IMF: TAKE YOUR ADVICE AND...

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001253

SIPDIS

STATE FOR EAP, EB
COMMERCE PASS ITA JEAN KELLY
TREASURY PASS OASIA JEFF NEIL
CINCPAC PASS FPA

E.O. 12958: DECL: 09/27/2012
TAGS: EFIN ECON BM
SUBJECT: IMF: TAKE YOUR ADVICE AND...


Classified By: COM Carmen Martinez for Reasons 1.5 (B,D)


1. (C) Summary: IMF proposals for marginal economic reforms
in Burma have been brushed aside by the government. Japanese
efforts to stimulate interest in reform in return for limited
adjustment aid will likely get a similarly cold reception.
Nonetheless, international financial bodies and donor
community experts should maintain contacts. They need to
rebuild their knowledge of the Burmese economy. They also
need to continue their economic education of the Burmese
technocrats who will one day be called on to administer an
economically viable state. End summary.

Show Me the Money


2. (C) Traditionally the IMF's suggestions for incremental
economic reform fall on deaf ears here. We understand that
the IMF will once again propose that the Burmese government
take marginal steps to: (1) begin to unify the market and
official exchange rates, (2) liberalize agricultural exports,
(3) improve tax collection, and (4) improve state-owned
enterprises' budgetary discipline. Although the IMF's report
of its July mission to Burma is not yet published, already
the word is that the Burmese government will ignore its
proposals. The official line of the Burmese government has
long been that no economic reforms will be possible without a
large structural adjustment loan. The IMF, restricted by
U.S. policy from extending new funding to Burma, has
repeatedly tried to convince the naysayers in Rangoon to
undertake limited, incremental reform measures that would not
require a large financial investment.


3. (C) A top Burmese businessman and former government
finance official said the regime was unlikely to shift its
position any time soon. He said that the ruling generals are
fixated on national pride. The government will dismiss all
IMF or World Bank advice as long as those institutions
"patronize" Burma and refuse to treat it like a full member
-- that is by giving it access to funding. He admitted that
the Ministry of Finance had discussed repaying its
International Financial Institution (IFI) arrears as a "sign
of good faith," but ultimately rejected the notion on the
grounds that the gesture would not result in any new loans
coming Burma's way.

Japan, Asia's Answer to the IMF


4. (C) The Japanese government is also getting in on the
economic advice game. A large team of technical consultants
and scholars has been regularly visiting from Tokyo to work
with Burmese government officials on economic reform. One of
the team's leaders, a professor of international studies from
Yokohama, told us that the Japanese government has had some
success in the region in the past where the IMF has failed,
getting Vietnam to accept conditionality for a 20 billion yen
bilateral economic adjustment loan. Ideally, the team leader
claimed, the Japanese government would like to arrange for
Prime Minister Koizumi and Senior General Than Shwe to sign
off on a similar structural adjustment loan agreement during
the upcoming ASEAN leaders meeting in Cambodia.


5. (C) The team leader was not optimistic that the current
Burmese regime would adopt economic reform measures.
However, he was concerned that if no effort was made to push
reform, and to support the few reform-minded technocrats
here, then any new democratic government would inherit a
country with very dim economic prospects. He felt that such
support would only be possible through a carefully monitored
and disbursed structural adjustment loan. Further sanctions
or economic isolation, he posited, would sound a death knell
for budding reformers.

Comment


6. (C) No one is surprised that the ruling junta scoffs at
the IMF proposals. Despite this, we think that the U.S.
government should encourage IMF and World Bank technical
missions to Burma, as long as they are not tied to any new
funding. Even if the government will not listen to reason,
at least these IFIs can rebuild their knowledge base with a
view to providing critically necessary adjustment funding
quickly when and if a political change occurs. Likewise we
think the Japanese should continue with their efforts.
Although we are dubious that the government will listen to
Japan any more than it will to the IMF, it is important for
communication to continue between Burma and donors on issues
of economic reform. End comment.
Martinez