US embassy cable - 02RANGOON1589

UNCLAS RANGOON 001589 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
CINCPAC FOR FPA 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, BM, Economy 
SUBJECT: BURMA'S ECONOMIC PROSPECTS: HOW LOW CAN THEY GO? 
 
REF: A. RANGON 1468 
 
     B. RANGOON 1248 
 
1. (U) The full text of the Burma Country Commercial Guide is 
available on the internet or via email from 
wohlauerbv@state.gov.  The following is a summary. 
 
2. (U) The U.S. Government has an official policy to neither 
encourage nor discourage trade with Burma.  Since May 1997, 
the U.S. Government has prohibited new investment by U.S. 
persons or entities.  A number of U.S. companies exited the 
Burma market even prior to the imposition of these sanctions, 
however, due to the increasingly poor business climate, and 
mounting criticism in the United States from human rights 
groups, consumers, and some shareholders because of the 
Burmese government's serious human rights abuses and lack of 
progress toward democracy.  No new sanctions were applied 
during FY 2001-02, although President Bush has continued the 
national emergency in place regarding the situation in Burma. 
 The U.S. Congress has been deliberating a bill that would 
impose additional sanctions on the import of Burmese textiles. 
 
3. (U) Burma's economy remains over 60 percent dependent on 
agriculture and extraction of natural resources.  The 
manufacturing sector makes up only 8 percent of GDP.  Burma's 
principal exports are natural gas, garments, beans and 
pulses, teak, and prawns and seafood.  Burma is also one of 
the world's leading producers of opiates.  U.S.-Burma trade 
is heavily skewed in favor of Burma.  Burmese garment exports 
to the United States, which more than doubled in 2000 to $415 
million, fell slightly in 2001 and are headed for a sharper 
decline in 2002.  U.S. exports to Burma, mostly machinery, 
totaled only $11.3 million in 2001 and are also off in 2002. 
 
4. (SBU) Most of the population is located in rural areas and 
survives at subsistence levels.  Nearly half the children 
suffers from malnutrition, and many children never enter 
primary school.  Drug use and HIV/AIDS are problems that are 
growing unchecked.  UN agencies and several international 
NGOs are in Burma, but their effectiveness is limited by lack 
of government cooperation and the restrictions many countries 
have on the provision of humanitarian assistance to Burma. 
The country's infrastructure, including the telephone 
network, is in a terrible state of disrepair.  Likewise, the 
educational infrastructure is in ruins as the government has 
kept universities closed for much of the past fifteen years. 
As a result, human resources have been severely damaged, with 
potentially serious long-term consequences. 
 
5. (SBU) Economic information is very difficult to obtain, as 
the government does not publish reliable data -- or in some 
cases, any data.  The economy suffers from serious economic 
distortions, including an official exchange rate that 
overvalues the Burmese kyat about 200 times.  Expansionary 
monetary policies and state deficit spending have contributed 
to inflation, which rose to over 60 percent for FY 2001-02. 
Foreign exchange is likewise in very short supply, with an 
average of only two or two and one half months of import 
cover throughout FY 2001-02.  The government has responded to 
this foreign exchange shortage by squeezing importers. 
 
6. (SBU) As reported in reftels, we see no sign that the 
government is moving toward improving its investment climate 
or reforming its economic policies.  In the year ahead, this 
ongoing mismanagement will only intensify the impact of 
forthcoming economic blows due to low levels of new foreign 
investment, and probable declines in key exports.  As usual 
the people, some of whom are already relying on government 
rice rations for survival, will bear the brunt of this 
further economic disintegration. 
Martinez