The recent fuel price crisis in Burma: The Structural Bones

"Burmese Scene" Acryllic painting and photo copyright Kyi May Kaung
Private collection.

For the past three weeks, demonstrations on the streets of Rangoon protesting fuel price hikes of 500% have been rocking Yangon (as the regime calls its former capital city) and spreading to other towns and cities. As one prominent Burma watcher says, “Poor Burma, where are these crooks (the State Peace and Development Council) going to go?”

Dr. Alfred Oehlers, a security analyst based in Hawaii, asked these crucial questions in an article Behind Burma’s Fuel Price Rise, on Augest 22 in The Irrawaddy Online Edition.

He asks the disturbing questions:

"How can a country so rich in gas and oil be unable to provide its own citizens with affordable supplies? How can government raise prices (to) such a huge extent, especially when it must be selling gas for what must be an incredible profit?

So far, various explanations have been put forward by analysts. Some have suggested the economic mismanagement of the regime is largely to blame, while others have pointed to an emerging foreign exchange and budgetary crisis as reasons behind the move."

Just about ten days ago, dissident newsletters on line reported the discovery of “huge gas (reserves)” in Burma.

As an explanation, the “economic mismanagement” explanation is too glib and has been overused since the late Dr. Mya Maung happened to talk about it, but not in detail, in the mid-90s. As I remember it, he did not define it precisely, nor say what he meant, before it was picked up by many journalists, who batted it about like the proverbial volley ball. We need to go much deeper than that, as Dr. Oehlers is doing. The by now clichéd phrase, “economic mismanagement” begs the question – is any complex economy manageable or micro-manageable at all? Clearly not, not even a relatively simply structured one such as the Burmese economy.

Burma has a few major exports, largely natural resources. In management structure too it is “simple” but in this case “simple” does not mean it is either efficient economically, nor good for its citizens, who deserve the right to better their lives and live in security and creating better lives for themselves and their children. Right now, they don’t even have the right to survive.

The mass outflows of refugees and economic migrants from Burma over decades already attests to this. There are one million internally displaced people. There is high infant mortality and low life expectancy, not to mention the AIDs pandemic and avian flu etc. Just over a month ago, The Fund for Peace rated Burma as the 14th most failed state in the world, after Iraq and Afghanistan. That means the government that does the least for its people.

More than that the Burmese government treats its people as cannon fodder, slave labor and its arch enemies. At a Burma Studies Conference in Gottenberg, Sweden in 2002, the late Dr. Chao Tzang Yawngwe described how the Burmese military junta treats all strata of society and all ethnic groups as its enemies.

When I speak of the Burmese economy or the Burmese polity or administrative system (and in large measure they coincide), as “simple,” I mean, the simple structures as Henry Minzberg classified in his book, The Structuring of Organizations. This is a pyramidal structure with all decision making done at the top. There is a "log jam” of information, that does not flow well along the single channel running between the top and bottom layers. This structural design was also the one the traditional Burmese kings used. They were heads of their own army as well as heads of the country, they were all powerful - “Lords of Head and Hair” as we say in Burmese.

It is not surprising that the present military regime in Burma has chosen traditional Burmese kingship as its model, even naming its new capital Pyinmana – Naypyidaw (The King’s Royal Capital). Megalomaniac ideas aside, slavery, apart from being inhumane, is not an economically efficient way to organize things. In the slave plantations in the South, in the United States before the Civil War, everything had to be chained down so as not to be stolen. Anyone who is laboring under slave-like conditions thinks only of escape, if things cannot be made better within the system.

We have to pay the highest tribute to the Burmese people, who, led by a few committed leaders, are trying so hard to make things better. In a disturbing video that was smuggled out and can now be seen on My Space, dissident Daw Su Su Nway is “protected” behind a “body guard” of a few men with linked arms. They all look shockingly vulnerable. She keeps shouting “(We’re) doing it for everyone!” Then there are close ups of demonstrators being pulled away. She is now reported to be in hiding. Her heart medication has run out.

Watching this video brought back disturbing memories of 1988. Then they were shooting people on the street, using phalanxes of armed soldiers, with real weapons and real bullets, not rubber ones. In 1992, they used fire hoses. In 2003, in the May 30th attack on Daw Aung San Suu Kyi, which is now known as the Depayin Massacre, they started using hired thugs in civilian clothes, wielding clubs. In this latest incident, a cartoon in the Irrawaddy, which I assume is accurate, depicts the clubs as “armed” with nails, pointed sides out. VOA broadcasts and witness interviews state that drifters on the street were given a square meal of dhanbauk rice (North Indian rice with spices and chicken) and liquor and ordered to rough up the peaceful demonstrators. They may also have been given drugs in a country notorious for being a major producer of drugs. A woman interviewed by VOA correspondent Thar Nyunt Oo, described how un-Burmese the thugs were in literally man-handling the demonstrators, who were mostly women. As in Depayin and the earlier White Bridge incident in 1988, women had their clothes torn from their bodies and lost their sarongs. This is deplorable, brutal behavior in the minions of a government that is always paying lip service to “Burmese culture,” as they define it, of course.

In his purely economic analysis, Alfred Oehlers points out that Burma is a diesel powered country, and as the demand for diesel oil has grown, the amount spent on subsidies to keep the diesel prices artificially low has also increased. He reasons that SPDC’s gas sales were probably negotiated some time ago and are probably locked in at low levels, while it has to import diesel at prevailing spot prices. He also says that some gas “revenues” are in fact not cash sales, but were barter arrangements without any money being exchanged. Burma is having to buy diesel, in spite of having “huge natural gas reserves” because it has inadequate refining capacity. Oehlers also points to “at least one nefarious motive.” It is rumored that the tycoon (Burmese oligarch) Tay Za and his Htoo Group of companies would be major beneficiaries of privatizing fuel products. Revenues would spill into their own back pocket (ko aik htair ko hpaik te) as the Burmese proverb goes, from state ownership to the hands of “pariah capitalists” as they are often termed.

Dr. Oehlers does assume though, that subsidies for diesel must come only from the energy sector. The junta is getting revenues illegal and legal from many different sources, and no one even knows how much has been leaking into the generals’ private bank accounts since the time of the arch kleptomaniac, Gen., later U Ne Win, the father of them all. Now of course he is the late U Ne Win.

The current price hike of 500% shows how large the subsidies were in the past. How far the fixed, that is, subsidized price was below the real price or the price set by demand and supply. The authorities clearly thought this new price would clear the market, that is, it was about what the market could bear, in economic terms, but they did not count on it creating political unrest. When it did, their only “solution” was to clamp down, as they have been doing repeatedly since 1962.

This does not solve any of Burma’s problems which by now are dyed into its structural, systemic bones. The price hike shows that the policy the World Bank favored, especially in Indonesia, of allowing prices to float to their real market level, will inevitably lead to political unrest unless accompanied by widespread political and economic reforms of a structural nature.

We can’t expect the junta to comprehend this, or try to do something about it even if they did understand the mechanics of the thing. In Zaire, years ago, an IMF report suggested that the government could not reduce its money supply because it had to pay off its cronies and buy loyalty from its supporters. Present day Burma is in a similar bind of the junta’s own making.

In conclusion, all this shows that micro-economic “solutions” will not work. It will only make the Burmese economy more contorted and bizarre, with reflected, reactive contortions in people’s lives. Micro-economic measures are like trying to do major surgery for a serious cancer with nail clippers and band aid.

What is needed in Burma are widespread economic and political reforms of a structural nature. On that front, there is a dim ray of hope on the horizon. While all our attentions were deflected by the troubles on the streets of Rangoon and other cities inside Burma, the Canadian Friends of Burma, a group which in the mid 90s started Burma activism, hosted a seminar on how India and China might pressure Burma to reform.

Kyi May Kaung (Ph.D.) is an analyst based in Washington, DC.

Copyright Kyi May Kaung