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Viewing cable 07RANGOON563, BURMA'S GAS EXPORTS FUEL A RECORD TRADE SURPLUS

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Reference ID Created Released Classification Origin
07RANGOON563 2007-06-11 09:11 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rangoon
VZCZCXRO1219
RR RUEHCHI RUEHDT RUEHHM
DE RUEHGO #0563/01 1620911
ZNR UUUUU ZZH
R 110911Z JUN 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 6160
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 1446
RUEHBY/AMEMBASSY CANBERRA 0337
RUEHKA/AMEMBASSY DHAKA 4556
RUEHLO/AMEMBASSY LONDON 1956
RUEHNE/AMEMBASSY NEW DELHI 3885
RUEHUL/AMEMBASSY SEOUL 7432
RUEHKO/AMEMBASSY TOKYO 4984
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 RANGOON 000563 
 
SIPDIS 
 
STATE FOR EAP/MLS; EB/TPP 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN PGOV BM
SUBJECT: BURMA'S GAS EXPORTS FUEL A RECORD TRADE SURPLUS 
 
1. (U) Summary: Burma's total trade reached approximately 
$8 billion in 2006-07, a record high.  The country's rich 
natural resources, especially natural gas, dominated 
exports, while domestic fuel demand made diesel the top 
import.  Government-owned enterprises dominated both 
sectors, controlling two thirds of exports and over a third 
of imports during the last fiscal year.  Burma's major 
trading partners were Thailand, China, and Singapore.  The 
GOB achieved recent trade surpluses by restricting imports, 
controlling lucrative sectors, exporting natural resources, 
while hobbling private sector efforts to grow.  End 
summary. 
 
2. (U) At the start of the fiscal year in April 2006, GOB 
officials projected that Burma's foreign trade volume would 
reach $7 billion in 2006-07.  A Commerce Ministry report 
quoted in the local press on May 21 listed Burma's exports, 
led by natural gas, at $5.01 billion, and imports at $2.92 
billion, totaling $7.93 billion in overall trade.  This 
represents a 43% increase over last fiscal year's official 
performance of $5.54 billion, and a record high since the 
regime took power in 1989.  A local private research 
company Business Information Group (B.I.G.) estimated that 
foreign trade was slightly higher, at $8.29 billion. 
B.I.G. uses figures from Customs officials, who report 
actual trade figures, whereas Commerce officials use totals 
listed on licenses they issue. 
 
RESOURCES OUT, MUCH LESS IN 
--------------------------- 
3. (SBU) Another Customs report stated that the Myanmar Oil 
and Gas Enterprise (MOGE) earned $2.16 billion in fiscal 
year 2006-07, more than double the 2005-06 figure.   MOGE 
revenues, divided with international partners, came mostly 
from natural gas exports to Thailand.  An Energy official 
was quoted as saying last year's increase came not from 
greater volume, but from higher prices for gas exports. 
One industry source, however, refuted the claims of a 100% 
revenue increase from gas exports.  He said the volume of 
gas exported was up about 5% and revenues rose only about 
15% in calendar year 2006. 
 
4. (U) Other top exporters include Myanmar Timber 
Enterprise (which earned $519 million), Myanma Gems 
Enterprise ($296.6 million), Myanmar Ivanhoe Copper, a 
joint Canadian - Ministry of Mines venture($106.6 million), 
and Htoo Trading, owned by crony Tay Za and involved 
heavily in timber and construction industries ($65.1 
million).  State enterprises generated 61% of export 
income. 
 
5. (U) The private sector accounted for 64% of all imports, 
but most importers are small and only one private firm, 
Rothmans of Pall Mall, was among the top importers.  The 
leading state-owned importer, Myanmar Petrochemical, 
brought in $676.3 million in diesel and petroleum products 
for domestic consumption.  MOGE was second with equipment 
imports to support the oil and gas industry.  The U.S. 
Embassy is listed as the country's tenth largest importer 
($20.7 million), thanks to materials imported for 
construction of the new embassy compound. 
 
6. (U) According to B.I.G, Burma's primary export products 
were natural gas, agricultural products, timber and forest 
products, precious and semiprecious stones, marine 
products, textiles and garments, mineral products, and 
animal products.  Major imports include diesel and oil, 
machine parts, steel, iron, cars, food and beverages, 
plastic, medicines, palm oil, cement, and tires. 
 
7. (U) The Commerce Ministry report lists Thailand as 
Burma's top trading partner with $2.66 billion in bilateral 
trade, followed by China ($1.27 billion), Singapore ($1.22 
billion), and India ($895 million).  Thailand, India, Hong 
Kong and China are the top export markets.  Singapore, 
China and Thailand are leading sources of imports. 
 
BORDER TRADE REACHES $1 BILLION 
------------------------------- 
8. (SBU) The overall figures include border trade 
transactions.  Most border trade has traditionally been 
 
RANGOON 00000563  002 OF 002 
 
 
conducted outside the banking system.  According to a 
Department of Border Trade (DBT) official and several 
business sources, authorities plan to normalize border 
trade at all eleven border crossing points by conducting 
transactions with Letters of Credit (LCs) and electronic 
transfers.  DBT officials and business contacts said that 
some transactions for container-sized shipments now go 
through the formal banking sector.  One businessman told us 
that, despite Burmese urging to formalize trade, Chinese 
trading partners are reluctant to conduct business through 
banks, fearing the effect of Burma sanctions on their 
relationships with American banks. 
 
9. (U) Although no official statistics for border trade 
exist, the Weekly Eleven journal, quoting a Ministry of 
Commerce source, released border trade figures for 2006-07. 
These figures do not include the significant amount of 
black market trade that flows across Burma's porous 
borders. 
                                         (US$ million) 
                     Export    Import     Total Trade 
                     ------    ------     ----------- 
Burma - China         423       298           721 
Burma - Thailand      160        88           248 
Burma - Bangladesh     24         1            25 
Burma - India          11         6            17 
                     ------   ------      ----------- 
Total                 618       393         1,011 
 
TRADE SURPLUS DOES NOT MEAN A BOOMING ECONOMY 
--------------------------------------------- 
10. (U) The government attributed the $2.09 billion trade 
surplus to its "export first" policy.  Importers must prove 
they have earned an equivalent amount from exports before 
they can receive an import permit.  The government-run 
Central Statistics Organization's (CSO) figures for 2005-06 
show trade volume of $5.54 billion, with $1.57 surplus, and 
in 2004-05 trade volume of $4.90 billion, with $935 million 
surplus.  IMF figures from Article IV consultations for 
import and export totals closely track those published by 
CSO, while B.I.G. figures are approximately 10% higher. 
 
11. (SBU) In February, Economic Minister Soe Tha claimed 
that Burma's trade surplus indicated that the country's 
economy was booming.  Senior local economists disagree. 
They note that Burma exports natural resources, not 
commercial, manufactured or industrial goods, and Burma 
does not import capital inputs to develop productive 
industries.  Moreover, the GOB's "export first" 
restrictions on import permits guarantee a trade surplus 
because import volume can not exceed export volume. 
 
12. (U) Government restrictions keep the private sector 
from starting or expanding potentially successful import or 
export businesses.  One contact described some of the most 
challenging difficulties faced by private business 
representatives who are not among the crony elite: the 
government won't issue import permits for advanced 
machinery; issuance of export permits is unpredictable and 
slow; official permission to travel for training abroad is 
rarely given; no reliable power, communications or 
transport infrastructure exists in the country; the 
government controls the most lucrative sectors; currency 
depreciation coupled with bureaucratic delays make pricing 
difficult; and the unattractive business climate keeps 
potential international partners away. 
 
13. (SBU) Comment: These trade figures reveal how revenues 
from export of Burma's resources keep the generals rich and 
in power.  Sadly, little trickles down to the people.  The 
regime's efforts to maximize export earnings include 
stifling development of the country's manufacturing, 
industrial or service sectors.  Burma suffers the resource 
curse.  End Comment.