ECONOMY

Burma is a resource-rich country with a strong agricultural base. It also has vast timber, natural gas, and fishery reserves and is a leading source of gems and jade. Tourist potential remains undeveloped because of weak infrastructure and Burma's international image, which has been damaged by the junta's human rights abuses and oppression of the democratic opposition. Due to Burma's poor human rights record, the U.S. imposed a range of trade sanctions, including bans on the importation of Burmese products into the U.S. and the export of financial services from the U.S. to Burma. In response to the September 2007 crackdown, President Bush announced on September 25, 2007 that the United States would tighten existing economic sanctions on the regime leaders and their supporters. On October 19, 2007, President Bush expanded sanctions to include individuals responsible for human rights abuses and public corruption, as well as individuals and entities who provided material or financial support to designated individuals or the Burmese military government. Other names were added to the targeted sanctions list in November 2007 and February and March 2008. Australia, Canada, and the EU also have imposed additional economic sanctions on the Burmese regime in response to the crackdown.

Despite Burma's growing GDP due to increasing oil and gas revenues, the regime's mismanagement of the economy has created a downward economic spiral for the people of Burma. The state remains heavily involved in most parts of the economy, infrastructure has deteriorated, and no rule of law exists. The majority of Burmese citizens subsist on an average annual income of less than $200 per capita. Inflation, caused primarily by public sector deficit spending and the eroding value of the local currency (the kyat), has reduced living standards. The International Monetary Fund (IMF) estimated that inflation was running at 40% in March 2007, in contrast with official estimates of 10%.

The military's commercial arms play a major role in the economy. The limited moves to a market economy have been accompanied by a significant rise in crony capitalism. A handful of companies loyal to the regime has benefited from policies that promote monopoly and privilege. State-controlled activity predominates in energy, heavy industry, and the rice trade. Agriculture, light industry, trade, and transport dominate the private sector.

Burma remains a primarily agricultural economy with 50% of GDP derived from agriculture, livestock and fisheries, and forestry. Cyclone Nargis, which devastated Rangoon and Irrawaddy Divisions, severely damaged approximately 20% of Burma's rice producing lands. Manufacturing/industry constitutes only 15% of recorded economic activity, and state industries continue to play a large role in that sector. Trade and services constitute 35% of GDP.

Foreign investment has declined precipitously since 1999 due to the increasingly unfriendly business environment and political pressure from Western consumers and shareholders. The government conserves foreign exchange by limiting imports and promoting exports. Published estimates of Burma's foreign trade (particularly on the import side) are greatly understated because of the large volume of off-book, black-market, illicit, and unrecorded border trade.

In the near term, growth will continue to be constrained by government mismanagement and minimal investment. A number of other countries, including member states of the European Union, Canada, and Australia have joined the United States in applying some form of sanctions against the regime.

Government economic statistics are unavailable and unreliable. According to official figures, GDP growth has been over 10% annually since FY 1999-2000. However, the rate is likely much smaller; the IMF estimated that the growth rate in 2007 was 5.5% and predicted 2008 growth to be between 4%-5%. Burma's limited economic growth results largely from its natural gas exports, which account for over half of Burma's export receipts and foreign direct investment. Natural gas exports will increase significantly once production begins from the offshore Shwe and Shwephyu Fields, estimated to hold 5.7-10 trillion cubic feet of natural gas. In 2007-2008, the oil and gas sector accounted for $3.42 billion in foreign direct investment. Corporations based in China, India, South Korea, Thailand, and Malaysia have interests in the exploration and development of several offshore and onshore blocks.

Burma remains the world's second-largest producer of illicit opium--although it amounts to only 12% of the world's total. Annual production of opium is now estimated to be less than 15% of mid-1990 peak levels. Burma is also a primary source of amphetamine-type stimulants in Asia. Although the Burmese Government has expanded its counternarcotics measures in recent years, production and trafficking of narcotics and failure to adequately prosecute those involved remains a major problem in Burma.

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