Ten Years of Chaos in Burma: Foreign Investment and Economic Liberalization under the SLORC-SPDC, 1988 to 1998

Abstract

O N 8 SEPTEMBER 1988, a military coup, led by General Saw Maung, under the direction of the retired former leader, General Ne Win, ended a fourteen-year period of constitutional military rule in Burma. A nineteen-member State Law and Order Restoration Council (SLORC) placed Burma once again under direct military rule by assuming comprehensive executive, legislative andjudicial powers. Upon seizing power in 1988, the Burmese military rulers attempted a series of superficial reforms aimed at achieving a measure of political legitimacy by encouraging economic liberalization and development. Having declared martial law, SLORC issued orders having the effect of law until they were withdrawn. One such order was The Union of Myanmar Foreign Investment Law, which came into effect on 30 November 1988. In accordance with SLORC's new policy to transform the Burmese economy from a planned socialist system to a private-enterpriseled market economy, this law provided some attractive incentives for foreign investors. Over the ten years since the passing of the Foreign Investment Law, a steady stream of private companies and governments have made commitments to Burma. Many have already departed, while others, having made discoveries in oil and gas, await a change in the political climate, or at least for some form of partial acceptance or recognition of the military regime by the international community, before proceeding any further. This paper will examine the nature and main features of the Foreign Investment Law, its procedures and incentives aimed at attracting foreign investment, and discuss the peculiar problems facing foreign investors in Burma. Along with investigating the kind of foreign investment that SLORC has encouraged, both the arguments offered in favor of foreign investment and the pressures facing investors over the past decade will be reviewed. The consequences of the imposition of U.S. sanctions on new investment in 1997 and the ramifications of the Asian economic crisis, or the Asian contagion, will also be discussed.