US embassy cable - 02RANGOON1248

UNCLAS RANGOON 001248 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP, EB 
STATE PASS USTR, OPIC 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
CINCPAC FOR FPA 
 
E.O. 12958: N/A 
TAGS: EINV, ETRD, BM, Economy 
SUBJECT: BURMESE INVESTMENT CLIMATE STILL HOSTILE 
 
This cable is Sensitive but Unclassified.  Please handle 
accordingly. 
 
 1. (U) As a companion to the recently submitted Burma 
investment climate statement, we want to summarize the key 
problems that plague the country.  The full text of the 
investment climate statement will be posted on the National 
Trade Data Bank and is available via email from 
wohlauerbv@state.gov. 
 
2. (SBU)  New U.S. investment in Burma has been illegal since 
1997.  Burma is a country blessed with extensive natural 
resources, low labor costs, and a great potential for 
tourism.  It is also an ASEAN member.  However, even if 
sanctions were removed, an extraordinarily hostile investment 
climate would hold U.S. investment -- as it has held all 
other investment -- to a very low level.  In Burma's FY 
2001-02, flows of investment dropped nearly 90 percent from 
the previous fiscal year to only $17.46 million for seven 
projects. 
 
3. (SBU) Burma's investment laws are relatively liberal, but 
their implementation is racked, at all levels, with 
corruption.  The ruling military junta, the State Peace and 
Development Council (SPDC), has promised an "open door' 
economic policy and urged foreign firms to invest, but 
regularly comes out with punitive and capricious regulations, 
which make investment for foreigners difficult if not 
possible.  The regulations are so vague and so conflicting 
that it is almost impossible for an investor to be fully 
confident that it is doing business "legally." 
 
4. (SBU) Some lowlights of the past year: (1) an oral 
directive forbidding renewal of existing trading permits, or 
issuance of new ones, for foreign firms; (2) a increasing 
disparity between the official exchange rate (6 kyat to the 
dollar) and the market rate (1300 to the dollar and falling); 
(3) continuing restrictions on the use of foreign exchange 
for imports unless the imports are matched by exports; (4) 
government expropriation of a foreign firm without 
compensation; and, (5) increasing consumer boycotts in the 
United States and Europe on products made in Burma. 
 
5. (SBU) Barring significant practical change, we do not 
expect Burma's investment climate to improve.  We have not 
seen any movement toward reform in recent years and expect 
none in the immediate future.  In fact, if recent events are 
any indication, the situation for investors will most likely 
deteriorate in the period immediately ahead. 
Martinez