BURMA 2004 INVESTMENT CLIMATE STATEMENT

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SUBJECT: BURMA 2004 INVESTMENT CLIMATE STATEMENT



1. Table of Contents:

Summary
Preface: U.S. Investment in Burma Subject to Sanctions
Openness to Foreign Investment
Conversion and Transfer Policies
Expropriation and Compensation
Dispute Settlement
Performance Requirements and Incentives
Right to Private Ownership and Establishment
Protection of Property Rights
Transparency of the Regulatory System
Efficient Capital Markets and Portfolio Investment
Political Violence
Corruption
Bilateral Investment Agreements
OPIC and Other Investment Insurance Programs
Labor
Foreign Trade Zones/Free Ports
Foreign Direct Investment Statistics

Appendices:

Available on request
(Executive Orders and Sanctions Regulations)


2. Summary: Under U.S. law, new U.S. investment in Burma has
been prohibited since 1997. Sanctions imposed in 2003 ban
imports of Burmese products into the United States and
forbid all financial transactions between U.S. persons and
Burma. Burma is a country blessed with extensive natural
resources, low labor costs, and great potential for tourism.
It is also a member of ASEAN. However, even if U.S.
sanctions were removed, an extraordinarily hostile
investment climate would hold U.S. investment - as it has
held all other foreign investment - to a very low level.

Though local investment laws are liberal on the surface,
their implementation is racked, at all levels, with
corruption. The ruling military junta, the State Peace and
Development Council (SPDC),despite pledging itself to an
"open door" economic policy and urging foreign firms to
invest, regularly comes out with punitive and capricious
regulations, which make investment for foreigners difficult
if not impossible. The senior generals making the decisions
rarely consider the law when they take action for or against
investors.

Our view of the current investment climate is very dim. We
have not seen any movement toward reform in recent years and
expect none in the next year. In fact, if recent events are
any indication, the situation for investors could well
become worse before it improves. End summary.


3. Preface: U.S. Investment Subject to Sanctions

On May 20, 1997, by Executive Order 13047, the President
imposed economic sanctions prohibiting new investment by
U.S. persons or entities in Burma (Myanmar). Those
sanctions were based on the President's determination that
the Government of Burma has committed large-scale repression
of the democratic opposition. The Cohen-Feinstein Amendment
to the Foreign Operations Act of 1997 formed the legal basis
for the investment ban. The U.S. government every six
months reviews sanctions policy. Since the investment ban
was imposed in 1997, the State Department has found no
measurable progress toward political liberalization in
Burma.

Prior to the imposition of the investment ban, a number of
high-profile U.S. investors had already withdrawn from Burma
due to a hostile investment climate and poorer than expected
returns. An active anti-Burma consumer movement in the
United States and Europe caused investing in Burma to be
high risk in terms of corporate image. Federal sanctions
ban new investment but allow companies invested in Burma
prior to May 20, 1997 to remain.

In 2003, the President signed into law the Burmese Freedom
and Democracy Act and issued an accompanying executive order
barring imports of Burmese products into the United States.
The 2003 sanctions also prohibited U.S. persons from
providing financial services to Burma and seized the assets
of certain Burmese entities. The 2003 and 1997 economic
sanctions are in addition to a number of sanctions the
United States imposed against Burma following the military
crackdown against civilian democracy activists in 1988 and
the nullified election of 1990. The United States opposes
the extension of international financial institution
assistance to Burma, prohibits military sales, denies
bilateral economic aid and all commercial assistance
programs, bans the issuance of U.S. visas to members of the
military, political, and economic elite, and has downgraded
our representation in Rangoon from Ambassador to Charge
d'affaires. In addition, the United States continues to
engage in a vigorous diplomatic effort to promote political
and human rights reforms.

U.S. commercial policy toward Burma is to neither encourage
nor discourage U.S. exports.


4. Openness to Foreign Investment

With a view to attracting foreign investment, the Burmese
government instituted the Foreign Investment Law (FIL) on
November 30, 1988. The basic priorities of foreign
investment, according to the FIL, are as follows:

Promotion and expansion of exports;
Exploitation of natural resources that require heavy
investment;
Acquisition of high technology;
Support for production and services requiring large amount
of capital;
Expansion of employment opportunities;
Development of facilities that would reduce energy
consumption; and,
Regional development.

According to the State-Owned Economic Enterprises Law,
enacted in March 1989, state-owned enterprises have the sole
right to carry out the following economic activities:

Extraction of teak and sale of the same in the country and
abroad;
Cultivation and conservation of forest plantations with the
exception of village-owned firewood plantations cultivated
by the villagers for their personal use;
Exploration, extraction, sale, and production of petroleum
and natural gas;
Exploration, extraction, and export of pearls, jade and
precious stones;
Breeding and production of fish and prawns in fisheries
which have been reserved for research by the government;
Postal and telecommunications services;
Air transport and railway transport services;
Banking and insurance services;
Broadcasting and television services;
Exploration, extraction, and exports of metals;
Electricity generating services other than those permitted
by law to private and cooperative electricity generating
services; and,
Manufacturing of products relating to security and defense.

However, the law provides that the Myanmar Investment
Commission (MIC) may, "in the interest of the State," make
exceptions. Exceptions have been made in areas such as
banks (though not for foreign investors),petroleum and
natural gas extraction, and air services. This discretion,
though, like most else resides in the hands of the Cabinet
and senior generals.

According to the FIL, the MIC must review all potential
investment, either foreign or domestic. However, due to
corruption within the MIC, the ruling State Peace and
Development Council (SPDC) removed much of the MIC's real
influence at the end of 1999. Potential investors must
still work through the MIC, but it has lost the authority to
make a decision. Interested foreign companies still
approach and submit proposals through the MIC, which in turn
gets approval from either the Cabinet (chaired by Prime
Minister Lt. General Soe Win, though the PM must get
clearance from SPDC Chairman Senior General Than Shwe)) or
the Trade Policy Council (TPC, chaired by SPDC Vice Senior
General Maung Aye). The Cabinet and the TPC have the same
membership so the choice of decision-making body is made on
a case-by-case basis. Though the MIC has no power or
authority to protect foreign companies, we have no evidence
of overt discrimination by the MIC against foreign
investors.

Once the government grants permission to invest, a foreign
company must get a "Permit to Trade" - essentially a
business license - from the Ministry of National Planning
and Economic Development's Directorate of Investment and
Companies Administration (DICA). In a typical "Catch 22"
that has for all intents and purposes closed Burma to most
new foreign investment, since February 2002 the government
is no longer permitting DICA to issue new permits or renew
existing ones for foreign firms. This decision has
disrupted the business of many foreign investors, and forced
closure of several foreign manufacturing firms. In an
effort to overcome this obstacle, since 2002 some foreign
investors that have attempted to do business as local firms
under cover of Burmese partners have faced legal action and
difficulties divesting.

In theory once a company has the "Permit to Trade" it may
then use it to get residence visa status, lease cars and
real estate, etc., and to get import and export licenses
from the Ministry of Commerce. The Ministry of Commerce has
had a policy in place since the end of 2001, though there is
nothing in writing, to only issue import licenses to those
firms who are export earners. Companies without export
earnings must purchase "export dollars" from another firm at
an inflated exchange rate in order to apply for an import
license.

The FIL allows for FDI as a wholly foreign-owned venture or
a joint venture with any Burmese partner (private or state-
owned). Sole proprietorships or partnerships are equally
acceptable. Overall, the FIL requires that at least 35
percent of equity capital in all JVs and partnerships be
foreign-owned. The minimum foreign investment required in
practice, though not specified in the law, for manufacturing
investments is $500,000 in cash or kind. In addition, the
minimum cash-on-hand requirement in foreign currency
(calculated at the official rate of exchange of roughly 5.6
kyat = $1) is 300,000 kyat for a services company, 500,000
kyat for a trading company, and 1 million kyat for a
manufacturer.

The military, via the military economic enterprises, the
Myanmar Economic Holdings, Ltd. (MEHL) and the Myanmar
Economic Corporation (MEC),is involved in many economic
activities. To set up a joint venture, foreign firms have
reported that it is useful to be affiliated with MEHL or MEC
in order to receive the proper business permits.
Nonetheless, entering into business with MEHL or MEC does
not guarantee success for the foreign partner, and some
foreign investors report that their military partners are
parasitic, making unreasonable demands, providing no cost-
sharing, and sometimes muscling out the foreign investor
after an investment is profitable.


5. Conversion and Transfer Policies

According to the Foreign Investment Law (FIL),investors in
Burma have a guarantee that they can repatriate profits
(after taxes). The law also provides that, upon expiry of
the term of the contract, the investor of foreign capital
has the right to the foreign currency in which the
investment was made. However, due to the shortage of
foreign exchange it is in reality not easy for foreign
investors to legally transfer their net profits abroad.
Foreign currency can be transferred abroad only after
obtaining permission from the Foreign Exchange Management
Department of the Central Bank of Myanmar.

Likewise, multiple exchange rates in Burma make conversion
and repatriation of foreign exchange very complex and ripe
for corruption. The official rate of about 5.6 kyat to the
dollar is grossly overvalued. The government issues Foreign
Exchange Certificates (FEC) that trade somewhat closer to
the market rate (roughly 930 kyat = $1 at the end of 2004)
but are still overvalued. Generally speaking, companies get
rid of kyat earnings as quickly as possible. The government
requires foreign companies to use dollars or FEC to pay
utility and telephone bills (charged at a higher rate than
for local firms),and rental charges. The government allows
foreign firms to deposit dollars in a state bank for
withdrawal as FEC by the company's employees.

In Burma, only three state banks, the Myanma Foreign Trade
Bank (MFTB),the Myanma Investment and Commercial Bank
(MICB) and the Myanma Economic Bank (MEB) are allowed to
deal with foreign exchange transactions. In practice the
MFTB and MICB handle most of these transactions. The MFTB
mainly handles foreign currency transactions of government
organizations, businesses, and individuals, and the MICB
caters primarily to companies and joint ventures. MEB
handles foreign currency transactions in border trade
regions.

Restrictions on provisions of financial services by U.S.
banks have caused a serious disruption to the legal foreign
trading system, which has long been primarily dollar-
denominated. U.S. banks no longer offer trade facilitation
or correspondent banking services, making the use of U.S.
dollar letters of credit problematic. Traders and
government banks have shifted to euros as much as possible.

As of July 29, 2003, the correspondent accounts of MEB,
MFTB, and MICB in the United States are frozen, along with
all other assets and property.

Private banks had assumed a large share of banking activity
before a major banking crisis in February 2003 effectively
closed the private banking sector. However, at no point
were these banks permitted to deal in foreign exchange. In
2004 the government allowed some of the smaller private
banks to resume operations, though the sector remains
moribund. There is no indication that if the private
banking system is revitalized it will be given the right to
deal in foreign currency.


6. Expropriation and Compensation
The Burmese Foreign Investment Law (FIL) guarantees against
nationalization during the investment's "permitted period"
of investment. However, a number of foreign firms in
various sectors have been forced to leave the country when
the terms and conditions of their investment agreements have
not been honored. In the late 1990s, two large Japanese
firms exited Burma after they found they were not able to
operate as they had been led to believe. Additionally,
there have been cases where the government has seized the
assets of foreign and local investors (without
compensation),when the investment turned out to be very
profitable.

The most recent example we know of is the case of a Swiss
cement importer and distributor that was forced out
ostensibly because it was not operating according to its
permit. In reality, the government turned the company out,
after it had made a significant investment in plant and
equipment, because it was able to sell better quality,
cheaper cement than its government-controlled competitors.
In another case in 1999-2000, the government confiscated a
large brewery that an expatriate Burmese businesswoman had
made profitable and turned it over to the Ministry of
Industry (1). The local courts were not helpful and the
investor was unable to get compensation from the GOB.


7. Dispute Settlement

Private and foreign companies are at a disadvantage in
disputes with governmental and quasi-governmental
organizations. Arbitration is addressed under the 1944
Arbitration Act. Foreign investors generally prefer to use
international arbitration, though the Burmese government
will try to stipulate local arbitration in contracts it
signs with foreign investors. If arbitration is handled
locally, difficulties arise since the central leadership
controls the whole legal mechanism. The courts are not
independent and cannot make free and fair decisions. There
is no recourse available for companies who face an adverse
administrative decision. Burma is not a member of the
International Center for the Settlement of Investment
Disputes nor is it a party to the New York Convention.

The legal system in Burma is ostensibly under the control of
the Attorney General's Office and the Supreme Court.
However, neither the Attorney General nor the Supreme Court
is independent. Burmese criminal and civil laws are modeled
on British law as practiced during the colonial period,
which ended in 1948. Every Township, State, and Division
has its own law officers and judges. However, the township,
state and divisional SPDC branches have supreme authority
over judicial decisions at the local level.

There is no bankruptcy law in Burma.

Foreign companies have the right to bring cases, and defend
themselves, in local courts. However, as the SPDC ruling
junta controls all the courts, foreign investors who have
had conflicts with the local government, or even had their
business illegally expropriated, have had little luck
getting compensation.


8. Performance Requirements and Incentives

Officially, companies covered under the Foreign Investment
Law (FIL) are entitled to a tax holiday period of three
consecutive years. Under the law this tax holiday can be
extended with permission of the Myanmar Investment
Commission (MIC). Investors are also eligible, at the MIC's
discretion, for a number of other incentives including:
accelerated depreciation of capital assets, a waiver of
customs duties and taxes on imported machinery and spare
parts during the period of construction, or on imported raw
materials during the first three years of commercial
production, etc. Though the MIC issues the permission, the
TPC and the Cabinet, not the MIC, make decisions on these
incentives and extensions.

There are no official performance requirements for new
foreign investors in Burma, but the government does require
an investor purchase local machinery, fire, marine, and
personal liability insurance. Unofficially, the government
often requires companies to commit to a certain level of
exports before being allowed to invest. The government then
requires compliance reports every three months with evidence
of export or explanation why the goals were not met. We
have no evidence that action is taken against firms that do
not meet their initial export targets.
There is no requirement that foreign investors buy or hire
from local sources. Technology transfer is not generally a
pre-requisite for investment.

Any enterprise operating under the FIL or the Myanmar
Companies Act must pay a 30 percent income tax rate.
Withholding tax on royalties and interest is 15 percent for
resident foreigners and 20 percent for non-resident
foreigners. Tax collection in Burma is very lax, but
foreign investors are an easy target for the cash-strapped
tax authorities. The Burmese fiscal year ends March 31 and
tax returns are due by June 30.

A surprising reversal of the government's mantra of "open
door economy" came in a February 2002 verbal directive which
outlawed the issuance of new, or renewal of existing,
"Permits to Trade" for trading firms owned by foreigners (or
by foreigners and Burmese). This was done ostensibly to
promote local trading firms, but has served only to further
distort the local marketplace. The authorities have not
published any official notice of this directive but it is
being enforced, including against foreigners who have tried
to evade the directive by listing their company under the
name of a Burmese colleague or friend.


9. Right to Private Ownership and Establishment

By law, foreigners may not own land, and may only rent
property on a short-term basis.

A private entity can establish, buy, sell, and own a
business only with the review and approval of the MIC (and
by proxy the top leadership).


10. Protection of Property Rights

Burma does not yet have adequate IPR protection. Patent,
trademark, and copyright laws and regulations are all
deficient. Nonetheless, the GOB has stated it will meet its
WTO TRIPS obligations before 2006. After Burma joined ASEAN
in 1997, it agreed to modernize its intellectual property
laws in accordance with the ASEAN Framework Agreement on
Intellectual Property Cooperation. However, an IPR law,
first drafted in 1994, still awaits approval and
implementation. A Patents and Design Act was introduced in
1946, but never brought into force. Thus the Indian Patents
and Designs Act of 1911, which was enacted under British
colonial rule, continues to govern the registration of
patents and designs.

Piracy of music CDs, video CDs, CD-ROMS, DVDs, books,
software, and designs is evident nationwide, especially in
the border regions and in the two major urban centers of
Mandalay and Rangoon. However, given the small number of
customers (most Burmese are too poor),and the lack of
adequate infrastructure (e.g., reliable electricity),we do
not believe piracy has a significant adverse impact on U.S.
products, which, are in any case, not readily available. We
assume that most if not all consumers of IT products,
private and governmental, are using pirated software. .

Burma has no trademark law, though trademark registration is
possible. Some firms place a trademark caution notice in
the local English newspaper, declaring ownership of their
trademarks. Once this notice has been published, criminal
and/or civil action can be taken against trademark
infringers. Title to a trademark depends on use of the
trademark in connection with goods sold in Burma. While a
Copyright Act was promulgated in 1914, no means to register
a copyright was ever instituted. There is thus no legal
protection in Burma for foreign copyrights.

In the vast majority of cases, real estate is purchased with
cash or using regular bank loans, though the latter are
difficult to obtain (and not available directly to
foreigners).


11. Transparency of the Regulatory System

Burma is notorious among foreign businesspeople for its
complete lack of regulatory and legal transparency. All
existing regulations, including those covering foreign
investment, import-export procedures, licensing, foreign
exchange, etc., are subject to change, with no advance
notice, at the whim of the senior ruling generals. The
economic decision-makers here are influenced strongly by
whimsy, wealthy cronies, the demands of state-owned
enterprises, and of the military-controlled Myanmar Economic
Corporation and the Myanmar Economic Holdings, Ltd. The
government also regularly issues new regulations with no
notice and with no opportunity for review or comment by any
non-governmental domestic or foreign market participants.
Furthermore, new regulations or regulatory changes are
rarely published. Instead, they are communicated verbally
to interested parties. If a new regulation or law is
published it will appear in the government's mouthpiece
newspaper, the New Light of Myanmar (Myanma A'Lin) or in the
Burma Gazette.

Burma's health, environmental, tax, and labor laws as
written do not impose a major burden on investment.
However, the protean nature of the regulatory and legal
situation - and the irregular enforcement of existing laws -
makes investment tricky without good, and well-connected,
local legal advice.

See "Openness to Foreign Investment" section for further
details of the legal and regulatory system.


12. Efficient Capital Markets and Portfolio Investment

Burma has no true equity or debt markets, and the notion of
portfolio investment is not well understood by the average
person. Burmese authorities have said in the past that the
existence of capital markets is essential for the
development of a well-functioning financial system. To this
end, the Myanmar Economic Bank (MEB) and Japan's Daiwa
Institute of Research Co. Ltd. established a joint venture,
the Myanma Security Exchange Centre Ltd., to set up a stock
exchange. This exchange is in existence, though moribund,
with only one listed company - a forestry joint venture. A
few companies have also begun to sell bonds privately and on
a very small scale. Private companies, both foreign and
domestically controlled, are generally small and thus their
shares are closely held by a small number of people or
entities - often within a family. There is no securities
law.

A large bank run in February 2003, and the subsequent
decision by the government to avoid bailouts, has
effectively cut off the private banking system from the
market. The state-owned and semi state-owned banks were not
impacted by this crisis. Though a few of the smaller
private banks resumed their operations in 2004, government
instructions and internal bank policies have made it
impossible for the largest private banks to take in new
deposits or loans, and weekly withdrawals are capped. The
future of these banks is uncertain.

Burma remains on the Financial Action Task Force's (FATF)
list of non-cooperating countries and territories for
failures to enact an adequate anti-money laundering regime.
The U.S. Treasury Department, in April 2004, issued a rule
prohibiting U.S. banks from doing business with Burmese
banks or their overseas branches because of concerns of
money laundering in Burma and specifically at Asia Wealth
Bank (the largest pre-crash private bank) and Myanmar
Mayflower Bank. The government announced it was
investigating these two banks under a 2002 money laundering
law, though no progress is evident.

Foreign firms do not have access to bank loans since the
banks require collateral of land or real estate, neither of
which foreigners can own. Since mid-2002 the government has
forbidden the use of gold as collateral. Loans in kyat are
available for local companies and individuals from state and
active private banks. Interest rates are currently running
about 15 percent per year with inflation about twice that.
Because of these negative real interest rates, a lack of
adequate supervision, and a shortage of banking experience
the private banking system, even at its peak, was very
unstable. Private banks engaged in reckless lending and
suffered high levels of non-performing loans. Though
statistics are not available, it is likely that public
banks, forced to bankroll the regime's pet projects and
personal needs, also have an extremely large percentage of
non-performing loans.

A 1990 banking law permitted foreign banks to open branches
in Burma but not to conduct business in the local market.
These offices may serve as a trade and commercial liaison
for local and foreign clients. For a variety of reasons,
including the Asian financial crisis of the late 1990s, the
slow local business climate, and the lack of liberalization
of the banking sector, most of the original 49 foreign banks
have left Burma, or downgraded their representation, in the
past several years. Under U.S. law, U.S. persons may not
provide financial services to Burma.

In 2004, in the absence of a government policy, the Myanmar
Accountants Council issued its own standard accounting
system - the Myanmar Accounting Standards - based very
closely on International Accounting Standards (IAS).


13. Political Violence

In May 2003, government-affiliated thugs ambushed a convoy
carrying pro-democracy opposition leader Aung San Suu Kyi
while she was traveling in northwest Burma. Dozens were
killed or wounded in the attack. Several small bombs went
off in downtown Rangoon in early 2003 and in mid- and late-
2004, and authorities regularly claim to discover improvised
explosive devices in Rangoon and various locations
throughout Burma.

Burma experienced major political unrest in 1988 when the
military regime jailed and/or killed an undetermined number
of Burmese democracy activists. In 1990, the military
government refused to recognize the results of an election
that the opposition won overwhelmingly. Burma experienced
major student demonstrations in 1996, and demonstrations
occurred in August and September of 1998. Popular unrest
and violence continue to be possible.

For the last decade there has been sporadic anti-government
insurgent activity in various locations, such as an attack
on a natural gas pipeline in the Tanintharyi Division and
bomb attacks against family members of senior military
officials in Rangoon. The Thai-Burma border area in Burma's
southern Shan, Mon, Kayah, and Kayin States and in
Tanintharyi Division, have continue to see sporadic fighting
between government forces and various insurgent groups. In
February 2001, several people were killed and some tourists
left stranded during shelling and cross-border gunfire in
the town of Tachileik, Shan State. The Thai-Burma border is
closed from time to time due to increased insurgent
activity, most recently for a period in 2002.


14. Corruption

Corruption is systemic in Burma and is considered by
economists and businesspeople to be one of the most serious
barriers to investment and doing business in Burma. Because
of the Byzantine and capricious regulatory environment, rent-
seeking activities are rampant and very little can be
accomplished, from the micro to the macro, without paying
"tea money." We think this problem will only get worse at
all levels as inflation further impoverishes government
bureaucrats and as senior leaders seek additional income
from a shrinking number of investment projects.

Corruption is a jailable offense in Burma, and has been
since 1948. However, the anti-corruption statute is applied
only when the senior generals want to take action against
some official who has become an embarrassment - most notably
in October 2004 when the SPDC arrested then Prime Minister
General Khin Nyunt, and many of his family members and
allies, for corruption. In all other cases corruption is
considered a very normal practice - indeed a requirement for
survival. The major, though by no means only, areas where
investors run into corruption are: when seeking investment
permission, taxation, when applying for import and export
licenses, and, when negotiating land and real estate leases.


15. Bilateral Investment Agreements

Burma has signed bilateral investment agreements, known as
"Protection and Promotion of Investment" agreements with the
Philippines, the PRC, and Vietnam. Except for increasing
investment from the PRC (see "Foreign Direct Investment
Statistics" section),these agreements have had little
impact on incoming investment from Vietnam or the
Philippines.


16. OPIC and Other Insurance Programs

Due to U.S. law, OPIC programs are not available for Burma.
Burma is not a member of the World Bank's Multilateral
Investment Guarantee Agency (MIGA).


17. Labor

In 1989, the United States withdrew Burma's eligibility for
benefits under the Generalized System of Preferences (GSP)
due to the absence of internationally recognized worker
rights. Labor unions are illegal in Burma. Workers are
unable to organize, negotiate, or in any other way exercise
control over their working conditions. Although regulations
set a minimum employment age and wage, and maximum work
hours, these are not uniformly observed, especially in
private factories and other establishments. The government
uses forced labor in infrastructure construction and
porterage for the military in active combat zones. These
labor practices are not consistent with Burma's obligations
under ILO Conventions 29 and 87, and thus explain why the
ILO imposed sanctions against Burma in 2000. The United
States strongly supported this decision.

Burma's cost of labor is very low, even compared to some of
its Southeast Asian neighbors. Burmese over the age of 40,
and particularly those over 65, tend to be very well
educated. However, a sad side effect of the repeated
closing of Burmese universities over the past 15 years is
that the current 15-30 year old demographic is sorely
lacking in technical skills. Many Burmese, though, speak at
least some level of English. Many educated Burmese studied
English in mission schools during the British colonial and
early independence period. After the nationalization of
private and mission schools in 1964, the socialist
government mandated English courses in school starting from
middle school. Soon thereafter then-dictator General Ne Win
ordered that English instruction begin in kindergarten after
his daughter allegedly failed an English exam and was
rejected for studies in the U.K.

The government does not publish unemployment figures.
However, anecdotal evidence and the recent divestment by
many foreign companies, support the assumption of a very
high level of unemployed and underemployed in formal, non-
agricultural sectors. An average worker in Burma will make
about 500-800 kyat (roughly $0.50 to $0.80) per day.


18. Foreign Trade Zones/Free Ports

The government has set aside as "industrial zones" 19 large
tracts of land surrounding Rangoon, Mandalay, and several
other major cities. However, these zones are merely zoned
for industry and do not come with any investment incentives.

There are no free trade zones in Burma.


19. Foreign Direct Investment Statistics

Note: Investment figures compiled by the Burmese government
include only investment approved by the Myanmar Investment
Commission (MIC). The figures do not include investments
not submitted for MIC approval, such as a myriad of small
and medium Chinese projects. Since the end of 2003, the MIC
has stopped providing investment figures to other
organizations and individuals. Current figures are
calculated based on the Monthly Economic Indicators
published by the Central Statistical Organization (CSO).

According to government figures at the end of March 2004,
cumulative foreign investment approved by the MIC totaled
379 projects, valued at $7.59 billion. This amount is 1.2
percent higher than the cumulative total listed at the end
of March 2003. However, it should be noted that this
cumulative number does not factor in subsequent divestment,
or investment that was approved but that did not actually
enter the country.

Extrapolating from the latest government statistics on FDI
flow for Burmese FY 2003-04 (April-March),we estimate a
4.6 percent year-on-year increase in the value of new FDI
approvals ($91.17 million) in five sectors compared with
total new investment approvals in FY 2002-03 ($86.95
million). The new investments came from Canada ($1.45
million in mining),China ($2.82 million in manufacturing),
Hong Kong ($3 million in transport),South Korea ($ 32.3
million in oil and gas and $2.6 million in fisheries),
Thailand ($22 million in oil and gas),and the United
Kingdom ($27 million in transport).

The trickle of approved new investment since 1997 has come
almost exclusively from Asian countries. Western countries
have largely stayed away from the Burma market. New U.S.
investment has been zero since 1997 when the U.S. government
imposed an investment ban.

According to GOB statistics, in stock terms, the United
States is the fifth largest foreign investor in Burma with
16 approved projects totaling $582 million. U.S. investment
approved prior to May 1997, which was grandfathered under
U.S. investment sanctions, is largely centered in oil and
natural gas exploration. South Korea was first in new FDI
approvals in 2003-04 (according to Burmese government
statistics). These official statistics do not take into
consideration considerable new investment, some of it state-
financed, from the PRC.

Major non-U.S. foreign investors in Burma are: Petronas
(Malaysia),Total (France),Ivanhoe Mines (Canada),PTT,
Plc. (Thailand),Shin Satellite (Thailand),Keppel Land
(Singapore),Daewoo (South Korea),China National
Construction and Agricultural Machinery Import and Export
Co. (PRC),and the China International Trust and Investment
Corporation (PRC).

So far there is no concrete evidence of large-scale
investment abroad by Burmese companies. However, we believe
that some wealthy Burmese individuals and small family
businesses have made a few investments in neighboring ASEAN
countries.


FOREIGN INVESTMENT OF PERMITTED ENTERPRISES AS OF
3/31/2004 BY SECTOR

(US$ million)
Approved In percent of Total
No. Particulars No. Amount Approved Amount


1. Oil and Gas 59 2,457.47 32.4

2. Manufacturing 151 1,606.89 21.2

3. Hotels and Tourism 43 1,059.66 14.0

4. Real Estate 18 1,025.14 13.5

5. Mining 53 528.19 7.0

6. Livestock and Fisheries 24 312.36 4.1

7. Transport and Communications 16 313.27 4.1

8. Industrial Estates 3 193.11 2.5

9. Construction 2 37.77 0.5

10. Agriculture 4 34.35 0.4

11. Other Services 6 23.69 0.3

Total 379 7,591.90 100.0

FOREIGN INVESTMENT OF PERMITTED ENTERPRISES AS OF
3/31/2004 BY COUNTRY

(US$ Million)
No. Particulars No. Approved Amount


1. Singapore 72 1,572.73

2. U.K.* 38 1,431.01

3. Thailand 51 1,312.20

4. Malaysia 33 660.75

5. U.S.A. 16 582.06

6. France 3 470.37

7. Indonesia 12 241.50

8. The Netherlands 5 238.83

9. Japan 23 212.57

10. The Republic of Korea 34 191.31

11. Hong Kong 30 165.72

12. Philippines 2 146.67

13. Australia 14 82.08

14. Austria 2 72.50

15. China 14 66.97

16. Canada 17 61.23

17. Panama 1 29.10

18. Germany 1 15.00

19. Denmark 1 13.37

20. Cyprus 1 5.25

21. India 1 4.50

22. Macau 2 4.40

23. Switzerland 1 3.38

24. Bangladesh 2 2.96

25. Israel 1 2.40

26. Brunei Darussalam 1 2.04

27. Sri Lanka 1 1.00

Total 379 7,591.90

*Inclusive of enterprises incorporated in British Virgin
Islands, Bermuda, and the Cayman Islands.

MCMULLEN