December 1, 1994

A corrupt corner of the Raj aims to pounce as Asia's new tiger. Dealing with a country subjugated for years by a ruthless ruler but now keen to take its place on the world's economic stage requires some holding of the corporate nose.

ERIC ELLIS, Rangoon

FOREIGN businessmen who have flocked to Vietnam and China in recent years are now packing the few flights to Burma's capital, Rangoon, seeking ground-floor positions in a former corner of the Raj where a day's labour costs only one US dollar. A 15-strong British Chamber of Commerce delegation from Hong Kong went last week and Gulf war veteran Brigadier Christopher Hammerbeck says he was impressed by what he saw.

'The old infrastructure is run down but it is basically there and the proficiency in English is much better than any comparable potential market. That is a big plus, ' he says. As a low-rent version of Vietnam, Burma wants to be Asia's newest tiger economy in waiting.

As their neighbours' economies have exported their way to the Organisation for Economic Co-operation and Development's front door, Burma's 43 million people are at last breaking out of the stagnation of three decades of socialist neglect.

Dealing in Burma - which has officially dubbed itself Myanmar - requires some holding of the corporate nose. The government is one of the world's most objectionable regimes and since 1962 has been a private fiefdom for General Ne Win and his family.

The old man has been effectively sidelined by his hand-picked, more pragmatic junta led by Ne Win acolyte and intelligence boss Lieutenant-General Khin Nyunt. As Secretary-One of the State Law and Order Restoration Council, or SLORC, Khin Nyunt leads the generals who have ruled Burma since September 1988 after ruthlessly gunning down students and democracy activists.

The 1990 election that followed was not recognised by SLORC and since 1989 they have held Nobel peace prize winner and opposition leader Daw Aung San Suu Kyi under house arrest.

In September, SLORC began a dialogue with Suu Kyi, brokered by a Buddhist monk from Birmingham. Western capitals and prospective aid donors have begun toning down the criticism heaped on the regime.

'China has been let off the hook but poor old Burma has been crucified for no real reason, ' says resident Iain Glover, an Australian who is bringing in electrical fittings. 'Asians only respond to discipline.'

A charming relic of Raj-era architecture, Rangoon is being transformed by the jackhammers of at least 20 construction projects, most of them new hotels.

The country is festooned with the hoardings of the ubiquitous Coca-Cola culture that marks developing Asia. Advertising signs for Sony, Pepsi, Evian, Daewoo, Kodak, Benson & Hedges, Carlsberg and Tiger beer crowd Rangoon's skyline.

Denied the most basic consumer items for decades, Burmese are flocking to local stores, lean-tos given a facelift in blue and gold awnings with handouts from British cigarette company State Express, whose popular 555 brand used to pass as foreign currency before Burma's doors swung ajar.

With the hotels full of foreign businessmen happily paying pounds 160 or more a night for sub-standard State-owned rooms, the impression is of a boom town.

BUT DIPLOMATIC analysts say it is a superficial boom. 'This economy has been so run down and so denied of the most basic of consumer items that there is a lot of slack in the system, ' says one. 'Once that slack is taken up, and we are almost there, it will just keep on hitting the roof until there is serious structural change from the old socialist systems.'

Burma's problems begin with its currency, the kyat. It is here that the government is proving particularly resistant to change, partly because of incompetence, partly because it is too profitable for vested interests to change the system and partly because of lingering allegiance to the policies of Ne Win, who is said to be opposed to devaluation on nationalistic grounds.

The contempt for the kyat is evident from the speed in which large sums of money are converted almost immediately on receipt into gold, US dollars and diamonds.

Burmese have long memories of Ne Win's obsession with the currency, which he has demonetised three times.

On one occasion, the government gave the Burmese people just a few hours to dispose of one high-denomination note before possession of it was made illegal, punishable by jail.

Family fortunes were wiped out before the end of the day.

The official rate is six kyats to the US dollar but on the black market a greenback will fetch anything from 100 to 160 (the current rate is about 120).

It is difficult to get a fix on what SLORC intends to do about the disparity which grossly distorts the economy (the black economy is said to be 10 times the size of the official economy).

SLORC officials talk vaguely about market forces eventually bringing about the convergence of the two rates, as if that is what the world wants to hear, yet another example of SLORC providing the free market that Western governments and donors love.

But it hides the poverty of official inspiration. The regime's chief economic adviser did much of his training in communist eastern Europe but claims to have 'always been a free-marketeer' and economics was not high on the Burmese military's curriculum at boot camp.

The military and State firms import goods at the official rate, paying low kyats for goods and filtering them into the market at prices closer to the unofficial rate. The profit potential is obvious.

For example, a can of imported Seven-Up costs about 50 kyats in a shop, a cheap 40-odd US cents at the black market rate but a staggering dollars 8 or more at the official rate.

PRIVATE traders get around the iniquities by smuggling. A small amount of product is brought in with an official import licence at official dollar-kyat rates and is allowed to be distributed to shops. The trader will then arrange for much larger amounts to be smuggled in.

This can be done either across the border from Thailand or from fishing boats plying the islands to the south of Rangoon, which are not policed.

It too goes on sale, impossible to distinguish from the legitimate item.

Unbeknown to the brewers, Foster's beer is apparently being shipped in from Bangkok and Singapore by a relative of Ne Win and has reputedly become Rangoon's most popular beer, according to competitors trying in vain to shift another brew.