Myanmar's New Dawn: Will Suu Kyi's release herald major economic change?

By Jonathan Hopfner

Less than a century ago, all the signs indicated that Myanmar would be one of Asia's greatest success stories. The infrastructure and social systems bequeathed by decades of British rule of the nation then known as Burma, as well as its abundance of natural resources, made it the richest in the region in the postwar period. But its years as a socialist dictatorship, as well as its recent isolation under a military junta, have left the country's economy in tatters, shunned by foreign governments and private investors alike.

Small wonder, then, that the recent release of Aung San Suu Kyi, Nobel laureate and leader of Myanmar's National League for Democracy (NLD), has provoked such enthusiasm -- both within Myanmar and abroad. While the terms of her newfound freedom are still unclear, she has already begun talks on "national reconciliation" with the ruling State Peace and Development Council (SPDC), leading many to surmise that democracy -- and more crucially, prosperity -- may be just around the corner.

This recent outpouring of optimism has been reflected in the sudden strength of Myanmar's currency, the kyat. Although the official rate quoted by government institutions is 6.9 kyat to the dollar, black market rates have plummeted from 600 to nearly 800 over the past year. Until mid-April, that is, when in a sudden effort to crack down on currency speculators the government revoked the licenses of all foreign trading firms operating in Rangoon and rounded up black market dealers. The result was, in the words of one anonymous Western diplomat, "disastrous," and the kyat sunk to a historic low of over 1000 to the dollar in early May. Since Suu Kyi's release, however, the currency has staged a remarkable turnaround, settling in the 740-770 range.

The currency, along with general economic sentiment, has been boosted by hopes that Suu Kyi's release will lead to the lifting of sanctions currently placed on the country by the governments of the U.S. and Europe. But long-term realities are likely to soon overpower these short-term joys. Although the international community has unanimously hailed the military junta's decision, there have been no indications that its stance on doing business with Myanmar has altered. More importantly, Suu Kyi herself has stated that, as far as the NLD's negative views on foreign investment and aid go, "nothing has changed."

The questionable state of Myanmar's infrastructure is also unlikely to change anytime soon. The junta has shown no willingness to abandon its currency peg, which allows it to use the official kyat rate in any "joint" ventures with foreign companies. Even in the capital, Rangoon, electricity is sporadic - most major hotels and offices are forced to rely on generators. Combined with the SPDC's recent move to evict foreign trading firms from Yangon with little advance warning, potential investors are not yet convinced the time is right to make serious commitments.

If there is a bright spot for Myanmar's ailing economy, it may be in the realm of tourism. The Pacific Asia Travel Association (PATA)'s recent decision to hold its annual Mekong forum in Yangon, as well as the growing number of independent travelers exploring the country, indicate the government's efforts to market Myanmar as a desirable destination may be paying off. Suu Kyi's release, despite the fact that the NLD's tourism boycott remains firmly in place, is likely to convince more people to visit. "I'm confident we'll see a 30 percent rise in visitors to Myanmar by the end of 2002," says Luzi Matzig, group managing director of Asian Trails, a Bangkok-based tour operator active in Myanmar.

But unfortunately the country's fundamental problems - a lack of infrastructure, currency reserves, or corporate governance - are likely to keep it firmly in the bottom tier of Asia's economies. It is up to the junta if they will speed this process along, thereby earning the assistance of the foreign community, or draw it out by once again trying to go it alone.