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History and Demographics of Myanmar

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Introduction

Myanmar (Burma - renamed Myanmar in 1989) has never seen sustained conflict-free periods since its independence in 1948. The military has ruled the country since 1962. In 1988, pro-democracy protests were crushed. In 1990, free and fair national elections were held in Myanmar for the first time in 30 years. The National League for Democracy, the main political movement led by Mrs Aung San Suu Kyi (1991 Nobel Peace Prize laureate), won 62% of the votes and 82% of the seats in elections.[1] While the purpose of these elections was never made fully clear (either to create a Constituent Assembly or a legislative Parliament), the military regime refused to honour the result. Since then, the senior political leaders and the army have remained the beneficiaries of the country's self and externally imposed isolation. The population continues to live under political oppression, aggravated by economic difficulties. Detentions, intimidation and political oppression of activists are common place.

In 2003, the military government presented a seven-step ‘roadmap' for constitutional and political reform towards a ‘disciplined democracy'. The first face of this 'roadmap' was launched in 2004, with the reconvening of the National Convention to deliberate on basic principles for a new Constitution. Then in December 2007, the process of drafting a Constitution, based on those basic principles, began.[2] Unlike other political groups invited, the NLD refused to take part in the process. Although these first steps might indicate progress, the roadmap has come under criticism for being non-inclusive and lacking credibility. The economic situation stays highly problematic and potentially de-stabilising. The poor data quality and dubious government's statistics, which point to double-digit economic growth, are highly misleading to outside observers and attempt to obscure the country's dire humanitarian situation. Because of political constraints, donor assistance levels to Myanmar remain grossly insufficient to cover the needs of the general population.

In mid-August 2007, as a result of the dismal economic situation, street demonstrations were sparked over a sudden increase in fuel prices. The demonstrations grew into a nation-wide protest against the regime's policies. The Myanmar Sangha - an influential institution in society - showed overwhelming support for the protests. The government responded with a violent crackdown on the peaceful protests. This crackdown was condemned by the international community, which consequently renewed its pressure on the regime for political reform. As a result the European Union extended their existing sanctions on Myanmar in November 2007.

Thus far, European sanctions do not seem to have pushed the government in the desired direction, and they may even have produced counterproductive effects. These include a hardened stance by the government, negative impact on Myanmar civil society and an undermining of the economy at large. It's often said that sanctions are, in and of themselves, a form of violence, employed as a political tool used for rhetoric rather that to create meaningful change. Nevertheless, it is questionable whether Myanmar's progress towards a functional democracy would be accelerated by the absence of economic sanctions.

The military government adheres to its Roadmap to ‘disciplined democracy', which can best be described as a fully controlled, slow transition to semi-civilian rule. This proceeds at the pace conducive to the generals in charge, protecting their interests and largely disregarding external criticism or pressure. In the government's point of view, Western sanctions are a hostile reaction towards its declared intention for a (controlled) transition. Since the SPDC can rely on sources of income outside the purview of sanctions (energy, commodities, etc.) it is hard to imagine that the regime will deviate from its declared goals as a reaction to sanctions or Western pressure.

While experts often argue that economic sanctions have no impact on a targeted country, this report seeks to provide evidence of sanctions applied against Myanmar that have an economic, social and the political impact. For supporting this thesis the focus will be on the restrictive measures imposed by the European Union. It reviews the European Unions existing policies ‘supporting Myanmar to become a peaceful, democratic and prosperous country'. Moreover, it will show that it is not enough to wait for a political breakthrough. Evidence suggests all sides, including the international community should have the courage to move away from these entrenched positions and try a different approach.

After having given the necessary background and having shown why restrictive measures are applied by western communities, this report will provide recommendations for a different approach towards democracy in Myanmar.

1. Background

In June 1989, the ruling military junta changed its name from Union of Burma to Myanmar, one year after the brutally suppressing of pro-democracy protests, where thousands were killed. The military junta claimed this name would be more neutral for a state of a huge ethnic diversity. Thus it would lead to greater harmony among the country's desperate people and provide them a feeling of release from their British colonial past. The capital's name was also changed from Rangoon to Yangon.[3] The new name was accepted by most countries, including the United Nations, as a privilege of the Burmese government in power, but was not accepted by the United States.[4] Both terms are commonly used, with some people referring to the country as Burma and others referring to it as Myanmar. The same is also true for Rangoon; most people are more familiar with this name than Yangon.

Myanmar is the largest country in Southeast Asia and in many ways a country defined by its geography, isolated and yet with a wealth of opportunities to work with its neighbouring countries. The country borders China, India, Bangladesh, Laos and Thailand. Much of the country is the valley of the Irrawaddy River, which runs north to south, from the icy eastern curve of the Himalayas down over a thousand miles to the brackish tidal waters of the Andaman Sea.[5]

To better understand modern Myanmar and the reasons behind its self-imposed isolation, their needs to be a greater focus on historical context. The inherent complexity of the issues involved is easier to understand if the various historical forces are analysed separately. The different strands of history, described below, will finally come together and shape the present and show that current issues which today concern the state are mainly rooted in the country's complex and often dubious institutions and history. Indeed, it can be argued that the country's current situation is a result of often well-meaning but definitely foolhardy attempts to apply popular political measures to a fragile system of social imperative. “Nationalism”, “socialism”, and “autarky”, as well as “federalism”, “autonomy” and “centralisation”, are systems that have been used by political rulers in post-colonial Myanmar.[6]

1.1 Colonial Past

Myanmar was relatively distinct, coherent, and autonomous for almost 1,000 years before the British annexed the country in the 19th century.[7] The first Burmese empire was founded in the 11th century. Many communities which lived in remote places were rarely brought under central domination, but remained relatively distinct from each other in matters such as language, culture, patterns of production, and political traditions.[8] Burman kings built glorious capitals like Pagan and Mandalay and ruled over a rich and thriving civilisation. Moreover, they benefited from an increasing population and revenues, providing significant military and economic advantages over neighbouring polities. Several wars in the eighteenth century led to territorial expansion, which further strengthened the Burmese state and created a distinctive Burmese cultural identity. At the same time, the growth of external trade, both with China and the western world provided further revenues.

But the era of Burman kingdoms could not last forever and ended in 1885 when the British deposed the last King Thibaw in Mandalay and made Burma a province of British India. With the invasion of the British, new powerful political concepts and models for later leaders were introduced.[9] The British annexed Burma in 1886 and divided the country into two main administrative areas: Ministerial Burma, which was mainly populated by the Burman majority, and the Frontier area.[10]

The British wanted to establish law and order through a low cost central administration. They secured their economic interest by rationalisation and commercialisation of agriculture. The British occupation did provide certain stability, by unifying diverse indigenous ethnic groups under colonial rule. Nevertheless, the British colonial system significantly changed and damaged the Burmese social structure.

The precolonial social organisation largely rested on the authority of local chieftains and Buddhists monks. Buddhism as the common faith shared among the Burman majority, the Arakanese and most Shan and Karen people, was the main source of social stability as this faith emphasises self-reliance and righteous behaviour. Moreover, education was offered by monks to all.[11]

With the British occupation, authority of local chieftains was replaced by weak influence of salaried officials, who were more responsible to local government rather than to the local communities.[12]

The influence of the monks was weakened and they were soon deprived of their main social function. In order to protect the interests of minorities, the British assigned them some key functions which the Burmans, the dominant ethnic group, could not participate. For example, the British mainly recruited Karens, Kachins and Chins in the colonial army and administration, whereas the Burman were kept out of such activities. According to Josef Silverstein, minority groups living on the frontiers were administered directly by the central British administration. They were separated from the rest of the country, and those living in Ministerial Burma were granted seats in the legislature.[13] Thus, ethnic minority groups were divided along occupational lines.[14] Moreover, the British displaced indigenous and non-indigenous to the South in the fertile delta region. Deprived of their traditional social structure, those newly established cultivators fully adopted the imported rule of law, tenancy rights and money lending practices. These British policies made the Burmese people conscious of their ethnic and cultural differences for the first time. This led to social division that had not existed in the pre-colonial period.[15]

With the British annexation of Burma the structures of foreign trade changed, as well. The Burmese economy under the informal empire had become dangerously dependent on the export of view primary commodities -cotton and teak in particular. At the same time, rice was being imported in ever larger quantities, and soon Burma became the world's largest rice exporter. However, as a consequence, an exodus of landless farmers in 1930 led to competition between ethnic groups and violent intra-communal riots.

The world depressions of the 1870s led to a dramatic decline in the relative prices of nearly all primary commodities, including all of Burma's main exports. But nevertheless, international rice prices stayed the same or even rose. Thus, at this time of attempted reform, in contrast to Siam (Thailand) which enjoyed the profits of growing international trade, Burma was plunged into increasing economic hardship and fiscal collapse.[16]

Efforts to promote economic development failed as the state lost its autonomy to colonial powers and the economy became more fully integrated into global markets. Local reactions to European expansion lead to crisis and intervention. The failure of British rule in Burma, instability and state insolvency were caused largely due to underpayment by Western countries for goods and services. The rise and fall of cotton prices and, more generally, dependence on western markets, weakened the Burmese government, desperate to find the funds with which to finance reform.[17] This demonstrates that these conditions created an opportunity for Western nations to dominate the country, eventually leading to British colonial rule.

Following the British withdrawal, the Japanese occupied Burma in summer 1942. But throughout their four years of control over Burma during the Pacific war, the Japanese did not succeed in bringing the Burmese population under their rule, nor could they manage to lessen the external menace of allied forces. To secure their position they promised to bring independence to Burma and support an indigenous army. By not following through on their promises, the Japanese precipitated the emergence Burmese nationalists, who consequently allied with the British. In March 1945, the Anti-Fascist People's Freedom League was formed.

Aung San, Chief of this Burmese army, became the head of the Anti-Fascist People's Freedom League. The AFPFL was first a resistance movement founded on Buddhist philosophy and open to all Burmese regardless their ethnic background, their political or religious beliefs. It later became a leading political party calling for national unity and federalism. During this transitional period to democracy, a Burmese government was created to handle administrative matters.[18]

After the Japanese occupation ended in August 1945, the Burmese feared a regression to the British colonial economic order. Strikes and negotiations led in January 1947 to a meeting in London. There it was decided that a constituent assembly should be elected in April, and those living in Frontier Areas would have to decide whether or not to join Ministerial Burma. In a second meeting in Panlong on the 12th February 1947, the Chin, Kachin and Shan agreed to join the future federal union as autonomous communities. However, the Karen, Karenni, Rakhine (or Arakanese) and the Mon did not sign the Panglong agreement, which seriously challenged its credibility. To this day, dialogue between the Burman majority and ethnic minority groups is a rare and difficult proposition.

As expected, the AFPFL won the elections, and Aung San was put in charge of writing the constitution, which espoused “unity in diversity” that could only be achieved by a federal system. His assassination in July 1947, as well as the deaths of other officials, left Burma without the means to pursue the democratisation process. And so, the declaration of Burma's independence from the Commonwealth on the 4th January 1948 did not prevent the hope of national unity to fall apart. After the Japanese occupation during World War II, the country gained independence from the British in 1948.[19]

1.2 Myanmar and its Ethnic Diversity

With its estimated population of 50 million, Burma is one of the most ethnically diverse countries in the world. Due its central location, settlers from many different backgrounds have migrated to Burma. Today about two thirds of the population is Burman (Bamar) and the remaining one-thirds are ethnic minorities. This ethnically diversity is more than ever a critical issue and thus the ground of most of the country's problems.

Largely due to the fact that throughout history, Burma has experienced a great deal of inter-ethnic mingling.[20]

Discussions about ethnicity are related to terms, such as “nationalities” and “national races”, referring back to the course which was introduced into Myanmar during the colonial era and became concretised with the country's independence in 1948 when various constitutional models for multi-ethnic states were being discussed. The examples of Yugoslavia, Stalinist Russia, and the United Kingdom were considered as alternatives for Myanmar. It started in the 1930s when ideas of socialist and Marxist concepts had been introduced into Myanmar which took power in 1948 as the essence of the critique of British imperialism and colonial rule. The disproportionate wealth that European and Asian foreigners had gained during the colonial period, creating a situation where the Burmese were poor people in their own rich land, meant that the removal of alien economic domination became a key goal of nationalist policy.[21]

The 1974 constitution, which is now being revised, divided Burma into seven ethnic states- the Rakhine, Shan, Mon, Chin, Kayin, Kayah (formerly Karenni) and Kachin - and seven divisions, where ethnic Burman people held the majority.[22] Furthermore, the military junta distinguishes 135 sub-ethnic groups among the seven major ones. According to Analysist and social scientists the s can be distributed as following: Bamah 65%, Karen 9%, Shan 7% , Chin 2%, smaller groups like the Mon, Kachin and Wa at 1% each, and Indian 7% at least.[23]

Due this huge ethnic diversity, locked into this small geographic zone, over hundreds of different dialects and languages have been identified. Most of the people would not be aware of such classification, if the countries military junta would not use this nomenclature for discriminative purposes. Ethnic minority groups are not excluded in cities populated by Burmans, but with the juntas assimilation into the Burmese Buddhist system, called “Burmanization”, they are faced severe discriminations, such as the deny of social, cultural and religious rights of ethnic minorities.[24]

Moreover, with its xenophobia and oppressions against minorities, the military rule is responsible for the eclipse of huge parts of the people's history. Minorities culturally and racially different from the dominating Burmans have been uprooted from their localities under the pretext of being “Kula”, “non- natives”, or even outright “foreigners”. In a multiethnic country like Myanmar, instead of following the democratic policy of unity and diversity, the military junta uses Burmanization as a guide and prosecutes the minorities, renames places, destroys minority places and replaces them with their ethnic names. The discrimination of minorities is reinforced by religious consideration, especially Christians, Hindus and above all Muslims communities are often target of many human rights abuses.

Christianity is often associated with the Chin, Kachin and Karen, Hinduism with Indians, and the Islam, accounting for about 13% of the population, is mainly represented in Arakanese, Indian and Pakistanis communities. They often have no access to certain jobs, mainly in administration and in the army. Those who live in the remote zones are subjected to atrocities committed by unleashed military groups. The juntas' propaganda portrayed ethnic minorities as trouble makers, and ordinary Burmans, besides the Tatmadaw, progressively share this view. Most popular targets of discrimination are the Royhingas, who are Muslims in religion and live in the Mon-State, bordering to Bangladesh.[25]

‘One party, one blood, one voice and one command' was already the slogan of the Dobama movement, a motto which still lives on in the Burmese armed forces, the Tatmadaw.[26] Nevertheless, given the fact that Burma is struggling with ethnically and political problems it may be impossible to build unity with such a slogan, especially when 40% of the population is not seen as part of the Burmese society.

1.3 Post Colonial Era

The country has been ruled by military dictatorship since 1962, when General Ne Win seized power from the Prime Minister U Nu. Only between 1974 and 1988 there is the exception of a period of one party rule. Ne Win introduced the “Burmese Way to Socialism”, which systematically referred to the decent of a country which had a 90 percent literacy rate and was rich in natural resources. Together with its regime, he dismantled the independent judiciary, the legislature, the multiparty system and finally cut Burma off from the outside world. This regime has been engaged in military operations against the Communist Party of Burma and various ethnic minorities fighting for autonomy or independence from the central government, which has traditionally been dominated by ethnic Burmans.[27]

The current executive body, the State Peace and Development Council is a group of a dozen high-ranking soldiers. On state and division level, military Regional Commanders enjoy a limited autonomy granted by the regime. On township and village level, local Peace and Development Councils exist. In the cease-fire areas, ethnic leaders determine and implement policies, depending on the degree of their autonomy vis-à-vis the Regional Commanders and SPDC. Although the system of government seems centralised, from the outside world, in reality, it is highly fragmented, with opaque decision making procedures and means of governance.[28]

The military is entrenched in every instant and institution of the state, including the Union Presidency, the Union Government, the Union Assembly and the Regional or State Assemblies. The constitution is fleshed out with repetitions and irrelevant provisions. In many respects the constitution is vague and confusing and open to conflicting interpretations. The military is above the constitution and above the law. The Chief of staff of the Defence Forces is the most powerful person under the constitution. His appointment and removal are not referred to the constitution. It is anticipated that he will be beyond the control of a civilian government. The Chief of staff of the Defence Forces and the military are regulated by the military's own regulations, which enables them to override the constitution and serves as a justification for the military regime to stay in power. The President appoints the Chief Minister for each state and region. A partially elected Legislative Assembly is also established in each state and region.[29]

The military regime, then under the name of State Law and Order Restoration Council, seized power in 1988. In August, widespread popular riots against the military regime, which were initiated by university students in Rangoon, were brutally suppressed and thousands were killed. People took to the streets and demanded an end to decades of military dictatorship and international isolation. The protests have been rumbling on for months, starting with students at the select Rangoon Institute for Technology, spreading through the sprawling capital and then upcountry. The price of food skyrocketed, and a mood of opportunity and imminent upheaval fused with long-pent-up anger and resentment against the authorities. In 1990 the SLORC held elections for a multiparty parliament. The NLD as the main political movement under the leadership of Mrs Aung San Suu Kyi won 82% of the seats in the National Assembly. However, the results of the elections were never recognised by the military regime which maintained power. The military refused to step down and since then have kept tight control of the country. Aung San Suu Kyi has been under house arrest most of the time and only the leadership and the army have benefited from self-imposed and external isolation.[30]

In October 1992 the SLORC formed the Commission for National Convention in order to draft fundamental principles of constitution. These principles underscoring six major points:

  1. Solidarity of the Union for Myanmar
  2. Solidarity of the national unity
  3. Perpetuation of national sovereignty
  4. Development of parliamentary democracy
  5. Development of justice, freedom and equality in the political arena
  6. The participation of Tatmadaw in the future state's national politics.

To determine these basic principles above, the SLORC convoked National Convention for Myanmar's new constitution in August 1993.[31] The convention assembled less than 15% of the representatives elected in 1990 and the principles which were discussed had to conform to the objectives of the convention, pre-defined by the SLORC. Western States have passed many resolutions to encourage the junta to give a timetable for the convention. But so far, there is no clear sign of its near conclusion, and the NLD, which has left the Convention in 1995 due to undemocratic procedures, has been banned permanently from the convention by the SLORC. The SLORC was officially dissolved on 15 November 1997, reformulating itself as the State Peace and Development Council.[32]

2. Recent Development

During the last four decades the regime has been effectively functioned under self-imposed isolation in an attempt to revitalise the ailing economy and avert popular pressure for political reform. To do so the regime operates without any respect of humans' basic freedoms and rights. It is in particular the absence of an effective judicial system, and with that the fact that rule of law is not guaranteed by any means, which makes a transition to democracy incessant. The military junta keeps all media under tight control and limits the development of civil society. Torture and extra-judicial executions as well as forced labour also remain widespread measures in the regime's fight against political opponents and certain ethnic groups. By that, forced village relocations and armed resistance of especially Karen and Shan populations continue to cause internal displacement and a refugee influx in particular into Thailand.[33]

The lack of good economic governance has led to widespread poverty among Myanmar's population, structural un- and underemployment as well as under-funded health and education systems. Engagement of the international donor community remains limited due to the country's political situation. It is also worrying that the junta spends high percentage of its budget for military hardware; as opposed to the few resources spend for public health and education. Concerns by the international community are aggravated by the widespread corruption inside the country as well as the uneven distribution of opportunities in urban and rural areas. So far, military rulers have been resisted external demands to turn over power to a democratic government and it seems that pressure from the international community has been mainly failed. Obviously it could not prevent the junta to seek almost total autonomy, although it seems that the present regime has opened up the country to some extent. However, the regime remains suspicious of and resistant to external criticism and interference.

This chapter seeks to present the country's recent development on the economic and political front. It shows Myanmar from the perspective of the international community. Moreover, it will provide a deeper understanding in Myanmar's economic structure and thus gives a basic background to understand how EU measures affect the country.

2.1 Myanmar's Recent Economic Development-An Analysis

With a real Gross Domestic Product (GDP) of 4.0 per cent in 2008, Myanmar is one of the poorest nations in the world.[34] Today, Myanmar's economy is based on agriculture, gems, timber and oil. Although, the country is rich in natural resources, it has only weak linkages to the global economy. Over the past four decades, deep structural problems caused by the military-inspired policies and the absence of any rational economic and developmental strategies have led to diminishing living standards and widespread poverty among the general population in Myanmar. Political repression and impoverishment have drastically reduced the ability of communities to handle political or social change.[35]

To give an economic overview and analysis of Myanmar, the focus in this section will be on macroeconomic indicators, such as GDP growth, exports and imports, inflation, investment and interest rates. Economic data, including s on foreign debt and investment are scarce. Data from the state's Research Centre are mostly inaccurate or distorted. This can be explained partly through the fact that the SPDC are noted to be using older methods of calculating some key indicators, which are therefore difficult to compare to data used by most other nations today. For instance, the IMF suggests that official s used are significantly overestimated.[36]

GDP Growth:

According to the IMF, over the period 1997/98-2007/08, GDP growth has remained at an annual average of around 5 per cent, with the exception of 2003/04 when the banking system belatedly to fall out of the Asian Markets Crisis of 1997. The annual growth of 5 per cent would be considered quite healthy in comparison to regional GDP growth, were it not for the rampant inflation in the country, which dramatically undermines any gains made. To clarify, any additional GDP revenues would be swallowed up by the even higher rising costs. The EIU suggests that there has been solid growth in the energy and mining sector as well as significant growth in the service sectors over the last decade.[37] This would be somewhat encouraging, were those gains not negated by inflation. Evidence supporting this can be found by looking at the continued poor social development indicators and widespread poverty in the country.[38]

A household survey conducted by UNDP shows that union-wide 32 per cent of the population lie below the poverty line and 10 per cent below the food poverty (i.e. cannot afford to buy food for basic nutritional requirements). This is also well illustrated by the fact that across the union 34.4 per cent of children under 5 years of age suffer from moderate malnutrition.[39]

GDP by Sector:

About 70 per cent of enterprises and firms (small and middle sized businesses) are in private poverty, the remaining 30 per cent (in particular large scaled enterprises) are still owned by the state, which work more often in deficit. The private sector is dominated by business people who are trusted by the government and often employ relatives of senior SPDC members. It has a share more than 90 per cent of the economic performance. However, Myanmar's economy is predominantly shaped by agriculture.[40] Therefore the agricultural sector gains approximately 50 per cent of the country's GDP. An estimated two thirds of all citizens are working as farmers or labourers. Contrary, the industrial sector including natural gas export segment contributes only 20 per cent of GDP and trade and services 36 per cent.[41]

Myanmar's economy was fully regulated by the state, but obviously the government is taking approaching steps to liberalize agriculture. Though it has ended some production controls and mandatory procedures as well as allowing to grow rice as a dry-season crop in irrigated areas. Some of the state owned enterprises which are contributing to the processing and supplying inputs of agriculture have been privatized. Myanmar has been one of the major rice exporters in the world until the government banned exports of rice and some other agricultural products to held domestic prices down. Only in 2006, the export ban could relax a bit and eased further in 2007.[42]

GDP by Capita and Purchasing Power:

As the chart below clearly shows, Myanmar's GDP per capita in 2006 was, by some significant margin, the lowest in the region. This is partly down to the low levels of annual GDP gained by the economy. This could be attributed to numerous factors, such as poor productivity levels, significant trade restrictions and consequent low levels of trade, poor foreign direct investment and poor taxation collection system.

According to the Central Intelligence Agency (CIA) and IMF estimates, Myanmar has the lowest GDP per capita at Purchasing Power Parity (PPP) of all neighbouring countries (as shown below). To clarify, PPP is an indicator designed to negate the relative costs of living in the country data and show a comparable income level per person on an equitable basis. Needless to say, the low relative GDP per capita, even at PPP rates shows how low general income levels are and why assistance is needed in key areas. For instance, although officially low, the fees for primary school education are extremely difficult to afford as additional unofficial fees for teachers, books, uniforms etc. are stacked on top to provide enough income to support schools.[43]

This out-prices many parents, particularly in rural areas, and causes very high drop-out rates. This combined with language barriers between staff and students in many regions in the country and the financial necessity of children working to help support families has resulted in drop-out of about half the students that enrol. This is against the UNDP estimates of 85 per cent enrolment of students to begin with.[44] Although the average of 71 per cent in South East Asia and the Pacific is somewhat lower, a significant smaller drop-out rate highlights the dangers of not addressing this situation. This is a long-term issue and needs urgent addressing or else only around 40

Unemployment is not determined by the government, but is estimated to reach at least one-third of the working population, whereas the principle of day-taller is widespread. As mentioned above the population is affected by poverty, especially in rural areas. However, the IMF ranks high budgetary deficits to the structural problems of Myanmar's economy. The Burmese government hardly publishes data of the national budget. It is expected that national expenditures are mainly used for the military.

Expenditures for education and health belong to the lowest in the world; only 1.3 per cent of GDP is spent for education and only 0.3 per cent of GDP for health.[46]

According to the German Federal Foreign Ministry Office, Myanmar has current foreign debts of 7.7 billion USD. Loans given by the Asian Development Bank and World Bank are currently not served by the country and in general Myanmar's access to international capital is extremely limited. The country does not receive any support from international financial institutions and sanctions imposed by the international community rather have a negative than positive effect to the country's economy.[47]

Exports:

Myanmar has strong export industries in oil and gas, which are likely to strengthen, significant sales of pulses to India, and hardwood, shrimp and fish to regional buyers. Textile exports used to be a major income generator for Myanmar, but its main market, the USA, has imposed sanctions on Myanmar preventing textile exports to US markets. This has significantly reduced the success of the industry, reduced its importance as a major export and reduced workforce in this sector by 100,000.[48] In the last couple of years, Myanmar could receive a trade surplus due its gas exports.[49] It is expected that this surplus will be decreased by the end of 2009 beginning of 2010 as an effect of the world crisis. Gas exports, mainly to Thailand, represent 40 per cent of total exports.[50] Also, as mentioned earlier, revenues from gas exports are negligible due to the use of the official exchange rate, but have increased foreign exchange reserves. Exports to Myanmar were 5.183bnUS$ in 2006/07, lower than all its neighbours other than Laos.

It is ridiculous that a country with such abundant natural resources would be exporting so much less than comparable resource poor countries around it. Exports for Myanmar were 5.183bnUS$[51] in 2006/07 vs. China 969.7bnUS$[52], India 123.208bnUS$[53], Thailand 128.213bnUS$[54], Vietnam 39.97US$[55], Bangladesh 11.528bnUS$[56] and Laos 0.593bnUS$[57], who have a much smaller population than Myanmar (6.5m people vs. 52.4m in Myanmar) and fewer resources.

Imports:

There is some importing of machinery and transport equipment and refined oil, which surged in 2006/07 due to oil price rises, make up the majority of imports into Myanmar, although there are some food and consumable goods imported mainly from Thailand as well. Thai consumer goods and food accounted for 22 per cent of imports in 2006, despite low domestic demand and income. The fact that this represents such a high proportion of imports does not suggest that there is high consumption, but that the total level of imports is relatively low overall. Also, imports from Singapore account for 16 per cent of imports and include significant machinery and technical equipment. Imports as a whole are small in relative terms and are likely to remain so in the current low income climate. As mentioned in the previous section, the SPDC have recently released additional income generation that can be gained from using exchange rate closer to the floating exchange rate. This has resulted in additional tax revenues over the 2006-2007 periods. In 2006/07 imports were 2.937bnUS$ vs. China which is 751.9bnUS$, India 184.362bnUS$, Thailand 113.4bnUS$, Vietnam 40.676bnUS$, Bangladesh 14.32bnUS$, with only Laos having lower import levels of 1.092bnUS$[58], but a much smaller population. This is a significant indicator highlighting the lack of domestic demand for foreign goods caused by low income levels in the country.

Inflation and Interest Rates:

Price constraints have been increasingly putting pressure on both the business community and population at large. The very high levels of inflation point to the lack of monetary control the government has over prices within the economy and the difficulty it has in maintaining sufficient income generation to reverse the economic decline of the past decade. In 2008, inflation rate was recorded to be 27 per cent, much lower than in the previous year.[59] Controls, subsidies and printing more money are the predominant means of controlling prices, but this significantly reduces trade, and even fuels inflation in its own right, consequently drastically reducing government income generation. Reducing inflation levels would greatly enhance the SPDC's ability to invest in more activities, infrastructure and follow its own strategic plan.

Interest rates have essentially remained relatively constant for many years, only moving from 10 per cent to 12 per cent in 2006/07, largely to counteract the additional inflationary pressure of a pay rise to civil servants and military officers in 2007 (a rise of between 500 and 1,200 per cent[60]). This situation makes it very difficult to maintain a stable economy without simultaneously crippling its exports potential and income.

Foreign Direct Investment:

According to statistics of the junta, the supply of foreign direct investments doubled itself in the first nine months of 2008. The value of the authorized investment projects rose in this period from 502bnUS$ to 974bnUS$. The main part of this amount (855bnUS$) was spent in the mining industry (digging gems) by Chinese companies. Besides, Russia and Vietnam spent together 114bnUS$ in the oil and gas sector. Outside of the mining and energy sector there are practically no foreign investments.[61] The development of the new offshore-gas fields in the Gulf of Bengal as well as new investments in the infrastructure and water power may lead to new investments in the next few years. The main proportions of investments so far, have Thailand, Singapore and China. Myanmar is regarded as highly risky for foreign investments.[62] The problem for Western investors might be beside the ban on investments that nothing exciting will happen on the economic front until there is some movement towards political reform. However, prospects are exciting regarding the 2010 elections.

2.2 European Union - Myanmar Trade - Recent Trade s and Trends

As mentioned before, Myanmar is a natural resource rich country but, due to its political situation, suffers from significant trade sanctions imposed by the EU and US. The US trade ban of 2003 has had a large impact on the textiles sector, which lost an estimated 100,000 jobs as a result of the ban. Trade restrictions laid out in the EU Common Position have curtailed trade between the EU and Myanmar for the past 12 years, modestly to begin with, and then more recently to a greater extent. As it will be discussed in more detail at a later point the EU Common Position outlines the following restrictions to trade with Myanmar, based on its lack of movement towards a democratic system of governance, respect for human rights and national reconciliation.

The sale, supply, transfer or export of arms and related materials of all types as well as assistance or services related to these activities is prohibited to Myanmar. There is a ban preventing investment in any State Owned Enterprise (SOE) or enterprises owned or controlled by the regime and entities associated with the State. It is prohibited to export to or finance companies in the logging, timber, metal/mineral mining industries as well as the mining of precious and semi-precious stones. This is equally applicable to imports from these industries.[63]

In comparison to other Asian trade partners, such as Thailand, China and Singapore, the trade between the EU and Myanmar plays only a minor role. In 2008, exports from the EU to Myanmar reached €105m (vs. Thailand €17,172.3m, vs. China €247,857.6m, vs. Singapore €16,178.0m) while imports have been accounted to be €185m (vs. Thailand €8,487.8m, vs. China €78,467.1, vs. Singapore €22,018.3m).[64] Imports from Myanmar to the EU are now almost exclusively either textiles/clothes or agricultural goods, while exports to the country are dominated by machinery and chemicals. One table and two graphs are shown below, indicating the situation and the changes in trade patterns between 2002 and 2009.

EU exports to Myanmar

(€ million)

EU imports from Myanmar

(€ million)

2004

77

2004

461

2005

84

2005

288

2006

81

2006

306

2007

164

2007

263

2008

105

2008

185

2009Q1

19

2009Q1

45

2009Q2

20

2009Q2

34

As can be seen in the table the trade between the EU in Myanmar decreased significantly between 2004 and 2009. From the exports point of view, there is an increase between 2004 and 2007 this could be due to the recovering from the banking crisis in 2003.

As the graph above illustrates, there has been a notable increase in exports from the EU to Myanmar between 2004 and 2008, rising from €77m to €105m over the period. Export of machinery and transport equipment to Myanmar have seen a sharp drop over the period 2004 to 2006, from €43m to €37.6m[65], although it is unclear exactly why this has occurred. It is possible that the completion of the new capital, Naypyitaw, has caused a decreased need for such equipment, or perhaps the tightening of the EU Common Position has resulted in diminished flows of transportation equipment to State Owned Enterprises and or State-affiliated organisations.

As the graph above shows, there has been relatively steady pattern of imports from Myanmar to the EU in agricultural goods and textiles and clothing. The decline in exports of agricultural goods is probably caused by a rise of rice prices after cyclone Nargis hit the Irrawaddy Division in early 2008. This said the total amount of imports to the EU from Myanmar has felt sharp between 2004 and 2009, falling from €461m to €34m, largely as a result of a decline in Myanmar textile and clothing imports into the EU.[66]

This sharp fall of imports between 2008 and the second quarter of 2009 might be result of the global financial crisis which led to a decline in not only European but also worldwide trade. Additionally, with increased public awareness and criticism of the Myanmar authorities in the international community, consumer boycotts and negative feeling towards imports from Myanmar resulted in this significant reduction in imports to the EU.

2.3 Myanmar in the Focus of the International Community

In 1997, Myanmar joined ASEAN. By doing so, the military government was seen to strike a new path towards regional rapprochement. Yet, Myanmar's relations with ASEAN members are not free of frictions. However, despite more and more vocal expression of concern and criticism, the ASEAN member states are likely to refrain from interference in Myanmar's domestic affairs as long as the country's ASEAN membership does not tarnish the alliance's international reputation.

The government has refrained from taking up its role as ASEAN Chair in 2006. In 2004, Myanmar joined ASEM.

Myanmar enjoys a certain “comfort zone” with its most immediate neighbors. China provides vital support to the regime and is Myanmar's most important defense ally, supplying part of its military hardware and training. The economic influence of China is significant, particularly in the North and East of the country. Like China, India and Bangladesh pursue a strategy of fostering regional stability and securing economic advantages, i.e. access to Myanmar's important natural resources, while refraining from only criticizing the country's domestic policy stance. Among others, Russia supplies arms. Japan follows an approach of constructive engagement in the form of development cooperation.[67]

In May 2002, faced with disastrous economic conditions and intense pressure from the international community, the military junta released Aung San Suu Kyi from house arrest and also released several hundred prisoners. During the eighteen-month period of Aung San Suu Kyi's latest house arrest, the SPDC leadership held secret meetings with her and her senior colleagues that were facilitated by the United Nation's Special Envoy for Myanmar (Malaysian diplomat Razali Ismail, as mandated by the United Nations General Assembly resolutions). The UN-led initiative, coupled with Aung San Suu Kyi's release in May 2002, raised hope that the two sides would move to substantive political dialogue, together with ethnic minorities, leading to agreement on transition to democratic government.

However, the regime remained unwilling to begin serious political dialogue with the NLD. Under General Than Shwe (the current ultimate authority in the ruling junta), the SPDC arrested a dozen democracy activists early 2002, but then released 21 political prisoners several months later. More than 1,300 political prisoners remain behind bars. Most of the population continues to live under political suppression, aggravated by an economic downturn.[68]

In 2003, the military regime presented a seven-step 'roadmap' for constitutional and political reform. The first step to the transition to democracy was launched with the reconvening of the National Convention to deliberate on a new constitution in 2004. This national convention is neither representative nor inclusive, and debate is circumscribed. Given the asymmetric power and resource relationship between the regime and its detractors it is likely that political change occurs through a slow process of “regime transformation” rather than “regime change” as advocated by the military's opponents.

On the international front, the United States and European Union remain unconvinced that Myanmar had progressed in the areas of human rights, forced labour, human trafficking, religious freedom, child soldiers, and drug eradication, despite the government's immense efforts to prove otherwise. Furthermore, the continue issue, and Western sanctions have been extended and bilateral and multilateral official development assistance (ODA) continue to be denied by the United States, EU, Japan and influential Western governments.[69]

The principal demands of Myanmar's ethnic groups are to gain genuine autonomy for their home areas and to achieve a significant voice in the affairs of the country as a whole.

Since the 1988 coup, the military has negotiated 17 cease-fire agreements with armed ethnic groups, giving them varying degrees of autonomy and in some cases permission to retain their own armies. In many of the ceasefire-areas, uneasy truces prevail. The two major groups maintaining their armed resistance against the military are the KNU and the SSA, both increasingly losing controls over once “liberated” zones. At the same time the SPDC convoked the final session of the National Convention, which produced a set of charter guidelines for a shift to democracy. But it turned out that these guidelines were more than less a guarantee for the military's continued dominance. But the document further ensures that the military will remain in power, wherever the road map leads. Under the guidelines, the military will control major ministries, hold large blocks of unelected seats in all legislative bodies and has the right to declare state of emergency and seize power at any time. This document also fails to meet the expectations of minority groups who have been demanding autonomy and other rights. The document also attempts to limit opposition by setting requirements for political office that seem tailored specifically to bar Aung San Suu Kyi and members of her opposition party, the National League for Democracy. The protests in August/September 2007 were sparked by a rise in fuel prices. The ensuing clampdown has dampened active protest since then, but the general economical and humanitarian situation will continue to breed political instability. Civil society groups, prodemocracy groups, ethnic minority groups and some Buddhist groups in the country all play a part in advocating and exerting pressure for change in Myanmar.[70]

The military regime organized a referendum on the Constitution in May 2008. The results of the referendum, officially 99% voter turnout and 92.4% voting in favour, are suspected to be significantly inflated. Multi-party elections are to take place in 2010.[71]

2.4 Ongoing Abuses of Human Rights

Myanmar has a very high occurrence of violation and human rights abuses. The military junta systematically denies citizens basic freedoms, including freedom expression, association, and assembly. The imprisonment of political activists and human rights defenders is widespread. Thus, the toll of political prisoners nearly doubled to more than 2,150, in 2008.

On May 27 Aung San Suu Kyi, which was under house arrest for five years by then, had her house arrest extended for another year. According to several reports her health condition is deteriorating and the regime denies her visitors or any contact with the outside world.

In September 2008 the SPDC yield to national and international pressure and announced the release of 9,002 prisoners, of which only seven were political activists. Only few days later, the SPDC arrested five members of the NLD. In October and November, more than 70 political activists, monks, nuns, labour activists, and journalists were trialled in secret proceedings in prison or closed sessions in court. Most of them received harsh sentenced for offences in the 2007 demonstrations; 14 of them were sentenced to 65 years each. Members of the 88 Generation Students faced 22 charges, which compiled contacts with exiled political groups and unlawfully publishing documents. They have been sentenced to 150 years in prison. Four lawyers, which have been represented the political activists were also jailed for contempt of court after they attempted to withdraw from legal representation to protest the unfair proceedings.[72]

The military violates not only the rights of political opponents, but also of civilians in ethnic conflict areas. Abuses such as extrajudicial killings, forced labour, sexual violence against women and girls, torture and beatings, as well as confiscation of land and property without any process are still common.

In 2008 the army displaced more than 40,000 civilians in these areas. There are an estimated 450,000 to half a million internally displaced people (IDPs) in eastern Myanmar. The Burmese and non-state armed groups extensively use land mines near civilian settlements and food production sites to chase civilians away. This is a clear violation of general accepted human rights.

In western Myanmar's Arakan State, the Rohingya Muslim minority also faces widespread right violations including religious persecution, forced relocation, land seizures, as well as the denial of citizenship and identity papers.[73]

Drug trafficking as well as the recruitment of child soldiers, especially by non-state armed groups, is still widespread. Indeed, the number of drug production, in particular of opium has been decreased, but the trade with these narcotics substances is still a serious issue.[74]

Myanmar's already dismal situation has been worsened following the devastation of cyclone Nargis in the night of May 2-3, 2008. The storm affected 2.4 million people across 37 townships and left those homeless or in need of food or medical assistance with an estimated 84,000 dead and 53,000 missing.

In response, the SPDC raised tight controls against emergency and blocked international assistance while they have pushed through a constitutional referendum in which basic freedoms were denied.[75] The basic needs such as food, water, shelter remained unmet in many communities and were often inadequate, infrequent in distribution or insufficient in quality. There were many reported barriers due government interference in local and international attempt to provide relief to the affected communities. These included travel restrictions (government denied visas to disaster relief experts and aid workers and prevented them from travel inside Myanmar), numerous checkpoints along routes to the Delta, combined with “fees” to access the Delta, which delayed and dissuaded relief work.

Furthermore, the Burmese grass-root organization E.A.T. reported about confiscation and theft of relief supplies by authorities in Myanmar. The military also obstructed delivery of aid to survivors of cyclone Nargis through intimidation and arrest of relief workers.

A major concern for relief workers was the inability to access reliable information. This was exacerbated by information released through the state-controlled official media outlets, which frequently minimized or obscured the extent of the disaster or needs of the victims. Relief workers were restricted in their communication due the banning of the import of communication equipment by the government. The government allows the local NGOs only 10 CDMA phones, maximum. Cases of land confiscation by the government were reported by many interviews, and included reports that military personnel forced inhabitants from their land. (Landownership in the Irrawaddy Delta is complex: most of the farmers do not own land but have long-term leases from the government for farming and fishing rights). Survivors, mainly men but also women and, in some cases, children were forced to provide labour for the reconstruction phase, which included repair of military bases as well as schools, roads and other infrastructure projects.[76]

As already mentioned, the SPDC announced in February 2008 that its long awaited constitutional referendum would take place on 10th May. The constitution itself was published in April, but under limited distribution. The new constitution strengthens military rule and limits the role of independent political parties. Moreover, it empowers the commander-in-chief to appoint military officers to a quarter of all seats in both houses of parliament, and gives the military even broader representation in the section of the president and two vice-presidents. With that the military regime has already saved half of its seats no matter how the result of the 2010 elections would be.

Despite the country was suffering from the devastation of the cyclone, the referendum took place throughout Myanmar on May 10, with a delayed vote on May 24, for 47 townships affected by the storm. There were no independent international observers and Burmese and foreign media could only cover a sparse of it. The referendum was characterised by irregularities of the voter registration, coercion and intimidation in communities and at polling stations, as well as widespread government corruption including ballot stuffing.

Then, in late May the SPDC announced a national voter turnout of 98.12 per cent, of which 92.48 per cent voted in favour of the constitution. Widespread international condemnation denounced the referendum as a shame. With the referendum and the announcement of multi-party elections for 2010, the SPDC completed the fourth step of its “Seven Road Map to Democracy”.[77]

On 14 May 2009, Aung San Suu Kyi was arrested after John Yettaw, a United States citizen swam to her compound on May 3. The terms of her house arrest forbids visitors. Thus she went on trial on 11 August 2009, and was found guilty and sentenced to 18 months under house arrest. According to the BBC South-East Asia correspondent Jonathan Head, it seems to be a pretext to keep her detained until elections in 2010, which could give the generals a legitimacy to maintain power.[78]

3. Sanctions on Myanmar

Economic sanctions have long been a tool of foreign policies and equally long a controversial topic when it comes to their effectiveness, desirability and morality. With the world now economically but not politically integrated, policymakers may rely on sanctions even more.

While comprehensive sanctions have been used for several decades in forms of blockades and embargoes, the new type of targeted sanctions has only been developed recently.

Increasingly awareness of the impact of sanctions among the overall population may have resulted in using “smart” sanctions by targeting certain entities or individual members of a targeted government. Lessons can be learned from the Iraq when the UN imposed sanctions during the 1990, which have been a humanitarian disaster. Thus, policymakers may have recognized that for any future political sustainability of sanction human costs have to be limited.

In general, targeted sanctions are designed to isolate certain entities such as companies, rebel groups or criminal networks from access to needed resources. They are seen as a political measure that includes economic initiatives in which a “sender” takes an explicit action against a particular “recipient” in an effort to make the latter comply with international norms, standards and practices. Mostly, sanctions are targeted at individuals, both privately and in their official capacity.[79]

They can be applied for a variety of reasons, such as to punish or weaken a target, to avoid war, or in response to ethnic conflict, human rights violation, drug trafficking, terrorism, or nuclear proliferation. Economic sanctions mostly include tariffs, trade embargoes that prohibit all merchandise and/or service trade between the sender and target, more limited trade bans on certain goods or services, restrictions on investment and other financial flows, limitation on travel, and limits on the transfer of assets between nations.[80]

Economic sanctions can be imposed for particular policy goals, either related to trade, or for non-economic policies such as the European Union's sanctions applied against Myanmar, based on a lack of democracy and human rights violations. The EU has been imposed sanctions against Myanmar gradually since 1996 and it was Aung San Suu Kyi who called first for economic sanctions against the junta. After a couple of key events, she attempted to make it clear that economic changes are not possible without political change.[81] The European Union have adopted several Common Positions since then, with attempts to condemn the violation of human rights by the Burmese government. However, regional cooperation and support have more than compensated for negative impact of Western sanctions, which, thus far, remained unabated. Obviously the military regime stays confident that it could ride out the storm of Western sanctions with the help of neighbouring states and increased exploitation of its natural resources.

Ironically, Myanmar's fledgling modern market-orientated urban sectors such as manufacturing, banking and external trading are bearing, the brunt of those sanctions. On the other hand, Myanmar still has sufficient counterpoise in form of food security, relatively productive rural agricultural sector, natural resources and the informal sector which enables the economy to subsist at a low level of equilibrium. This, in turn allows the regime to withstand the overall impact of western punitive measures. Possessing a very high pain threshold, it is highly unlikely that the regime would give in to the West's pressures in the near future. It may even be counterproductive, as the self-reliance mentality would be further reinforced.[82]

Indeed the international response was strong and actions have varied greatly, but somehow the international pressure on Myanmar has weakened over time. The question is whether smart sanctions applied by the EU can achieve significant results? This chapter gives a fundamental framework for the EU sanctions applied against Myanmar. While the broader consents is about why and how sanctions are used by the EU, the second part deals with the response of the EU to Myanmar and its new sanctions applied recently.

3.1 Legal Framework

To take restrictive measures under a Common Strategy, Common Position or Joint Action it needs EU legislation. There exist a wide range of legal instruments which allows the EU to take sanctions. But only within the Framework of the Common Foreign and Security Policy (CFSP), the EU is able to apply a variety of restrictive measures against governments of third countries, or non-state entities and individuals (such as terrorist groups).

Within this framework there are procedures for different types of sanctions. While economic and financial sanctions fall under community law, travel and diplomatic sanctions are decided on the member state level. For sanctions that needed to be regulated by community law, the European Commission has to propose the necessary measures, which are then adopted by the Council of the European Union.

The main legal instruments of the CFSP are indicated by article 13, 14 and 15 of the Treaty on European Union as well as the objectives, which are set out in article 11. The objectives under this article may be objectives to safeguard the common values, fundamental interests, independence and integrity of the Union which are conform with the principles of the United Nations Charter. Further objectives are strengthening the security of the Union, preserving peace, strengthening the international security, promoting international cooperation, developing consolidate democracy and the rule of law and respects for human rights and fundamental freedoms.[83]

In general, sanctions are an Instrument of a diplomatic or economic nature which seeks to bring change in activities and policies of governments of third countries such as violations of internal law or human rights or policies which do not respect the rule of law or democratic principles. Restrictive measures imposed by the EU comprise arms embargoes, other specific or general trade restrictions (import and export bans), financial restrictions, restrictions on admission (visa or travel bans), or other appropriate measures. Currently, the EU is applying sanctions for instance against Belarus, Haiti, Iran, Iraq, Sudan and Zimbabwe. Using the CFSP framework, the 27 EU Member States commit to the implementation of sanctions decided on by the Security Council of the United Sanctions under Chapter VII of the UN Charter. The UN Charter confers on the Security Council powers to decide in a manner binding for all UN members restrictive measures required in order to maintain or restore international peace and security.[84]

Indeed, the EU and the UN have similarities in their capabilities to apply sanctions. In terms of reasons for imposing sanctions there are differences. This can be referred back to the composition of these two organisations. While th


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