another case in 1999. state and divisional level. Every Township. sell. buy. still awaits government approval and implementation. and copyright laws and regulations are all deficient in regulation and enforcement. have little luck getting compensation. established in July 2004. Companies facing adverse administrative decisions have no recourse. The local courts proved unhelpful in resolving the case. Right to Ownership and Establishment By law. frequently for terms less than one year. it agreed to modernize its intellectual property laws in accordance with the ASEAN Framework Agreement on Intellectual Property Cooperation. the government evicted the company because the Swiss company could sell better quality. cheaper cement than its governmentowned competitors. first drafted in 1994. Patent. nor is it a party to the New York Convention.

books. Corruption and other Bureaucratic Obstacles Corruption is endemic in Burma. Thailand. with assistance from the World Intellectual Property Organization. Bangladesh. Thus. although trademark registration is possible. Thus. Regular bank loans are difficult to obtain and are not available directly to foreigners. but had not changed its rates by December 2006. CD-ROMS. Most real estate transactions in Burma require cash. rent-seeking activities are ubiquitous. Title to a trademark depends on use of the trademark in connection with goods sold in Burma.S. when applying for import and export licenses. The British colonial government published a Copyright Act in 1914. from the smallest transactions to the largest. without paying “tea money. when the SPDC arrested then-Prime Minister General Khin Nyunt and many of his colleagues and family members for corruption. Most citizens view corruption as a normal practice and requirement for survival. Burma has until 2015 to comply with required tariff reductions. both in the private sector and in government. As a member of ASEAN. Very little can be accomplished. the ruling generals apply the anti-corruption statute only when they want to take action against a rival or an official who has become an embarrassment – most notably in October 2004. India. After publication. Burma is a member of the WTO and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). Some firms place caution notices in local newspapers to declare ownership of their trademarks. corruption is officially a crime that can carry a jail term. However. video CDs. DVDs.” As inflation increases and investment declines. especially in border regions and in the two major urban centers of Mandalay and Rangoon. Climate for Investment & Trade 1-Apr-2010 • Page 7 . charging them with corruption. authorities arrested over 300 Customs officials. However. and lack of infrastructure (e. As one of ASEAN’s least developed members. poor state of the economy. and product designs is evident nationwide. Burma had committed to start its reduction plan in 2006. Burma has no trademark law. and has set a goal of February 2007 for a formal agreement. The major areas where investors run into corruption are: when seeking investment permission. but never brought it into force. software. In 2006. Given the small number of local customers.. BIMSTEC is negotiating its own free trade area. The Government of Burma introduced a Patents and Design Law in 1946.g. enacted under British colonial rule. Because of a complex and capricious regulatory environment and extremely low government salaries. in the taxation process. this problem appears to be worsening. Burma will also participate in an agreement between ASEAN and China to begin reducing tariffs by 2010. Economists and businesspeople consider corruption the most serious barrier to investment and commerce in Burma. piracy does not have a significant adverse impact on U. there is no legal protection in Burma for foreign copyrights. use pirated software. Since 1948. The piracy of music CDs. the owners can take criminal and/or civil action against trademark infringers. Burma has border trade agreements with China. and when negotiating land and real estate leases. the registration of patents and designs in Burma is still governed by the Indian Patents and Designs Act of 1911. products. Burma is part of the ASEAN Free Trade Area (AFTA). The WTO has delayed required implementation of the TRIPS Agreement for Least Developed Nations until 2013. most consumers of IT products in Burma. unreliable electricity for manufacturing).Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. International Agreements Trade Agreements. but has never instituted a means to register copyrights.

OPIC programs are not available for Burma. Workers are not allowed to organize. These labor practices are inconsistent with Burma’s obligations under ILO Conventions 29 and 87. Burmese over the age of 40. but the lack of investment in education by the military regime and the repeated closing of Burmese universities over the past 18 years have taken a toll on the country’s young. Labor Conditions In 1989. The United States strongly supports ILO action against Burma. due to the absence of internationally recognized worker rights. or in any other legal way exercise control over their working conditions. The minimum wage is 500 kyat (roughly $0. particularly those over 65 years of age. These agreements have had little impact on enhancing incoming investment from other countries in the region. The government does not publish any unemployment figures. The ILO imposed sanctions against Burma in 2000 and has critically reviewed the forced labor situation in Burma at subsequent ILO Conferences and Governing Body meetings. Burma has signed several bilateral investment agreements. Burma is not a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA). China. The military nationalized schools in 1964 and discouraged the teaching of English in favor of Burmese.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. non-agricultural sectors. managers do not uniformly observe these regulations. OPIC and Other Investment Insurance Programs. Investment treaty discussions are underway with Thailand and Singapore. An average worker in Burma earns about 500-1000 kyat (roughly $0. Sources: BURMA COUNTRY COMMERCIAL GUIDE FY 2007. Bilateral Investment Agreements and Regional Cooperation. with the Philippines. especially those in the private sector. the ILO Governing Board raised the possibility of bringing Burma to the International Court of Justice for its refusal to address forced labor. Due to U.S. and maximum work hours. Most in the 15-39 year old demographic group lack technical skills and English proficiency. Burma’s labor costs are very low. negotiate. PRS Data files. Independent labor unions are illegal in Burma. US & FOREIGN COMMERCIAL SERVICE AND US DEPARTMENT OF STATE. even when compared to most of its Southeast Asian neighbors. law. the United States withdrew Burma’s eligibility for benefits under the Generalized System of Preferences (GSP). Although government regulations set a minimum employment age. are generally well-educated. wage rate.8) per day. and Laos.4 to $0. The government uses forced labor in its construction and commercial enterprises and for porterage and military building. also known as “Protection and Promotion of Investment” agreements. Lao PDR and Vietnam. Many older educated Burmese studied English in mission schools during the British colonial and early independence period. In some instances workers have gained minor benefits through direct work actions. Anecdotal evidence and recent divestment by many foreign companies indicate a very high level of unemployment and underemployment in formal. The GOB has signed a number of Memoranda of Understanding to expand bilateral trade with those countries. especially for wage increases at private enterprises following a significant pay increase for civil servants in April 2006. Page 8 • 1-Apr-2010 Climate for Investment & Trade . In 2006.4) per day.

but winters offer lower humidity. September 2001: Khin Nyunt visited Thailand and pledged to eliminate the problem of the drug trade in the Golden Triangle by 2005 by initiating a crop substitution plan. limestone. milder temperatures. zinc. February 2001: The army clashed with Shan rebels at the Thai border. stability and prosperity. January 2002: The government announced that Russia would supply the reactor for a planned nuclear research facility and train the local staff. average low and high temperatures are 26ºC and 29ºC. and Myanmar agreed not to build a controversial dam over the Naf River on their common border. and celebrated the capture of a white elephant (naming it Yaza Gaha Thiri Pissaya Gaza Yaza). forced five ministers to retire. ringed by steep. The central region of Myanmar consists of lowlands. SPDC leaders removed two top military leaders. while the others were arrested and detained. and less rainfall. Yangon averages temperatures ranging from 19ºC to a high of 33ºC and has less than one day of significant precipitation. and some marble. Myanmar contains potentially valuable oil. and precious stones. October 2000: Suu Kyi began secret talks with the government. often rugged highlands. and humid. Meanwhile. Thailand and Laos border the country to the southeast. The southwestern monsoon season runs from June to September. tungsten. 2000: Suu Kyi was blocked from boarding a train to travel to the northern city of Mandalay with several NLD colleagues and was returned to her home. a symbol of future “peace. Its substantial mineral reserves include tin. China to the northeast. Myanmar Country Conditions Background Geography Myanmar is the largest nation on mainland Southeast Asia and lies along the eastern coast of the Bay of Bengal. December 2001: Thailand closed a camp that housed Myanmar dissidents. who had used it as a base for hostage-taking incidents since 1999. and coal reserves. and in the northeast from December to April. In January. forests of teak and other hardwoods. and Bangladesh and India to the northwest. November 2001: The International Labor Organization investigated the status of reforms related to forced labor and expressed “profound concern” over the limited number and nature of the government’s reforms. but kept Suu Kyi under house arrest. and significant precipitation occurs during 27 days.” protection from “hazards and dangers” and provider of harvest bounty. copper. natural gas. rainy. The country’s fertile farmlands contribute to its role as a major rice exporter. In July. hot. Recent History September 20. August 2001: The SPDC freed senior NLD leaders U Aung Shwe and U Tin U. Background 1-Apr-2010 • Page 9 . Summers are typically cloudy.Political Risk Services 1-Apr-2010 Reproduction without written permission of The PRS Group is strictly prohibited. and lead. Most of Myamar is in the tropic zone. antimony.

Khin Maung Win. announced the suspension of all aid payments. October 8. and the extension of existing barriers to entry into the US by members of the regime. the junta released more than 90 NLD supporters who had been arrested during the crackdown that followed Suu Kyi’s detention in late May. who reported that she was “in good health and high spirits. and Transport Minister Hla Myint Swe were permitted to “retire. 25. 2004: The SPDC reconvened the National Convention (NC). the NLD. June 2003: Following Myanmar’s refusal to release Suu Kyi. the EU imposed sanctions. Myanmar’s largest aid donor. and Zwe Ne Win. September 2003: After she underwent surgery at a Rangoon hospital. Khin Nyunt. which had been suspended in 1996. November 2003: The government released five senior NLD members at the behest of UN officials. the junta permitted Suu Kyi to meet with officials from the International Committee of the Red Cross. May 2002: Hundreds of villagers fled to Thailand as government and UWSA forces launched a major assault on positions held by the SSA and Karen National Union (KNU) just across the border from Thailand’s Chiang Mai province.” with no official explanation. boycotted the constitutional convention. December 2002: Ne Win died. and she immediately began to test her freedoms. however. May 2003: The US extended its ban on US direct investment into Myanmar for another year. May 16. September 18. July 2003: US imposed fresh sanctions against Myanmar. leader of the NLD. Agriculture Minister Nyunt Tin. 2002: Family members of former leader Ne Win—Aye Zaw Win. After intense international pressure. Japan. an expansion of the visa ban to include any military officers above the rank of brigadier-general. Suu Kyi was again detained in her home. according to the authorities. September 26. married to his daughter Sandar Win and their three sons: Aye Ne Win. Gen. reportedly without restriction on either her movements or political activity.” August 2003: SPDC carried out a government reshuffle that introduced a new prime minister. the regime’s key political opponent. 23. was released from 19 months of house arrest. 2004: Foreign Minister Win Aung and his deputy. May 17. including a ban on imports. 21—were found guilty of plotting a coup and sentenced to death. 2002: Suu Kyi. and subsequently. and a declaration that EU members would vote against extending any loans to Myanmar from international financial institutions. a ban on financial transactions. effectively placed under house arrest. placed in “protective custody”—following a clash between supporters of the NLD and SPDC backers in the northern town of Yaway Oo. Khin Nyunt announced that the National Convention—a constitutional review body adjourned in March 1996—would be reconvened as part of a seven-step “roadmap” for the establishment of democratic governance in Myanmar. Suu Kyi was once again detained—or. including a ban on dealing with businesses linked to the military dictatorship.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. Page 10 • 1-Apr-2010 Background . 2004: Due to continued detention of NLD’s leader Aung San Suu Kyi. and brought changes in five other ministerial posts. Kyaw Ne Win. 54.

July 2007: The government opened what interim Prime Minister Thein Sein promised would be the final stage of drafting a new constitution. 2006: The UN adopted a resolution expressing “grave concern” over persistent human rights violations in Myanmar. November 2004: The SPDC released some 9.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. killing as many as 150. boycotting because Suu Kyi remained under house arrest. Background 1-Apr-2010 • Page 11 .000 people. 2008: A devastating cyclone hit low-lying areas of the country. among the released some 30 were political prisoners. as well as several of Khin Nyunt’s relatives. which Khin Nyunt had continued to head while prime minister. May 2. the government launched its largest offensive in nearly 10 years against the KNU. relations with Bangladesh became strained because of their ongoing territorial/maritime dispute in this area. Prime Minister Khin Nyunt.248 prisoners who has been “wrongly charged” by the NIB. Buddhist monks held anti-government demonstrations in the streets of Rangoon. October 2007: The monks ended their protests amid a military crackdown on their demonstrations. 2004: The National Intelligence Bureau (NIB). August 2005: The SPDC formed a 13-member special committee to “stabilize” the government. May 2005: In the most recent example of the deteriorating internal security situation in Myanmar. Education Minister U Than Aung. were placed under investigation. preparatory construction had been taking place for about three years before the announcement. December 23.” after which he was placed under house arrest amid allegations of corruption. October 22. a process that began in 1993. July 2005: The government passed up its chance to take over the rotating chairmanship of the Association of Southeast Asian Nations (ASEAN) after the US and the EU had threatened to boycott ASEAN meetings if Myanmar were allowed to assume the organization’s chair while Suu Kyi was still being detained. a rebel group fighting for autonomy for nearly six decades. October 19. May 2006: Calling its action a needed response to increased guerrilla attacks since 2005. replacing a host of regional commanders and security bureau chiefs. as well as. November 2005: The government announced that the capital was being moved from the port city of Yangon to the remote village of Pyinmana situated in the mountains. October 2008: When Myanmar deployed four ships to the Bay of Bengal to explore for oil and gas. February 2005: The National Convention responsible for drawing up a “democratic” constitution resumed work despite the absence of NLD representatives. was abolished. 11 people were killed and a further 162 injured when three bombs exploded in Yangon. who was widely recognized as the head of the moderate faction within the SPDC. particularly those involving violence against minority groups. and senior NIB officials. September 2007: The military government closed the National Convention and declared the end of constitutional talks. was “permitted to retire. 2004: The architect of the map to democracy.

was jailed after swimming across the lake to the home of Aung San Suu Kyi. including government employees. which is overly represented in both the army and the government. located in the south and east. The education system has deteriorated significantly since the onset of military rule in 1962. The uneven regional distribution of economic progress deepens disparities between them and the rest of the population. violent ethnic conflict has troubled the country since independence. Although minority rights were outlined in the 1947 Panlong Agreement. the income of most urban residents. Low wages and a mandatory program of political indoctrination have led to a shortage of competent teachers. and hundreds of Rohingyas were later rescued. May 2009: An American. and near the administrative capital of Pyinmana (about 320 km north of Yangon). Thailand expelled members of the Muslim Rohingya minority who appeared off its coast. Government-imposed official and informal fees deter attendance in the more impoverished rural areas. and healthy life expectancy averages less than 52 years. Education. Health. About 20% of the population has no access to safe drinking water or acceptable sanitation. Ethnic guerrillas fight largely for greater regional autonomy and more influence in the national government. reflecting the diversion of trade from the Thai border to the port of Yangon and the Chinese border as a result of trade liberalization measures undertaken in the early 1990s. August 2009: Aung San Suu Kyi was convicted of violating the conditions of her house arrest when an American citizen. who was uninvited. National independence was granted only after Aung San had secured the consent of ethnic minorities to join the union. Funding for public education has declined markedly. Offensives since 1994 against ethnic Karen and Mon guerrillas. located largely in the eastern plateau region. Growth has been negligible in such peripheral regions as Mon. Expansion has been greatest in Yangon. but over the same period. but falls below 35% as primary school ends and to 5% in secondary schools. In border areas. Enrollment is 91% in primary education. mostly into Thailand but also into Bangladesh. Myanmar’s health system is among the world’s worst. The partial liberalization of agricultural production and marketing in the late 1980s and early 1990s boosted real disposable farm income. October 2009: Aung San Suu Kyi began having talks with military leaders and was allowed to meet Western diplomats. Social Conditions Ethnic Divisions. A varied ethnic composition is the product of a long history of migration and the absence of well-defined borders before the British colonial period. as well as against Rohingya Muslims. January 2009: Although Myanmar denied that the group even existed. Page 12 • 1-Apr-2010 Background . The Karen have denounced the government for driving out ethnic minorities that had caused no problems. Since 1988. the government has concluded truces with most armed ethnic groups and has conducted concerted military campaigns against the others. government supervision to enforce restrictions against teaching in local languages has also impeded education.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. but some have sought full independence. swam to her home and hid there for two days in May. Regional and Class Divisions. The largest minority groups are ethnic Shan (9% of the population). Military officers and a small group of SPDC officials have consumed most of the benefits of economic growth. and Karen (7% of the population). and she was charged with violating the terms of her house arrest. have prompted a massive flight of refugees. who thought he would be helping her. from their boats. the northern state of Shan. near Indonesia. leading many to supplement their income by demanding bribes and engaging in other forms of corruption. declined in real terms. Roughly two-thirds of the population belongs to the Bamar ethnic group.

 The following sections are extracts from the publication: Background Note: Burma. only Rangoon itself was under the control of national government authorities. launched an attack against the Karen National Union. Power is centralized within the SPDC. Cease-fire agreements with the ethnic Wa and Kokang permit the cultivation and trade of opium. the civilian president will not be the commander in chief of the armed forces. plague. Additionally. and tuberculosis are common. a military-led system of economic patronage. The prime minister is appointed directly by the SPDC. the military will be guaranteed at least 25% of seats in parliament and will have the power to suspend civil liberties and legislative authority whenever it deems necessary in the interest of national security.” but some members of the democratic opposition and other political activists do not recognize the name change and continue to use the name “Burma. January 2010 Published by Bureau of East Asian & Pacific Affairs.3% of GDP. repression of individual rights.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. medicine is frequently in short supply. many of which fought for greater autonomy or secession for their regions after the country’s independence. though a few armed groups remain in active opposition. with Burma Army soldiers occupying the key positions. In 1948. further isolating the government from the public and international community. which maintains strict authoritarian rule over the people of Burma through intimidation by a pervasive security apparatus. Parliamentary elections are scheduled for 2010 but no date has been specified. The military regime has a contentious relationship with Burma’s ethnic groups. In November 2005. In August 2009 the Burma Army launched an offensive against the Kokang during which thousands of people fled to China and a weapons and narcotics processing facility was destroyed. US Department of State Government & Political Conditions The Union of Burma is ruled by a military regime called the “State Peace and Development Council” (SPDC).000 live births in 2009 remains one of the world’s highest. In June 2009 the Burma Army and its proxy. Since 1989.S. Most government workers and ministries moved to Nay Pyi Taw over the following six months. malaria. In 2009. the regime began pressuring ceasefire groups to join a Border Guard Force--an integrated unit of Burma Army and ceasefire group soldiers. Administrative control is exercised from the central government through a system of subordinate executive bodies and regional military commanders. The SPDC continues its harsh rule and systematic human rights abuses. and rapid development of Background 1-Apr-2010 • Page 13 . strict censorship.” Out of support for the democratic opposition. Under the new constitution. 49 deaths per 1.” Burma consists of 14 states and divisions. Although each village has access to community health centers and larger regional hospitals. and insists that any future political transition take place on its terms. Amputation injuries are commonly linked land mines installed during years of regional conflict. the regime has entered into a series of ceasefire agreements with insurgent groups. Nay Pyi Taw is a sparsely populated district located approximately midway between Rangoon and Mandalay. Government likewise uses “Burma. and suppression of ethnic minority groups. In many areas. The SPDC changed the name of the country to “Myanmar. HIV infection is a serious problem. fostering heroin addiction. the ruling regime unexpectedly relocated the capital city from Rangoon to Nay Pyi Taw. the Democratic Karen Buddhist Army. Government spending for health care amounts to about 2. the U. Subsequent military campaigns brought more and more of the nation under central government control. and the infant mortality rate.

000 Burmese refugees it hosts. In November 2007. In January 2007. the United States and the U. 2008. Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMSTEC). On May 2. Secretary General Ban Ki-Moon named former UN Undersecretary General for Political Affairs Ibrahim Gambari as his Special Advisor for Burma. they have been tainted by a long history of border conflicts and sporadic hostilities over narcotics trafficking and insurgents operating along the Burmese-Thai border. pulses. Since 1988. Burma’s lack of progress on human rights and democracy has frayed some international ties. Burma passed up its scheduled 2006 ASEAN chairmanship. Foreign Relations During the Cold War. Burma also is a member of the World Trade Organization. the Thai Government issues temporary work permits to another one million Burmese who live outside the refugee camps in Thailand. Burma has grown closer to both China and India in recent years. Burma joined ASEAN in 1997. Although Burmese-Thai relations are generally cooperative. conferences. 2009. including construction of a massive parliament building. Tan Sri Razali Ismail. 2007. and soft loans used for the construction of infrastructure and light industry. 2008. Burma’s commercial and military ties with India are growing as well. Burmese foreign policy was based on principles of neutrality. sponsored a UN Security Council resolution on Burma that was ultimately vetoed by both Russia and China. As of January 2010. and in July 2005. economic development grants. his replacement had not yet been named. On August 13. the Security Council released another press statement expressing its serious concern over her conviction and sentencing and the political impact of those events. and timber. China quickly is becoming Burma’s most important partner. The UN has made several efforts to address international concerns over human rights in Burma. Despite their oftencontentious histories. His report detailing the Burmese authorities’ September crackdown on demonstrations by monks and democracy activists and the severe reprisals was released on December 11. often tending toward xenophobia. Foreign diplomatic missions are still located in Rangoon. however. The UN Security Council adopted by consensus a Presidential Statement on October 11. On May 22.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. In addition to the approximately 150. and has participated in that regional forum. At the end of 2009.K. Special Advisor Gambari was named the Secretary General’s Special Envoy to Sudan. resigned his position in December 2005 due to the regime’s lack of cooperation. 2009 the Security Council released a press statement expressing concern over the trial of Aung San Suu Kyi and reiterating its call for dialogue. It now is a member of the Association of Southeast Asian Nations (ASEAN). continues. China also is purportedly Burma’s major supplier of arms and munitions. In the wake of Cyclone Nargis. The UN Secretary General’s first Special Envoy to Burma. Subsequently. official and unofficial economic ties remain strong. Burma has expanded its regional ties. the Security Council issued a second Presidential Statement calling for the Burmese regime to conduct the referendum on its draft constitution in a free and fair manner. and several other regional organizations and initiatives. The UN Security Council issued a press statement on the crackdown on November 14. UN Secretary-General Ban Ki Moon visited Burma in May 2008 and called on the regime to grant greater access for international aid to cyclone-affected areas of the country. Nonetheless. UN Special Rapporteur on the Situation of Human Rights in Myanmar Paulo Sergio Pinheiro was allowed to visit the country for the first time since 2003. India is a primary destination for exports of Burmese beans. 2007. the new administrative capital. Special Advisor Gambari made eight trips to Burma. deploring the September 2007 crackdown and calling for the release of all political prisoners and the creation of the necessary conditions for a genuine dialogue. offering debt relief. and ministerial meetings. 2007. In July 2009 the UN Secretary General Page 14 • 1-Apr-2010 Background . hosting a number of seminars. Tomas Ojea Quintana replaced Pinheiro on May 1.

polished. The JADE Act expands the categories of individuals and entities subject to asset freezes and travel restrictions. The political relationship between the United States and Burma worsened after the 1988 military coup and violent suppression of pro-democracy demonstrations. and also bans the importation into the United States of Burmese rubies and jadeite.-BURMESE RELATIONS. Bilateral technical assistance ended in 1988. the U.7 billion. or set into jewelry) in a third country. The UN Development Programme’s 2009 Human Development Report indicates that official development assistance totaled $242.S. In 2003. The United States has imposed broad sanctions against Burma under several different authorities. The United States has also imposed countermeasures on Burma due to its Background 1-Apr-2010 • Page 15 . Currently. Since July 1987.S. Burma receives grants of technical assistance (mostly from Asia). Burma’s total foreign debt now stands at over $7 billion. Bush imposed new sanctions against Burma pursuant to the Burmese Freedom and Democracy Act (BFDA) and Executive Order 13310. Government has prohibited new investment in Burma by U. most recently in July 2009.O. U. The IMF performs its mandated annual Article IV consultations. In the wake of Cyclone Nargis. Since 1998 Burma has been in non-accrual status with the Bank. In a speech to the diplomatic community. a ban on the export of financial services to Burma. consumers. companies exited the Burma market even prior to the imposition of sanctions due to a worsening business climate and mounting criticism from human rights groups. 2007. On April 30. which further expanded sanctions to permit asset freezes against designated Burmese entities. Burma became a member of the International Monetary Fund (IMF) and World Bank in 1952. As such. and concessional loans from China and India. approximately 110 individuals and entities have been designated for asset freezes under these authorities. further strained the relationship.S. the International Financial Corporation (IFC) in 1956. 13348) that expanded sanctions to include asset freezes against designated individuals responsible for human rights abuses and public corruption. regardless of whether the rubies or jade were substantially transformed (cut.S. as well as designated individuals and entities which provide material or financial support to designated individuals or the Burmese military government. and the Asian Development Bank (ADB) in 1973.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. again visited Burma but was not permitted to meet with Aung San Suu Kyi. and shareholders. the World Bank has not made any loans to Burma. 2008 President Bush issued Executive Order 13464. In addition. including a ban on imports of products of Burma. limited humanitarian aid and debt relief from Japan and China. he noted the regime’s “missed opportunity. The United States has provided $83 million to date in assistance for Cyclone Nargis recovery efforts. and an asset freeze against the SPDC and three designated Burmese foreign trade financial institutions. Burma has not serviced its ADB loans since January 1998. the international community has provided more than $343 million to Burma in response to the UN appeal for humanitarian relief. including the brutal crackdown on peaceful protestors in September 2007. On October 18. the International Development Association (IDA) in 1962. A number of U.” Most Western foreign aid diminished in the wake of the regime’s suppression of the democracy movement in 1988. Congress has renewed the BFDA annually. since May 1997. President George W. President Bush issued a new Executive Order (E. roughly $4 per capita (compared with $68 per person in Laos and $46 per person in Cambodia). individuals or entities.8 million in 2007. Subsequent regime repression. Burma is involved in the ADB’s Program of Economic Cooperation in the Greater Mekong Sub-region. The debt total to Japan alone is reportedly $4. Congress enacted the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008. although it has not received loans or grants since 1986. but there are no IMF assistance programs. In July 2008. it participates in regional meetings and workshops supported by the ADB.

it would augment those tools with the addition of expanded humanitarian assistance and direct. The review also concluded that. prosperous. In February 2009 Secretary of State Hillary Clinton announced that the administration would begin a comprehensive review of U. In September 2009. Burma has been found to have “failed demonstrably” in the 2009 Majors’ List. peaceful. In August 2009 U. and ethnic minority leaders. senior-level dialogue with Burmese authorities. Page 16 • 1-Apr-2010 Background . Senator Jim Webb (D-Virginia) became the first member of Congress to visit Burma in 10 years. Burma policy. the BFDA. and democratic Burma that respects the human rights of its citizens.S. the United States has designated Burma a Country of Particular Concern (CPC) under the International Religious Freedom Act. The review reaffirmed the United States’ strategic goals in Burma: that the United States supports a unified. The United States downgraded its level of representation in Burma from Ambassador to Chargé d’Affaires after the government’s crackdown on the democratic opposition in 1988 and its failure to honor the results of the 1990 parliamentary election. In November 2009. the JADE Act. and other authorities for many years. inadequate measures to eliminate money laundering. the administration announced the conclusion to that policy review. East Asian and Pacific Affairs Assistant Secretary Kurt Campbell traveled to Burma for meetings with government officials. Due to its particularly severe violations of religious freedom. In addition. leaders of the democratic opposition including Aung San Suu Kyi. Burma is designated a Tier 3 Country in the Trafficking in Persons Report for its use of forced labor. in addition to the tools the United States has long applied to achieve its goals in Burma of sanctions and support for the democratic opposition.S. The first senior-level meeting between the United States and Burma under the administration’s new policy took place in September 2009.Political Risk Services 1-Apr-2010 Myanmar Country Conditions Reproduction without written permission of The PRS Group is strictly prohibited. These designations subject Burma to additional sanctions. visa restrictions against Burma have been in place under Presidential Proclamation 6925 pursuant to Section 212(f) of the Immigration and Nationality Act.

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