Burmese sweat in gulag labour as heroin cash surges

ON the fifth floor of Burma's grandiose new army museum in Rangoon charts proudly show how much prison production has boomed in the last eight years. Income from prison quarries, for example, has climbed from 7.4 million kyats (about HK$9.87 million, according to the official exchange rate) in 1987 to 103 million kyats in 1995. The displays specifically indicate how meagre such revenues were 'before taking over the responsibilities by the State Law and Order Council', or Slorc, as the junta formed in 1988 styles itself. The regime repeatedly drums the message that under its guidance the economy will continue moving towards takeoff - as long as the population remains wise enough not to challenge its iron political control. Yet that prisons display - amidst a cornucopia of new town plans and martial splendour - is an ominous reminder to what lengths the generals will go to boost the economy, and, so they hope, their legitimacy. A glance under the mysteries of Burmese government accounting reveals an economy so weak that forced labour, gulag production, remittances from workers overseas and - perhaps - profits from the heroin trade, help to keep it afloat. The World Bank concluded late last year that 'the pace of economic growth is still not rapid enough to compensate for the economic stagnation of the preceding quarter century'. In a recent interview with Sunday Money, opposition leader Aung San Suu Kyi said the junta would always find economic development difficult. 'It is simply incompetent,' she said. 'If you are not prepared to tolerate differences of opinion you will never get correct answers.' The generals' ability to lift an economy that Ms Suu Kyi claims is 'very much biased in favour of the privileged few' is likely to become more contentious because the opposition National League for Democracy (NLD) says it will soon publish its own economic plans. Ms Suu Kyi's NLD has been shunned by the military - which has held power since 1962 - despite having won 80 per cent of the vote in a 1990 election. She claims it is because 'they live by fear' that the junta has, according to its own figures, more than tripled military expenditure in the last five years. The International Monetary Fund (IMF) pointed out in its latest report that the government's attempt to tackle its budget deficit by trimming expenditure was 'accompanied by a reallocation of outlays from capital development and social services to military uses'. Some observers have claimed that military spending may swallow up nearly half the government budget, but we really have no idea because government figures express these things at the wildly overvalued officially rate for the kyat - 20 times the openly tolerated street price. This is the beauty of Burma's much maligned dual-currency. 'It's two sets of books,' according to one economist. Although private transactions are carried out at street prices the junta and its friends tolerate a dual-currency system because it allows them to skim money from the economy. A simple example: Army officers and civil servants are sold petrol at 25 kyats (25 US cents) a gallon which they resell at 200 kyats a gallon. State-owned enterprises are in a terrible mess but, from the junta's point of view, they are useful because they are forced to sell underpriced goods to the government. 'They are not rocket scientists,' one expert observer says. 'They can't even imagine other ways to cream off the economy. 'The Indonesian elite takes rents off the economy but is much more subtle.' If street prices are substituted for official values - for a crude but probably more accurate assessment - a modest picture becomes quite gloomy. The legal, non-military 1995 current account deficit is slashed from 0.7 per cent to 11.6 per cent of GDP, the fiscal deficit doubles to 12 per cent, and the 1995 growth rate is trimmed from 4.6 to 6.8 per cent. The IMF pointed out that its foreign exchange reserves were only kept level by 'the accumulation of arrears on external-debt service obligations'. The fund showed that for all its pleas for foreign help it only spent 12 per cent of official aid on capital projects. Despite the controversy over foreign investment in Burma, actual money moved into the country remains very modest. Indeed in 1995 net legal private transfers of money - 'the dishwashers of Singapore' - was greater than foreign direct investment. The danger for the regime now is that the first wave of investment - heavily concentrated on luxury hotels - will be not be repeated soon, especially after the widespread condemnation of the Slorc for its recent detentions of more than 200 opposition members. In its desperation to squeeze some life out of the economy, Slorc appears to have stepped up what some critics have claimed is virtually a gulag economy. Slorc readily admits that 'voluntary labour' is widespread in Burma. A United Nations report quoted Foreign Minister U Ohn Gyaw saying last year: 'These citizens did not even ask for money because they would consider it an insult.' Ms Suu Kyi paints a very different picture. 'Forced labour is all over the place - quite often the breadwinner can't be spared to work on a forced labour project so the wife has to go. 'In some areas the situation is so bad the husband and wife must both earn money so they have to send their children to do forced labour.' The Burmese government's annual review reveals, with typical military precision, the extent of forced labour when it notes that local projects are supported by state spending and also 'people's contributions', including 'public donations in cash, kind and services'. 'People's contributions' to local projects have climbed from 5.5 million kyats in 1988 to 159.9 million kyats in 1995. There is no similar breakdown in the figures for state-level projects although the annual review says they are carried out 'in co-operation with the public'. The state's 'construction and renovation' work expanded from 2,262 kyat in 1988 to 20,176 kyat in 1995. For all Burma's problems any visitor can see there are seams of real wealth in what is after all a fecund country which makes the US$100 annual output per head implied by government statistics appear absurd - it would be the poorest country in the world, poorer than Chad. The per capita GDP figure is way out of kilter, even given shaky official figures, with a per capita purchasing power generally calculated at around US$600. The implication is that Burma has a huge hidden economy. Indeed it would not be surprising if the public tried to hide their dealings from an unpopular regime - the more than a dozen rebel groups certainly do not pay taxes. There is another, darker, source of wealth flowing into the Burmese economy. Profits from the Golden Triangle's opium and heroin trade - the source of 60 per cent of all heroin seized on the streets of America. Western narcotics officials value the Golden Triangle's exports of opiates at over a US$1 billion a year at the country's borders so it is not hard to imagine that these ill-gotten gains account for at least part of the surprising flush of wealth in Rangoon and Mandalay. These suspicions are fuelled by reports that two 'retired' drug warlords are investing in Burma's mini-boom - the notorious Khun Sa and an earlier rival Lo Hsing-han. The fact that narcotics profits may be flowing south does not, of course, necessarily fill the government's coffers. Nevertheless for all its problems Burma is not on its knees. It never had the money to saddle itself with Soviet-style industry. It has rich resources to exploit even if foreign factories keep staying away and, whatever you say about official figures, there is no doubt the economy is growing. Yet the IMF was able to report that Slorc's partial reform of the economy had 'failed to engineer a decisive transformation of the economic system'. 'There is growth there - that's part of the problem,' one economist said. 'The army will probably be able to hobble along into the next century because they are not really under pressure to change.'