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 a