Asia Keeps Burmese Industry Humming
Trade, Both Legal and Illegal, Blunts Effect of U.S. Economic Sanctions

By Alan Sipress
Washington Post Foreign Service
Saturday, January 7, 2006

RANGOON, Burma -- Hundreds of women leaned over sewing machines amid the soft whir of industry. Row after row they sat, dark eyes intent on work, cheeks smeared with a traditional chalky cosmetic made from tree bark.

Many of their friends lost their jobs at the factory, leaving empty places at the machines after the United States banned imports from Burma in 2003 to protest the actions of the country's repressive military government.

But last month, the workers were stitching a sample batch of women's trousers ordered by a Taiwanese company for sale in Europe. If successful, the Burmese factory owner anticipates a follow-up order of as many as half a million pieces, which would make for a very busy year.

"We've suffered a lot, but it's getting better and better," he said. "There are so many new buyers."

Burmese industry and exports were on the decline in the 1990s as a result of progressive attempts by the United States to tighten economic sanctions on Burma, protesting its suppression of democracy. But the effort to pressure its rulers has been vastly undercut by the enthusiasm of other countries, especially Burma's Asian neighbors, to tap its cheap workforce and abundant natural resources, ranging from precious gems and teak to nickel and natural gas.

Some of the trade is legal, but timber and other products are also smuggled across Burma's remote, unsettled borders. Businessmen say some exports, such as seafood, garments and teak, are relabeled and shipped beyond the region.

The U.S. government first barred investment by Americans and U.S. companies in 1997, objecting to Burma's repression of the National League for Democracy, led by Aung San Suu Kyi, who received the 1991 Nobel Peace Price. Suu Kyi's party won legislative elections in 1990, but the ruling military never allowed it to take office.

Two years ago, Congress extended the sanctions to include the import ban, a prohibition on financial services in Burma and a freeze on the assets of some Burmese financial institutions.

While the NLD has endorsed the U.S. embargo, some of its senior members acknowledged that it has not been very effective. "Exports are continuing to increase," said a senior NLD member, who asked not to be named. "India and China will buy anything we sell. They demand a lot of our raw materials and agricultural materials."

India, for example, now hopes to import natural gas from a huge field discovered two years ago off Burma's west coast. With production still several years off, the Indian government has been negotiating with Bangladesh to build a pipeline to transport Burmese gas. Daewoo International, the South Korean company that is the largest investor in the gas development, reported last week that the site would produce up to 3.56 trillion cubic feet of gas, company officials said.

Two other Burmese fields are already exporting natural gas to neighboring Thailand, and several more are being explored by companies in China, India and Singapore. Official estimates put total gas exports at more than $1 billion a year.

Burma, whose government calls the country Myanmar, also ships agricultural products to India. And with its long coastlines and vast tracts of swamp, Burma is a major exporter of shrimp and other sea-based products. Businessmen said much of those exports are shipped beyond Asia, including to the United States, by way of neighboring Thailand.

"They have the means to infiltrate markets in the West. It's onward to somewhere else," said Maung Maung Lay, joint general secretary of Burma's national chamber of commerce. "It's very hard to say the country of origin. It's not stamped on the fish."

Some of Burma's timber exports also are shipped onward to unsuspecting consumers outside Asia, including teak that ends up in the United States, Maung Maung Lay said.

On the outskirts of the country's largest city, Rangoon, tall stacks of hardwood logs are mostly concealed behind high wooden fences off main roads. Local businessmen say they operate at night, when the illegally cut logs are loaded into metal shipping containers and trucked to Rangoon's port for transport elsewhere in Asia.

"You can't do this unless you're close to the army," said a businessman, who like some other entrepreneurs asked not to be named because he feared government retribution for speaking with a foreign journalist.

In the north, more than 100 trucks a day haul illegal teak and hardwood to the Chinese border, according to businessmen who said they witnessed the trade.

Khin Maung Lay, director general of Burma's commerce ministry, said in an interview that China would become his country's main trading partner within five years. Since 2003, China has lowered tariffs on imports of about 230 Burmese commodities. The governments have set a goal of $1.5 billion in official bilateral trade this coming year, an increase of more than a third.

China has agreed to invest in several large mines, including two potentially large nickel deposits, and Chinese businessmen are working with Burmese to develop light industries. Burma's newly established capital, Pyinmana, will be powered by electricity from one of several hydroelectric dams China has helped build.

When trade sanctions blocked garment exports to the United States in 2003, subcontracting work from China kept some factories working, businessmen said.

The garment industry was one of the few sectors hit hard by the embargo. About 80 percent of Burma's garment exports had gone to the U.S. market, valued by officials at about $470 million a year. According to Khine Khine Nwe, managing director of Best Industrial Company and a board member of the Myanmar Garment Manufacturers Association, Burmese businessmen kept less than $50 million of this while foreign companies supplying the fabric and buying the finished products took the rest.

More than half of Burma's 400 garment factories closed after the trade sanctions were approved, and many workers returned to their village homes or found work in new plants just over the Thai border, said businessmen and foreign economic experts. Those who kept their jobs saw their wages drop.

Since then, business has picked up, with Burmese factories receiving mounting orders from Korean, Taiwanese and other Asian companies selling primarily in Europe, manufacturers said.

But behind the high metal gates of one Rangoon factory, the plant owner complained that foreign companies knew Burmese manufacturers were in a weak position, so they offered low prices and placed difficult orders that other countries turn down. He said with a thin smile that he had no choice but to accept.

"If we don't get enough orders, we send our workers home after half a day," he said, motioning toward the young women outside the door of his factory office. But suddenly turning upbeat, he added, "Next year will be better. More orders will come."

The country's leaders in particular have succeeded in insulating themselves from the sanctions, which diplomats and economic experts in Rangoon said mainly harm smaller businessmen. The military rulers, their families and some business associates still make money, including from taxes and payments on legal trade, the teak cartel and several government-awarded monopolies enriching tycoons close to the generals.

The import of automobiles, for instance, is so tightly restricted by these well-connected businessmen that Burmese say a 15-year-old Japanese sedan might sell for more than 20 times its value elsewhere and the supply of mobile phones is so limited that they can cost more than $2,000.

Correspondent Ellen Nakashima in Bangkok contributed to this report.

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