BurmaNet News, May 11, 2004

[Editor]

May 11, 2004, Issue # 2473

INSIDE BURMA
Japan Economic Newswire: Myanmar premier urges support for junta's
democracy road map
Irrawaddy: 104 Articles to be Discussed in NC, Says Junta

ON THE BORDER
Kao Wao: Hundreds of Migrant Workers Waiting at the Border

BUSINESS / MONEY
Irrawaddy: Multilateral Banks and Burma
Bangkok Post: Bangkok Airways Adds Rangoon, Burma Route
Xinhua: Myanmar to raise telephone density
Irrawaddy: Beating the Sanctions


INSIDE BURMA
_____________________________________

May 11, Japan Economic Newswire
Myanmar premier urges support for junta's democracy road map

Yangon: Speaking at a Myanmar writers and journalists conference Tuesday
in Yangon, Prime Minister Khin Nyunt urged public support for the junta's
road map to democracy.

The general also said he hopes all invited parties will attend the
National Convention resuming May 17, which is the first step in his
seven-step road map.

Khin Nyunt announced his road map to democracy in August last year, aimed
at creating a multiparty democratic government.

The changes are to begin with resumption of the suspended convention to
write a new constitution and to end with a democratic government formed
after a general election to be held in accord with the new constitution.

The authorities have invited delegates of the previous convention,
suspended in March 1996, to attend the resumed convention on May 17.

But the National League for Democracy, led by Nobel Peace laureate Aung
San Suu Kyi, who is still under house arrest, told the junta April 30 the
government must make changes in procedures for the convention to be a
success.

It is still waiting for the junta's response before deciding whether or
not to attend.

_____________________________________

May 11, Irrawaddy
104 Articles be Discussed in NC, Says Junta - Naw Seng

The 104 articles intended to make up the body of Burma’s forthcoming
constitution will be open for discussion at the National Convention, said
a senior military intelligence officer during a meeting on Monday.

“There will be the opportunity to discuss the 104 articles at the National
Convention,” said Brig-Gen Than Tun of the Office of the Chief of Military
Intelligence, or OCMI, as quoted by Nai Tala Nyi, a convention delegate
from the New Mon State Party. Nai Tala Nyi spoke by telephone from Rangoon
on Tuesday.

 There will be the opportunity to discuss the 104 articles at the National
Convention.
—OCMI officer Brig-Gen Than Tun

However, Than Tun said he could not guarantee the proceedings or
conditions of the assembly.

A meeting between OCMI and fifteen of Burma’s ethnic ceasefire groups took
place on Monday to discuss the National Convention, which is scheduled to
reopen after an eight-year hiatus on May 17.

Rangoon announced in April that the assembly will be held in accordance
with the six objectives and 104 tentative articles put forward at the
previous convention, which adjourned in 1996. The government-tabled
articles, if adopted, would ensure that the military plays a leading role
in any future administration.

Five delegates from each of the ceasefire groups are to attend the
convention. They will be required to stay at Nyaung Hnapin in Hmawbi
Township, 32 km north of Rangoon. But Brig-Gen than Tun said they will be
allowed mobile phones at the venue.

“We, like other groups, will discuss in a constructive way,” said Chang
Lang, a delegate from the New Democratic Army-Kachin, speaking by
telephone from Rangoon

Kachin Independence Organization vice chairman Dr Tu Ja said in April that
it would be difficult for the group to attend the convention unless
Rangoon was prepared to change the 104 articles—a call echoed by other
invited attendees.

The main opposition National League for Democracy party, or NLD, and eight
ethnic-based parties, are yet to confirm whether they will attend.

Burma’s second largest political party, the Shan Nationalities League for
Democracy held a meeting on Tuesday to decide if it will attend the
convention. The party’s decision was not known at the time that this
article was filed.

The National Convention first opened in 1993. The NLD walked out in
November 1995, claiming that the proceedings were undemocratic. The
assembly was adjourned by the government in March 1996.


ON THE BORDER
_____________________________________

May 10, Kao Wao News
Hundreds of Migrant Workers Waiting at the Border - Taramon

Sangkhlaburi: Hundreds of migrant workers have gathered at the Burmese
border town of Three Pagodas Pass waiting to get into Thailand.  Word has
spread that the Thai authorities will issue work permits next week.

A Mon village headman from the area estimated that close to two thousand
were in the border area.

Nai Phe Sein, a former university student from Karen State, said the
migrants would have to wait about a week to enter the Kingdom. They have
to pay over 7,000 bahts to the traffickers who work in cahoots with Thai
traffickers believed to be policemen.

Last week, four cars carrying migrants were stopped in Kanchanaburi
province across the border in Thailand, according to a businessman in
Three Pagodas Pass.

“As the deadline to register for the work permits is approaching,
migrants, especially from Mon and Karen States, have been flocking to the
border.  There are about eight hundred migrants in Palai Japan village,”
Nai Mae Pone told Kao Wao.

Some migrants have been attempting sneak into Thailand using a crossing
point near Three Pagodas Pass. Others try to get to Kanchanaburi by
trekking for three days along a route through the jungle that avoids the
checkpoints where the cars were stopped.   Most migrants are reluctant to
take the jungle route because they lack food and some have even died in
the harsh wild forest.

Even though large numbers of security forces are deployed along the road
inside Thailand, most migrant workers finally manage to get into the
Kingdom by paying money to snake heads.  According to a Thai Mon who has
close relations with Thai officers at the border, the checkpoint
authorities are displeased by the influence of the human traffickers.
May


BUSINESS / MONEY
_____________________________________

May 11, Irrawaddy
Multilateral Banks and Burma - Yuki Akimoto

The Asian Development Bank has quietly started providing modest assistance
to Rangoon. Is more to follow?

On April 8, 2004 Mitch McConnell, a prominent American senator from
Kentucky with an interest in the Burma debate, expressed concerns over
multilateral assistance to Burma and threatened to cut US funding to
institutions that might provide such assistance.

At a hearing of the Senate Subcommittee on Foreign Operations, he stated:
“Unfortunately, I am hearing that international financial
institutions—particularly the World Bank and the Asian Development
Bank—are keen on re-engaging Burma. They do so at their own risks, and
should begin finding other funding sources for the upcoming fiscal year
because none will be forthcoming from this Subcommittee.”

Senator McConnell’s statement reflects the unease shared by many in the
Burma democracy movement about multilateral assistance going to Rangoon,
which has a poor track record regarding transparency and public
participation in development projects and has been accused of a range of
human rights abuses.

So what exactly are the World Bank and the Asian Development Bank, or ADB,
doing with respect to Burma? As yet the numbers are small, but imply an
effort to renew assistance.

Clearance of Arrears

The short answer is that neither the World Bank nor the ADB is providing
any direct financial assistance to Rangoon. Burma is a member of both
institutions, but lending and technical assistance from the banks stopped
in 1986-87. Burma is in arrears at both the World Bank and the ADB (US $25
million and US $28.7 million in overdue payments, respectively), and it
cannot receive any more assistance until those arrears are cleared.

Clearance of arrears, however, is only a technical hurdle. For example, at
the end of 2002 Afghanistan had arrears of $18 million at the ADB that the
United Kingdom simply paid up, thus enabling the country to start
receiving assistance from the ADB. Once the World Bank and the ADB decide
to resume assistance to Burma, arrears probably will not be much of an
obstacle. As institutions providing billions of dollars each year to
developing countries, the multilateral banks could become major sources of
development financing for Rangoon.

The common assumption has been that the multilateral aid to Burma would
not resume until there was some sort of “transition” in the country.
However, this need not be the case. In the past decade, there have been at
least two occasions when multilateral assistance to Burma was considered.
In 1995, the IMF offered to Rangoon a “staff-monitored program” that might
have led to a financial assistance worth US $3 billion upon successful
completion. In 1998, the chiefs of mission of the US, British, Japanese,
Australian and Philippine embassies in Rangoon and representatives from
the UN and the World Bank got together in Chilston Park in England to
discuss the possibility of offering financial assistance in exchange for
political reform.

Since the State Peace and Development Council, or SPDC, unveiled its “road
map to democracy” in August last year, the banks have shown interest in
re-engaging with the regime and have begun to look for ways to do so.

A Foot in the Door

The ADB already has become more involved with Burma in several ways. Since
July 2003, there has been an SPDC representative on the bank’s board of
directors. There are 12 executive directors at the ADB: Burma, Thailand,
Malaysia, Singapore, and Nepal form a constituency that is currently
represented by an executive director from Thailand, Chaiyuth
Sudthitanakorn. Every executive director has an “alternate”. Chaiyuth’s
alternate is Dr Sein Tin from Burma, formerly the Director-General of the
Central Statistical Institute in Rangoon.

Sein Tin has been advocating for the resumption of ADB assistance to Burma
and is likely to continue doing so for the rest of his three-year term.
His efforts have manifested in some unusual ways: Sein Tin recently helped
facilitate an Easter vacation to Burma for about 20 ADB staff.

Re-engagement Rush

On a more substantive note, after Aung San Suu Kyi was again released from
house arrest in May 2002, the ADB started reviewing three of Burma’s
sectors: agriculture, health, and education. Generally, a sectoral review
is conducted as an early step in identifying potential projects and
programs for which institutions like the ADB can provide assistance.
Officials said that such reviews were necessary to keep the bank’s Burma
knowledge base updated in the event that it decides to resume assistance
to the country.

At the same time as the start of the sectoral reviews, in the summer of
2002 the ADB prepared a proposal to fund a regional drug control project
in mainland Southeast Asia. Under the scheme the bank was to provide a
grant for a regional effort to promote “alternative development”
operations in areas where opium poppy was grown. In other words, the ADB
technically was to fund a regional project, not a project in Burma.

The project was scrutinized and met with strong opposition at the ADB’s
board of directors, which had to decide whether to approve the proposal.
American sanctions and the European Union Common Position on Burma require
executive directors representing the US and EU at the World Bank and the
ADB to oppose loans and other assistance to Burma. As such, the American
and European executive directors were poised to vote against approval.

Regional Technical Assistance to Burma

In the end the proposal was withdrawn from the board’s consideration for a
reason unrelated to Burma. But the ADB has successfully used a regional
veil to obscure funding to Burma before and since then. In 2001 and 2003
the bank approved and funded at least five “regional” projects where the
money was channeled to Burma (see table below).

Table: please see: http://www.irrawaddy.org/print/printed/april/guest.html

The five projects were essentially the same as the drug control proposal
(they were all regional technical assistance projects funded by grants
from the ADB) save for one point: the amount of assistance from the ADB
for the five projects that were approved was in each case less than US $1
million and so required only the approval of the president of the bank,
not that of the board. The president of the ADB historically has been a
Japanese national. It is conceivable that the US and EU board members were
not even aware of the five projects as they advanced through the approval
process. This explains why, on the one hand, the drug control project met
with resistance from the board of directors, while on the other hand the
five projects were approved without mention.

Highways, a Port and a Dam

In addition to the five approved projects, several other ADB ventures are
in planning stages. Burma is part of the Greater Mekong Sub-region, or
GMS, economic cooperation program, which is supported and facilitated by
the ADB. Six countries comprise the GMS: Burma, Thailand, Cambodia,
Vietnam, Laos and China’s Yunnan Province. The brief of the GMS is to
develop a physical infrastructure so as to encourage and facilitate trade,
investment, and economic integration in the region. The ADB has compiled
information about and mapped out the different components that will
comprise the infrastructure and subsequent economic integration.

The bank has identified eleven “Flagship Initiatives”, one of which is
called the East-West Economic Corridor, or its ungainly acronym EWEC. A
key goal of the EWEC is to significantly reduce travel time and transport
costs between the Andaman Sea and the South China Sea by establishing a
land route from Burma through Thailand and Laos to Vietnam. The ADB
identifies as a priority of EWEC the construction of an industrial port at
Moulmein on Burma’s Andaman coast with a road link to Da Nang, a port in
Vietnam.

Another Flagship Initiative is a regional power integration plan among the
GMS countries. Under the scheme, electricity generated by large-scale
hydropower plants in China, Laos, and Burma is to be exported and consumed
in Thailand and Vietnam. The sole hydropower station in Burma included in
the plan is the controversial Tasang project to be built in Shan State,
under which a massive dam is to be built on the Salween River. The ADB has
yet to address allegations of human rights abuses, such as forced labor,
in relation to the Tasang project. Currently the project has no financing,
but that is no guarantee the situation will remain that way.

In sum, the re-engagement of the multilateral banks with Burma can not be
dismissed as something that will happen only after “transition” or with
endorsement from the pro-democracy opposition. If pro-democracy groups as
stakeholders want a voice in the development of Burma, they need to demand
consultation with the World Bank and ADB with regard to the two
institutions’ current and future activities in Burma.

Yuki Akimoto is a coordinator of the Burma Information Network-Japan. She
is also a staffer at the Bank Information Center, Washington, DC.

_____________________________________

May 11, Bangkok Post
Bangkok Airways Adds Rangoon, Burma, Route - Boonsong Kositchotethana

Bangkok Airways has inaugurated scheduled services to Rangoon, becoming
the third Thai carrier to provide an air link between Thailand and Burma.

The start of daily flights between Bangkok and Rangoon this month by
Thailand's largest privately owned airline came as a surprise as the route
had not been planned earlier.

However, Burma's prime minister, Gen Khin Nyunt, agreed to grant the
closely guarded rights, apparently under a deal personally negotiated by
Dr Prasert Prasarttong-Osoth, the founder, president and chief executive
of Bangkok Airways.

Dr Prasert has a reputation in the industry for his ability to secure
traffic rights from countries with political complexities such as Cambodia
and China. Industry sources said it had also been Bangkok Airways'
intention to start the Burmese services with flights to Pagan or Mandalay
as an extension to its Mekong World Heritage Network that connects four
Unesco World Heritage sites -- Sukhothai, Luang Prabang, Hue and Angkor
Wat.

However, M.L. Nandhika Varavarn, senior director for corporate
communications at the airline, said strong tourist demand was the main
reason behind the decision to introduce daily service to Rangoon, using
125-seat Boeing 717 aircraft.

The Burmese military regime has recently eased its entry restrictions for
foreign tourists in a revived bid to stimulate its tourism industry, which
has been affected by international sanctions for its alleged poor human
rights record, according to industry sources.

Last October, Rangoon granted PB Air, a small airline owned by the
Bhirombhakdi family that operates Boon Rawd Brewery, the right to operate
two weekly flights from Bangkok to Pagan.

Dubbed "Asia's boutique airline," Bangkok Airways plans to use Rangoon as
a stepping stone to other key Burmese destinations, they said.

Up to now, the Bangkok-Rangoon route has been primarily served by Thai
Airways International and Myanmar Airways International on a code-sharing
basis.

Myanmar Airways is a joint venture between Myanmar Airways, Singapore and
Brunei interests, supported by Royal Brunei Airlines.

To promote its new route, Bangkok Airways is charging 5,000 baht for a
round-trip ticket purchased from now to June 15, after which fares will go
up to 8,080 baht.

The flight time is 90 minutes one-way non-stop.

_____________________________________

May 11, Xinhua News Agency
Myanmar to raise telephone density

Yangon: Myanmar has planned to raise its telephone density by up to 3
percent within the next two years, a local press reported in this week's
issue.

The country's present telephone density stands at 0.8 percent that is 8
per 1,000 people out of its 52-million population.

The plan, which is part of a program by the Association of Southeast Asian
Nations (ASEAN) to narrow the development gap between its older and newer
members, is to be realized ahead of the grouping's summit in 2006 which is
to be hosted by Myanmar, the Myanmar Times quoted the state-run Myanma
Posts and Telecommunications (MPT) as saying.

Myanmar now has 416,000 telephone lines and 63,150 mobile ones. Of the
mobile phone system, 8,500 are of cellular system, 2,700 of digital
European cordless telecommunication (DECT) system, 30,050 of CDMA system
and 21,900 of GMS system, according to official statistics.

The cellular system was introduced in 1993, while the DECT and CDMA
systems were launched in 1997 and the GSM system in 2002.

Meanwhile, the country is planning to add 10,000 more mobile phone lines
under a latest infrastructural project to improve its telecommunications
industry.

The MPT remains at present as the only mobile phone service provider in
Myanmar.

_____________________________________

May 11, Irrawaddy
Beating the Sanctions - Bruce Hawke

The tight American sanctions that came into effect last year make
international trading in Burma more complicated and expensive. But, with
help from at least one Singaporean bank, Rangoon’s entrepreneurs have
found ways around them.

On May 30 last year, a convoy carrying Burmese opposition leader Aung San
Suu Kyi and hundreds of members of her National League for Democracy
party, or NLD, was attacked by a government-recruited mob armed with clubs
and sharpened sticks. Dozens, perhaps hundreds were killed in the melee,
which according to survivors, went on for hours.

Suu Kyi and other central executive committee members were detained by the
government in the aftermath (she and vice-chairman Tin Oo remain under
house arrest). The senseless and brutal incident elicited a strong
response from the American government.

On July 29 last year the President of the United States signed an
executive order that, effective immediately, prohibited American financial
institutions from providing any services to the country. He also signed
The Burma Freedom and Democracy Act, which, effective September, banned
all imports from Burma. They represented the toughest measures that any
state has taken against the junta.

Burma’s most significant export to the US was garments. The US Department
of Commerce reported that the country imported Burma-made clothes to the
value of US $324 million in 2002 (and US $251 million in the first eight
months of 2003). The industry was hit, but not as hard as one might
expect. A recent survey of Hlaing Thayar Industrial Estate indicated that
of 120-odd garment factories located there, only about 20 had closed.

Anecdotal evidence suggests that no more than a fifth or a sixth of the
approximately 350 apparel factories in the city have stopped operating.
There are credible reports that some manufacturers are mislabeling
garments to get them into the US (see Intelligence, page 4).

Potentially, the most damaging of the sanctions was the ban on clearance
of payments to or from Burma through American banks (all US
dollar-denominated telegraphic transfers and bank checks must be cleared
through a New York bank, regardless of from where it is sent).

Most international trade outside the eurozone is conducted in dollars,
this is particularly true of globally traded commodities such as
petroleum, copper or rice. Additionally, trade between developing
economies is almost always in greenbacks, as they tend not to trust each
other’s currencies.

Up until September last year, apart from overland border trade with
abutting countries, almost all Burma’s international commerce was in
dollars. Since then, the only possible dollar transactions have been in
cash.

The Sakura Residence serviced apartment building on Inya Road, which
charged in dollars, had all its tenants agree to have their rents paid
into the bank account of an associated company in Thailand. Each month,
residents’ credit cards are put in a mechanical credit card swiper and the
paper transaction records taken to Bangkok to be banked.

Officially the rent payment transactions for Sakura Residence are Thai
domestic commercial transactions. Thai banking regulations stipulate that
all domestic commercial transactions be made in baht. So the credit card
statements of the tenants of Sakura Residence in Rangoon show monthly
payments to a Bangkok company made in baht. That Sakura is using this
method to collect the rent opens a legal can of worms with regard to which
jurisdiction (Burma or Thailand) it should be paying tax in.

Some firms, notably garment manufacturers, simply hand-carry hard currency
in, declare it at the airport then deposit the cash in the Myanmar Foreign
Trade Bank, or MFTB. Initially the firms brought in greenbacks, but then
the MFTB said it had no use for so much American currency and asked
customers to open accounts in euros instead. Companies with subsidiaries
in Singapore, Bangkok or elsewhere use their bank accounts to clear
transactions, then convert the amount to euros and remit it to accounts at
Rangoon’s MFTB by SWIFT.

The Bank identified across Rangoon as being instrumental in helping the
entrepreneurs get past the US dollar financial roadblock was United
Overseas Bank, or UOB, Singapore’s biggest financial institution.

As of Dec 3, 2003, UOB Group had total assets of $113 billion Singapore
dollars (US $66.5 billion) and branches in the Philippines, Malaysia,
Thailand, Indonesia, Hong Kong, the US, Taiwan, Australia, Brunei, Canada,
France, Japan, South Korea, United Kingdom and Vietnam, and representative
offices in China and Rangoon.

According to economists in Rangoon, UOB has set up some sort of net
settlement account service using its international banking network by
which it has trading accounts that it subtracts or adds to, then settles
at the end of the day. UOB doesn’t make public the manner in which it does
this. The following is an informed guess of how the system works. It has
to be operated from Singapore, as the UOB does not have a bank branch
licensed to trade foreign exchange in Rangoon, it has only a
representative office.

If a Burmese-domiciled firm exports US $3 million worth of silver to
Indonesia, the UOB’s Jakarta branch would subtract US $3 million from its
settlement account (which is denominated in greenbacks but is only a
bookkeeping exercise). The UOB Singapore head office, acting as agent for
the MFTB, would add the same (US $3 million) to its settlement account
then remit the euro equivalent amount of US $3 million to the MFTB in
Rangoon. There may be any number of transactions between Singapore and
Jakarta (and between Singapore and the UOB’s other branches) during a
business day.

Then at the end of the trading day—possibly in US dollars, but more likely
in the equivalent amount in euros or Singapore dollars—all the
transactions between the two settlement accounts in Singapore and Jakarta
would be netted and the difference between the accounts settled by a
telegraphic transfer (if Burma sold more to Indonesia than Indonesia sold
to Burma on that day, a remittance would be made from Jakarta to
Singapore).

In the case where a Burmese firm or the Burmese government trades with a
country where the UOB has no branch, such as India, one-off currency swaps
for each transaction would probably be made with an Indian bank that UOB
maintains a correspondent relationship with.

The Burmese government’s single biggest source of revenue comes from the
natural gas that it exports to Thailand from its Yadana and Yetagun
fields. The Petroleum Authority of Thailand paid for the gas in US dollars
until August last year. Now it is presumably converting baht into a
dollar-equivalent amount of euros to make payment to the Burmese
government and the two international consortiums that hold the operating
rights to the two gas fields.

Unocal, the California-based energy company that holds a major equity
stake in the Yadana field, does not appear to be in breach of the
sanctions as it is neither exporting Burmese gas to the US nor is it
paying Burma for the gas.

One curious side-effect of the financial sanctions is that, despite the
likelihood that Burma’s (legal) export receipts will drop this year due to
the American ban on imports, the kyat has strengthened against the US
dollar since the Depayin incident. It gradually built up from more than
900 to the greenback in June last year to around 840 at the moment. The
reason is not clear, but may be because there is less demand for dollars
now that they are so problematic to use.