Myanmar economy targeted for sanctions

BANGKOK, Thailand -- With Myanmar's democracy leader Aung San Suu Kyi again under arrest, the United States is preparing tough economic sanctions against the ruling military junta to make it change its course.

But history and politics argue that such moves may have little effect.

Myanmar, also known as Burma, has come under intense international criticism since arresting Nobel Prize winner Suu Kyi on May 30. Japan, Myanmar's largest aid donor, has announced plans not to extend new development assistance.

Now an imminent U.S. ban on imports from Myanmar could cut its export earnings by one-quarter to one-third. The country's exports to the United States totaled about $356 million in 2002, mostly in garments.

The import ban is part of a package of measures the U.S. Congress assembled to punish the ruling junta for its fresh crackdown on the country's pro-democracy movement.

A bill passed by the Senate is awaiting House approval, and President Bush is expected to quickly sign it into law.

Proposed European Union trade barriers would also chip away at export earnings.

But Myanmar, long ruled by generals, has a long history of economic isolation giving it a certain immunity against sanctions.

The late military dictator Gen. Ne Win, who ruled from 1962 to 1988, espoused a "Burmese Road to Socialism" banning most foreign investment which turned one of Southeast Asia's most prosperous economies into a basket case.

The country has gone without much bilateral aid and no new aid from the World Bank and the International Monetary Fund since 1988 when the military brutally crushed a pro-democracy uprising. Washington banned new investment by U.S. companies in 1997.

"People have mixed feelings about sanctions," said U Saw, a businessman. "They know there is a need, but it affects the people."

People are used to hardship, U Saw said. "Forty years ago we are suffering. Today we are suffering," he said.

Global maneuvering may lessen the impact of sanctions.

As Western nations ostracized the military regime, China seized the opportunity to become Myanmar's closest political ally, main military supplier, and, in essence, banker of last resort.

Senior Gen. Than Shwe reaped a $200 million loan in a trip to China along with agreements on health, technical and economic cooperation and the prospects for new industrial projects.

Playing the China card has also pulled India -- once an outspoken friend of Myanmar's pro-democracy movement -- into Yangon's corner.

India has agreements with Myanmar to develop road and port facilities, and to explore for offshore and onshore petroleum and gas. Gas and mineral investment by many countries already promise future income for the junta.

Still, Western nations are committed to imposing sanctions, although their effectiveness as a form of political leverage is sharply debated.

Proponents claim sanctions forced South Africa to abandon its racist apartheid system. Opponents cite Cuba's survival through four decades of financial ostracism by Washington.

"The proposed new sanctions will bring about neither freedom, nor democracy to the Burmese people," said Bill Reinsch, president of the National Foreign Trade Council and co-chairman of USA Engage, a group which opposes economic sanctions.

Sanctions, he said, will hurt the Burmese people because many depend on the export market to earn a living.

But the nonpartisan New York-based Council on Foreign Relations said in a June study that sanctions can make an impact.

"Economic sanctions against the Burmese regime adversely affect industries that directly benefit the military and deprive it of an important source of revenue," says the report.

Repression has driven many of the country's best and brightest abroad, including some notably gifted economists, while the economy is close to dysfunctional.

"Pervasive corruption and continuing economic mismanagement by the regime have hurt the Burmese people even more than sanctions," says the Council on Foreign Relations report.