It will house the military war office, government ministries and a parliament, according to a government official who has seen blueprints for the 10sqkm complex.

'It's one of the biggest constructions I have ever seen,' a western diplomat said.

Mansions for the senior generals, government offices and national headquarters for the country's ethnic groups and the Union Solidarity Development Association - the official social organisation - are being built.

Although a new parliament is being built, it is unclear from the plans whether plots will be allocated to political parties, particularly Aung San Suu Kyi's National League for Democracy, according to the government official.

Bunkers, tunnels, a large military hospital, apartments, a huge airstrip and a golf course are being built, according to witnesses.

The creation of the new capital is primarily the idea of Senior General Than Shwe. The plans have been in the pipeline for several years and building began almost two years ago.

'The planned retreat is essentially strategic,' said an Asian diplomat who regularly deals with the junta.

The US-led invasion of Iraq in 2003 reinforced General Than Shwe's fear that Washington might attack, according to analysts. Myanmar's military strategists have long argued that the country was vulnerable to attack from the sea.

'Than Shwe has a bunker mentality, and when he's completely secure, he'll launch his offensives,' according to senior Myanmar analyst Win Min, who is based in Chiang Mai, Thailand. 'But a key strategic drawback of the site is its lack of access to the sea - it is not close to a port.'

According to the plans, the whole military and government administration is to be relocated there. Even foreign embassies are likely to have to follow when the government is finally transplanted to the hills.

Several ministries are scheduled to move to the new capital in the next few months, according to diplomats.

Civil servants have been panicked by the planned move.

The lack of accommodation for families at Pyinmana means only bureaucrats who are single are likely to be transferred in the first phase. As a result, many young public servants are desperately trying to find marriage partners to help postpone their reassignment.

The construction work is being largely carried out by several prominent Myanmese companies, including Htoo Trading, owned by the wealthy magnate and arms dealer Te Za, who is reputed to be very close to General Than Shwe.

But the construction work has been plagued by material shortages and delays.

Last year, a shortage of cement temporarily stopped construction. But General Than Shwe rejected out of hand Mr Te Za's request to import cement from China.

Now an acute shortage of timber has added a further complication to the project's completion.

'The delay in the reconvening of the National Convention and the drafting of the constitution may actually be related to the completion of the new capital at Pyinmana,' a western diplomat in Yangon said.