Burma's economy heads for crisis

Mekong ministers are meeting in Rangoon

By the BBC's Larry Jagan in Bangkok

A rare report on Burma's economy suggests it is on the verge of collapse.

In its latest report the Asian Development Bank (ADB) says the country's cash-strapped military government is unable to provide essential services or the infrastructure needed for economic development.

"There is a pressing need to increase the flow of public resources to basic health and education services and other areas where developmental needs are not being met," says the report.

Although the eight page report is written in dry, statistical language, the ADB says Burma's economy needs thorough reform.

Without it, the report argues there is little prospect of the country reducing the widespread poverty in the country.

Investment needed

The ADB says one of the key problems is the acute lack of investment.

It has remained stagnant for more than a decade at only 13% of annual national production - this is less than a third of the investment levels the rest of South East Asia has managed over the past three decades.

One person in 200 has a telephone

Taxation is amongst the lowest in the world, preventing the government from investing in essential services and infrastructure development, says the report. Only three people out of every 20 have access to electricity and the country's road network is totally inadequate.

Only one person in 200 has a telephone and most rural areas lack even a single phone link to the outside world.

Government expenditure on education and health is low - amongst the lowest in the world says the bank, while the country's state economic enterprises are inefficient and a drain on the economy.

Tipping the balance

Throughout the report there are continuous references to what the bank calls macroeconomic imbalances which are unsustainable.

The report reveals a country that has suffered from massive economic mismanagement, instability and stagnation under decades of military rule.

It says the only solution is extensive economic reform and international financial assistance.

The report was released in Rangoon at the ministerial meeting of the six Mekong countries - Burma, Cambodia, China, Laos, Thailand and Vietnam.

At the meeting, the military intelligence chief Lt General Khin Nyunt told ministers that the Burmese economy had been growing at over 8% a year over the last five years - and had done so without international assistance.

He also predicted the economy would continue to grow at 6% per annum over the next five years.

"I am confident that, with increased inputs from abroad, our economic growth will be more rapid," he said.

But his assertion contrasts sharply with the findings of the ADB's report.

Bail out rumours

The fact that the ADB has just conducted a comprehensive survey of the Burmese economy, and the Mekong ministerial meeting took place in Rangoon, has led to rumours that the Bank might be about to resume loans to Burma.

But ADB officials insist that this is still a long way off.

In fact the Bank has not approved any loans to Burma since1986, and the country owes some $530m to the ADB in capital alone.

This has grown since 1998 when Burma stopped paying its debt servicing charges, and is now believed to be about $900m.

"Burma would have to pay off all the accumulated interest arrears before the Bank could consider resuming loans," a bank official said.

But it seems likely that the ADB, like many international financial institutions and western donor countries, is gearing up to getting involved again in the Burmese economy as soon as the dialogue process between the Generals and the opposition leader Aung San Suu Kyi produces tangible results.