In Myanmar, Two Hidden Worlds

Amid privations, its regime prospers by trading with China and India

by Paulo Sergio Pinheiro

http://online.wsj.com/, June 20, 2009

This grandiose new city has four-lane highways that are largely empty, a gems museum with sapphires and a zoo with air-conditioned Arctic habitats for penguins. Government officials reside in high-security compounds that can't be visited by foreigners.

A five-hour drive to the south, residents in Yangon get by with hours at a time of no electricity. Their once-grand city is filled with collapsing Victorian mansions and abandoned colonial administrative buildings. Roads are often impassable during monsoon rains, and most cars date to the 1980s or early 1990s. Some taxis are so worn out that they have holes in the floorboards that allow passengers to see the road rushing by underneath.

The divide between Myanmar's shining new capital, home to much of its military elite, and its commercial capital underscores the failure of a decade of U.S. and European sanctions, efforts to break the country's military regime by cutting it off from doing business with much of the Western world. Instead, the country's leaders and top businessmen have survived and even thrived by replacing Western buyers with Asian ones. Trade with China has more than doubled over the past five years, and sales of natural gas and other resources to Thailand, India and other Asian powers are also growing quickly. In the process, the regime has only tightened its grip.

All that is leading dissidents, human rights advocates and congressional leaders to an increasingly widespread conclusion: It's time for a new approach. Many believe it will require a far greater effort by Western governments to engage directly with the secretive regime. It will also require exerting more pressure on Asian trading partners, including China and Singapore, to pressure the junta to curb human rights abuses and make other changes. Many advocates are calling for more radical approaches, including offering to dismantle some of the sanctions -albeit with threats of more serious actions, such as arms embargoes or criminal tribunals like ones in Rwanda or Sudan, if the regime doesn't reform.

Others go so far as to propose that the West should accept a diminished role for Aung San Suu Kyi, Myanmar's leading opposition figure. The Nobel laureate is arguably the world's most revered prisoner of conscience since Nelson Mandela, but she has drawn criticism for her inflexibility in dealing with the regime. It's unclear when, or if, she'll be able to lead the opposition again. The 64-year-old is on trial for letting an American well-wisher visit her home this May in violation of a longstanding house arrest, and faces up to five more years in jail.

In February, U.S. Secretary of State Hillary Clinton acknowledged that past strategies including sanctions weren't working, and promised the U.S. would conduct a thorough review-still incomplete-of its policies towards Myanmar. Top officials in the Obama administration are also hoping to significantly increase humanitarian aid, according to people familiar with the matter, which many Myanmar experts hope will be a step towards rebuilding a civil society that could mature into a new opposition movement to supplement or replace Ms. Suu Kyi.

Once dismissed as a backwater, Myanmar has seen its profile rise dramatically in recent years because of its position between China and India, the world's two biggest emerging superpowers. Both are jockeying for Myanmar's natural gas, copper and other resources, and Myanmar offers China a potential alternate overland route for oil and gas, bypassing the crowded Strait of Malacca near Singapore that handles much of East Asia's supply today.

Trade with China jumped to more than $2.6 billion in 2008 from about $630 million in 2001, according to Chinese government data. Analysts say the official numbers vastly understate the full extent of China's investments in Myanmar. In downtown Yangon, its commercial capital, trucks laden with massive logs or other goods-sometimes with Chinese characters painted on the side of the vehicles-are a common sight.

Monywa, once a relatively minor village in central Myanmar, has emerged as a major trading center for beans and other legumes, commodities in heavy demand across Asia, especially India. Myanmar is now the world's second biggest exporter of the crops after Canada, and Monywa has reaped the rewards. It has quadrupled in size to 400,000 people over the past two decades. The number of traders has grown to roughly 1,000 from 200 in the 1990s and multistory homes with Greek columns are commonplace, as are imported SUVs, which can cost $100,000 in Myanmar.

In places like Monywa, "it's easy to make money," says one local trader in his 20s.

Some analysts and U.S. congressional leaders fear Myanmar could become a nuclear threat. Russia has acknowledged signing an agreement with Myanmar in 2007 to help build a nuclear reactor and a center for nuclear research there, reportedly for medical research purposes, but Russian officials have said no concrete projects ever materialized. Others point to growing ties between Myanmar and North Korea.

Any new diplomatic initiative from the U.S. would require finding a way to deal with one of the world's most reclusive regimes. Top officials-including the country's senior-most general, a psychological warfare expert in his 70s named Than Shwe-are ensconced in Naypyitaw. Members of the inner circle rarely meet with Western ambassadors, who remain in Yangon.

Attempts to reach the regime for this article were unsuccessful. The generals typically make their views known through state-run newspapers. In recent weeks they have blasted foreign countries for interfering in Myanmar's internal affairs and defended the imprisonment of Ms. Suu Kyi as necessary for public security.

The government usually prohibits foreign journalists from entering. Authorized guests, including aid workers, often must get permission to travel outside Yangon. Residents can be imprisoned if caught aiding international journalists.

In the 1800s, British soldiers conquered what used to be known as Burma. It became the world's biggest rice exporter and a major source of timber. In the late 1940s, nationalists led by Ms. Suu Kyi's father, Aung San, secured independence. Aung San was assassinated and in 1962 the military took over for good, implementing a series of disastrous socialist policies that sent the economy into a tailspin.

Anger boiled over in 1988 student protests, in which more than 3,000 were killed, and the government agreed to hold national elections. When Ms. Suu Kyi's party won, the military ignored the result.

The U.S. banned new American investments in Myanmar in 1997, and in 2003 it outlawed imports of Myanmar goods and restricted American banks from doing business there. The Bush administration added additional targeted sanctions against members of the regime.

The practical effect of the sanctions, though, has been to push the regime deeper into the arms of China and other Asian powers, while leaving much of the rest of society to suffer the consequences. Per capita gross domestic product is about $1,200, only slightly higher than Rwanda, and far below Singapore's $52,000 and $47,000 in the U.S.

In Yangon, U.S. trade restrictions ripped apart the garment industry earlier this decade, throwing as many as 80,000 young women out of work, according to economists. Trucks filled with soldiers are seen often, as are signs with pro-government messages such as one that exhorts residents to "Crush all internal and external destructive elements as the common enemy."

In Yangon's central business district there are offices or billboards for many of Asia's biggest brand names, including Mitsubishi and Canon, but almost no sign of Western companies. Thai oil and gas producer PTT Exploration & Production PCL has Myanmar investments that provide about one-third of Thailand's natural gas needs, worth $2 billion or more in recent years. Cnooc Ltd. is exploring for oil and a number of Chinese resources and engineering firms are involved in hydropower and mining ventures.

Much of the money flows directly to the regime and its allies. According to the U.S. government, the military owns a majority stake in virtually all enterprises responsible for extracting natural resources. The government is now sitting on more than $3 billion in foreign exchange reserves, compared to just $30 million in 1988. Wealthier residents, including businessmen linked by U.S. intelligence reports to the military, have access to art galleries, pricey French restaurants and shopping trips to Singapore.

Adding to the frustration is evidence that Ms. Suu Kyi's opposition is in tatters. Leaders of Ms. Suu Kyi's political party, the National League for Democracy, are in their 70s and 80s, and the junta has imprisoned most of the younger blood, exiles and human rights groups say, with more than 2,000 political prisoners now under lock and key. The government has also pressured monasteries to purge monks involved in 2007 street protests, and it routinely blocks blogs and Web sites, such as youtube, that it deems to be subversive.

"Almost no one is willing to join the (opposition) party for fear of being arrested," said one resident. Party leaders meet regularly at their headquarters, a modest house surrounded by shops on a busy street in central Yangon; it's widely assumed the building and its occupants are monitored by the government.

Another resident said she started attending meetings at NLD headquarters when Ms. Suu Kyi's trial began, but stopped because she felt they were going nowhere. "They were old, they were like aunties and uncles," said the young woman, who thought the meetings felt "like a reunion" for old dissidents. Without Ms. Suu Kyi, "there is no one," she said.

Even some dissidents who support sanctions say additional tactics are needed, including more direct engagement with the regime. Others believe the sanctions would be more effective if fine-tuned to focus only on the junta members themselves, or backed up with more potent punishments, including arms embargoes or criminal tribunals.

More than 50 U.S. congressmen signed a letter in recent weeks calling for a U.N. Security Council inquiry into alleged crimes against humanity in Myanmar, similar to what occurred in Rwanda, Bosnia and Sudan. The United Nations' former special rapporteur on human rights in Myanmar, Paulo Sergio Pinheiro, has issued similar calls in the past six weeks, as has a team of leading jurists in conjunction with Harvard Law School.

Those efforts may well be blocked at the U.N. by nations that have defended Myanmar in the past, notably China and Russia. But backers say the U.S. hasn't been willing to press hard enough to get Asian nations to get tough on Myanmar.

Another option gaining popularity in Washington: significantly boosting humanitarian aid, partly to build stronger groups to counter the military.

One group is Myanmar Egress, a local think tank set up in 2006 by young intellectuals with the goal of trying to end the stalemate between the government and Ms. Suu Kyi's backers. Egress has produced studies for the government outlining its vision for reform. In one, co-founder and former Yale student Nay Win Maung suggested that Ms. Suu Kyi propose to contest only 50% of the seats in an election planned by the regime in 2010. In return for effectively conceding the vote, the government would end her house arrest and release political prisoners.

Mr. Maung's approach has angered some Myanmar exiles, who are suspicious of engaging with the state and distrust Mr. Maung, whose parents were in the military and taught at Myanmar's version of West Point. His approach, though, has made him a useful mediator between foreign aid groups like Oxfam and the generals, local aid workers say. The U.K.'s Department for International Development, for example, is funding an Egress project to train Myanmar citizens in managing aid projects.

The junta could block or limit aid if it suspects it's being used to undermine the regime, as it did temporarily last year after Cyclone Nargis, which killed 135,000 people or more. Currently, development aid to Myanmar totals less than $3 per person, compared with about $50 in Sudan.

Whatever happens, "if people want to punish the regime, they need to find ways to do it that don't punish the people," says Andrew Kirkwood, Myanmar country director for Save the Children, the aid organization.

Paulo Sergio Pinheiro, the former U.N. special rapporteur to Burma

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