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Viewing cable 06RANGOON778, BURMA BUSINESS REPS PESSIMISTIC ABOUT FUTURE

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Reference ID Created Released Classification Origin
06RANGOON778 2006-06-13 02:38 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rangoon
VZCZCXRO6400
RR RUEHCHI RUEHDT RUEHHM
DE RUEHGO #0778/01 1640238
ZNR UUUUU ZZH
R 130238Z JUN 06
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 4670
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 0935
RUEHBY/AMEMBASSY CANBERRA 9708
RUEHKA/AMEMBASSY DHAKA 4196
RUEHLO/AMEMBASSY LONDON 1652
RUEHNE/AMEMBASSY NEW DELHI 3378
RUEHUL/AMEMBASSY SEOUL 6804
RUEHKO/AMEMBASSY TOKYO 4419
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 RANGOON 000778 
 
SIPDIS 
 
STATE FOR EAP/MLS; EB/TPP 
TREASURY FOR OASIA: AJEWELL 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV BM
SUBJECT: BURMA BUSINESS REPS PESSIMISTIC ABOUT FUTURE 
 
REF: A) RANGOON 762, B) RANGOON 456 
 
1. (SBU) Summary: At a recent meeting with visiting EAP/MLS 
Director Scot Marciel, Burmese business representatives 
described the many challenges they face in the current 
business environment, including multiple exchange rates, 
lengthy bureaucratic delays, constant power shortages, 
rising costs, and a collapsing educational system. 
Although they are among Burma's more successful 
entrepreneurs, they will not be able to unleash the 
country's rich potential without a dramatic shift in 
economic policy-making.  End summary. 
 
The High Cost of Cheap Labor 
---------------------------- 
2. (SBU) On June 2, Scot Marciel, EAP/MLS Director, met 
with leading business representatives to discuss the 
overall economic situation.  Than Lwin, a consultant for 
KBZ Bank and former Vice-Governor of the Central Bank of 
Myanmar, acknowledged that the country?s pervasive economic 
problems stem from the political situation.  He estimated 
that the average cost of living for a family in Rangoon is 
about K.50,000 ($40 at current market exchange rates) per 
month, or $480 annually.  Business reps said they paid 
their employees an average of K.20-25,000/month (less than 
$20).  In January, annual per capita income for a mid-rank 
public official in Rangoon was equivalent to $183.  The 
huge rise in government salaries in April 2006 (ref B) may 
help more civil servants make ends meet, but further 
squeezes the bottom line of private companies expected to 
match the unprecedented increase for their workers. 
 
3. (SBU) Aung Khin Myint said that the government counts on 
the Chinese to invest in new industrial zones to take 
advantage of cheap Burmese labor costs.  Garment factory 
owner Julia Chung said Burma's lower labor cost is the main 
reason her plant continues to receive garment orders from 
Europe, but added that she recently increased the basic 
salary of her workers because of the increase in government 
salary scales.  Aung Khin Myint mentioned that his 
employees, like most other private sector workers, also 
demanded salary increases.  The business reps acknowledged 
that productivity levels in Burma are low and unlikely to 
change in the near term.  Reinforcing the impression of 
continuing economic decline and tougher times for 
individuals, the business reps said they had begun serving 
lunch or snacks to their employees to keep their 
productivity up.  When they had paid meal money, they 
noticed that their workers were not eating lunch and 
visibly weakened over the course of the day. 
 
Which Exchange Rate? 
-------------------- 
4. (SBU) Dr. Maung Maung Lay, Executive of the Chamber of 
Commerce and a major importer of medicines and medical 
equipment, discussed business problems caused by Burma's 
multiple exchange rates: the official rate (K6/$1), market 
rate(currently K.1275/$1), transfer rate(1245/$1), FEC 
rate(K.1245/$1), export earnings rate (K.1280/$1), and the 
exchange counter rate(K.450/$1).  Than Lwin noted that for 
decades, since the time of General Ne Win, regime leaders 
have ignored bankers' advice to adjust the exchange rate. 
Business reps were unable to analyze the impact of multiple 
exchange rates when questioned by Marciel, and expressed 
embarrassment that the current system had been in place so 
long that none understood its full economic effects. 
 
Disrupting Trade 
---------------- 
5. (SBU) Business reps also described increased delays in 
the import/export application process due to the recent 
closure of Commerce Ministry offices in Rangoon (ref A). 
Starting June 1, traders must submit all import/export 
applications in the new capital of Naypyitaw (Pyinmana), 
and authorities will allow only one employee of each 
company to receive an identification badge necessary for 
access to the new government offices.  Brokers who 
traditionally handled this business for multiple companies 
can no longer provide the service, increasing expenses and 
 
RANGOON 00000778  002 OF 002 
 
 
hardships for companies.  Aung Khin Myint, whose company 
manufactures bakery products, expressed hope that GOB 
attempts to tighten cross-border trade might reduce the 
current high volume of smuggling that brings in cheaper 
goods to compete with his domestic production.  Charge 
pointed out that, based on experience, tighter controls and 
corrupt officials usually combined to drive even more trade 
underground. 
 
Who Turned Out the Lights? 
-------------------------- 
6. (SBU) The business reps unanimously agreed that the 
country's power situation was very bad and getting worse. 
Most of them rely heavily on generators and pass on most of 
the increased fuel costs to their customers, further 
raising the inflation rate.  They agreed that they would be 
willing to pay higher electricity charges for reliable 24- 
hour supply.  GOB officials regularly predict that the 
country's power situation will improve when new projects 
come on line in 2007-08, but most Rangoon residents agree 
that the outages this year have been the worst in decades. 
 
World's Shortest School Year 
---------------------------- 
7. (SBU) The business leaders also discussed declining 
educational levels.  Dr. Thaung Han, who runs a trading 
company, said university education is very poor, especially 
since the regime relocated most universities to remote 
areas with minimal transportation links.  He gave the 
example of Mandalay University students who must row boats 
to reach their classes in the rainy season.  Many students 
now can only study via "distance learning," which, due to 
Burma's lack of modern communications, means lessons by 
mail.  Course materials often do not reach students until 
just before exam time.  Students then travel to the remote 
university locations to attend the required thirty days of 
classes before taking their final exams. 
 
8. (SBU) According to a former GOB education supervisor, 
teachers are encouraged to give students passing grades 
despite poor performance.  The regime recently banned the 
common practice of teachers earning extra money by 
providing private tuition classes after school hours, which 
not only deprives teachers of critical added income, but 
also sharply reduces the amount of education that many 
children now receive. 
 
9. (SBU) Comment: These Burmese business representatives 
are among the most successful non-crony entrepreneurs in 
Rangoon.  They know the local situation and its challenges 
well, but lack substantive knowledge about international 
economics, finance and trade.  The regime's self-imposed 
isolation, devastated educational system, irrational 
economic policies, and propaganda have made Burma 
uncompetitive in comparison to its neighbors.  So Burma 
falls further behind, while its neighbors make impressive 
advances.  We provide information to these progressive 
business reps to broaden their knowledge of outside 
developments, but it will take dramatic economic reforms 
before they will be able to apply the lessons learned so 
that Burma can begin growing again and reach its rich 
potential.   End comment. 
STOLTZ