Page last updated at 10:21 GMT, Tuesday, 2 October 2007 11:21 UK

The hardship that sparked Burma's unrest

By Jonathan Head
BBC News, Bangkok

On 22nd February, a small group of around 25 people attracted little attention at first in the crowded Rangoon market. Then they brought out home-made posters, and began shouting.

Residents go on their daily business on Monday Oct.1, 2007, in Rangoon
Many Burmese simply concentrate on survival
Their complaints seemed innocuous enough. "Down with consumer prices," read one poster. "We want 24-hour electricity," read another. They pointedly avoided saying anything critical about Burma's military government.

That did not spare them. Nine were rounded up and jailed, accused of acting "totally against the law". They were later released, but they had touched a very raw nerve.

Though small, these were the first street protests seen in Rangoon for at least a decade.

And they highlighted the growing economic distress that was beginning to push huge numbers of Burmese families to the brink of destitution - distress caused by the government's incompetence.

Chronic mismanagement

When the military took power in 1962, then-military strongman Ne Win decided to take the country down an isolationist path, the "Burmese Way to Socialism" as it was called, which stressed self-sufficiency, and called for the nationalisation of almost all private companies.

Burma economy graph

Military officers took over these companies, as well as many civil service positions. It was their mismanagement that led to chronic inflation and near economic collapse by 1988, and the mass protests that came close to overthrowing the government at that time.

After that, the military tried opening up the economy to market forces and foreign investment, but it has never been willing to release its grip on crucial areas of the economy:

  • Imports and exports all require licenses, confronting entrepreneurs with mountains of red tape, and opening opportunities for corruption.

  • The trade in rice is entirely controlled by military-connected companies.

  • Internal transport is hobbled by poor infrastructure and frequent military bans on access to troubled areas.

  • Many commodities are subsidised, but available in very limited quantities.

There is an official exchange rate for the local currency, the kyat, which is 200 times lower than the black market rate.

Add to that the fact that more than half the annual budget goes to the armed forces, and that Burma is subject to strict sanctions by the United States and the European Union, and it has proved impossible for Burma to lift itself out of poverty.

The construction of a secretive new capital city since 2005, hacked out of the bush 400km (249 miles) north of Rangoon, must have added considerably to the government's financial difficulties, although it has given no figures for how much this mega-project is costing.

A decision to raise admittedly paltry civil service salaries by up to 1,200% last year did not help either, although civil servants could scarcely survive on salaries that sometimes fell below $3 a month.

Grinding poverty

The result is what the United Nations describes as a largely unreported humanitarian crisis.

UN figures show that one in three children is chronically malnourished, government spending on health and education is among the lowest anywhere in the world, and average income is below $300 a year.

Population - 50m
Children in primary education - 85%
Life expectancy at birth - 61 years
Infant mortality - 76 per 1,000 births
Health spend - 2.8% (World avge - 10.2%)
Under 5s undernourished - 31.8%
Source: World Bank 2004

Diseases like tuberculosis and HIV/Aids are increasing at frightening rates.

"The World Food Programme [WFP] provides food aid to 500,000 people across Myanmar [Burma] but that really only represents the poorest of the poor," said Paul Risley at the WFP in Bangkok.

"What we've found is that over the last decade, opposite to virtually every other country in Asia where slowly poverty is being gnawed away at and food security is becoming more commonplace, in Myanmar there are more people living below the poverty line and more people facing food insecurity," he said.

Towards the end of last year, prices of basic commodities began rising sharply in Burma. Rice, eggs, and cooking oil all went up by around 30-40%.

For a population that on average spends 70% of its income on food, this was very difficult to absorb. It is not clear why this happened, but the inherent distortions and rigidities in the military's economic management can easily lead to sudden bottlenecks in the supply and prices of basic necessities.

Dramatic decision

Then came the rise in fuel prices on 15 August. There was no warning. Gas prices rose by 500%, and diesel - which more or less powers everything in Burma, from transport to the essential generators - doubled in price.

Burma economy graph

The impact was immediate. People could not afford to go to work, and the increased cost of transport started pushing food prices even higher.

Within days activists were out on the streets in protest. When they were arrested, the monks - who can accurately measure economic distress by the food put into their begging bowls every morning - took their place.

Like so many decisions made by the reclusive generals, the sudden hike in fuel prices is hard to fathom.

The IMF had advised weaning the population off subsidised fuel, because with rising world oil prices it was becoming an unsustainable burden for Burma, which although rich in natural gas, relies on imports for almost all of its refined petrol and diesel.

But it is unlikely the IMF would have supported such a dramatic, and unannounced price rise.

'Parallel world'

At the time some speculated that perhaps the generals were trying to provoke an uprising, to see who their enemies were.

But their ubiquitous intelligence networks would surely already have that information. More likely it implies they did not understand the shocking economic impact the move would have.

Living in a privileged, parallel world, Burma's armed forces are virtually a state within a state, subject to none of the chronic economic insecurity that afflicts the rest of the country.

Many of the generals have become immensely rich - the video of the wedding of senior general Than Shwe's daughter, dripping in diamonds worth many millions of dollars, is testimony to that.

Secluded in their luxury villas in Naypyidaw, cut off from the squalor of Rangoon and other towns, Burma's military rulers probably had no idea that their clumsy decision would cause such immediate economic pain - that thousands would override their fear of the soldiers, and come out to join the monks on the streets.


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