US embassy cable - 02RANGOON1253

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001253 
 
SIPDIS 
 
STATE FOR EAP, EB 
COMMERCE PASS ITA JEAN KELLY 
TREASURY PASS OASIA JEFF NEIL 
CINCPAC PASS FPA 
 
E.O. 12958: DECL: 09/27/2012 
TAGS: EFIN, ECON, BM, Economy 
SUBJECT: IMF: TAKE YOUR ADVICE AND... 
 
 
Classified By: COM Carmen Martinez for Reasons 1.5 (B,D) 
 
1. (C) Summary: IMF proposals for marginal economic reforms 
in Burma have been brushed aside by the government.  Japanese 
efforts to stimulate interest in reform in return for limited 
adjustment aid will likely get a similarly cold reception. 
Nonetheless, international financial bodies and donor 
community experts should maintain contacts.  They need to 
rebuild their knowledge of the Burmese economy.  They also 
need to continue their economic education of the Burmese 
technocrats who will one day be called on to administer an 
economically viable state.  End summary. 
 
Show Me the Money 
 
2. (C) Traditionally the IMF's suggestions for incremental 
economic reform fall on deaf ears here.  We understand that 
the IMF will once again propose that the Burmese government 
take marginal steps to: (1) begin to unify the market and 
official exchange rates, (2) liberalize agricultural exports, 
(3) improve tax collection, and (4) improve state-owned 
enterprises' budgetary discipline.  Although the IMF's report 
of its July mission to Burma is not yet published, already 
the word is that the Burmese government will ignore its 
proposals.  The official line of the Burmese government has 
long been that no economic reforms will be possible without a 
large structural adjustment loan.  The IMF, restricted by 
U.S. policy from extending new funding to Burma, has 
repeatedly tried to convince the naysayers in Rangoon to 
undertake limited, incremental reform measures that would not 
require a large financial investment. 
 
3. (C) A top Burmese businessman and former government 
finance official said the regime was unlikely to shift its 
position any time soon.  He said that the ruling generals are 
fixated on national pride.  The government will dismiss all 
IMF or World Bank advice as long as those institutions 
"patronize" Burma and refuse to treat it like a full member 
-- that is by giving it access to funding.  He admitted that 
the Ministry of Finance had discussed repaying its 
International Financial Institution (IFI) arrears as a "sign 
of good faith," but ultimately rejected the notion on the 
grounds that the gesture would not result in any new loans 
coming Burma's way. 
 
Japan, Asia's Answer to the IMF 
 
4. (C) The Japanese government is also getting in on the 
economic advice game.  A large team of technical consultants 
and scholars has been regularly visiting from Tokyo to work 
with Burmese government officials on economic reform.  One of 
the team's leaders, a professor of international studies from 
Yokohama, told us that the Japanese government has had some 
success in the region in the past where the IMF has failed, 
getting Vietnam to accept conditionality for a 20 billion yen 
bilateral economic adjustment loan.  Ideally, the team leader 
claimed, the Japanese government would like to arrange for 
Prime Minister Koizumi and Senior General Than Shwe to sign 
off on a similar structural adjustment loan agreement during 
the upcoming ASEAN leaders meeting in Cambodia. 
 
5. (C) The team leader was not optimistic that the current 
Burmese regime would adopt economic reform measures. 
However, he was concerned that if no effort was made to push 
reform, and to support the few reform-minded technocrats 
here, then any new democratic government would inherit a 
country with very dim economic prospects.  He felt that such 
support would only be possible through a carefully monitored 
and disbursed structural adjustment loan.  Further sanctions 
or economic isolation, he posited, would sound a death knell 
for budding reformers. 
 
Comment 
 
6. (C) No one is surprised that the ruling junta scoffs at 
the IMF proposals.  Despite this, we think that the U.S. 
government should encourage IMF and World Bank technical 
missions to Burma, as long as they are not tied to any new 
funding.  Even if the government will not listen to reason, 
at least these IFIs can rebuild their knowledge base with a 
view to providing critically necessary adjustment funding 
quickly when and if a political change occurs.  Likewise we 
think the Japanese should continue with their efforts. 
Although we are dubious that the government will listen to 
Japan any more than it will to the IMF, it is important for 
communication to continue between Burma and donors on issues 
of economic reform.  End comment. 
Martinez