RETURN TO REPORTS DESK WITHIN ONE WEEK DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. SA-34 THE ECONOMY OF RLTU1 N TO THE UNION OF BURMA nEPj fl" November 10, 1972 South Asia Department [This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
RETURN TOREPORTS DESK
WITHINONE WEEK
DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION
Not For Public Use
Report No. SA-34
THE ECONOMY
OF RLTU1 N TOTHE UNION OF BURMA nEPj fl"
November 10, 1972
South Asia Department[This report was prepared for official use only by the Bank Group. It may not be published, quotedor cited without Bank Group authorization. The Bank Group does not accept responsibility for theaccuracy or completeness of the report.
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This report was prepared by Mrs. Chandra Hardy and basedupon the findings of a mission which visited Burma betweenMarch and April, 1972. The Mission consisted of:
Mr. J. Baneth (Chief)Mrs. C. Hardy (Deputy Chief)Mr. V. Dragomanovic (Industrial Economist)Mr. P. Bourcier (Transportation Economist)Mr. K. Hideshima (General Economist)Mr. M. Kamiya (Agricultural Consultant)
TABLE OF CONTENTS
Page No.
coUNTRY DATA
SUMMARY AND CONCLUSIONS
I. TOWARDS A SOCIALIST WELFARE STATE . ............... 1
II. NATIONAL INCOME AND PRODUCTION . . 5
III. AGRICULTURE ....................................... 10
IV. INDUSTRY AND MINING . . 28
V. TRANSPORTATION . ................................... 37
VI. POWER AND TELECOMMUNICATIONS . . 47
VII. THE SOCIAL SECTORS .. 50
VIII. HUMAN RESOURCES .. ..... . 57
IX. PRICES, TRADE AND DISTRIBUTION . . 60
X. PUBLIC SECTOR FINANCE . . 67
XI. MONEY AND CREDIT .................................. 77
XII. THE EXTERNAL SECTOR . . 84
XIII. PERFORMANCE POLICIES AND PROSPECTS: APPRAISAL .... 96
STATISTICAL APPENDIX
Page 1 of 2 pages
COUNTRY DATA - BUHRA
AREA 2 POPULATION DENSITY678,528 km 28.2million (1970/71) 42 per km2
Rate of Growth: 2.2% (3965/66 to 1970/71) 14i per kw2 of arable land
POPULATION CHARACTERISTICS (169/70) (Selected Urban Areas) HEALTH 197UQ/LCrude Birth Rate (per 1,000) 36.2 Population per physician 9,177Crude Death Rate (per 1,000) 10.8 Population per hospital bedl,370Infant Mortality (per 1,000 live births) 62.8
INCOME DISTRIBUTION (year) DISTRIBUTION OF LAND OWNERSHIP (year)a of national income, lowest quintile X owned by top 10% of owners
highest quintile % owned by smallest 107% of owners
ACCESS TO PIPED WATER (year) ACCESS TO ELECTRICITY (year)P. of population - urban 7 of population - urban
- rural - rural
NUTRITION 1969 70 EDUCATION 1970/71Calorie intake as % of requirements 124 Adult literacy rate % 70Per capita protein intake (grammes) 60 Primary school enrollment % 88
1/GNP PER CAPITA in 1970/71 US $ 80.00
GROSS NATIONAL PRODUCT IN 1970/71 ANNUAL RATE OF GROWTH (7M. constant prices)
1/ The Per Capita GNP estimate is at 1970 market prices, calculated by the same conversiontechnique as the 1972 World Atlas. All other conversions to dollars in this table areat the average exchange rate-prevailing during the period covered.
/ Includes Official Grants.i Ratio of Debt Service to Zxporta of Goods and Non-Factor Services.
not available
not applicable August 30, 1972
South Asia Departmint
SUMMARY AND CONCLUSIONS
i. The last Bank report on Burma (FE-t8a, December 30, 1960) coveredthe post-war developments of the economy up to the end of the fifties. Be-tween 1956 and 1961, the Bank made three loans to Burma totalling $33.4 mil-lion for projects in transportation. These loans have been fully disbursedand the amount outstanding as of September 30, 1972, was $10.2 million. Since1961, the Bank has made no further loans to Burma.
ii. Burma with an area of 262,000 square miles is the largest countryon the south-east Asian mainland. It faces the Bay of Bengal and the AndamanSea on the west and south and shares land borders with Bangladesh, India,Laos, China and Thailand. Located at about the same latitude as Mexico,Burma has a tropical monsoon climate. The country is rich in natural re-sources. Its wealth lies primarily in its vast agricultural, forestry, fish-ery and mineral resources; however, most of this wealth is yet to be devel-oped. Burma, with a per capita income of about $80, is among the lowest in-come countries in the world. The characteristic features of the populationof about 30 million are that it is predominantly Buddhist, rural, Burman,young and fast-growing.
iii. The last thousand years of Burmese history have been one of inter-mittent warfare and internal struggles to unify the country. Burma cameunder British rule between 1826 and 1886 and remained a colony until 1948.The twenty-five years since independence have not been easy. The economy wasgravely devastated during the war, with about half the country's man-madeassets destroyed. Recovery was hampered by the drop in foreign exchangeearnings, the lack of technical expertise and continuous insurgency. Overthe last decade, Burma successfully isolated itself from external pressuresby maintaining a policy of strict neutrality, limited use of foreign assis-tance and restrictions on the issuance of exit and entry permits, but thedomestic struggle with various insurgents still continues.
iv. The present government which assumed power in 1962 had as its maraims the establishment of a socialist welfare state, nationalization, Burmanization and laying the basis of industrialization. Although the overall ob-jectives are similar, the scope and method of implementation of these aims,represent a significant departure from those of the preceding government.Nationalization of the means of production and distribution has been largelyaccomplished with the notable exception of the agricultural- sector. Agricul-ture is not collectivized and there are few state farms and as yet few pro-ducer cooperatives. It is also unlikely that the sector will be takeL overby the state. Burmanization, which basically meant the expulsion of for-eigners from commercial activities and no foreign participation in production,has also been accomplished. The industrial sector is still only about 12percent of GDP but the development of industry is emphasized in the currentplan.
v. Burma's major success has been in the provision of advanced socialservices for a population of about 30 million with a per capita income ofabout $80. Over the last 9 years, expenditure on health and education doubled
bringing about increases in the number of hospitals, doctors, schools,teachers and students. Free medical care is taken to the rural populationthrough an extensive network of rural and MCH clinics. At least 9 years ofeducation are provided free and minimal fees are charged for those who qual-ify for higher education. The literacy rate of the adult population isnearly 70 percent.
vi. High rates of economic growth were not a major pre-occupation ofthe Government. Resources were mobilized primarily for the accomplishmentof social and political objectives and overall, economic growth has not beendynamic.
vii. National ncome statistics are not wholly reliable, but sectors forwhich there are acggrate data (foreign trade, balance of payments, etc.) in-dicate that there is no reason to believe that the broad outlines are incor-rect. Over the last nine years, the average annual rate of growth of theeconomy barely exceeded the growth of population. Per capita income may beslightly higher than in 1961 (a bad agricultural year) but is probably belowits 1964 peak. The distribution of income in Burma is far less unequal thanin many other countries but this is likely to be of small comfort if per capitaincomes continue to stagnate. Over the decade consumption and investment in-creased much faster than national income and the resource gap was met by adrawdown of reserves and an increased, though still modest, capital inflow.
viii. The performance of the major sectors has been disappointing. Agri-culture directly provides about one-third of GDP, and much of secondary andtertiary activity is also based on agricultural products. Over the lastdecade, the real rate of growth of agriculture was probably around 3 percentper annum. The Government's policy towards agriculture is mainly dictatedby equity and welfare considerations. The programs to increase agriculturalproductivity have not been successful and no comprehensive program for thedevelopment of the sector has yet been prepared. The slow growth of produc-tion is attributable to the insufficiency of capital and credit, rigid procure-ment prices, the negligible application of modern farming techniques and equip-ment, and inadequate marketing and distribution facilities. The most importantconsequence of this slow growth, coupled with an expanding population and grow-ing per capita food consumption, has been the drying up of the export surplus:from 3 million tons before the war, and about 1.5 million tons in the latefifties and early sixties, rice exports fell to around 350,000 tons in1968 and 1969. Since then, they recovered, but only to about 700,000 tons.This has not only affected export earnings (which in recent years stood belowtheir pre-war dollar value), it also affected Government revenues which havelong been heavily dependent on rice exports. Other agricultural surpluses heldup better, but not enough to cushion, let alone to offset, what was happeningto rice.
ix. Although Burma possesses 80 percent of the world's teak resources,the production of teak which is still below pre-war levels, has been stagnant.The failure to exploit this potential and to take advantage of excellent worldmarket conditions for teak exports is partly due to insurgency activity in thetimber areas and the shortage of capacity at each stage of production.
x. Industrial production consists mostly of the processing of agri-cultural products. The focus of industrialization is the development of in-dustrial raw materials and import substituting consumer good industries. Con-siderable scope exists for increasing the growth of the industrial sector butthe policies governing the operation of the sector seem designed to ensure acontinuation of its poor performance.
xi. After the cpmpletion of the post-war reconstruction program duringthe first half of the decade, investment in transportation has not been enoughin recent years to maintain existing assets, let alone expand capacity. In-adequate transportation was a factor contributing to the slow growth of pro-duction. The functioning of the nationalized trade sector is highly ineffi-cient. This has created artificial scarcities which are an important ob-stacle to development, and given rise to a flourishing black market, thusfostering the most anti-social forms of private activity.
xii. Over the decade, fiscal and monetary policies have been carefullymanaged to conform with the Government's priorities, which include the objec-tive of price stability. The pattern of current expenditure reveals thatmajor emphasis was given to social and economic services and defense. Tocushion the revenue impact of falling rice exports, expenditures have beeninvariably cut back to avoid excessive reliance on deficit financing. Never-theless, current revenues have not been sufficient to meet current expendi-tures and this, in addition to the overall deficit of the state enterprisesector, has meant rising budget deficits in recent years.
xiii. Export performance has been extremely poor. As already noted, thevolume of rice exports declined rapidly until 1968/1969; the subsequent re-covery was partly offset by a sharp drop in world prices. Imports were severe-ly curtailed. Nevertheless, the balance of payments deficit on current ac-count has risen from $20 million in 1966/67 to $62 million in 1970/71. Thedeficit has been financed by increasing reliance on short-term borrowing and,a drop in reserves. Gross foreign exchange reserves are currently equal toabout three months of imports, but net reserves (including debt to the DIF)are about nil. Following the realignment of major currencies and the worsen-ing of the balance of payments situation, the Kyat was devalued by 18 percentin terms of gold and 11 percent against the dollar at the end of last year.
xiv. Burma has received very little foreign assistance. External assis-tance in the form of grants (mainly Japanese war reparations) amounted to $194million over the last decade. Total debts, including undisbursed, is$257 million. The average terms and conditions of the loans haveon the whole been favorable to Burma, but repayments which are rising steadily,are nevertheless equal to more than 80 percent of gross disbursemehts. Thedebt service ratio, currently at 15 percent, is expected to rise to 18 percentover the next five years on debt already incurred. In view of this alreadyhigh debt burden, future borrowing, which Burma greatly needs, should beon long-term concessionary terms.
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xv. This recounting of the past indicates that performance has been oneof mixed successes and failures. The successes have mainly been in achievingsocial and political objectives. The social transformation of the economy,begun in the late forties and fifties, has been accomplished. Agrarian reformhas given to the peasants the right to cultivate the land and to transmit itto their heirs and the major means of production and distribution are state-owne.d. The Government exerted its main efforts in order to keep the pricesof basic commodities stable, to reduce inequalities in the distribution ofincome and to fight malnutrition, disease and illiteracy. These are no smallachievements, particularly when considered in the context of declining for-eign trade and little reliance on external borrowing. At the same time, therate of growth of wthe economy has barely kept up with population growth.Since the achievej.nt of a higher growth rate was not an objective of theGovernment, it is zd4ff4fcult to call non-achievement a failure. The factremains, however, that policies dictated by other priorities have had depress-ing effects on economic growth. More importantly, and w-ithout question, thetime has come when the lack of progress in economic growth may endanger thesocial progress that has been made.
xvi. The major economic problems have been and still are (i) the slowgrowth of agricultural and industrial production, (ii) the inefficiency ofthe state enterprises, (iii) the lack of foreign exchange, and (iv) the short-age ,of domestic savings. The major policy problems confronting the Governmentare to improve the maanagement of the public sector and to increase the mobil-ization of resources for investment. The Mission found that within the publicsector - in transportation, industry, forestry, and the social sectors - theentities are generally well run and operate efficiently within the existingpolicy framework and foreign exchange constraints. It is the policy frame-work, including the over-centralized decision-making, which constrains thepublic sector enterprises' ability to function efficiently. Some hard choiceswill have to be taken to deal with these problems. The Government has provenits ability to create institutions and mobilize resources in implementing itssocial welfare programs. The same determination and effort are now requiredto take the steps necessary to achieve higher rates of economic growth.
xvii. The Government is aware of these problems and is trying to dosomething about them. On the political front, insurgency is still aproblem but there is a renewed air of self-confidence in the Government.Burma's approach to the Bank after 10 years is one among many indicationsof a renewed preoccupation with growth, and of a willingness to acceptforeign assistance to promote it. On the economic side, the Government'recognizes that the deterioration of physical assets and slow rate of economicgrowth cannot continue if the population, growing at nearly 3 percent per annum,is to be provided with adequate job opportunities. There is evidence, particu-larly over the last two years, of improved policies regarding the developmentof the agricultural sector and the operation of the state enterprises.
xviii. The current Plan (1971/72-1974/75) projects a modest increase inthe rate of growth'of GDP to 4 percent per annum. The Plan guidelines areparticularly lacking in economic analysis and prescription. Planned invest-ment - which is to be maintained at the 1970/71 level - is unlikely to be
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sufficient to achieve the targeted rates of growth. Nevertheless, the Planis an important document in that it is the first clear statement of the im-portance given by the Government to economic development and it attempts todefine sectoral priorities within the constraints of available foreign ex-change.
xix. Throughout the report, recommendations have been made for achievinghigher rates of growth. This will require, in addition to improved policiesand project preparation, an increase in capital investment. In view of thepresent constraints to mobilizing greater resources for investment, reliancewill have to be made on long-term concessionary finance. There is no questionabout Burma's need for IDA assistance nor of the country's ability toeffectively absorb foreign aid in certain sectors. Burma has never comeanywhere near to exploiting its enormous resource potential, and if thecountry is now (as it seems to be) at a turning point, assistance at thistime would be both timely and far-reaching.
I. TOWARDS A SOCIALIST WELFARE STATE
1. The Union of Burma covers an area of 262,000 square miles,roughly three times the size of the United Kingdom, but with just one halfof the latter's population. Facing the Bay of Bengal and the Andaman Seaon the west and south, the borders of Burma generally follow a horseshoeof mountain ranges: to the west, the Naga hills form the frontier withBangladesh and India, to the north and east, the 1,200 mile border withChina follows an extension of the Himalayas and the mountains of Yunnan;to the east, the frontier with Laos follows the Mekong River and the longborder with Thailand lies along the mountain ranges which lead to theMalay peninsula. The dominant physical feature of the country is t'he ex-pansive valley of the Irrawaddy river which flows south from the foothillsof the Tibetan plateau to the fertile delta on the Bay of Bengal.
2. 'Located at about the same latitude as Mexico, Burma has a trop-ical, monsoon climate. Annual rainfall varies from 200 inches in the coast-al areas to 40 inches in the central "dry-zone."
3. The population which is about 85 percent rural is concentratedin the lower valleys of the three main rivers: Irrawaddy, Salween andSittang, in the area known as Burma Proper. The dominant ethnic group isthe Burmans who account for more than seventy percent of the total popula-tion of about 30 million. The minority ethnic groups consist mainly of about3 million Karens, about 2 million Shans and about one million Kachins andChins. Population density is about 102 persons per square mile, rising toabout 200 per square mile in the delta and official estimates put the rateof growth of the population at between 2.2 - 2.8 percent per annum.
Historical Background
4. The Burmans first appear in historical accounts in the ninthcentury in the rice growing areas of Upper Burma. Pagan, the first capitalwas built in 849. For the next thousand years, the history of Burma wasone of intermittent warfare with neighboring states and internal strugglesto unify the country by establishing control over various ethnic groups.In 1826, the British took Assam, Arakan and Tenasserim and Upper Burma wasannexed in 1886. In the ensuing years up to 1948, the British extendedtheir rule over all the territories now comprising the Union.
5. Burma became independent in 1948 and chose immediately not to bea member of the British Commonwealth. The twenty-five years since independ-ence have not been easy. Burma has successfully isolated itself from exter-nal pressures by maintaining a policy of strict neutrality; limiting the useof foreign assistance and restricting the issuance of exit and entry permits,but the domestic struggle with the hill peoples still continues. The tragicassassination in 1947 of the leader of the independence movement, GeneralAung San at the age of thirty-three and six of his cabinet colleagues was agreat setback to establishing political stability.
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6. The first decade after independence (1948-1958) Was largelyconcerned with nation building and reconstruction. The aovernment of PrimeMinister U Nu, a coalition of widely divergent political interest groupshad the task of administering a disunited, newly independent country andmanaging an economy that had been gravely devastated durinsg the war. Hardlyany other country had been so badly damaged. It has been estimated that atleast half of the couintry's man-made wealth was destroyed between 1941 and1945.
7. The policy of creating a socialist state had, e4dived during theindeptenden'ce struggle and was written into the conistitition of 1947. Thegovernment drew up a Two-Year Economic Plan in 1948 but It was neverimplemented becaufg-- of continual inisurrection. In 1951, for6fg1n expertsassisted the govetiiiin't- in preparing a Comprehensive Develop6e*it Planwhich was completed in 1953. The plan was ambitious and immediately raninto difficulties because of lack of foreign exchange, admin'istrativeincdajpcity an'd considerable political disorder. In the chaotic conditionsof 1958, Prime Minister U Nu invited General Ne W{h to take control ofthe g6vernment with a mandate to establish law and order and prepare thecountry fot elections. When these aims were accomplished, the countrywas handed over to, civiiian rule in 1960 but over the next two yearspolitical disunity and insurrection seemed to threaten the goals ofindependent Burma.
8. W-hen the present government assumed control in 1962, parliamen-tary democracy was declared a failure and all elective b6dies and politicalorganizations were dbolished. Officially, the 1947 Constitution has notbeen repealed or suspended, but in practice only those provisions whichhave not been superseded by action of the Revolutionary Counsil are appli-cable. General Ne Win, the leader of the group that assumed power in 1962is the Chairman of the Revolutionary Council and the head of the government.The ievolutionary Council is vested with supreme executive, legislative andjudicial authority and the Burma Socialist Program Party (BSPP) is the coun-try'8 only authorized party.
9. The political concepts of the Revolutionary Government of theUnion of Burma (RGUB) - the formal title of the government since 1962,are a combination of traditional Burmese values, socialist doctrine andthe philosophy of General Aung San. Political guidelines are to be foundin the April 1962 document entitled, "The Burmese Way to Socialism" and inseveral pamphlets antd speeches of the Chairman. The declared aims of theleadership are to remold society by transforming existing institutions tomeet the needs of society (as interpreted by the government) and to replaceparliamentary democracy with a socialist democracy. The economic goalsof the RGUB are to raise the standard of living and reduce inequalitiesin the distribution of income. The means by which these goals are to beaccomplished entailed planned development and the nationalization of allsectors, with the notable exception of agriculture. Although the overall
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objectives of the RGUB are similar to those of the preceding government, thescope and method of implementation of these aims are considerably different.
10. Under the new leadership, a hierarchical organization has beenestablished under the aegis of the Central Security and AdministrativeCommittee (CSAC) as the primary means of governing the nation. ThisCommittee then are a member of SAC's which extend down to the village level.The function of the BSPP is to provide leadership and organize support forgovernment programs and policies. In spite of the enormous reach of theSAC's and the party-cells which extend right down to the village level, thetraditional indifference of the largely rural population toward participationin government (whatever the system) has tended to restrict support for govern-ment programs that seem to be outside their immediate interest. Inaddition to lack of cooperation, insurgency continues to undermine thegovernment's efforts at establishing political stability and is an im-portant obstacle to development.
Administrative System
11. The administrative divisions established in 1948 have remainedessentially the same. Burma proper is divided into eight divisions:Mandalay, Irrawaddy, Pegu, Magwe, Tenasserim, Arakan, and Sagaing. Rangoon,the capital of Burma is also classified as a division. The remaining areaincludes the states of Shan, Kachin, Kawthulay (formerly Karen), Kayah (for-merly Karenni) and the Chin Special Division. These 13 major entities havebeen divided into 48 districts. Districts in turn are divided into townships.The lowest administrative unit in the towns and cities is the ward and, inthe countryside, the village. The country is also divided into six militaryregions. Military regional commanders supervise and control all administra-tive organizations down to and including the district level.
12. On March 15, 1972, there was a major reorganization of thestructure of public administration. An administrative chart of the Govern-ment is given after the Statistical Appendix. The Revolutionary Council,under the Chairmanship of the Prime Minister, consists of fifteen Ministersand stands at the apex of the structure. Under the Revolutionary Council,there is the Council of Ministers which is also chaired by the PrimeMinister. The Central Security and Administrative Committee (CSAC), whichis headed by the Minister of Home Affairs, plays a coordinating role ineconomic, social and administrative matters. At the local government level,the most important-elements are, the military, the local SAC, the policeand the government administration representative. The latter holds thetitle of commissioner at the state and division level, and under him is adistrict officer, township officer and village headman. These governmentrepresentatives work under the general supervision of the Ministry of HomeAffairs, and are mainly concerned with routine administration.
13. The basic thrust of the reorganization was the long over-duemodernization of the Secretariat system. This system had been designedto carry out the limited functions of a colonial government (law and order,
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revenue and essential services). It was also designed to en'able the topechelons to exercise complete control over public administration and asa result, detailed procedures were prescribed to ensure that no initiativenor responsibility was taken by the executing departments. Since 1948,the Secretariat system was expanded to include new ministries but there *asno change in its operation. The result was an over-staffed, badly-paid,bureaucratic and obsolete structure incapable of efficiently carrying 'outthe new functions of the government. Under the present system, there hasbeen an amalgamation of ministries and departments to reduc'e overlappingand a clearer definition of functional responsibilitie's. Nt6ie importantly,the directors of departments will report directly to the Mi'i'ster.Directors will have greater responsibility in determini'ng staff requirementsand there is also d'o be a complete revision of the equally 'dit-dated payscales and gradini' sy8tem for the civil service. It remai'ns to be seenwhat effects the reorganization Will have on reducing bu'reaicratic pro-cedures and improving the efficiency of the government. Two other recentpolitical developmeats have been the announcement that Generai Ne Win hasrelihquished his military title a:nd that all mihisters with military titlesare to do the same. Secondly, the first draft of a new constitution is beingcirculated for discussion and comments throughout the country.
Economic Organization
14. Over the last decade, the Government has progressiv'ely nationai-ize'd all sectors of the economy with the exception of agriculture. Be-twee'n 1962 and 1965, all private banks (14 foreign and 10 domestic) werenationalized. All large industrial and mining enterpris;es were eithernationalized or placed under Government supervision pending nationaiiza-tion. In recent years, the policy has been to retain the fdrmer ownersas managets. Construction and all public utilities (power, telecommuni-catio'ns, transportation) ate state-owned and operated. Thg provisiohof education and health services is also the State's responsibility.With regard to agriculture, the Government distributed land to tenantcultivators and the payment of rent was abolished.
15. Compensation has been paid to all but three of the foreign banksthat had to be compensated. (The People's Republic of China voluntarilyrelinquished all claims for its two banks.) Recently, Burma submittedproposals to the governments of India and Pakistan for lump-sum paymentsto enterprises formerly owned by Indian and Pakistani nationals. TheGovernment has also 'i-nvited several British firms to come to Burma todiscuss payments 'Which are to be made on an individual basis.
16. Although there is no ambivalence in the Government's policy tohave state ownership of the means of production and distribution, con-siderable private sector activity is currently allowed in retail trade,transportation (trucking and inland water), small scale industry, minorforestry, inland fishery and private money lending. The Governmentintends to gradually replace the private sector in transport as and whenresources permit the replacement of the private sector's overagedvehicles, and to establish producer, consumer, savings and credit coop-eratives to replace the private sector in the_remaining sec-tQrs-.- Thecomprehensive Cooperative Plan announced in May 1970 is discussed inChapter IX.
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II. NATIONAL INCOME AND PRODUCTION 1/
17. Burma's economic growth aver the last nine years has not beendynamic. Total output grew steadily between 1961/62 and 1964/65 at 5.6 per-cent per annum, but then dropped sharply over the next two years due to the
severe drought and decline in agricultural production. Since 1966/67, theeconomy has shown a steady recovery growing at 6.5 percent per annum butthe growth of GDP in constant prices averaged 3.5 percent per annum over theperiod (Table 1). The distribution of production among the various sectorshas not shown any marked changes over the period. The share of agriculture,forestry, livestock and fishery increased from 34.6 percent in 1961/62to 37.7 percent in 1970/71, with most of the increases taking place inlivestock and fishery. The share of trade declined steadily from 29percent in 1961/62 to about 26 percent in 1970/71. The shares of industryand mining, infrastructure and construction have remained constant overthe period at 12 percent, 7 percent and 2 percent, respectively (Table 1).The performance of the major sectors is discussed in the following chapters
with the exception of Trade, which is discussed in Chapter IX.
Total 7768 100.0 9172 100.0 8209 100.0 10557 100.0 3.5
Source: Ministry of Planning and Finance.
1/ National income statistics are not absolutely reliable because the pro-cedures for the collection and processing of data are elementary andsometimes non-existent. However, there is no reason to believe that thebroad outlines are inaccurate and those sectors for ihich there is accu-rate data (foreign trade, balance of payments, etc.) indicate that the
figures are at least consistent.
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National Income
18. Over the last nine years, gross national product (GNP) increased
by 3.9 percent per annum. Consumption increased faster than national incomeand increased its share of GNP from 86 percent in 1961/62 to 92 percent in
1970/71. Expenditure on gross fixed investment increased faster than both
national income and consumption, registering an average annual rate of growth
of 5.7 percent. As a result, the share of national resources allocated to
investment increased from 10.3 percent in 1961/62 to 12.6 percent in 1970/71.
As Table 2 shows, both per capita incomes and per capita fixed investmenthave increased, although not by very much. The increase in the relative
shares of consump-4ion and investment in GNP meant an increase in the re-
source gap which was financed by increased reliance on external savings.
Table 2
Expenditure on Gross National Product (Constant 1969/70 Prices)
/1 Current price series deflated by the implicit overall GDP deflator.
Source: Ministry of Planning and Finance; Report to the People 1971/72 andMission estimates.
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Distribution of Income
19. Burma has one of the lowest levels of per capita income in Asiaand in the world. To the extent that per capita GNP figures are meaning-ful in a largely agricultural and subsistence economy, per capita GNP was$69 in 1961/62. It rose to $77 by 1964/65 (a peak crop year), declinedthe following two years, picked up again and is currently at the same levelas in 1964/65. It must be noted that these estimates are based on officialdata on the rate of growth of population at 2.5 percent per annum. SomeGovernment estimates put the rate of growth of the population at 2.8 per-cent per annum and if this rate is used, per capita income in 1970/71would be below the 1964/65 level.
20. In the absence of more accurate data, the Mission made someestimates which confirm observable evidence that the distribution of incomein Burma is far less unequal than in many other countries. Assuming thatagricultural incomes account for at least half of GNP (the total output ofthe sector plus half of wholesale and retail trade), per capita income inagriculture is about $46. The average monthly earnings of an industrialworker is $34, and assuming he has a family of five, his annual per capitaincome is $82. Similar estimates give a per capita income of $41 for un-skilled workers. The very small differential between agricultural incomesand those of urban unskilled workers to a large extent explain the slowgrowth of urbanization in Burma.
21. There are, nevertheless, disparities in levels of income. Thehighest paid Government employees earn twenty times as much as the lowestpaid Government workers and incomes are probably quite high for thesuccessful private traders, truckers and money lenders. However, in agri-culture, which accounts for 70 percent of the labor force, there is noscope for the accumulation of wealth above the average. Eighty-seven per-cent of the four million farming families who own nearly 60 percent of thetotal cultivated area, have plots that are average 5.3 acres and there isno institutional possibility of increasing wealth by purchasing land. Inaddition to the relative equality of incomes, there is greater equality ofopportunity resulting from the provision by the State of free medical careand at least 9 years of free education. Burma has undoubtedly achievedgreat success in reducing income disparities, but this is likely to be ofsmall comfort if per capita incomes continue to stagnate.
Savings and Investment
22. The growth of consumption over the last nine years was mainlydue to population growth and to various Government policies, such as theuniform price policy for rice, which induced greater per capita consump-tion. With consumption increasing slightly faster than national income,the share of national savings to GNP naturally declined. The data for thefirst half of the decade is distorted by the effects of nationalization andfor this reason, we have used the data since 1967 to analyze the trends innational savings and the financing of investment.
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.23. The share of national savings in GNP' declined steadily from 10.5percent in 1966/67 to 8.8 percent in 1970/71 (Table 3). Private sectorsavings have fluctuated around K500-600 million and. accounted for 72 per-cent of total savings in 1970/71. The reduced role of the private sectoris reflected in the fact that private savings have been almost twice ashigh as private investment.
24. The share of gross fixed investment has remained constant ataround 12 percent of GNP over the last five years and has.been increasinglyfinanced by external savingp. Net external borrowing as a .pr.qportion ofGNP rose from 1.5 percent in 1966/67 to 3.8 percent in 1970/71 (Table 5).Over this period, investment increased much faster than the av,erage for thedecade, with most 4f the increase taking place, not surprisingly, in publicsector investment.. In the interest of maintaining price stability, theGovernment relied more on foreign borrowing than on the banking system toclose the savings gap. Net borrowing from the banks was more or lessequal to the surplus of private sector savings over private sector invest-ment.
Tab le 3
Ratios of Investment, Savings and Foreign Capital Inflows to GNP
Year ending September 30 1967 1968 1969 1970 1971
Gross National Product(million Kyats) 8203 .9298 9578 10029 10359
Gross Fixed Capital Formation(million Kyats) 990 1054 1077 1146 1311
CFCF as % GNP 12.0 11.3 11.2 11.4 12.6
National Savings (million Kyats) 863 775 706 749 912
National Savings as -% GNP 10.5 8.3 7.4 7.5 8.8
Net External Borrowing(million Kyats) 127 279 371 397 399
Net External Borrowing as % GNP 1.5 3.0 3.9 4.0 3.8
National Savings as % GFCF 87.1 73.5 65.5 65.3 69.5
Source: Ministry' of Planning and Finance and Mission Estimates.
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Price Stabili'ty
25. Throughout the fifties, the Government had, in addition to itsother problems, a continual struggle to restrain domestic inflation. Underthe present Government, price stability became an overriding objective anda remarkable degree of price stability has been achieved over the decade.No price indices are compiled, but the implicit overall GDP deflator showsthat prices rose steadily at nearly 3 percent per annum between 1961/62and 1967/68, but have since declined slightly (Appendix Table 2.5). Overthe last nine years, the rate of inflation averaged 2 percent per annum.
Table 4
Gross Fixed Capital Formation and its Financing(million Kyats)
Year Ending September 30 1967 1968 1969 1970 1971
Gross Fixed Capital Formation 990 1054 1077 1146 1311
of which l- (Bank financing) (297) (114) (328) (372) (256)
/1 These figures are lower than the budget data on capital expenditure.The explanation given to the Mission was that the budget data wereadjusted for inventory changes and to exclude inter-agency transactions.The Mission further finds that when the budget data is adjusted toexclude capital expenditure on defense, that the National Incomefigures,are higher than the budget figures.
/2 Private Savings are the residual after deducting budget savings andforeign capital inflows from gross fixed capital formation.
Source: Ministry of Planning and Finance; People's Bank and MissionEstimates.
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III. AGRICULTURE
26. The wealth of Burma lies primarily in its rich agricultural,forestry, fishery and livestock resources. The country has three majorgeomorphological divisions: the Western Hills, the Central Belt and theShan Plateau, which continues southward to Tenasserim. The Central Beltconsisting of the valleys of the three main rivers, was formed by themass of sediment brought down by the rivers. The fertile delta facingthe Bay of Bengal is considered one of the greatest rice granaries in theworld and the Pegu mountains are one of the leading producers of teak. Ex-cept in the higher areas, the climate is monsoonal - the southwest monsoonbrings heavy rains in May to October, while the remainder of the year isrelatively dry. Rainfall varies from 200 inches in some coastal areas toabout 100 inches in the Delta; 80 inches in the east and 40 inches in thecentral dry-zone, which is in the rain shadow of the Arakan mountains tothe south. Supplemntary irrigation is used for rice in the dry-zone-but. Thewhire precipitatfion is-Bsufficient for the cultivation of one rainfedcrop in the monsoon season. The Western Hills and the Shan Plateau are oflittle economic importance at present but have considerable potential forforestry development. The rivers and their innumerable tributaries, inaddition to Burma's long coastline of 2,000 miles and vast continentalshelf of 82,000 square miles are a rich reservoir of unexploited marinewealth.
27. Burma's economy is heavily dependent on the agricultural sector.Eighty-five percent of the population is rural, and the great majority ofthese depend on agriculture for their livelihood. Despite some urban migra-tion, the number of persons engaged'in agriculture continues to rise as popu-lation grows. Agriculture provides directly 38 percent of GDP, and much ofsecondary and tertiary activity is also based on agricultural products. Theshare of agriculture in GDP increased slightly over the decade but this wasmainly due to the increase in livestock and fishery production.
Table 5
Agriculture's Share of the Economy /1
Percent of Percent Percent of ExportsEmployment of GDP All Agriculture Rice Timber
1961/62 n.a. 34 94 67 10
1966/67 n.a. 38 92 56 19
1970/71 70 /2 38 91 49 24
/1 Including livestock, forestry and fishing.
/2 1969/70.
Source: Report to the People 1971/72.
Agricultural products are the major source of export earnings which have de-clined by more than 50 percent over the decade. Timber has increasingly re-placed rice and other crops in the declining export sector, and of the majorexport commodities, teak is the only product for which exnort earnings haveincreased slightly.
Table 6
Performance of Principal Agricultural Exports, 1962-71
28. Agriculture is the notable exception in the Government's policyof nationalization. Agriculture has not been collectivized and there arefew state farms and as yet few producer cooperatives. Production is carriedout by individual small farming units. Following the Land NationalizationActs of 1948 and 1953, land was distributed to the peasants. Tenant farmerswere protected against seizure of the land for loan defaults and in 1965,when the payment of rents was abolished, the farmers were made virtualowners of the land. However, land titles cannot be sold, mortgaged or other-wise transferred; they can only be inherited and this provision encouragesfragmentation of the land.
29. During the sixties, the number of farming units increased to 4.3million and now the average farm size is a little more than 5 acres. In1969/70, 87 percent of the farming units held 10 acres or less and about57 percent of all cultivable lands. (Table 8) Most of the newly independentfarmers are former laborers and they lack both farming implements and draughtanimals. Cultivators are not encouraged to rely on permanent labor and thisalso contributes to land fragmentation and subsistence farming.
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Table 7
Pattern of Land Holding, 1969/70
Size of Percent of Farm Percent of FarmFarm Unit Population Land
Less than 10 acres 86.8 56.910 - 20 acres 10.4 27.720 - 50 acres 2.7 14.150 - 100 acres 0.1 0.9More than 100 acres neg. 0.4
100.0 100.0
Source: Ministry of Agriculture and Forests.
30. Although agriculture is privately operated, the State exercisesextensive control over the sector. All major irrigation, land reclamationand flood control,works are undertaken by the State. T-he purchase and dis-tribution of more than half of agricultural production is monopolized bythe Government, and except for minor forestry activity and inland fishing,the state is entirely responsible for forestry and coastal fishing. Inaddition, control over the sector, is exercised by the State distributionof needed inputs of seeds, fertilizers, credit and f arm implements.
Land Area and Land Use
31. About 47 million acres or 28 percent of the land area is suit-able for cultivation but less than half is actually under cultivation(Appendix Table 1.1). Rice is the predominant crop, accounting for 67percent of the total cultivated area. Seventy-five percent of cultivationtakes place in the rain-fed areas of the Central Belt, particularly in theDelta, where flood control is a major problem. Over the last decade, theeffective farm land area increased by 3.3 million acres through landreclamation, irrigation and double-cropping. The area under irrigationincreased by 56 percent over the same period, but is still only 11 percentof the cultivable area. The increase in the effective farm land could havebeen much larger, but for the fact that one million acres of arable land areflooded each year because of inadequate flood control.
Production Performance (1961/62 - 1970/71)
32. Official statistics show that value added in agriculture grew atan average annual rate of 4 percent over the period. If livestock, forestryand fishery are included, the growth rate was 4.5 percent annually. However,these aggregate measures disguise considerable fluctuation, both between years
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and between commodities. Output was very low in 1961/62 and again in 1965/67,while production in 1964/65 and 1970/71 was very high. The major agriculturalcrops are rice, groundnut and sessamum, beans and pulses, cotton, jute, sugar-cane, tobacco, onions and garlic. Among the major commodities, paddy produc-tion showed an annual rate of growth of less than two percent over the periodwhereas jute output grew at an average of nearly 17 percent annually. Duringthe first half of the decade, the increase in production was mainly due to theexpansion of sown acreage which increased at 3.3 percent per annum. However,same increase in productivity is reflected in the fact that over the last fiveyears, production increased by 19 percent while sown acreage increased by onlythree percent. The recent increases in productivity (however slight) are inpart due to the Government's efforts to increase crop diversification andintroduce modern methods of farming. The changes in area and output of theprincipal crops are summarized in the following table.
Table 8
Growth in Area and Production ofthe Principal Crops (1961/62 - 1970/71)
Average Annual Growth inSown Area Output
Paddy 0.9 2.0
Pulseu 1.4 1.0
Groundnut 2.4 3.3
Sesame 5.7 6.3
Cotton - 8.0
Jute 19.0 18.7
Source: Ministry of Agriculture and Forests.
33. Rice is the main agricultural product and Burma's major export.Once one of the largest rice exporters in the world, Burma suffered severelyfrom the devastation wrought in World War II and from recurrent social dis-turbances. By the end of the fifties, paddy yields had regained the pre-warlevel but total output and sown acreage were only about 80-90 percent of the1940/41 level. During the early sixties, the Government took steps to expandthe acreage under cultivation and to provide extension and farm mechanizationservices. By 1964/65, sown acreage under paddy reached 12.6 million acresand output 8.4 million tons, exceeding pre-war levels for the first time.Over the last five years, sown acreage has remained constant and the shareof paddy in total agricultural output dropped steadily to 55 percent in1970/71.
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34. The output of paddy averaged 6.7 million tons per' annuim in theearly sixties and,7.09 million tons per annum over the last few years.The increase in output between 1961/62 and 1965/66 was mainly due to theincrease in sown acreage. However, yields per acre have been showing slightincreases since 1966/67 (Appendix Table 7.4). The paddy output of abouteight million tons in 1970/71 represented an increase'of two percent over'the previous year, with no increase in sown acreage. One may cautiouslycon'clude that the production of rice in Burma has just begiui to enter a newphase of development through'the use of modern methods of prdduction, namely,the use of fertilizers and high jlelding varieties. The s'coPe for suchinnovgations is tremendous-as paddy yields in Burma are among the lowest inAsia. If the input- availThlility and financial incentives to grfowers can beexpanded, it should be possible to achieve some significant increases inaverage yields over the next few years.
35. Over the las't nine years, the prodtiction of ri-c did not keeppace with populatiti growth but ii spite of the glow groith 6f production,the consumption of rice increased substantially. In 1964, the Gdve'rnmentreduced the price of rice by 10 percent and the retail ptice for rice wasset at K20' per bag (160 iba). The uniform pricing policy for rice resultedin a considerable increase in rice consumption, particularly in the remotenon-rice producing areas. Following the nationalization of trade, Govern-mient purchases of paddy ac6ounted for 48 percent of total output and theGover'nment sales of rice domestically sveraged one million tons during the'sixties. At the same time, the quantity of rice retained by cuitivators(including unofficial sales), increased from 2.3 million tons in 1964/65to ar6und 3 aiillion to'ns per year. Overall, the domestic demand for ricehas been increasing at 3.1 percent per annum. The increase in domesticcondumption is afso' reportedly attributed to the producers' dissatisfactionwith the 1overnmeint p-rocurement prices. For most of the period, there wasa wide discrepancy between the Government price and international riceprices. The surplus on rice exports in fact subsidized Government domesticsales; but when the unit export price fell in 1970/71, the Government suf-fered a substantial revenue loss. Over the last two years, the averagecost of rice exported was K429 per ton compared with the average unit ex-port price of K443 per ton in 1969/70 and K372 per ton in 1970/71, result-ing in a marginal profit of K14 per ton in 1969/70 and a substantial los8of K71 pet ton in 1970/71. At the same time, the average price for ricesold domestically was K352 and K340 per ton compared to an average costof R411'per ton. In 1970/71, the overall financial losses on rice opera-tions' amounted to, K127 million.
36. 'The increase in domestic consumption together with the slow growthof production' led to a decline in the exportable surplus and for the,poorexport performance over the last nine years. The volume of rice exportsdecreased from' i.8 million tons in 1961/61 to 1.3 miilion tons in 1964/65and to 347,000 tons in 1967/68. During the same period, the' export priceof rice rose from Kyats 463 ($96 per ton)' to Kyats 653 ($136) per ton.Therefore, if'the Gbvernment had been able to increase procurement, it
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would have been able to take advantage of a seller's market. In 1968/69,the exportable surplus increased by 40 percent to 787,000 tons but by thistime, world market conditions had changed and the price fell sharply. Overthe last two years, the volume of rice procured has remained around700,000 tons, but export prices have fallen and in spite of a 120 percentincrease in the volume, the value of rice exports (K292 million) in 1970/71was only 24 percent higher than in 1968/69. The Government estimates theexport market potential for rice at around 1.3 million tons and has set atarget for 920,000 tons for this year. Contracts have already been con-cluded for about 720,000 tons, but there are some indications that theexportable surplus will be less than 920,000 tons and the Government willhave to reduce official stocks to meet this export target.
37. In terms of area, groundnut and sessamum follow paddy in importance.Changes in price policy and marketing controls led to fluctuations in the areacultivated to oilseed, but overall both the area and production of oilseedshave grown fairly rapidly. This has been achieved through the introduction ofdouble cropping on paddy land and the extension of cultivation into new areas.There is no evidence to suggest that any significant increase in yields hasbeen obtained in recent years. On the other hand, the supply of oilseeds hasproved to be very price elastic. In 1966, trade in these crops was decontrolledand the immediate increase in selling prices stimulated a three-fold increasein production over five years.
38. Beans and pulses are widely grown, particularly in the northerndry-zone both as food and as cash crops. The exports of beans and pulses aresecond only to rice in their share of total agricultural exports, howeverdomestic demand has risen much more rapidly than output and exports of beansand pulses have fallen by 50 percent over the past decade. Production hasfluctuated about a-very slowly rising trend, and again no increase in yieldsis apparent. One of the problems affecting the production of these commodi-ties is the considerable erosion of the land suitable for their cultivation.The sown acreage under pulses has actually declined since 1963/64. In an at-tempt to stimulate production, the Government raised the purchase price forpulses by 6-12 percent in 1970/71 but greater efforts also need to be made inincreasing flood control projects and land reclamation.
39. Of the fiber crops, cotton and jute are the most important. Cottonproduction grew fairly rapidly in the first part of the 1960's, largely as aresult of the expansion in acreage. The nationalization of marketing activitiesled to a sharp decline in output in 1965/66 and since then output has declinedeven further. The slow growth of output was partly due to bad weather and pestinfestation and to the low purchasing price of the Government. The Governmentrecently launched a crash program aimed at making Burma self-sufficient intextiles and farmers are being encouraged to grow more cotton where soil con-ditions permit. In 1971, the Government raised the purchase price of cottonby 7 to 50 percent and although the value of production is still below the1964/65 level, indications are that production will expand to the maximumlevel possible, given existing irrigation facilities. Over the decade, Burmamoved from being an exporter of cotton to being a net importer. In contrast,
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jute in the form of: gunny bags., has long been a major import item,. but effortsto stimulate domestic production have been successful. Last year Burma ex-ported 5000 tons of ju,te and the Government plans to expand processing facil-ities.and promote the exports of raw jute. Indeed, jute.with an average an-nual growth rate of about 14 percent per annum, has been the only dynamic,com-.modity in an otherwise near-stagnant agricultural economy.
Development Policy and Constraints
40. Since 1962., the government's policies, in .agripcur ue. have. em,pigs,zed.distributional, rather. than production oriented measuir,es., Thes,e_ have, included:strict controls on land rental and employment of hired labor-; increased,gov-ernment involvemee,-in ma-rketing, the supply of inputs, and.credit and thesetting of price.poMicy.. To a considerable extent, the soci,ali or, distribu-tional objectives have'been met: landless rural laborers, asa.class have been.largely eliminated, as, have the major inequalities.,in the dis,tributXion.of agri,-cult,,ral land. Although tenancy..persists,, the. payme,t, of.- r.,ent, was-; abolished.and, tenants enjoy, complete security, of tenure;, to. a, cert,a.in) "eten-t,,, the.dependence of the, small farmers on private traders for, production and consump-.tion-credit,and for marketing has been relaxed. However,,, this.success, in rek,c,hing s.cial obj ectives,, has been achieved. at an. imimense co,gt to the, economy..Agricultural exports., which.provide more than 90.percentof Burma's.total ex-port,earnings, have.fallen to less.than half their 1963. level. There has b,een,littlle increase, in, crop or forest-ry production, over the, pas,t. deca4e, anrd, pr,o,.gress. in, technological innovation and- incr,eased product-ivity, of, land and labo.r,has been negligible.,
41. Although th4ere has been repeated- off-icial recognition ofA the- fact-,that the development of agriculture merited greater priority,,, vviable programp;to increase productionZhave, not. yFt been formulated. In.rewcent years, theGovern,ment.has mad.e,,increasing efforts to encourage cr.op diversification.and,modernize agricultur.e. These efforts have met with modest success. but the s-l,owgrowth of production over the last decade indicates-that several factors. impede.agricultural development. However, there is also evidence,to.suggest that theattainment of Burma's,social objectives.need not be incompatible with growthin production and increased incomes and that appropriate changes in.certain.policies and in resource allocation could result in major improvements ineconomic performance at little or.no social cost. In the following paragraphs.some of the key,policy issues,affecting agricultural development are discussed.
Levels 'of Technology,and Input Use.
42 . Production practices in Burmese agriculture are prescribed to aconsiderable extent by.physical conditions of soil and climate. In the lower-Irrawaddy and Sittang valleys and in the coastal regions, croplandeis.period-ically innundated by. monsoon rains and flooding. The. lack of water controlin these areas,.in-addition to the deterioration of embankments and dykeslargely limits land use to the cultivation of paddy in the wet season, al-though jute has grown in importance in recent, years. There is some double.
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cropping in these areas with groundnuts and pulses and there is also someirrigation, but the use of low lift pumps for dry season cultivation couldbe greatly extended. Further north in the Central Belt, where rainfall ismuch lower, a wider range of crops is cultivated. However, in this region,irrigation is necessary for permanent double cropping and for improved paddycultivation. In the mountainous areas, agricultural production is essentiallybased on shifting cultivation.
43. Throughout Burma, land preparation and other fatm operations areperformed with draft animal power - buffaloes in the lower valleys and cattlein the drier areas. However, with the increase in the number of farms overthe decade, a shortage of draft animals has developed particularly among thosefarmers who acquired small plots under the land distribution program. In1961/62, the Government increased the number of imported tractors and by1966/67, there were 3,300 tractors and 88 tractor stations. Over the lastfour years, there has been little increase in the number of tractors, but asignificant increase in the number of unusable tractors, due to breakdownsand lack of spare parts. Over the decade, the area ploughed by tractors in-creased threefold, but still represents only three percent of the total sownacreage and on av erage, each tractor ploughed only about 200 acres. Theoperation of the tractor stations has been probably the most unprofitable ofthe public sector enterprises. Farmers hire the tractors for K15 ($3.00) peracre, but the Government has had difficulties collecting fees and the averageincome was K2,300 compared to expenditures of K10,000 per tractor in 1970/71.The high operating expenses are due to the high proportion of road drivinghours to total working hours. and the small acreage ploughed. Each tractorstation covers more than 100,000 acres and the tractors spend one-third oftheir working time getting to the fields and by the time they get there,the farmers frequently cannot use them. In 1969/70, the Government beganto sell the tractors to cooperatives or groups of farmers. As a result,during the last two years, therelhave been some improvements in the averagefield hours and acreage ploughed per tractor. However, to increase produc-tivity through mechanization, the Government will need to provide credit forthe purchase of additional tractors and spare parts and reduce the fragmenta-tion of plots.
44. The yields per acre of most crops in Burma are low by Asian standardsand have shown little or no improvement in recent years. Paddy yields, atabout 1400 lbs per acre, are no higher than in the late 1950's and are onlyslightly above pre-war levels. The principal reason for the very low yieldsis undoubtedly the failure to use improved seeds, fertilizer and other inputs.Although the introduction of local adaptations of high-yielding rice varietieshas begun, these are grown on less than 4 percent of the total paddy acreage.Fertilizer use is similarly low - of a total consumption'of about 50,000 tonsin 1970/71, about half is used on paddy, with the remainder principally usedon cotton, sugarcane, groundnuts and jute. At an application rate of 50 lbsper acre, barely 1 million acres of paddy or about 8 percent of the totalcropped area, can be estimated to receive adequate fertilization. The useof insecticides similarly is at a negligible level. The failure to raise
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paddy yields is the principal cause of stagnating paddy production and of-the drastic decline in rice exports. There are a number of reasons whyyields have not risen, including pricing policy and credit limitations whichare discussed below, but the failure to increase input use is probably themost important. To bring about increased use of fertilizers, insecticidesand improved seeds in the future, will require a number of m!easures on thepart of the government, including an improvement in the technical assistanceand promotion programs, expansion in the credit supply, changes in price pol-icy, and the provision of adequate supplies of the necessary inputs. Beforesuch measures are implemented, however, it is important that the technologicalmix that is promoted is well suited to the local conditions. The first ex-perience with the introduction of improved rice varieties, for example, showedthat IR-8 was poqtly adapted to Burmese conditions - it was intolerant of thepoor level of water control and yielded badly. Flooding and fluctuating waterlevels led to poor germination and widespread crop failures. Although IR-5and other varieties perform better, they still require better soils, stricterwater control, higher input use and more careful cultivation than the tradi-tional varieties. The expansion of fertilizer use faces similar problems.Little is known about soil nutrient levels; traditional varieties respondpoorly to fertilizers and cost-price relationships may result in insufficientfinancial incentive for farmers to invest in cash expenditures where there isa risk of crop loss. Therefore, although increased input use is essential ifyields are to improve in the future, careful economic and technical evalu4tionis needed to determine production practices and levels of technology appropri-ate to Burmese conditions.
Agriculture Credit
45. After independence, in addition to the redistribution of land,the Government wrote off all pre-war debts and increased the volume ofshort-term credit to the farmers. However, public credit extended duringthe fifties appeared to meet only half of the demand and the farmers stillhad to rely heavily on private money-lenders. In 1962, the present Govern-ment undertook a massive credit program which was aimed at eliminating thefarmers' reliance on usurious private lending. Disbursements of new'loansincreased from K152 million in 1961/62 to between K350-400 million by 1962/64.Since then, the level of annual credit has dropped back to the 1962 level, andit is estimated that farmers still rely on private money lenders for about40 percent of their credit needs. Credit was extended mainly by the StateAgricultural Bank and since the unification of the banking system, most ofthe credit to agriculture is handled by the People's Bank. The system andvolume of agriculture credit is discussed in detail in paragraphs 240-244.
46. Farmers-are provided with seasonal loans at a rate of 25 Kyatsper acre for paddy cultivation and 10 Kyats per acre for harvesting butthe annual ceiling per farmer is K500. For the cultivation of other crops,the following credits per acre are extended:
These uniform credit ceilings are generally insufficient, particularlysince they have remained fixed from the beginning of the sixties, whilecosts have risen. The farmers have no source of medium- and long-termloans. The Government has assumed the responsibility for all capital in-vestment in agriculture, but since the level of public investment is inade-quate, the Government should consider the establishment of institutions forchannelling medium- and long-term credit to the cultivators. In addition,the demand for modern machinery and equipment such as tractors and pumps isgrowing among producers of cash crops such as cotton, jute, sugarcane andpulses. The expansion of capital stock is therefore needed to acceleratecrop diversification and improved productivity.
Agricultural Investment
47. No information is available on the level of private sector invest-ment in agriculture but it is probably safe to assume that it is of negligi-ble proportions. Public sector capital expenditure on agriculture increasedrapidly from K22 million in 1961/62 to K97 million in 1965/66. However,since 1965/66, capital expenditure on agriculture has declined in both ab-solute and percentage terms (Table 9).
Table 9
Public Sector Capital Expenditure on Agriculture(million Kyats)
Source: Budget estimates and Ministry of Agriculture.
Emphasis was first placed on land reclamation and mechanized farming andin the latter half of the decade, priority was given to the expansion ofirrigation facilities (Table 10).
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Table 10
Dis,,ribution of Public. CapitalExpenditure in-Agriculture
Irrigation Land Development Mechanization,-- (percent )…----- -- …- - ---
Average 1961-64 35.4 37.8 17.2
Average 1965-6-7' 51.9 10.5, 27;.1
Average 1968-71 53.2. 1:0.4 18.6
Source: Report to- the Peoplje 1971,/72.
48. Irrigation, systems throughout Burma werte severely da,mged duringWorlds War II, and, t-he irrigated area did, not reach pro-w,ar, levels until thle,mi,d-1960's., Investmen,t in irrigation over the. past dec,ade has seen a shiftin emphasis away from the traditiqnal area of irrigationk, the Central Beltto the remote frontier regions,, as, can be seen from the data presented inTable, 11. This, shi1ft was prescribed'_by reasons of intern4al security an,d adesire, to incorporate, ethnically, distinct regions. into, t-he. ovexall econo,my.as. much as by. resource. use or production criteria. As a res,ult, the ratioof irrigated to total cultivated area has remained constant at abou 17per-cent, in the. Cen.tral Belt-, whereas the proportion of irriga,ted land in thefrontier regions has increased from 3 percent to 24 percent over the pastdecade. The expansion of irrigation in the Central Zone contributed to theincrease in sown acreage, double-cropping and the introduction of high-yield-,ing varieties of seed.. In the Delta area, the expansion of pump irrigationhas been largely responsible for the expansion of the acreage under jutecultivation. HoWever, there is no evidence to suggest, that the expansion ofirrigation in the fr-ontier regions has been the most productive use of funds.
Table 11
Irrigated Area by Region(1,000 acres)
Central /1Upper Burma Lower Burma /2 Other Regions Total
49. The three main categories of public investment in agriculture areirrigation, land development and mechanization and it is quite clear thatthe level of investment in agricuLture is totally_inadequate. Asstatedpreviously, more than one million acres of cultivable land are subject toflooding each year because of inadequate flood control works; the area ploughedby tractors represent only three percent of the total sown acreage and only11 percent of the to#&l cultivated area has regulated irrigation.
Prices and Marketing
50. The performance over the last decade indicates that the inadequatemanagement of the State monopoly of the purchase and distribution of agri-cultural products is a major bottleneck to increased production. Until 1961,the State Agricultural Marketing Board (SAME) purchased paddy at fixed pricesdirectly from the cultivators, had it milled in private facilities and thenexported, usually through contractual Government-to-Government agreements.The Government also allowed local millers to purchase paddy directly fromproducers and to export rice on payment of a premium to the SAMB. As theprices offered by the private purchasers often exeeeded the SAMB price,paddy production and the quantity marketed through local millers increased.
51. After the nationalization of trade, the Government raised thepurchase price of paddy, opened 1,350 purchasing centers, established 19rice mills and continued to hire private mills to expedite the processingof paddy. Immediate cash payment was made on delivery to the purchasingcenters and in 1964, a system of advance payment for paddy was introduced.In spite of the Government's efforts, the decline in sown acreage and inoutput during the mid-sixties, was to a large extent attributable to thefarmers' dissatisfaction with the drastic changes in the marketing systemand the rigidity of the Government procurement prices. The inadequacy ofdistribution facilities also encouraged the growth of black market opera-tions and increased consumption of the better quality rice in urban areas.In order to increase paddy procurement, the Government raised the price ofpaddy by 5-10 percent in 1966/67 and also introduced a graduating scale forearly and late sellers. The prices ranged from K3.2 to K3.4 per basket.In 1967, the Government took further steps to increase procurement. Anumber of mobile buying centers were established and special agents wereauthorized to purchase paddy from the farmers at the official prices for acommission of two Kyats per 100 baskets. Paddy_prices have remained con-
\stant at the 1967 level, and so has the quantity of-paddy procured by theGovernment.
52. In addition to the inadequacy of marketing facilities (the lackof storage, transportation and grading facilities), a major problem in paddyprocurement is the government purchasing price. A survey of production costin 1970/71 indicated that the average cost of paddy production (not includingan imputed value for labor) in the Delta area was Kill per acre. At thiscost and given the average yield per acre of 32 baskets, the present pricelevel does not cover production cost. The reason why farmers produce at all
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even though each year they have to run down their capitai assets is due tothe fact that most cultivators have no real alternative to paddy growing inthe wet season. Fortunately, there is a considerable differential betweenthe government and the free-market price and this encourages large-scaleprivate operations. The Government pricing policy also affects the produc-tion of the other major crops. For most of the sixties, the producear pricesfor the other major 'crops (pulses, cotton, sugar-cane and groundnut) Uerefixed at prices often lower than the 1961/62 level (AppendiX Table 7.5). Tocounter some of these difficulties, in 1966, the Governm-ent authorized theprivate sector to engage in the domestic trade of 34 food item-s. As a re'suitof the decontrol measures, the producer prices of some6 crops jumped up gharp'yin 1966/67 stimulating incrieases in production as in the case of edible bilswhere production b's expanded by about 25 percent per annum.
53. Agricultural production in Burma is at the threshold of A newphase of development through the adoption of modern fartinig techniquesahd crop diversification. However, improved productivity will requiremore modern and costly inputs and greater incentives, both price andnon-price. The Government policy of holding prices fixed was dictatedby the aim of restraining increases in the cost of living, howev'er, therigidity of prices did have some effect in depressing agriculturalproduction during the sixties. In addition to prices, the lack ofmarketing facilities such as stotage, grading and inspection, anid theinsufficiency of capital and credit, constitute the major bottlenecksto expanding production.
Forestry
54. The forests of'Burma cover 57 percent of the totai iand are~a andcontain many varieties of commercially valuable timber, of which'teak is byfar the most important. Burma possesses about 80 percent of the world'steak resources and teak is one of the major sources of foreign exchangeearnings. In 1970/71, the value of forestry production was K471 million,of which teak and hardwood accounted for 43 percent and firewood for 26 per-cent. The share of forestry products accounted for three percent of GDP and25 percent of export earnings in 1970/71. The State Timber Board has themonopoly of teak and hardwood exploitation and is the sole exporter of timberproducts. The State Timber Board (now Corporation) also controls the millingof timber by operating its own sawmills and hiring private facilities.
55. Over the past decade, the value of forest products increasedat an average annual rate of 2.6 percent in real terms; however, whilethe production of the less valuable firewood and bamboo increased steadily,teak production decreased between 1962/63 and 1966/67, picked up thefollowing year, and has since been stagnant. In 1970/71, the productionof teak was 338,000 tons - still well below the pre-war level of 477,000tons (Appendix Table 7.6). Hardwood production which had regained itspre-war level in the mid-fifties, showed a similar pattern of growth asteak and although'hardwood production in 1970/71 was almost double thepre-war level, it only exceeded the 1961/62 figures by 3,000 tons.
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56. The exports of timber have always been a major source of foreignexchange earnings, but despite favorable world market conditions, theexports of teak which increased steadily until 1963/64, have declinedover the second half of the decade. Teak exports which amounted to 127,000tons in 1970/71 are still below the 1963/64 level (Table 12). Over thepast five years, the share of sawn timber in the export of teak and hard-wood decreased from 72.5 percent in 1966/67 to 62 percent in 1970/71 in-dicating some shortage of milling capacity.
Table 12
Exports of Teak and Hardwood
Teak HardwoodQuantity Value Quantity Value'000 tons Mil. kyats '000 tons Mil. kyats
Source: Report to the People 1971/72; Ministry of Agriculture and Forests.
57. Re-afforestation is the responsibility of the Ministry of Agri-culture and Forestry. In the last four years, 18,700 acres were newlyplanted to teak and 12,100 acres to hardwoods. Artificial regeneration hasbeen successfully introduced since 1964 to replenish forest reserves whichwere destroyed during the war. On average, 8,000 acres are planted eachyear. Other methods such as natural regeneration, improved felling, weed-ing and thinning are also used for forest conservation and in 1970/71,forestry management covered 97,500 acres. In recent years, apart from theforestry production, the area of reserved forests has been actively expandedfor natural conservation (Appendix Table 7.7).
Major Constraints on Development
58. The production of timber is constrained largely by the capacityof felling, extraction, transportation and milling. The timber industry inBurma is presently facing serious problems owing to the declining capacity
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at each stage of production (Appendix Table 7.8) and to continuing insurgencyin the timber areas. In spite of the expansion of felling capacity in theearly sixties and the, increase in the number of ripe girdled trees, theratio of trees felled to ripe girdled trees decreased from 46 percent in1961/62 to 25 percent in 1966/67. Over this period, the expansion of fell-ing capacity (the increase in the number of chain saws) had no influenceon the felling of teak, and the decline was mainly due to difficulties ofgaining access to the felling areas. Since 1968/69, the rapid decrease inthe number of cha4n saws and cross-cut saws has prevented any substantialincrease of the number of trees felled.
59. The initial handling of logs is traditionally done by elephants,and buffaloes ax4 the STC maintains a power force of about 3,3O00 elephants(about half of the pre-war level) and 15,000 buffaloes, but siince 1968/69the number of buffaloes used has been decreasing. It is difficult toincrease the elephant stock since elephants do not reproduce well incaptivity. About 200 are captured each year and they take 2-3 years totrain. In 1963/64, STC started to mechanize the extrac.tion and haulageof timber and about 80 percent of timber production is n,ow estimated tobe moved by mechanical extraction equipment, the capacities of which arenearly saturated. Early in 1970, the Corporation had aP total of 777pieces of mobile equipment, of which 70 percent were in operating condi-tion, 14 percent had been cannibalized to keep others going and the re-mainder was awaiting repair. Moreover, the increase of the number ofskidders and loaders from 30 in 1963/64 to 109 in 1970/71 was not matchedby a similar increase in truck capacity. Although the STC fleet increasedfrom 281 trucks in 1966/67 to 602 in 1970/71, this was not sufficientto make up for the decrease in number of private trucks. The Corporationis now facing an extreme shortage of-extraction capacity. due to the lack,of timber trucks and to the condition of the mechanized equipment whichis old and cannot be properly maintained because of the lack of spareparts.
60. The Timber Corporation invested $5.5 million in the mechaniza-tion of timber extraction up to the end of 1966. However, the investmentin mechanical extraction did not bring about any significant increase inproduction because of insurgency in the, teak producing areas and theshortage of skilled personnel. Investments in the expansion of mechanicalextraction capacity since 1966 have been offset by the deterioration ofexisting equipment. The expansion of mechanical extraction may enablethe STC to open up teak areas previously regarded as physically inaccessiblebut much will also depend on the rate of construction of forest roads. Theshortage of skilled and semi-skilled labor has also been a problem and in1971 the Government started a program for the training of forest workerswith the assistance of the Canadian Government.
61. After extraction, teak logs are floated down- the forest creeksand the main rivers to the sawmills located at Rangoon, Toungoo andMoulmein. River floating is the main mode of transport for teak and ac-counted for 82 percent of the tonnage in 1970/71. The transport of hard-wood is mostly by road, which accounted for 60 percent of the tonnage in
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1970/71, while rivers and rail transport accounted for 22 and 18 percent,respectively. As much as 20 percent of the tonnage delivered to the millsby river is estimated to be lost during raft floating, but logs cannot bediverted to other modes because of the lack of adequate road and railtransport facilities. Most of the teak for export is processed in Rangoonand it can take up to two years for a log to reach the city after extrac-tion. The STC considers that the lack of handling and transport facilitiesis a major bottleneck to the expansion of exports and the efficient opera-tion of the sawmills which, because of the irregularity of delivery, mustkeep excessively large stocks. Stocks are presently equal to three timesthe volume of annual exports. Stock-piling, without proper storage shedscauses an enormous loss in the value of logs because of stains, checkingand splitting from weathering and direct exposure. If the present levelof stocks are to be maintained, storage facilities should be expanded inorder to minimize the loss and wastage caused by the down-grading of thetimber.
62. According to the Timber Corporation, a sustained yield of 400,000tons of teak is assured for at least the next 30 years and the hardwoodpotential is almost unlimited. Since the world demand for quality teakhas been growing steadily, the current Plan gives high priority to theexpansion of production and the export of forests products. The Plan hasset targets for an overall increase in teak production by 11 percent andhardwood by nine percent between 1971/72 and 1974/75. However, the exist-ing extraction, transportation and milling facilities may not be sufficientto meet these targets.
Livestock and Fishery
63. During the war, the livestock population of Burma was greatlydestroyed and it was only in the early sixties that the number ofanimals reached their pre-war level. Over the last decade, according toofficial data the number of horses, donkeys, pigs and poultry increasedsteadily while the stock of cattle, buffaloes, sheep and goats has shownlittle increase. Many prevalent animal diseases and large-scale smugglinghave hindered the increase in the animal population. Between 1961/62 and1970/71, the output of livestock and fishery production increased by 7.1percent per annum, registering even higher rates of growth over the lasttwo years. Over the same period, the share of livestock and fishery intotal GDP increased from 5.6 percent to 7.6 percent. The output of theprincipal dairy and animal products increased steadily, particularly pig andpoultry production. The increase has been partly attributable to the factthat meat prices are not controlled by the Government and partly to the ef-forts made by the Government to improve the quality of the animals throughthe distribution of pedigreed animals bred by the State.
64. The prospects for a significant expansion in livestock productionare extremely good. Cattle and buffaloes are used primarily for plowing,transport and manure and the recent increase in the number of farm units,sown acreage and double cropping explains the increased demand for draft
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animals. The average daily intake of animal protein is currently estimatedat 16 grams per person compared to 9.2 grams in 1964-66 but the BurmaMedical Research Institute estimates that the average daily intake shouldbe 27.6 grams per person. The Buddhist beliefs of the majority of thepopulation tend to discourage the consumption of meat. However, thereare recent indications of changing attitudes.
65. Burma is extremely rich in fishery resources. In addition tothe innumerable rivers and streams, there is the long coastline as yetbarely utilized for coastal and off-shore fishing. The value of fisheryproducts in 1970/71 was K192 million, representing only one percent of GDP.During the sixties, fishery production increased at an average annual rate,of 6.2 percent. Seventy percent of the catch is from marineL waters andmarine fishing is becoming increasingly important. Catches of marine fishincreased from 227,000 tons in 1961/62 to 315,000 tons in 1970/71. Seventy-eight percent of the marine catch is from coastal fishing, carried out bysmall fishing units using boats with 90-Hp engines. Fresh water fishery iscarried out by a large number of licensed private fishermen- and fishing co-operatives. The People's Pearl and Fishery Board (now Corporation), whichwas established in 1965/66 has 77 fresh water fisherfes but the output ofthe Corporation accounts for less than 2 percent of the total catch of freshwater fish. The main fishing gear used in fresh water and coastal fishing isnylon driftnets (15-22 meters long and 6-8.5 meters deep). The small boatsused for fresh water fishing are generally not mechanized.
66.. Burma could considerably increase the production of fish bothfor domestic consumption and for export but the lack of foreign exchange isthe main bottleneck. The Corporation only has 5 trawlers, 4 of which werepurchased in 1969 with a supplier's credit from Holland. In, coastal andfresh water fishing, the shortage of engine spare parts and importednylon nets are a serious constraint to increased production.
Future Growth
67. Burma possesses very considerable resources in agriculture, live-stock, forestry and fishing, and the failure to exploit this potential inthe past does not preclude more effective development in the future. Insome commodities, production programs will inevitably take time to develop.Recent experience suggests, for example, that applied research and carefulprogram formulation will be needed before a take-off in rice production canbe expected. The-gap between current levels of technology in Burma and tho8ein other nations is now very large,' and some adaptation will be needed beforenew practices can be introduced on a large'scale in Burma. Similarly, theGovernment faces a major task in trying to build up the supply and distribu-tion network that will be needed to achieve any significant increase in theextremely low current levels of input use. On the other hand, there are anumber of measures that could give a relatively quick response in terms of.production and exports, without raising major financial or logistical prob-lems. The most obvious example is the need for an increase in producer prices
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of a wide range of commodities including paddy. These could be introducedrelatively quickly, and part or all of the extra cost could be passed on tourban consumers.' The evidence of recent years suggests that the supply re-sponse would be large and quick. Another field in which relatively rapidreturns could be expected is in forestry. The introduction of modern forestmanagement systems combined with technical assistance from abroad and invest-ment in cutting and milling capacity could, in a relatively short time, raiseBurma's timber production much closer to the potential of the resource baseand provide much'needed export revenues.
68. The current Four-Year Plan (1971/72 - 1974/75) gives priority tothe expansion of production and exports of agricultural livestock fisheryand forestry products. Agriculture plays a major role in the economic struc-ture of the country, and achievement of the Plan target of a 19 percent in-crease in GDP over the four-year period will depend mainly on the performanceof the sector. The Plan envisages an increase in agricultural production of16 percent by 1974/75, to be brought about by a combination of increasedyields and the expansion of cultivation on 700,000 acres of virgin and fallowland. The Plan also places emphasis on regional specialization in agricul-tural production. In order to improve agricultural productivity, the mostsuitable crops are 'to be selected for each area, which are to be declared asselected crop areas. Despite the importance of agriculture to the economy,however, the proposed budget allocates only 8.4 percent of public investmentto agriculture over the Plan period, with another 3.5 percent proposed forforestry, fishing and livestock. This allocation of funds appears to be in-adequate for the requirements of the sector, and unless major policy changesare made the production targets, albeit modest, do not seem to be attainable.In addition to infrastructural expansion, the Plan calls for improved pro-duction techniques leading to increased productivity. However, these tech-nical improvements are' not explicitly mentioned. The targets of increaseof yields per acre for various crops are shown, but no information on inputrequirements is available.
69. Irrigation investment is to be concentrated in Upper Burma andduring the Plan period the irrigated acreage is to be extended by 194,000acres, of which nearly 70 percent is to be double cropped. If these projectsand land development projects are implemented as planned, the effective useof farmland would be expanded by 4 percent and sown acreage under variouscrops other than paddy would be increased by 9 percent, whereas no expansionof sown acreage under paddy is planned. If these changes in sown acreageand the planned increase in paddy production (a 7.5 percent increase duringthe Plan period) are assumed, an average increase in productivity of othercrops of 25 percent over the four-year period will be required in order toattain the production targets. However, the present situation of dissemina-tion of improved techniques and shortage of modern inputs suggests that thereare many difficulties in realizing such a rapid increase. It is also doubt-ful whether the price policy under the Four-Year Plan, which aims at uniform-ity in benefits from the cultivation of each crop, will stimulate the invest-ments needed in crops such as cotton and jute. Even if the Plan target of a7.5 percent increase in paddy production over the next four years is realized,rice production will lag behind population growth and there will be a furtherdecline in the export availability.
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IV. INDUSTRY AND MINING
Industry
70. Over the last decade, the value of industrial production at constantprices grew at an average annual rate of 4.6 percent and the share of manu-facturing in GDP increased from 10.5 percent in 1961/62 to 11.6 percent in1970/71 (Tables 1 and 2). The growth of output in the first half of the dec-ade fluctuated with the trend in agricultural production and the nationaliza-tion of private sector enterprises. Output declined in 1963/64 by 10 percentfollowing the nationalization of the sector, jumped up sharply by 18 percentin the peak crop,of 1964/65 and declined by 15 percent in 1966/67. Over thelast 4 years, the average annual rate of growth was 11.6 percent but this wasmainly due to the coming on stream of several new factories.
Structure of Industry
71. Over the period, important changes occurred in the structure ofindustry. New industries were established to produce fertilizers, paper,glass and chemicals and to assemble tractors, pumps, heavy and light ve-hicles and home appliances. At the same time, the production of sometraditional products, such as wheat flour, cotton, yarn, bricks and cementincreased considerably. Food processing still accounts for 60 percent ofproduction but over the period the output of minerals (mainly oil), industrialand building materials increased their shares while that of consumer goods(wearing apparel and household equipment) decreased. (Appendix Table 8.1).
72. The number of factories employing 10 or more workers increased by64 percent to 4,744 in 1969/70. The increase was much higher (75 percent)in the category of 10-50 workers than in the group, of above 50 workers.However, in recent years, the number of small and medium-sized units hasbeen decreasing due to the closing down of some establishments and the con-solidation of others into larger units.
73. Since 1963, the creation of new private sector enterprises has notbeen permitted and a large number of firms have ceased to operate. By 1968,the nationalization of all large-scale industries was complete and during thelast 2 years the Government took over the 230 remaining private sector enter-prises which were under its supervision. Although the number of privatelyowned firms is decreasing, the private sector still owns eleven times asmany establishments as the public sector and employs ten times as manypeople. In terms of production, the share of the private sector in grossoutput fell from 72 percent in 1960/61 to 58 percent in 1970/71. However,since inter-industry transactions take place much more among the modern,large-scale industries, it is likely that the private sector's share inindustrial value-added is much larger than 58 percent. The share of producercooperatives in total industrial production is not significant. In 1971, therewere 23 manufacturing cooperatives and their share of output increased from
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0.8 percent in 1961/62 to 2.9 percent in 1970/71, but the expansion ofproducer cooperatives is expected to play a significant role in thetransformation of the remaining private sector activity.
Institutional Framework
74. The overall management of the industrial sector comes under theMinistry of Industry under which there are two Planning Corporations and12 Production Corporations. Corporation No. I has the responsibility forthe planning and implementation of Government policies with regard to modernlarge-scale industries and Corporation No. II has the overall responsibilityfor all other industries except those which come under different Ministries,such as oil refining, rice and flour mills and timber. At the factory level,Workers' Councils and Joint Consultative Committees have been formed to assistin the day-to-day operation of the enterprises but they have no managementresponsibility.
75. Public enterprises have no financial autonomy and their managerialautonomy is limited to operational matters. Fixed capital is provided bya budget allocation, with no interest or repayment obligations except whenforeign loans are involved. Working capital is also provided through thebudget as a non-commercial appropriation. Since both fixed and liquidassets bear no charges, enterprises have no incentive to maximize theiruse or to lower production costs as evidenced by the excessive level ofstocks held by the corporations. The level of inventories (of raw materials,spare parts and finished goods) amounted to about K380 million or 31 percentof new output in 1970/71. Once approved, the budget determines the enter-prise's scope of activity, equipment pattern, product-mix, number and typeof employees and indirectly, the prices of output. The policy of the Gov-erment has been that industrial products should be sold at cost and thatprices should be uniform for identical products. In practice, little accountis taken of quality differentials. The ex-factory price therefore consistsof the non-negotiable purchasing price for raw materials plus processingcosts, overheads, transportation and depreciation charges, and a safetymargin which can be increased by 5-10 percent depending on whether the in-
dustry relies heavily on imported raw materials or the finished product isclassified as a luxury good. Since most of the elements are fixed or pre-scribed, the determination of prices becomes a simple matter of computation.It is not so simple when there are several producers of the same good. Insuch cases, the price is determined at the Ministerial level.
76. The purchasing of raw materials and the sale of finished goods isonly in a technical sense the responsibility of industrial enterprises. Itis actually the concern of the Trade Council t/ and the productive enterpriseshave very little direct contact with the market. In most cases, production is
1/ Ministry of Trade.
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determined,by capacity rather than consumer demand or taste. This lack ofdirect communication with market demand is also responsible for the unneces-sary stock-piling and/or shortage of goods and explains the wide fluctuationsin output from year to year.
77. In addition to the lack of financial autonomy and the inability toreact to market conditions, the State enterprises have little managerialautonomy. These.factors all contribute to the low level of labor productivity.Output per worker has been stagnant in the manufacturing sector and clearlydeclining in mining. Managers also-have no say in personnel policy and laborprobl,ems have been one of the causes of the slow growth of output. The problemis not one of thq labor force itself. The Burmese worker is fairly well-disciplined and Waptable. The problem is two-fold. There is an acuteshortage of skilled and semi-skilled labor and the wage system leaves noscope for encouraging increased efficiency. Basic wages and salaries havenot changed since 1947 and uniform wage rates mean that urban unskilled workersand under-ground mine workers are paid the same. Piece-rates have been intro-duced in some enterprises but they have been too weak to induce significantincreases in performance. Other problems in labor relations include thetwenty-fold differential between the highest and lowest wage earners; thesizeable percentage of part-time workers (9 percent in industry and 32 per-cent in mining). and the excessive number of authorized leave days - 40 daysin addition.to sick leave each year.
Policies and Constraints
78. During the fifties, the Government was unable to carry out plannedindustrial development programs because of ma,ny constraining factors. Inthe early sixties', the present Government launched an ambitious industriali-zation program,to, strengthen the role of the public sector in industry, toregain the growth momentum and to restore faith in industrialization. Theshare of industry in total capital expenditure increased steadily from 3.6percent in 1961/62 to 37 percent in 1970/71.. Most of the investment wentinto establishing new factories rather *than to the expansion or moderniza-tion of existing capacity. The lack of attention paid to maintaining exist-ing capacity resulted in a less than optimal use of investment resources.The ratio of investment to value-added in industry rose from a meager 2 per-cent in 1962/63 to 27 percent in 1970/71, while the industrial output of thepublic sector, which got most of the investment, only increased by 3.4 per-cent per annum The Government expects a.substantial increase in the rate ofgrowth of output with the scheduled completion of several new projects at theend of this year.
79. The major emphasis of industrial policy during the sixties was thedevelopment of import substituting industries, but it is not easy to assessthe success of this policy for a number of reasons. Firstly, the substitutionprocess coincided with a declining trend in imports and there is no way ofdetermining how-much of the decrease was due to the success of import substi-tution. Secondly, the overall supply and demand picture is fogged by the
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large-scale but unquantifiable smuggling of consumer goods imports. Thirdly,import substitution seems to be synonymous with independence and self-reliance,consequently enterprises tend to cover a range of activities from makingtheir own spare parts and components, to providing their own power supply andon-the-job training programs. There is still considerable scope for furtherimport substitution since several industries rely on imported raw materialswhich could be produced domestically and many products are imported bothofficially and unofficially. However, further import substitution has a costand it would therefore be advisable to devise a comprehensive strategy forindustrial development at this stage.
80. The extensive development policy of the Government has had harmfuleffects on the operation of existing industries. The Government has usedthe resources generated by the depreciation of industrial equipment to financenew investments, thereby creating a shortage of resources for the replacementof equipment. This problem is aggravated by low depreciation rates. Currentdepreciation rates for most items range from 1.5 percent to 7.5 percent andare applied to a somewhat under valued capital stock since the revaluation offixed assets is rarely undertaken. Depreciation charges are transferred tothe budget and very little of these resources have been returned to the en-terprises for replacement purposes. This policy, pursued over a long period,has led to decapitalization in many branches of industry. As a result, aconsiderable part of Burmese industry and mining functions today with highlyobsolete, written-off equipment incurring high production costs, capacityunder-utilization and frequent breakages in production. The lack of spareparts is a particularly serious problem and a growing number of factoriesare running the risk of falling apart. That this has not happened yet speakswell for Burmese ingenuity and for the technical competence of factory man-agers. Many establishments with machinery written-off several times over,such as the Mandalay brewery and match factory and a large number of rice mill1and sawmills, function amazingly well because of spare parts and componentsmade by themselves. Spare parts manufacturing has become one of the principr'ltasks of the so-called light engineering industry.
81. The development of infrastructure facilities, particularly oftransportation, has generally lagged behind the growth of industry. Theshortage of trucks, railwagons and river barges increasingly affects theoperation of some industries and mines. Since industrial enterprises haveto rely almost completely on public transport agencies, they can do verylittle to change the situation. They have been given the chance to do moreon their own in power generation and owing to recent increases in electricityoutput, industry has not been exposed to major and prolonged power cuts, butfrequent, short interruptions in power supply have been a problem. Therefore,some of the larger plants maintain their own power generating stations.
82. There are other imbalances, too, that may develop even further inthe absence of proper policies. In some cases, the local raw material basehas been neglected (for example, in cotton production), or intra-industry
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capacity constraints have been allowed to evolve. 1/ These structuralimbalances do not yet constitute a major problem because of the low level ofindustrial development. A cause for greater concern is the almost completelack of sensitivity on the supply side towards the changing industrial en-vironment, demand conditions or technological opportunities. Given exist-ing conditions, industrial managers are doing their job fairly well. Inmost of the factories visited by the Mission, production units were effi-ciently organized, crews well trained and technical manage,rs competent.Repair and maintenance work is being undertaken and special attention isbeing paid to quality control. Some success has also been achieved in on-the-job training and labor disputes have been kept at a minimum.
83. The majQj, problems of the industrial sector are the inadquacy ofthe pricing and ftiancing policy and the lack of managerial autonomy. Th,eeffects of these deficiencies on the growth of the sector are inter-lockingand cannot be analyzed separately. The extensive development policy over thepast 10 years has not been complemented by an adequate policy on capitalformation. On the contrary, the principle of selling industrial productsat prices marginally above cost has resulted in part of the industrial surplusbeing passed on to trade corporations and consumers through prices which havebeen kept artificially low thereby limiting the resources for development. Inaddition, the budgetary process is such that resources which should have beendevoted to the replacement of obsolete equipment have been diverted to newindustries and as a result existing industries have been decapitalized.Facing these problems, as well as a complete lack of autonomy in determiningtheir own policy, industrial managers have paid little attention to suchproblems as cost control and optimum production.
84. The basic principle embodied in Burma's industrial development hasbeen to achieve an expansion of production through additions to capacityrather than to improve the performance of existing enterprises. This policymakes some sense but it becomes unrealistic when the industrial sector's sharein total investment reaches the point where further increases would causeserious deterioration in other sectors, as well as for the existing industries.With 45 percent of total investment earmarked for the industrial and miningsectors over the next 4 years and decapitalization trends already apparent, itis clear that the policy of extensive development needs reassessment.
85. Greater priority needs to be given to. making better use of existingcapacity. Such a change in orientation would require policy changes givinggreater economic, financial and managerial autonomy of enterprises and arehabilitation of their capital formation function. It would also requiresome forms of self-financing, functional depreciation policy, introduction
1/ This has been the case with the textile arnd rice milling industries.Due to the lack of grading equipment in the rice milling sector, thereis an over-capacity for lower rice grades and a lack of higher gradecapacity.
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of performance incentives for enterprises and workers and a meaningfulselection of production lines, types of technology and size of firms. Aswitch to a more intensive type of industrialization would also imply a moreexport-oriented policy of development. Industrial development in the pasthas been directed only at the domestic market and there is no indication ofany change of this policy. The Government does not seem to believe that Burmacould make a break-through in industrial exports. One has to agree that thiswould be a formidable task but it is not impossible. Burma could developmany new industries based on rubber, timber, bamboo, jute, lead (car batteries)and fruits (canning) and find profitable outlets in the world market.
86. One solution to the problems constraining industrial growth would beto improve on the existing system by minimizing its shortcomings and refiningits techniques but this would only be a short-run solution. On the other hand,considering the lack of flexibility of the present system, radical policychanges are not likely in the immediate future. There are signs of somemodifications in existing policies. There is talk of giving greater autonomyto enterprises, of a Working Capital Scheme, of reforms of the wage system, andthe Plan gives some indication of changes in depreciation and capital formationpolicies. Also, the recent reorganization of the Government is aimed atestablishing clearer lines of functional responsibilities. However, these areonly indications of a change in policies and have yet to be put in operation.The only real cause for optimism is the fact that so far there has been noobvious misallocation of resources. Burma's industrial development issingularly without any prestige consumption projects or ambitious heavyindustries development.- There is rather a too conservative approach toimproving the productivity of existing industry and developing an exportpotential.
Mining
87. The exploitation of minerals started in the late nineteenth centuryand grew until World War II. At the outbreak of the war, oil was extracted inCentral Burma, lead and zinc at the Bawdwin mine in Northern Shan State, tinand tungsten in Southern Shan State and in Tenasserim, rubies and sapphiresat Mogok in Mandalay Division. The mining sector was controlled by foreign-owned companies and the labor force of about 50,000 workers mostly consistedof Indians, Gurkhas and Chinese. Burma was among the main suppliers of re-fined lead, tin, tungsten and zinc concentrates and in 1938/39, the exportsof minerals, oil included, accounted for 35 percent of total exports and 5.5percent of GDP.
88. During the war, most of the installations were heavily damaged,particularly in the oil sector, and mineral extraction came to a standstill.Following the war and the struggle for independence, continuing insurgencyin the mining areas and the departure of the foreign manpower prevented anysignificant recovery of the mineral production, except in the oil sector.
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89. After the period of joint ventures with foreign-owned companiesduring the fifties, the Government nationalized the oil sector in 1963.
The nationalization of the mines is now almost completed; and at present the
mining sector is state':owned with the exception of a few private mines whichoperate under Government supervision and some illegal mines whose output is
smuggled across the border to Thailand. The sector is administered by the
Ministry of Mines and six corporations dealing respectively with oil, tinand tungsten, mineral development, geological survey and exploration andindustrial minerals.
Performance and Constraints
90. Over the;last decade, with the exception of' oil which accounts for
43 petcent of totil output, the production of minerals has b,een declining an,d
is well below the pre-war level (Table 13).
Table 13
Trends in Mineral Production
1938/39 1953 1961/62 1964/65 1967/68 1970/71
Crude Oil 100 13 55 48 71 79
Zinc concentrates 100 8 23 23 13 10
Copper 100 1 5 4 2 2
Nickel 100 5 16 8 3 3
Refined lead 100 5 22 20 12 11
Tin concentrates 100 20 17 17 7 10Tungsten concentrates 100 18 33 2 4 7Mixed tin and tungsten 100 36 - 8 4 5
Jade 100 53 189 128 2 28
Refined Silver 100 65 23 19 13 13
Source: (Appendix Table 8.2)
Total value added of the sector decreased by 12 percent in real terms while
the share of mining in GDP fell from 1.4 percent in 1961/62 to 0.9 percent
in 1970/71. Some positive developments over the period were the extractionof new minerals - natural gas, antimony, barytes, coal, limestone - and ex-
tensive mineral and geological surveys were conducted under bilateral andUNDP technical assistance. Several investment projects were prepared andGerman and Japanese experts were hired to advise the Government. Investments
in mining over the decade averaged 1-2 percent of total Government capitalexpenditure.
91. The main reasons for the stagnation of mineral production after the
war were, the lack of skilled manpower, the lack of investments, and the
depletion of certain mines. After independence the foreign under-ground
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workers left the country and were not replaced by Burmese workers, partlybecause most of the mines are located in areas where insurgency was prevail-ing and partly because the uniform wage system did not provide incentivesfor under-ground workers. Investment in the mining sector over the past10 years has not been sufficient to undertake the replacement of obsoleteequipment and to carry out the exploration and development work which wasneeded to reconstitute the depleted reserves. This is particularly true atthe Bawdwin mine which is the main producer of lead, zinc and silver.
92. There are several indications that the Government is determined toreconstitute the sector's role in exports and industrial development. Inrecent years, a great number of exploration and survey studies have beencarried out with the assistance of foreign experts; several mining projectshave been prepared and considerable emphasis is given to mining in the Plan.The Plan sets a target for an increase in crude oil production by 52 percentover the next 4 years and an increase in the output of minerals by 36 percent.However, unless something is done to alleviate the shortage of manpower, toreplace or recondition the equipment and provide adequate transportation, theprospects for a recovery of mineral production look bleak.
The Oil Sector
93. Burma is one of the oldest oil producing and exporting countries.Before the war, most of the production of the oil fields located near Chauk,Lanywa and Yenanyaung, in Central Burma was exported. During the war, the oilsector suffered extensive damages and despite reconstruction, recovery wasslow; by the end of the fifties, oil production was about half of its pre-warlevel of 20,000 b/d. In 1960, the Government increased its share in the BurmaOil Company from 33-1/3 to 50 percent and cooperated with private interestsin the development of the existing fields and exploration operations until1963. The oil sector was completely taken over between 1963 and 1965 and itis now managed by the Myanma Oil Corporation.
94. Proved reserves were estimated at 50 million barrels in 1969 andexplorations in recent years have yielded new reserves in the area of Prome.However, production is still below the pre-war level and has to be supplementedby imports, mostly from Brunei. In 1970/71, imports of crude and refinedoil amounted to about 30,000 tons. Over the past 5 years, the production ofcrude oil grew at an average rate of 8.5 percent and reached nearly 17,000 b/din 1970/71. Natural gas is also produced, though in small volumes (less than20 MMcfd), and is utilized as feed-stock for the fertilizer plant near Chauk.In the future natural gas will also be used to supply two gas turbine powergenerating plants located near the oil fields.
95. Burma has two refineries, one at Syriam near Rangoon, with acapacity of 20,000 b/d and another at Chauk, with a capacity of 6,800 b/d.Refining capacity is running short and because of the imbalanced demand, someproducts, mainly naphtha, petroleum coke and wax are exported. There areplans to expand refining capacity by doubling the capacity of the Syriamrefinery and later building a third refinery.
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96. Following a seismic survey conducted by a German firm 2 yearsago, Burma recently launched an offshore exploration program on which theGovernment has placed great hopes. The program is being financed by a $10million loan from Japan's Overseas Economic Cooperation Fund. Drilling hasstarted but to our knowledge no discovery has yet been made. MOC is alsoproceeding with onshore exploration that is financed by a $5.6 million loanfrom the EximBank and Manufacturer Hanover Trust and a $7 million loan fromthe Federai Republic of Germany that will be used to buy equipment. So farkMDC has been against joint ventures with foreign-owned companies, althoughit has been contacted by German and Japanese groups. The cAosest Burma has
comin to such an arrangement has been to give permission to Gulf Oil Corpora-tion to carry ou't additional seismic work at its own expe-nse (estimated at$1 million).
97. The oil fields along the Irrawaddy are shallow and g&nbrally small,but the deep drilling program which is just beginning may well turn up somereally significant oil fields in the Delta or offshore, and Burma co'uld beagain a net exporter of 'oil in the future.
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V. TRANSPORTATION
98. From time immemorial, Burma has depended on her rivers which providea natural means of transport. Three main rivers traverse the country in anorth-south direction. The largest river, the Irrawaddy, flows over 1,000miles, 900 of which are navigable. Its main tributary, the Chindwin Riveris navigable over 300 miles. The two other rivers, the Sittang and Salweenare only navigable for about 100 miles from their estuaries. The largestcities are located on or close to the main rivers and the 5,000 miles of theinland waterways network are the most important mode of transportation.
99. Before World War II, Burma was also served by 2,100 miles ofrailways and about 8,000 miles of roads, half of which were paved. Duringthe war, the network was considerably damaged. It is estimated that about60 percent of the infrastructure and equipment were either destroyed or neededrepair at the end of the war. Progress in reconstruction has been slow dueto the lack of foreign exchange and continuing insurgency and, by 1960, thecapacity of the transport sector was estimated to be about 70-80 percent ofpre-war level. Reconstruction and rehabilitation were partly financed byJapanese war reparations. In 1956, the Bank participated in the program withtwo loans of $5.3 and $14.0 million, respectively, to the Railway Board andthe Port of Rangoon. A third loan of $14 million was signed in 1961 for theacquisition of rolling stock and track renewal. Since 1961, the Bank hasmade no other loans to Burma.
100. Since independence, the Government's policy has been to progressivelynationalize the sector. However for the time being, considerable private sec-tor activity is permitted in inland waterways and road transport. Public sec-tor transportation presently consists of: The Union of Burma Railway Board(UBR); the Inland Waterways Transport Board (IWTB); The Road Transport Board(RTB); The Union of Burma Airways Board (UBA); the Board of Management forthe Port of Rangoon (BMPR); and The Union of Burma Five Star Line Corpora-tion. 1/ The transport sector, excluding highway planning and construction,is under the authority of the Ministry of Transport and Communications (MTC).(Highway Planning and Construction comes under the authority of the Ministryof Housing and Construction.) The MTC is responsible for enforcing Govern-ment policies regarding transportation by (a) approving the budget of thetransport agencies in consultation with the Ministry of Finance and Planning,(b) setting tariff policy, and (c) drafting and enforcing regulations forthe operation of the sector. The actual operation of the sector is controlledby the Movement Coordination Committee (MCC) whose role is to allocate the
1/ Following the Administrative Reorganization decided on March 15, 1972,the names of the various transport agencies have been changed into BurmaRailway Corporation, Inland Water Transport Corporation, Road TransportCorporation, Burma Airways Corporation, Port Corporation, Five Star LineCorporation. However, to avoid confusion the abbreviations given herewill be used throughout this Report.
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movement of the Government controlled commodities amongst the various modesof transport. The allocation is done by giving priopity to the public trans-port.agencies to the extent that there is capacity. When the capacity of thepublic sector cannot meet the demand, private carriers are hired.
Private Sector
101. The private sector is au.thorized to operate.only on roads and in-land waterways and *to transport decontrolled commodities. Except in Rangoonand 3 larger towns, urban passenger services and inter-city bus services areoper,ated.by private carriers. 0n inland waterways, p,assenger services areoperated by IWTB and private carriers. However, when a service run by aprivate carrier copetes with one run by IWTB, the private carrier mustschedule his vesse4 to leav.e one hour later. The private seA,cor does notcompete with, but rather complements the public sector transport sexvice.sin the movement of .controlled commodities and passengers. p-rlvate carrierswilling to carry -controlled commodities must register with the MC.C. Cargois then allocated by the MCC which specifies the route,,schedule and rates.The mission estimates that the private sector handled 46 percent of the long-haul tonnage in 1970/71 (Table 14) and probably an even larger percentage ofthe ,medium-haul traffic. All of the short-haul tonnage is handled by privatecarriers. Overall the share of the private sector in total value-added int-ransportation is probably around 60 percent.
Table 14
Distribution of Long Haul Tonnage 1970/71by. Mode .and Sectors
102. Very little information is available on the performance of theprivate sector. In view of the Government's policy to nationalize the sectorand owing to foreign exchange restrictions, private carriers are not allowedto import new vehicles or to replace obsolete ones. The private sectorrequirements for spare parts are estimated from registration statistics and
the procurement and distribution of spare parts is handled by the Ministryof Trade. Over the past 5 years, the private fleets of road vehicles andriver crafts have been decreasing at an average annual rate of 18 percentand 4 percent, respectively. However, the Mission was told that because of
the shortage of capacity of the public agencies, more private trucks and
river crafts were being hired by MCC. No figures are available for roadtransport but over the past 4 years the number of private crafts registeredfor use by MCC increased at an average rate of 10 percent per annum, al-
though the carrying capacity increased only at 2.9 percent.
Performance 1961/62 - 1970/71
103.- No data is available on traffic flow and ton miles. The Ministryof Planning estimates the demand for transportation in terms of tons by de-
ducting from the gross volume of production, the volume of goods used locally
or not-requiring vehicular transport and adding the volume of imports. Ac-cording to official estimates, the total demand for transportation has been
104. The composition of demand has remained stable over the past fiveyears. Agriculture,'including livestock, forestry and fishery accounts for70 percent of the tonnage and industry and mining, 30 percent. According tothe Ministry of Planning, total demand is divided between short, medium andlong haul in about equal ratios. Short haul covers distances up to 25 milesand transport by non-powered vehicles. Medium and long haul cover distanceup to 50 miles and over and the transport by powered vehicles or crafts. Thedistribution between short, medium, and long haul has'not changed either overthe past decade. Traffic flows for passengers and freight are determined bythe geography of the country. Most of the traffic moves along the valleys ofthe main rivers.. Rice is transported by inland waterways and rail from theDelta and Central Burma to the upper part of the country and to Rangoon.Forest products and minerals are transported from the hill areas surroundingthe central plaii. to Rangoon and the coastal ports. Over the past decade,the structure of production has not changed nor has the pattern of transporta-tion altered except for the increase in rice transport to the deficit areasin Upper Burma. Therefore, the growth of demand in terms of tons can be con-sidered a reasonable approximation of the growth of the demand for transporta-tion over the past ten years.
105. The growth of traffic of the major transport agencies is given inTable 16. Freight traffic on the railways increased at 4.9 percent per annumbetween 1961/62 and 1965/66. Since then, freight traffic has been decliningpartly as a result of the diversion of diesel locomotives to passenger trafficwhich grew at an average annual rate of 6 percent over the decade. 'The aver-age distance travelled by passengers increased, reflecting a preference forrailways for long distance travelling and the efforts of the railways to pro-vide faster and more comfortable trains. UBR also operates a circular linein Rangoon but passenger traffic on this line is also decreasing owing to thefact that maintenance expenditures and services have had to be cut for lackof foreign exchange to-maintain and replace obsolete equipment. Since 1961/62,freight traffic on inland waterways has been growing at 5.4 percent per annum.The main increase has been in petroleum products and rice. Passenger trafficalmost doubled between 1961/62 and 1965/66 and has since levelled off. Therapid increase in the early part of the period was due to the improvement ofexisting services and to preferences given to public transport.
106. The Road Transport Board was created in 1963 and over the lastsix years, the volume of freight and passenger traffic carried by RTB in-creased by 44 percent and 29 percent respectively. RTB trucks have replacedold private trucks which have limited their operation to short-haul traffic.Recently RTB has taken over some long-haul traffic from the railways, butRTB is having difficulties in maintaining capacity and since 1968/69, totaltonnage carried by RTB has been decreasing. The Port of Rangoon handles82 percent of total port traffic. Between 1961/62 and 1968/69, traffic atthe Port of Rangoon decreased at an average annual rate of 8.4 percent. Thedrop was mainly due to the decline in exports which fell from 2.4 milliontons in 1961/62 to 720,000 tons in 1967/68. Over the last 2 years, rice ex-ports have been increasing and traffic in the port increased by 16.5 percentin 1969/70 and 6 -ercent in 1970/71. Traffic in the other ports showed thesame pattern: a decrease of 11.5 percent per annum between 1962/63 and1968/69 and increases over the last 2 years of 2.5 percent and 15.5 percent,respectively.
107. Overall the volume of traffic handled by the public transport agen-cies has been declining over the last five years. This is mainly due to thedecrease in serviceable capacity as there is no evidence of a decline indemand over the period. To date, carriers have been able to operate withoutmajor disruptions because of the slow growth of the economy but the situationis deteriorating rapidly. Delays are more frequent because increasing numbersof vehicles are visibly standing idle awaiting repairs and spare parts. Theslow growth of production of agriculture, forestry, industry and mining ispartly attributable to the shortage of transportation. The inadequacy of thestate distribution system is also partly due to the shortage of capacity forlong and medium haul. The Mission found that warehouses in the ports and ina number of factories are congested because of the lack of transportation.There is also a shortage of capacity for passenger traffic. Trains are over-crowded; inter-city bus services are inadequate and recently IWTB has had toreduce or curtail services for lack of vessels. The shortage of transporta-tion capacity results from the inadequacy of investment in replacement andmaintenance equipment.
Investment and Infrastructure Developments
108. Although by 1960 most of the pre-war capacity had been restored,the transportation sector still showed two major weaknesses. Firstly, theinfrastructure had been rebuilt according to pre-war standards and was notsuitable for modern transportation. This was particularly true for roads,85 percent of which had a surface of 14 feet or less. Secondly, the equip-ment was over-aged (Appendix Table 8.3), since most of it had been salvagedor recovered from war surplus. The situation called for major investmentsboth in equipment replacement and infrastructure improvement and expansion.During the first half of the decade, the Government completed rehabilitationprojects which had been delayed by the lack of resources and continuous in-surgency. More recently, priority has been given to projects that enablethe public transport agencies, mainly road transport, to maintain and expandtheir capacity.
109. Public sector investment in transportation, excluding road con-struction, doubled over the decade (Appendix Table 8.4). Over the last fouryears the sector's share in public investment decreased from 31 percent to17 percent, amounting to K134 million in 1970/71. More than half of theinvestment over this period covered the acquisition of road vehicles, rollingstock, vessels and aircrafts, and road construction accounted for 30 percent.The distribution'of investment appears to have been realistic. The threemajor modes of transport received 88 percent of the total investment. Thelarge allocation to road transport reflects the Government policy to progress-ively take over private sector trucking and replace the private sector's over-aged equipment. Overall, the level of investment has not been sufficient tomaintain capacity. As a result, equipment has been kept in use beyond normaleconomic conditions and the fleet is still considerably over-aged. The lackof foreign exchange has curtailed the procurement of necessary spare partsand maintenance programs have been cut back putting increasing numbers of
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vehicles out of use. Investment in road construction and maintenance havebeen below the revenues derived from road transport. However, it is diffi-cult to judge whether investment in roads have been deliberately cut backor whether it has not been possible to spend more because of the capacitylimitation of the Road Construction Corporation. About 50 percent of theRCC's equipment is out of use for lack of replacement and spare parts. Of-ficials estimate that it would require an investment of K50 million in spareparts and K250 million in new equipment spread over 5 years for the Corpora-tion to undertake the construction and maintenance works whiich are urgentlyneeded. The Mission was told by the other major transport agencies that theactual level of investment over the past decade was about half of the originalprogram submitted to the Ministry.
110. Over the decade, the railways completed their program of rehabil-itation and modernization and by 1970/71, railway route miles amounted to1,947 miles (about 95 percent of the pre-war level). The railways have alsoundertaken the dieselization of their locomotives. Diesel locomotives ac-counted for 30 percent of the total number of locomotives in 1970/71 com-pared with 2 percent in 1961/62. In order to cope with the maintenance andrepair of new diesel equipment, a steam workshop was partly converted intoa diesel shop. Construction of a diesel workshop, nearly Mandalay began in1969/70 and is expected to be completed next year. The UBP. also started con-struction of a shop to make passenger coaches and freight cars at Myitnge in1969/70.
111. The pre-war infrastructure capacity of the Port of Rangoon wasrestored by the early sixties. No major developments have occurred sincethen, but no capacity problems are foreseen since port traffic is stillbelow pre-war levels. However, the instability and shallow draft of theaccess channels have been of some concern to the Port Authority and thepossibility of dredging an access channel through the outer bar is beingconsidered. The conditions in the other main ports have not changed mucheither and at least three of them, Bassein, Moulmein and Akyab are currentlyfacing draft limitation problems. Little dredging has been carried out forlack of equipment.
112. Over the last decade, very little attention was given to roadconstruction. About 150 miles of secondary roads have been constructed an-nually and approximately the same length upgraded. The upgrading of themajor roads has been delayed for lack of equipment and the road system ispresently incapable of accommodating modern road traffic. Most of the roadshave a surface width of 14 feet or less and the numerous bridges are too weakto bear loads of over 6 tons. No significant developments have taken place ininland water transport. The authorities feel that river marking and dredgingshould be undertaken, but little has been done because of lack of resources.The Rangoon International Airport was completed in 1955 and since then nomajor improvements have been made in civil aviation infrastructure. Thereare 42 airfields in Burma of which 50 percent have gravel runways and can onlyaccommodate DC3's.
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Finances
113. Over the last decade, the four main transport agencies (UBR, IWTB,RTB and the Port of Rangoon) have shown an operating surplus after deprecia-tion but in recent years, this surplus has been declining (Appendix Table 8.5).The trend in the return on net fixed assets in the railways and inland watertransport is indicative of the decrease in serviceable carrying capacity.The estimates show a decline in the rate of return on net fixed assets of therailways from 9.3 percent to 5.9 percent during the same period. The declinehas probably been much greater since no revaluation of assets has taken placesince 1960. However, comparison between the net cash generated by the Railways,IWTB and RTB and their capital expenditures show that overall, the funds gen-erated internally pvered actual investment. If one assumes that investmenthas been on average 50 percent below the normal level, the Railways would havefinanced 80 percent of their capital requirements, the IWTB 35 percent andRTB 30 percent. Faced with a difficult situation, whereby the normal capitalrequirements could not be obtained from the Government, the various transportagencies have done extremely well within the limit of material and spare partsavailability. They have applied a considerable amount of ingenuity to keepequipment running, and to maintain the quality of service. The transportagencies are on the whole cost-conscious and try to show an operating surplus.However, they believe that operations could be improved if they were givengreater autonomy in financial and personnel matters.
Main Problems of the Sector
114. The main problems of the sector are inadequate infrastructure, thelack of statistical information and the need for institutional improvements.As stated previously, the sector has suffered from insufficient investment tomaintain the existing equipment and infrastructure. The Government has doneits utmost to stem the deterioration of existing assets but there is a limitbeyond which equipment cannot be maintained any longer and this limit hasnearly been reached in Inland Waterways and Road Transport. The problem isprimarily one of the lack of foreign exchange as technical and managementstandards are good and in many respects better than in other countries.Inadequate transportation is already an obstacle to development and unlesssomething is done in the very near future, even the modest growth rates en-visaged for the next 4 years will be unachievable.
115. As in many other countries, Burma lacks adequate information ontraffic flows and transport demand. In the absence of reliable data it isdifficult to assess the efficiency of the MCC in coordinating the allocationof traffic to the various modes. According to the transport agencies, theMCC plays an indispensable role in that it allocates cargo in volumes large-enough to utilize their capacity. At the same time, there are reports oflong and costly delays in obtaining transport and incorrect allocation ofcargo, such as rice being transported by road to locations which could have beenbetter reached by rail. However, the review of the traffic statistics ofthe main transport agencies does not show any obvious misallocation, withthe possible exception of sugarcane transport which is handled over a shortdistance by the railways and could probably be transferred to Road Transport.
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The problem appears to be more of one of the lack of coordination between
the shippers and the carriers than of the uneconomic use of the various modes.
Both the Ministries of Planning and Transport are aware of these deficiencies
but lack the expertise to do anything about it. Traffic flows in Burma are
relatively simple and a study of transport demand could be undertaken at
relatively little cost with some technical assistance.
116. -The Ministry of Transport does not play an active role in the plan-
ning of investments, and there is still no clearly defined policy for public
sector expansion. No policy is defined as to which modes of transport will
receive priority and in practice each agency is responsible for its own de-
velopment plan. This lack of planning and coordination of investment decisions
may lead to uneconomic investments. For example, the Railways want to invest
in additional motive power and rolling stock to recapture tonnage which has
been diverted to the Roads because of their lack of capacity. At the same
time, RTB plans to expand its fleet because its own demand has been growing.
Another point to bear in mind, is that although the Government will allocate
traffic to these agencies in line with any expansion of capacity, this will
be at the continued expense of the private sector and may not be the optimum
use of the country's transportation resources. Since most of the investment
over the decade was for rehabilitation rather than the expansion of capacity,
this lack of policy has not led to any obvious uneconomic investment; however,
as the situation of the sector calls for major investments in the very near
future, the need for a clearly defined investment strategy is becoming more
acute. Such a policy would have to be based on an analysis of the economic
costs of moving goods which could be done at the same time as the study of the
transport demand.
Future Growth of the Sector
117. During the period of the current Four Year Plan (1971/72-1974/75),
the demand for transportation in terms of tonnage to be carried is expectedto grow at an average annual rate of 4 percent in line with the overall growth
of the economy. Within the transport sector, the tonnage to be carried by
RTB will increase by 9 percent per annum, while the tonnage carried by the
railways and IWTB will increase by 7 percent and 6 percent respectively.Planned investment in transportation during the Plan period amounts to K630
million or 18 percent of total capital expenditures. The allocation to the
main transport agencies (K483 million) is 22 percent higher than their actual
expenditure over the past four years. However, the amounte allocated for the
Railways, IWTB and RTB are expected to remain at the current levels while the
allocation for civil aviation, shipping and ports will more than double. The
allocation for road construction and maintenance is only one third of the
actual expenditures over the past four years. (Appendix Table 8.7)
118. Over the past four years, the traffic growth of the three main agen-
cies has been considerably lower than the rates of growth projected and it is
therefore unlikely that they will be able to meet the plan targets, let alone
solve the long term problems created by the inadequate level of investment
over the past decade. The shortage of capacity is therefore likely to become
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even greater over the next four years. The government is aware of theseproblems but is limited by the availability of resources. In preparingthe plan for transportation, the investment program was divided into twoparts: projects for which resources, both local currency and foreign ex-change were available and projects for which only local currency was avail-able. The former.are included in the Plan and the projects submitted forconsideration by the Bank Group are included in the latter.
119. The projects submitted to the Bank represent an additionalinvestment program of $125 million with a foreign exchange component of $80million (Appendix Table 8.8). Three groups of projects were submitted bythe IWTB, the railways and the ports which cover the acquisition of vessels,rolling stock and equipment as well as the rehabilitation and improvementof infrastructure-in each of the sub-sectors. The Mission's review of theseprojects indicates that the replacement projects and some of the infrastruc-ture projects are urgently needed and that their implementation will enablethe transport agencies to restore their capacity and meet the projecteddemand while solving the problems created by the obsolescence of the fleetand the inadequacy of the infrastructure.
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VI. POWER AlD TELECOMMUNICATIONS
Power
120. Power generation, transmission and distribution facilities areState-owned and managed by the Electricity Power Corporation within theMinistry of Industry. However, some Government agencies have their owngeneration facilities.
121. In 1970/71, total generating capacity was about 196,000 KW, ofwhich 44 percent was hydro, 29 percent thermal and 27 percent diesel(Appendix Table 8.9). Since 1961/62, the hydro and thermal generationcapacity remained constant, while diesel generating capacity increased atabout 2 percent per annum. The reason for the apparent stagnation is thecommissioning in 1960 of the Lawpita hydro-generating plant (Moybe project)which created a large excess capacity in thermal generation. The powergeneration capacity of the other Government agencies was about 56,000 KWin 1970/71 of which 21 percent was hydraulic, 37 percent thermal, and42 percent diesel.
122. The total length of the transmission and distribution grid, excludingconsumer distribution lines was 7,861 miles in 1970/71 compared to 5,988 milesin 1961/62. Transmission lines (over 33 KV) accounted for 1,391 miles anddistribution lines (up to 11 KV) for 6,470 miles. Over the past decade, themain increase in line mileage has been in distribution. The extension oftransmission lines has been carried out to connect new industrial plants tothe main grid.
123. In 1970/71, 569 million kilowatt hours were generated compared to324 million in 1961/62. Total consumption was 416 kilowatt hours. Totalconsumption over the decade has been growing at nearly 7 percent per annum.However, the rate of growth increased substantially over the second half ofthe decade and reached a peak of 16.3 percent over the last 2 years. Theconsumption of the industrial sector grew twice as fast as the other sectors.As a result, the share of the industrial sector in total consumption increasedfrom 42 percent to 54 percent over the decade, while the domestic sector de-creased from 35 percent to 27 percent. The geographical pattern of distribu-tion also changed substantially with the share of the Ranaoon area decreasingfrom 75 percent in 1961/62 to 51 percent in 1970/71. This reflected the in-crease in industrial consumption outside Rangoon which grew at an averagerate of 23 percent per annum over the period.
124. The total number of electrified villages and towns increased from685 in 1961/62 to 744 in 1970/71. Progress in rural electrification has beenslow, but a large number of villages are now supplied through the transmissionand distribution grid instead of through diesel captive plants. Restrictionsin the supply of electricity are still applied and out of 335 electrifiedtowns, 260 are supplied at least 12 hours per day and only 164 have a 24-hoursupply.
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125. Capacity utilization has been improving over the years, but the
utilization of generating capacity is still low for hydro and thermal plants
(Appendix Table 8.10). Over the decade, losses and internal uses averaged
28 percent of the total power generation. The main reasons for such high
losses are likely to be the inadequacy of distribution facilities and the age
of the station equipment.
126. Over the past 5 years K115.8 million were invested in the power
sector. Generation accounted for K58.5 million, transmission for K19.5 million
and distribution for K33 million. The pattern of investments changed over
the period and the share of generation increased substantially from 28 percent
in 1966/67 to 73 percent in 1970/71 because of the extension presently under-
taken on the Lawpitj4 plant, the capacity of which is expected to double by
1973. (Appendix T4ble 8.11).
127. The tariff structure was revised in 1971 and made uniform for each
category of consumer. The structure is based on a unit selling price which
decreases as consumption increases. Although EPC is showing an ope-.ation
surplus after depreciation and interest charges, we cannot determine whethertariffs adequately cover costs since no information is available on the value
of assets. There is, however, no apparent distortion in the structure of the
tariff, and no apparent cross-subsidy to the industrial sector.
128. According to EPC, the main problems of the power sector are (a) the
unreliability of the supply due to the lack of interconnection between the
generating plants, and (b) the inadequacy of the location of the power sources
which because of the Government policy to regionalize industry are too far
from the consumption areas. To improve the situation ESC is presently
expanding its generation and transmission capacity. It is expected that by
1973/74, generating capacity will be expanded by (i) doubling the capacity
of the Lawpita hydro plant, (ii) installing two gas turbines using natural
gas and (iii) increasing the capacity of the Rangoon Ywama power station.
Several extensions of the transmission lines are in progress or are being
considered, to supply new industrial areas on the right bank of the Irrawaddy
or to interconnect the various sources of supply.
129. The objectives of the Four-Year Plan for the power sector are to
reduce the transmission and distribution losses, to use diesel and thermal
generators pending the completion of the Moybe project and to use small
generating units, diesel or hydro, pending the construction of larger hydro
plants in conjunction with irrigation projects. Total investments in the
Plan amount to K492.5 million (with a foreign exchange component of $63 million)
of which power generation will account for 69 percent and transmission and
distribution for 26.5 percent. (Appendix Table 8.12)
130. Given the past growth of power consumption and the present under-
utilization of the existing facilities, the projected increase in generating
capacity seems to be excessive. Even if consumption grew at the same rate as
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over the past 2 years, there would seem to be an excess of generating capac-ity by the end of the Plan. Greater emphasis should probably be given toexpanding transmission and distribution facilities.
Post and Telecommunications
131. The Director General of Posts and Telegraphs under the Ministry ofTransport controls the telephone, telegraph, radio and postal communicationsystems.
132. The number of telephones increased at nearly 7 percent per annumover the last 9 years but the increase mainly took place in Rangoon.Telephone facilities outside Rangoon are quite limited. In 1970/71, out ofthe 27,297 telephones in the country, 85 percent were fully automatic and inRangoon. The city is linked by telephone (land lines) to only 128 out of the292 townships and there is an enormous unsatisfied demand for improvedtelecommunications. In Rangoon alone, the waiting list is over 5,000.Consumers pay an initial installation charge of K240, an annual rental of K60and 10 pyas per call. However, Government agencies and employees, who are themain consumers, pay a flat sum of K450 per year.
133. There are 282 telegraph offices linking Rangoon with 260 townships.A direct telegraphic link exists between Rangoon and Osaka but service toall other countries has to be routed through Ceylon and India. Internationalcommunication is by radio. Internal communication is also largely by wireless.There are an estimated 370,000 licensed radio receivers of which half are inRangoon.
134. There are nearly 1,000 post offices which operate in the townshipsand larger villages. Deliveries are made four times a day in Rangoon butare much less frequent elsewhere.
135. The Government plans to spend about K7 million per year over thenext 4 years to connect 10 towns each year with telegraphic service and toincrease the number of telephones in Rangoon by 1,000 per year. To improveinternational communications, the plan is to purchase three more highfrequency transmitters and receivers.
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VII. THE SOCIAL SECTORS
Education
136. In the fields of education and health, Burma has achieved successeswhich surpass those of very much richer countries. With a population roughlyequal in size and structure but with a per capita income of about one-quarterof Iran's, the literacy rate of the adult population in Burma is currentlyestimated at about 70 percent. This is about equal to the illiteracy ratein Iran.
137. The objectives of the Government have been to provide basic educationto all of the population; higher education to those with ability and torestructure the educational system in line with the needs and social objectivesof the country. These aims were defined in the University Education Law (1964)and the Basic Education Law (1966). A law on Technical and Vocationaleducation is under preparation. Over the last decade, the two most importantachievements in education have been the enormous expansion of facilities andthe reform of the educational system. The number of students doubled fromnearly 2 million in 1961/62 to 4 million in 1970/71, out of which the numberof primary and secondary school students increased by 109 percent and thenumber of university students by 157 percent. The overall expansion ofeducational institutions was 35 percent, with the greatest increases occurringin the secondary-level general and vocational schools. In line with theoverall expansion of enrollment, the number of teachers increased by 85 percent.(Appendix Tables 8.13-8.14)
138. In implementing the program for education, the Government doubledexpenditure on education over the last 9 years. Education is provided freeup to the eighth grade (lower secondary-level). Students pay K5 ($1) permonth to the end of high school and university fees are about K15 ($3) permonth. In addition, the Government provides scholarships to 20 percent ofthe higher education students enrolled in science and professional subjects.Technical and vocational education is provided free and the Government alsogives stipends covering 60-75 percent of the cost of boarding for studentsenrolled in Technical high schools and Institutes. The salaries for teachersrange between K11O-300 ($22-60) per month for primary and secondary schools;between K300-800 ($60-160) per month for instructors in technical highschools and Institutes and between K300-1,400 ($60-280) for university staff.In 1970/71, expenditure on education accounted for 2.9 percent of GNP and 18percent of current budgetary expenditures. These figures do not include theexpenditures on the construction of school buildings in the rural areas whichare provided by the villagers.
139. By 1970/71, the Government's objective to provide basic educationto all the population was within reach. Enrollment in primary schoolsaccounts for 88 percent of the school age population and at the present rateof expansion, compulsory primary education will be realized by 1975/76.
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Enrollment in secondary schools accounts for only 13 percent of the 10-19 agegroup, but the Government hopes to provide compulsory education up to thelower secondary level (10-14) by the mid-eighties. The major imbalance inthe expansion of the educational system has probably been the expansion ofhigher education. The number of university students increased by 11.1 percentper annum over the last 9 years reaching a total of 51,000 in 1970/71. Thisexpansion is considerably in excess of available employment opportunitiesand the Government faces a serious problem of under- and unemployed graduates.
140. The Government has also made laudable efforts to restructure theeducational system. In essence, the curricula inherited from the British hasbeen made more adaptable to Burmese conditions and greater emphasis has beengiven to science and professional subjects. Ten years ago, 60 percent of thehigher education students were enrolled in the humanities. This ratio hasbeen reversed. Science and professional subjects now account for 73 percentof enrollment with Liberal Arts, only 27 percent. The number of vocationaland technical schools has more than doubled over the last 9 years and theGovernment plans to expand the number of technical schools from 6 to 14 by1975. There are also two post-secondary level Agricultural Institutes andthree Technical Colleges.
141. Finally, mention must be made of Burma's progress in eradicatingadult illiteracy. Three years were spent in carrying out pilot studies todetermine how the adult literacy program was to be carried out, to preparecurricula, teaching methods and materials and follow-up studies. In 1969,the campaign was launched in one district; in 1970 it was extended to twodistricts and in 1971 to four districts. At the present time, illiteracyhas been completely eradicated in the first three districts; the remainingfour districts will be completely covered by this summer arnd programs infive new districts will be started. The youth of Burma are making an out-standing contribution in the literacy campaign. They participatevoluntarily, pay their own fares and expenses and by living in the villages,not only do they teach but they offer all kinds of assistance from diggingwells to harvesting. In 1971, 7,800 students participated in the program.This year, an estimated 15,000 are likely to be engaged in the literacy and wc:-;programs. It would be difficult to understate the excitermient and enthusiasm.of the authorites, the students and the villagers which the Mission witnessedat the launching of this year's campaign. Burma has received internationalrecognition of the success of its efforts and was awarded the Reza ShahPahlavi Prize by UNESCO in 1971 for outstanding achievement in eradicatingadult illiteracy.
142. In spite of all these efforts, classrooms are generally over-crowded and lack laboratory and teaching equipment. The pupil/teacher ratios,particularly in the primary and secondary schools are still too high anda great deal more needs to be done to expand the number of teacher trainingcolleges. In addition, the output of the technical and vocational schools isnot sufficient to meet the demand for skilled labor. The Ministry of Planningestimates that the demand for skilled labor over the next four years is 3,000
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per year. The present output of the technical and vocational schools is1,000-1,200 per year. However, a firm basis for expansion has been estab-lished. Policies and goals have been defined and the authorities haveproven their ability to carry out the education program.
Health
143. In the beginning of the sixties, medical care was provided by severalautonomous agencies and was limited largely to the urban areas and to thosewho could afford to pay for it. Over the last decade, the policy of theGovernment has been to provide free medical care to all of the population,expand the scope and integrate the provision of all medical services. Thedecision to provide free medical care for a population of about 30 millionwith a per capita income of $78 is remarkable enough, but even more admirableis the effectiveness of the implementation of this policy. Resources havebeen mobilized and institutions developed to carry out the health program.Early in 1962, medical conscripts were assigned to civilian posts and alldoctors were required to register themselves for government service, althoughprivate practice was and is still permitted. The major reorganization of thehealth service came in 1965 when all private hospitals were nationalized andthe payment of fees by patients was abolished. The Government also decidedto decentralize the administration of the health service by giving greaterresponsibility to the Divisional and Township level.
144. Expenditure on health increased from K54.8 million in 1961/62 toK126.8 million in 197Q/71 at 9.7 percent per annum. Health expenditureaccounts for 1.2 percent of GNP and 7.3 percent of current budgetaryexpenditure. Burma currently spends roughly one dollar per head on health. 1/
1/ The United Kingdom spends $100 per head (5 percent of GNP) to operateits National Health Service, while Ethiopia spends about 50 cents perhead, with a population of 22 million.
of which - Private 1,202 430 -Nurses and Midwives 1,929 7,233 275Rural Health Centers 555 909 64Health Assistants 552 892 62MCH Centers 194 252 30School Health Teams 20 29 45Expenditure on Health K54.8 m. K126.8 m. 131
Source: Report to the People 1971/72.
145. In addition to expanding the number of hospitals, all the largegeneral hospitals have been equipped with specialist facilities. Despitethe Government efforts, or perhaps because of them, the demand for hospitalservices is increasing at an astronomical rate. All the hospitals areovercrowded and tremendous strains are being put on the available personnel.For example, the Mandalay hospital which was expanded from 300 beds to 800beds has an average of 1,200-1,400 in-patients per day. The outpatient clinicsare even more over-crowded even though the staff work around the clock.Differences in the availability of financial resources are also reflected inthe statistics for hospital beds per population. While there are 10 beds forevery 1,000 of the population in the United Kingdom, there are less than 2per 1,000 in Mexico; 0.4 per 1,000 in India and 0.7 per 1,000 in Burma. Theratios of population per doctor are also striking. In the United Kingdom,there is one doctor for every 860 people; one for every 13,000 in Haiti andone for 8,500 in Burma. (For comparisons with other Asian countries, seeAppendix Table 8.14). The Director of Health in Burma would like toconsiderably expand the number of hospitals, provide better equipment andincrease hospital personnel but he recognizes that such improvements areconstrained by the availability of resources, in particular foreign exchange.
146. The major emphasis of the health program is on preventive ratherthan curative medicine and the greatest achievements have been made in thefield of public health. With 85 percent of the population rural, a mainfocus on the health program has been the expansion of the number of ruralhealth centers and para-medical personnel. Each center covers a populationof 25,000 and is staffed with a Health Assistant, 3-5 midwives, a lady health-visitor and a vaccinator. The Government hopes to expand the number of ruralhealth centers so that each covers a population of 5,000-8,000 over the nextdecade and the annual expansion of rural health centers is in line with thisobjective.
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147. Since 40 percent of the population is under the age of 14, importantattention has also been given to the provision of improved Maternal and Childcare services. The number of lady health visitors and midwives has almostdoubled over the last 9 years and the number of pregnant women treated hasincreased from 57,000 in 1961/62 to 1.4 million in 1969/70. As a result, thematernal mortality rate has dropped from around 4 per 1,000 live births tojust over 1 per 1,000 live births. Infant mortality has declined from over300 per 1,000 live births to about 150 in the rural areas and 65 in the urbanareas during the same period. The Government also manages a School HealthService, but at the present time, this service is confined to the urban areasand covers only a quarter of the student population.
148. With the assistance of WHO and UNICEF, several projects have beenestablished for the control of major communicable diseases. Tuberculosis isone of the major causes of death and seems to afflict the adult populationat the peak of their productive life. The national TB control program(established in 1966) provides case finding and ambulatory treatment servicesas well as BCG vaccinations. Since the inception of the program, 19.2million tuberculin tests have been made and 9.6 million people have beenvaccinated. The malaria eradication program has had some success in reducingthe number of deaths due to the disease, particularly in the Delta area, butthe program which was started in 1963 has run into difficulties due to theproblem of controlling the disease in inaccessible forested areas. The leprosy(1952) and trachoma control projects (1964) are mainly directed in the centraldry-zone because of the high incidence of these diseases in this area. Morerecently, a filariasis control project (1970) was established. It is theintention of the Government to integrate these special services with thebasic health network of the country.
149. In keeping with the expansion of medical services, the institutionsfor the training of doctors, dentists, para-medical personnel, nurses,midwives and health assistants were also expanded and improvements andmodifications made in the curricula. There are at present three Institutesof Medicine producing 300 doctors per year, a dental college, an institute of.para-medical services, and a training school for health assistants. Thetraining of nurses and midwives comes under the responsibility of the NursingDivision in the Directorate of Health, instead of being the responsibility ofhospitals which previously established training courses for their own needs.The Nursing Division is responsible for the training of personnel in responseto overall requirements, the selection of candidates and the establishment ofcurricula. There are at present 4 training schools attached to hospitals.
150. The health program is administered by the Ministry Director ofHealth who is also responsible for health planning. He is assisted by fourdeputy directors in- charge of Hospitals, Public Health, Disease Projects andLaboratory Services. In addition, there are assistant directors in chargeof special projects (malaria program, MCH centers, etc.) and technical headsof departments (statistician, health educator, etc.). For the purpose of
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administering the health program, the country is divided into six administra-tive regions: Rangoon, Central, Northwestern, Eastern, Southwestern and South-
eastern divisions. The authority at the Divisional level is fairly compre-hensive. The Divisional Director and his staff supervise the entire range ofmedical services in their region. The township medical officers have the
responsibility for the health services in their township and report to theDivisional Director. There are also district medical officers who supervisethe operation of the rural health centers.
151. A serious weakness in the health program is the lack of statisticson health. Morbidity information is scattered and the Health StatisticsCenter is at present unable to establish a system for the collection andprocessing of data beyond coverage of urban hospitals. The major causes ofmorbidity are known to be (i) diseases of children: malnutrition andgastroenteritis (ii) tuberculosis and (iii) infectious and parasitic diseases.However, while it is not possible to accurately quantify the success of thehealth prbgram, Burma has undoubtedly made significant strides in improving.the health of the population. The administration of the sector functionsefficiently and the Mission was impressed by the dedication of field workersfrom the directorate level to the rural health centers. A great deal more
remains to be done but the policies and objectives are defined and theinstitutions for achieving these objectives have been established.
Nutrition
152. The Government has given high priority to eliminating malnutrition.The uniform pricing policy for rice and other essential foodstuffs (salt,sugar, fish paste and milk products) ensures that however inadequate thedistribution may be, there are no food deficit areas or deaths from starva-tion. The effect of this policy has resulted in an increase in consumption,particularly in the hill areas and overall, the per capita consumption of
rice has gone up by some 30-40 percent over the last 10 years.
153. In 1963, the Burma Medical Research Institute launched a large scale
nutrition project. In general, the studies show an iron deficiency anaemiaamong large sections of the population. Since the analysis of the diet showcsufficient quantities of iron, this seems to be a problem of defectiveabsorption. Several more recent nutrition surveys (Table 18) confirmobservable evidence that the Burmese are well-fed. The sample survey shows
that the adult daily intake of calories exceeds the average daily require-ment of 2,400 by 25-46 percent. For children, the surveys show a calorieintake 14 percent higher than the average requirement of 900. However, amongthe children, there are serious nutrient deficiencies of calcium, vitamins A,B2 and C. These deficiencies contribute to the high infant mortality ratesby making the children less resistant to infectious diseases. Calciumsupplements could be added to sugar or salt and vitamin A supplements couldbe given once a year in conjunction with one of the national vaccinationprograms.
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TABLE 18
Nutrition: Estimated Daily Calorie Intake
Yeiit Vitamin Vitamin Vitamin Vitamtnof Food Protein Pat Celoim Iron A B-1 B-2 Hiaoin C
154. The characteristic features of Burma's population are that it isyoung, rapidly growing and predominantly rural. Elsewhere in this report,we have pointed out that the population is educated, healthy and well-fed.
155. The last complete population census was taken in 1931. The datafrom the 1941 census was lost during the war except for a table of provision-al totals by districts. Partial censuses were taken in 1953/54 covering allthe urban areas but only about 15 percent of the rural area. The presentdata on the size and composition of the population are therefore very roughestimates. The 1971 population is estimated at 28 million growing at an an-nual rate of 2.3 percent. Other Government estimates of the rate of increasevary from 2.5-2.8 percent. 1/ About 85 percent of the population is rural.The urban population is around 4.2 million of which nearly 2 million are inRangoon. The next largest town is Manadalay with a population of 425,000.As in most developing countries, the population is quite young. Forty percentof the population is under 14 years. The national birth rate is estimatedat 43 per 1,000 and this has not changed since the war, but it has probablygone up in the rural areas. The death rate in the towns is 11 per 1,000.No figures are available for the rural areas but the average mortality rateis probably about 20 per 1,000. This is mainly due to the high rates ofinfant mortality. Sample surveys indicated that the age-specific deathrate for children under the age of one was 123.4 per 1,000 in 1964. Theinfant mortality rate is declining particularly in the urban areas but itis still about 150 per 1,000 in the rural areas. (Appendix Tables 1.3-1.5)
156. The increase in the rate of growth of the population from 1.5percent per annum in the fifties to nearly 3.0 percent currently has beendue to the decline in the death rate, mainly of infants and mothers. TheGovernment does not consider the present rate of population growth a problemand Burma has no family planning program. There is an official ban on theimport of contraceptive devices and the sterilization of women is onlypermitted under dire circumstances. The Government considers the optimumsize of the population to be about 50 million. At the present rate of growth,this will be achieved by the 1990's and will raise the density of populationfrom 105 to 181 persons per square mile, which is still very low by Asianstandards.
157. There is undoubtedly no pressure of population on the land as inIndia or in Indonesia and Burma can afford, other things being equal, anincrease in the size of the labor force to fully exploit its resource po-tential. At the same time, the size of the dependent population, currentlyabout 46 percent (if those over the age of 59 are included) and the slow
1/ Ministry of Health.
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growth of production will continue to place great strains on the economyparticularly in view of the Government's policy of increasing domestic con-sumption of rice at the expense of an exportable surplus and the increasingcost of expanded health and education services. The choice is not to cutback consumption or the welfare program but to increase the rate of economicgrowth.
Manpower
158. In the absence of a population census and manpower surveys and ina predominantly agricultural economy, estimates of the labor force arenecessarily incomplete. In 1969/70, the labor force was estimated at 10.9million, of which one-third was female. Agriculture, forestry, fishery andlivestock account for 70 percent of the labor force; manufacturing and mining,7 percent and commerce, 9 percent (Appendix Table 1.6). The public sectoraccounts for only 10 percent of total employment, but this somewhat under-states the role of the Government. In the non-agricultural wage-earningsectors, the Government is the major employer accounting for nearly 30percent of total employment. The information available on the skill-mix ofthe labor force is indicative of the high level of education of the employed.Overall, the ratio of university and diploma graduates to the total employedin the public sector is 1:18. The ratio of skilled and semi-skilled workersto unskilled workers is 1:1.6 and varies from 1:0 in Social Services andAdministration to 1:4 in industry and agriculture (Appendix Table 1.7)
159. The Ministry of Labor operates 43 employment exchanges in the maintowns and all establishments employing more than 5 people must registervacancies with these exchanges. Between 1962 and 1967, the number of newregistrations of people seeking work increased from 150,000 to over 200,000.The noticeable decline in registrations from 193,000 in 1968 to 173,000 in1971 was due to a tightening up of procedures to avoid duplicate registra-tions and is not an indicator of trends in employment. The average numberof vacancies over the last 9 years has been about 36,000 per year and theMinistry is able to fill about 95 percent of these jobs. Over the sameperiod, the number of people seeking jobs rose from 41,000 in 1962 to 112,000in 1971 (Appendix Table 1.8).
160. The unemployment problem in Burma shows an imbalance between the.supply and demand for jobs and a structural imbalance reflected in widespreadunder-employment. Urban unemployment is currently estimated at 6.5 percentcompared to 6 percent in 1969/70. Unemployment is particularly acute amonghigh school and university graduates between the ages of 15 and 24. Approx-imately 100,000 high school students sit for the final examination each year,of which 20,000 will continue their studies and the rest either have to tryagain for a university place or enter the ranks of the under-employed. Theunemployment situation among graduates has been of increasing concern to theGovernment and in 1970, a committee was established to deal with the place-ment of graduates. So far, the committee has found jobs for 3,277 graduatesbut there are still 6,500 on the register.
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161. The shortage of jobs also affects those who are employed. In theurban areas this makes itself felt in many ways: high rates of absenteeism,lax working habits and the frustration of being over-qualified and underpaid.The summer literacy and work programs have been of tremendous help inchannelling the energies of the youth into productive activity, but this isonly a temporary solution to the problem of expanding the number of vocationaltraining schools and increasing the rate of economic growth and employmentopportunities.
Wages
162. Wages and salaries in the public sector have remained unchangedsince 1948 except for specified cost-of-living adjustments (AppendixTable 9.3). The highest salaries are between $292-332 per month; the averagemonthly earnings for unskilled laborers is about 20 times less - about $17per month. Because of these differentials, climbing the education ladder,(even at the risk of unemployment) is still preferable to seeking new skillsfor reasons of tenure, ease of job and higher wages. The salaries of lowerrank Government employees range from $41-93 per month compared to the averagemonthly earnings of an industrial worker of $31 (Appendix Table 9.4). Un-skilled workers in the rural areas earn about K3 per day (56 cents).
163. A revision of the basic wage rates is long over-due for a number ofreasons. Firstly, the wage structure is extremely cumbersome. There areover 700 categories of pay with nearly 400 variations for fixed salary andannual increment groups, and 7 for the daily-wage group. Secondly, theGovernment recognizes that the twenty-fold difference in earnings betweenthe highest and lowest paid workers is not compatible with its efforts toreduce inequality in the distribution of income and the differentials alsoencourage more people to seek white-collar jobs. Raising the lower endwill increase consumption, therefore the wage differentials may have to becompressed by reducing the middle and top ranks. Thirdly, a revision ofsalaries and wages should be such as to provide incentives for greaterefficiency. A committee is to be established shortly and it is hoped thatthe outcome will be a much simplified system revised to bear a closerrelationship with (i) increases in the cost of living, (ii) the need to en-courage students to seek blue-collar jobs, and (iii) the need for incentivesto efficiency.
164. In spite of the low level of wages, labor conditions are not onerous.Real wages are considerably higher than money wages in view of the wide varietyof benefits provided by the Government which include low-cost housing,extended leave, social security, workmen's compensation, fixed tenure andfree medical care. There are no Trade Unions and strikes are not permitted.Instead, labor disputes are submitted to local conciliation committees andWorker's Councils which perform some of the same functions as Trade Unions.In addition, 284 Joint Consultative Committees have been formed since 1964in industrial establishments to supervise conditions of work through con-sultation between the management and workers.
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IX. PRICES, TRADE AND DISTRIBUTION
Prices
165. There is no wholesale price index and the official consumer priceindex for Rangoon was discontinued in 1965. This is not surprising in viewof the fact that the determination of pricing policy and the price system isthoroughly confusing. In principle, price determination is centralized butdistinctions have to be made between the policies determining the wholesaleprices of industrial and agricultural products; between the prices of con-trolled and decontrolled commodities and between the retail prices of thePeople's Shops, the free market and the black market.
Wholesale Prices
166. For industrial enterprises there is an ex-factory price inclusiveof excise tax, which is the price at which goods are sold to the TradingCorporations. These prices are fixed by the Trade Council on the basis ofaverage costs. Production costs include depreciation but not interest chargeson funds provided by the Government. The Trade Council adds profit marginsvarying between 1 and 10 percent depending on whether the good is classifiedas a wage, conventional or luxury good. Price stability has been a majorconcern of the Government and official prices change slowly. The officialprices of some goods were raised by 10-30 percent in 1967 but have sinceremained largely constant. Consumers rarely bear the burden of an increasein costs. Price adjustments are generally made at the expense of profitmargins. Some flexibility in pricing policy can be observed in that theprices of soiled and slow moving items can be reduced in the People's Shopswhile those of luxury goods can be increased up to 50 percent. Agriculturalprices are mainly determined by the Ministry of Agriculture in consultationwith the Trade Council.
Import Prices
167. Until 1971, import prices were determined by adding fixed marginson the landed cost for customs duties, sales tax and handling costs. How-ever, in 1971 it was decided to reduce the inflationary impact of the risein import prices and mark-ups were reduced. Imported goods are classifiedin-the same categories of wage, conventional and luxury goods. The pricesof the last two are to be increased by 15-25 percent when their importprices rise. Last year the following goods registered even higher increases:umbrellas (45 percent); poplin (39 percent); flour (33 percent) and cottoncloth (27 percent). Most of these were imported goods or produced largelywith imported materials. A price committee was established in December 1971to study the effect of the realignment of currencies on the structure ofprices since wage and conventional goods account for 95 percent of totalimports.
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Retail Prices
168. As stated previously, there are three kinds of retail prices: the
official price in the People's Shops and consumer cooperatives, the free
market price and the black market price. Official retail prices are uniform
throughout the country. Following the nationalization of trade, the prices
of all officially imported goods and essential consumption goods: rice,
salt, fish paste, soap, longyis, medicines, etc. were fixed by the state.
The free market price refers to the price of decontrolled commodities leftto private sector trading. These include meat, fruits, perishable vegetables,
confectionery, fish, tea, tobacco, onions, garlic, handicrafts and several
minor forest products. The black market price refers to the prices of all
the above plus smuggled imports of consumer and consumer durable goods sold
on the black market. According to the latest data available, the prices of
most agricultural commodities have been falling since 1969 due to increased
supply and there is still a difference of 20-40 percent between farm-gateprices and wholesale prices in the nearest town and a 50-100 percent differ-
ence between farm-gate prices and retail prices in Rangoon (Appendix Table 9.1).
The decline in agricultural prices was also reflected in a decline in free
market prices during the last two years but as the following table indicates,free market prices for essential commodities are two to three times higher
than the official prices.
Table 19
1971 Prices of Essential Commodities(Kyats)
Unit People's Shop Free Market
Rice Per Pyi 0.65 0.80Flour Per Viss 2.00 3.50Fish Paste Per Viss 3.25 6.00
Fish Sauce Per Viss 2.65 4.25Salt Per Viss 0.50 1.30
Condensed Milk Per Tin 1.45 4.38Sugar Per Vise 2.10 8.83
Man's Longyi Each 13.65 27.00Woman's Longyi Per Yard 2.80 6.00Soap Each 1.30 3.00Hosiery Each 3.30 6.25Rough Cloth Per Yard 2.40 4.50Battery Each 0.65 1.30
Source: Report to the People 1971/72; IMF Report 1972.
Trade
169. The nationalization of domestic wholesale, retail and foreign trade
took place between 1963 and 1965 and the trade sector is currently managed
by the Trade Council presided by the Minister.
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170. The data on this sector has to be taken with more than a littlegrain of salt since both the methodology and the statistical basis for cal-culation are dubious to say the least. Estimates of internal trade arederived from estimates of the value of products available for sale (atproducer's prices) plus the c.i.f. value of imports. Procurement of theState Trading Corporations is deducted and the residual is the volume leftto the private sector. This procedure indicates a decline in the privatesector's share of trade from 63 percent in 1961/62 to 44 percent in 1970/71.However, these figures are not very meaningful since they are gross outputfigures and there is no breakdown of wholesale and retail trade. It isnot clear how the value-added figures given below are derived. The Missionwas told that value-added data are provided by the Trade Corporations andthat value-added coefficients derived from a 1964/65 survey were appliedto the estimates of the sale of the private sector. The State as a majorpurchaser must account for most of the wholesale trade and all officialimports, but it is estimated that the private sector (and mostly the blackmarket) accounts for up to 70 percent of retail trade.
171. As the following table shows, even with the above qualificationsin mind, the performance of the trade sector over the last nine years wasexceedingly poor.
The large increases in value-added in 1963 and 1965 mainly reflectincreases in coverage following the two waves of nationalization of thesector in these years. The declines in 1965/66 and 1966/67 were due to theshortage of rice during these years of severe drought and the drop in agri--cultural production; the increase in 1967/68 was the recovery from thesethroughs. Over the period, the annual average rate of growth of the sectorwas 2.1 percent and the share of trade in total GDP declined steadily from29.1 percent in 1961/62 to 25.7 percent in 1970/71. Because of the size ofits share in GDP, the poor performance of the trade sector was largelyresponsible for the slow overall rate of growth of the economy. Value-addedin trade should have grown by at least the same rate as those of agriculture
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and the manufacturing sectors which averaged 4 percent and 4.6 percent re-spectively. The fact that it did not was mainly due to the malfunctioningof the distribution system which is described below. The performance of thetrade sector also has an impact on growth in another way. The revenues ofthe Trade Council (sales tax, excise duties and operating surplus) are oneof the major sources of Government revenue and if additional resources areto be mobilized for investment, greater efficiency will have to be achievedin the operation of the State distribution system. Until these improvementsare made, the lagging rate of growth of the trade sector will continue toretard the overall rate of economic growth.
Distribution
172. Perhaps the single most difficult action of the Government has beenthe nationalization of trade. Since 1962, the Government has progressivelynationalized domestic wholesale trade, most retail trade, shipping agenciesand foreign trade. Transport facilities, except for some private operationsin inland water transport and trucking have also been taken over. The inter-nal marketing of all imported goods and all goods produced by state or state-supervised enterprises is handled exclusively by the Government. The Govern-ment also monopolized the purchase and distribution of rice, cotton, tobacco,wheat, sugar-cane and jute. The private sector is permitted to trade onlyin certain commodities such as fish, meat, poultry, fresh vegetables, fruitsand cooking oil.
173. The official distribution system is administered by the TradeCouncil which is responsible for the formulation of both domestic and tradepolicy, under the Ministry of Trade. The executive arm of the Trade Councilis the Trade Department (previously known as Central Trade). Under the TradeDepartment come the 22 Trade Corporations (Appendix Table 9.2) which areengaged in both production and distribution. Each Trade Corporation isresponsible for establishing and operating People's Shops handling theircommodities. In other words, there are no general stores; if you wish topurchase medicines you go to a medical shop, textiles to a textile shop, etc.With few exceptions such as the Myanma Oil Corporation and the State TimberBoard, who are entirely responsible for the internal distribution of theirproduction, the Trade Council determines how trading is to be conducted ineach locality - whether through People's Shops, cooperatives, private storesor the people's market. At the local level, the Trade Council is representedby Divisional Trade Officers under whom come the Township Trade Officers whosefunctions are to store, transport and deliver goods to the retail outlets.
174. The following account will give some indication of how the systemfunctions. The Divisional Trade Manager for Upper Burma is located inMandalay. He is directly responsible to the central Trade Department forthe region covering Mandalay, Magwe, Sagaing, Chin State and Kachin State.Under him comes 118 Township Officers. For the Mandalay Township whichcovers a population of approximately 425,000, there were until last year333 People's Shops dealing with foodstuffs, 53 dealing with textiles, 6each dealing with vehicle spare parts and construction stores, 12 medical
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shops and 17 others representing other Trade Corporations. The staffingof a People's Shop generally consists of a manager drawing a monthly salaryof $35 and 4-5 assistants.
175. The central Trade Department in Rangoon decides how much is requiredby each township. This decision is supposed to be based on data on populationsize and income provided by the Ministry of Home Affairs, but there is no-suchadequate data. Nevertheless, the Government feels that this system is prefer-able to the previous one of Township Officers submitting orders which weregenerally too high and resulted in overstocking and heavy losses. Consignmentsare made from Rangoon to the Mandalay Railway Station. It is then the respon-sibility of the Township Manager to transport the goods to the 140 warehouses(with a capacity of 7,000 tons) in the area. The retail outlets are then re-sponsible for transporting the goods from the warehouses to the stores. Whole-sale prices are fixed by the Trade Council inclusive of transportation costsup to the local warehouses. Retail prices are also fixed by the Trade Counciland retail outlets have to bear the handling costs from storage to shop.
176. The aim of the nationalization of trade was the elimination offoreign capitalists (mostly Indian and Chinese) from their control of commerceand to reduce prices and inequities in the distribution system by the removalof middlemen and the setting of a uniform price policy. But by 1966, it wasobvious that the system was not functioning well. It is over-burdened byexcessive overhead costs, due to overstaffing and large unsold inventories.In 1969/70, the value of stocks held by the Trade Council amounted toK1,546 million compared to K1,278 million in 1966/67. Stocks have generallybeen between 30-40 percent of total sales. Distribution is also hampered byinadequate information on consumer demand and supply, insufficient storagefacilities and a shortage of qualified personnel. These deficiencies createmany artificial scarcities and have given rise *to a flourishing black marketoperation.
177. In an effort to deal with some of these problems, in 1966 the Gov-ernment authorized private sector trading in .36 food items and 42 forestryproducts previously controlled by the Government. In addition, consumer com-mittees were formed to plan procurement, stocks and sales and to operate asystem of household booklets. The household booklet covers all the commodi-ties sold in the People's Shop, both domestically produced and imported. Thesystem was designed to ensure an equitable distribution of scarce goods accord-ing to family size (and incomes). The booklet system is applicable withincertain defined areas and does ensure some form of equitable rationing withina specified area but not between areas or different parts of the country andit has generally degenerated into a system whereby purchases are made fromthe official stores and resold at higher prices on the free market. The ricecrisis of 1967 brought the distribution system to near collapse. In thechaotic conditions which followed the extreme shortage of rice, the Governmenttemporarily relaxed all controls and consumers travelled great distances tobuy rice where they could.
178. The Government is aware of the enormity of the problem, but it isnot clear what can be done about it. The Chairman himself used a very apt and
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vivid metaphor to describe the problem. He said the Government, after takingover responsibility for retail distribution, was "like a man who has caught atiger by the tail". To keep clinging to the animal was as difficult as to letgo of it. Part of the distribution problem is the slow rate of growth ofproduction. There are cases where the shelves are just empty. But, even moreserious are the many bottlenecks in the distribution system: transport andstorage facilities, poor communications, high rates of pilferage, and the sheerinefficiency leading to duplicate, wrong or totally unnecessary consignmentsto stores. The main hope for an improvement in the distribution system isthat competition between the consumer cooperatives and the state retail shopwill lead to greater efficiency.
Cooperatives 1/
179. The establishment of cooperatives had been encouraged in the 1950'sand by 1970 there were over 13,000 with a total membership of 4.8 million, ofwhich 4.6 million belonged to the Agricultural and Multi-purpose cooperatives.The functions of these cooperatives were largely the production and sale ofagricultural, forestry and fishery products but their role was limited andthey received little attention from the Government. In May 1970, the Govern-ment announced plans for a comprehensive Cooperative Plan to be implementedby the Ministry of Cooperatives. The long-term aim is to expand the numberof cooperatives and increase their membership to 21 million persons. Whenthe Plan was announced, it was largely explained in terms of helping to solvedistribution problems, mobilize more loan capital and replace what remainedof private sector trading activities.
180. Three types of cooperatives are to be established: consumer,producer, savings and credit societies. The Agricultural and Multi-purposecooperatives are to be reorganized as consumer/producer cooperatives and con-sumer cooperatives are also to be established in urban areas. Producer co-operatives will be formed on the basis of industries. Full time employees andfarmers will form savings and credit cooperatives and will also extend loansto members. All cooperatives will have to operate with their own funds orwith funds borrowed from the People's Bank. No private capital is to beaccepted. The State would appoint staff, when needed, define methods ofoperation, fix prices and appoint one-third of the members of each coopera-tive committee. So far, the People's Bank has made only a nominal amount ofloans to the cooperatives and cooperatives are to be taxed at the same rateas individual or business income. The cooperatives are also to be organizedon a three-tier system covering: primary, township and central cooperatives.The township cooperative will have the responsibility for operating a whole-sale store; the central cooperatives will supervise, coordinate and organizethe business of the other two.
1/ The Mission was unable to see the Ministry of Cooperatives and theinformation obtained has been collected from various sources anddiscussions with the Ministry of Trade.
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181. Under the new scheme 11,024 cooperatives have been reorganized bythe end of April 1972 including, 63 producer, 215 credit, 12 consumer and10,698 village cooperatives. In addition 3,564 new cooperatives have beenformed including 1.978 consumer, 344 producer and 944 credit cooperatives.
182. Heads of the families permanently residing in an area are eligiblefor membership in a consumer cooperative and must contribute equal shares.The average membership of a consumer cooperative is between 500-1,000 families.By the beginning of this year, consumer cooperatives had taken over more than50 percent of the 2,600 People's Shops which handled basic foodstuffs andhousehold goods; 260 out of 800 textile shops and 300 out of 800 other spe-cialized shops. Cooperatives are allowed to purchase goods from both theTrade Corporations and the private sector. For all commodities, except rice,they receive discount rates of 5-7.5 percent from the Trade Corporations.These discounts are expected to cover all their charges: labor, rent,electricity, storage and transportation from the township warehouses. Co-operatives are instructed to sell goods at the retail prices fixed by theTrade Council and are only allowed to add specified margins on purchasesfrom private traders. A recent exhortation from the Ministry of Coopera-tives indicates that both of these rules are being honored more in thebreach than in the observance.
183. The expansion of consumer cooperatives may perhaps bring about someimprovements in the distribution system, but this is not likely to happen forsome time. Their present operation is constrained by many of the same factorsclogging up the State distribution system: inadequate storage and transporta-tion facilities in addition to shortage of capital. An initial share capitalof K20 per family is enough to purchase one bag of rice. This is about theaverage family requirement for a week. Credit is sometimes extended to thecooperatives for one month by the Trade Corporations, but this is not sufficientto cover their purchase needs and the frequency of trips raises their handlingcosts. In addition, the lack of autonomy in choosing and firing their managerswill also limit their ability to induce greater work efficiency.
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X. PUBLIC SECTOR FINANCE
184. The role of the budget in Burma, as in all other countries, is thetransfer of resources from one part of the economy to another. However, thebudget has greater importance in Burma because of the direct responsibilityof the State for the bulk of economic life. Thus in 1970/71, Government re-
venues amounted to 78 percent of GNP. The consolidated budget comprises thebudgets of the Union Government, the Boards and Corporations, the States and
Local Bodies. However, the budget is not really consolidated since, among
other things, it does not include the foreign loan transactions of the enti-
ties but does include inter-agency transfers. The policy of the Governmenthas been to keep receipts in line with expenditures but Union Government re-ceipts have not been sufficient to cover rising expenditures on defense,
social and economic services. The State enterprises which account for 75percent of all Government receipts and expenditures have registered overall
deficits in almost every year since 1963. The budget deficit which has been
rising over the last four years has been financed by borrowing from the banks
and by increasing foreign capital inflows (Table 21).
Current Revenues
185. Union Government revenues increased sharply between 1962/63 and
1964/65 but declined steadily thereafter (Table 22). This was mainly due
to the decline in income tax receipts and revenues from customs duties.Revenues from income tax accounted for 39 percent of tax revenue in 1970/71,but given the low level of incomes, the tax base is quite limited and in-come taxes account for only 5.6 percent of GNP. Revenues from income taxesincreased from K352 million in 1962/63 to K593 million in 1970/71 at 6.7percent per annum.- The sharp increase in personal income tax receiptsbetween 1962/63 and 1965/66 was due to the upward revision of tax rates
which was part of the comprehensive tax reform in 1963/64 and the increased
efforts of the Government to assess and collect back-taxes. Since nationali-zation, the share of personal income tax declined with the size of the private
sector and was replaced by income tax from the state enterprises which have
been stagnant since 1965.
186. The present tax structure is extremely progressive and applies
to both individuals and corporations (Appendix Table 5.1). The tax ratevaries from 7 percent for incomes between K1,500 - K5,000 and rises rapidly
to 99 percent for incomes over K300,000. Income tax is payable when in-
comes exceed K4,200 after deducting family allowances: wife (K1,000) andchildren (K400 each). Employees have an earned income allowance of. 20
percent in addition to family exemptions. The exemption level for personal
income tax is probably too high. Incomes are assessed for taxes only after
they exceed $936 after deducting family allowances. In general this means
that only the professional classes pay income taxes. A lowering of the
exemption level would increase the tax base and would also require consider-
able improvement in the procedures for the assessment and collection of
;/ The Special Accounts bave been added to Union Government receipts and expenditures since theybelong to the Union Goverrment and are treated separately for other reasons.
2/ Capital iRevenues are derived from the liquidation of state assets.
.Source: Maistry of Planning and Finance.
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taxes. The slow growth of corporate income tax is partly due to the poor
performance of the state enterprises and to the inability of the tax authori-
ties to assess and collect their taxes. The scale of operation of the Boards
and Corporations has considerably expanded since 1963/65 but corporate in-
come taxes have shown no increase over the last five years. Since the enter-
prises are required to transfer all their income to the consolidated cash
funds, the inability. to collect corporate taxes is only a mechanical pro-
blem. The real difficulty is to increase the operating surplus of the
enterprises.
187. Indirect taxes, of which the most important are customs and excise
duties and sales tax, accounted for 37 percent of tax revenue in 1970/71.
Customs duties are levied on all imports and except for certain essential
commodities such as sugar and kerosene which have specific taxes, duties are
levied ad valorem, with the rates varying from 5-500 percent. The unweighted
average import tariff rate is almost 25 percent (Appendix Table 5.2). The
steady decline in customs duties over the period was due to the drop in im-
ports from K1,413 million in 1964/65 to K833 million in 1970/71. Customs
duties are also levied on certain exports. Rice and rice products bear a
specific tax of K5-10 per ton and all other commodities pay ad valorem duties
of 5-10 percent. The customs duties from exports account for only about 4
percent of revenues from customs duties.
188. Commercial taxes consist mainly of sales taxes which are levied on
all goods sold by the Trade Corporations (including imports) and the tax
varies from 5-15 percent depending on whether the good is classified as a
wage, conventional or luxury good. Some attempt is also made to collect
sales taxes from private retailers but with little success. The tax liabil-
ity of the private sector (for both income and sales taxes) is generally
settled by agreement with the tax officer and this leaves room for a great
deal of corruption. The revenue from sales taxes has also declined since
1965/66 due to slow growth of production, the lax procedures for the col-
lection of sales taxes and the disorganization of the entire distributionsystem. Excise and excise duties are applied at the ex-factory stage onsuch goods as motor fuels, cigarettes, sugar and beer. High rates are
applied to opium and liquor to discourage their use. Excise duties are the
only tax receipts which have grown steadily over the period at 4 percent per
annum.
189. Property taxes are levied on the users of State property: agri-
culture, forestry, mining and fishing. Land taxes have been fixed at
K2-5 per acre for decades and the revenue from land taxes have remained
constant. Land taxes were altered a few years ago to reclassify the land
according to the commodity cultivated. The rates were unchanged but the
idea was to encourage crop diversification. However, the new system has
not yet been implemented and in any case, it would not yield a significant
increase in revenue. The Government is unwilling to increase the tax burden
on the agricultural sector and there are no plans for any additional land
taxes. Royalties paid by foresters amount to only K50 million and mining
fees have disappeared with the nationalization of the sector. Other taxes
consist mainly of the lottery tax and vehicle registration fees.
/1 Includes other taxes; earnings'from the saie of goods and' services andother receipts.
Source: Ministry of Planning &'Finance.
Current Expenditure
190. The expenditure pattern of the budget reveals that major emphasishas been given to the Government's social and economic priorities and defense.Over the period (1962/63 - 1970/71), Union Government current expendituresincreased at 4.2 percent per annum. The rate of increase has been fasterover the last four years while current revenues have been declining. (Table 23).The share of defense in total current expenditure has declined from 39.5 percentin 1962/63 to 33.2 percent in 1970/71. Total expenditure (current and capital)on defense has been declining but still accounted for 5.7 percent of GNP in1970/71. Burma produces small arms locally and most of the expenditure onhardware seems to have gone into replacing wartime jeeps, trucks and communica-tions equipment. Nevertheless, the share of defense in GNP is quite largefor a country at Burma's level of per capita income and'is yet another in-dicator of the burden which continuing insurgency'places on the nation's re-sources. Expenditure on social and economic services account for 40 percentof total expenditures. These expenditures have grown much faster than the
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growth of the economy, averaging 6.8 percent per annum over the last eightyears. Priority was given to the social sectors which doubled their expendi-ture over the period.
191. A peculiarity of the Burmese budget is the separation of the so-called Special Accounts which are in fact Union Government receipts andexpenditures. The Loan, Contribution, Public Debt and Investment accountsconsist of short-term loans to cultivators, contributions to charitableorganizations, retirement of internal and external debt and short-termhousing loans to Government employees. With the exception of the PublicDebt account, the mission does not fully understand why these accountsshould be treated separately. These accounts have generally shown a de-ficit over the last eight years and this is mainly due to the fact thatcultivators, particularly in the early sixties, were very lax in repayingloans to the Government.
192. The States (Shan, Kachin, Kawthulay, Kayah) and the Chin SpecialDivision covers 48 percent of the country's land area and accounts for 17percent of the total population. It is difficult to judge from the budgetdata how much is being done by the central Government for the minority-dominated areas for several reasons. Firstly, several items of expenditurein the states and all the expenditure in the Chin Division come under UnionGovernment expenditures. Secondly, the budget does not reflect the revenueloss to the Government of the uniform price policy for rice which has meantan increase in consumption in the non-rice producing state. 1/ Thirdly,other data availabe indicate that expenditure on education and health, whichaccounts for more than 65 percent of the total, doubled in the states be-tween 1961/62 and 1970/71. Part of this expenditure originates in thestates but some of it also represents a net transfer from the Government.Nevertheless, the budget figures show that total expenditure (current andcapital) in the states, which increased from K59 million in 1961/62 to K74million in 1962/63, declined steadily to 1966/67, increased thereafter andis now at the same level as in 1962/63.
State Enterprises
193. The major source of Government revenue is the receipts from theBoards and Corporations. As stated previously, state enterprises are re-quired to transfer all receipts to the Consolidated Cash Fund, from whichfunds are returned to the enterprises according to their budget allocations.If the accounts of the Boards and Corporations were shown on a net basis,it would be seen that the major sources of income to the Government arethe current surplus of Industry, the Transport agencies, Printing and Press,Banks and Insurance and with sharp fluctuations, the Trade Council. Inactual fact, the major source of Government revenues -- corporate taxes,sales tax, excise and customs duties -- comes from the operations of theTrade Council. The surplus shown in the budget is what is left after allthese receipts have been transferred to the Government and after paymentof all current expenditures.
1/ According to a recent IMF Report, the revenue loss from the Governmentpolicy of subsidizing the domestic price of rice amounted to K70 millionin 1969/70.
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TABLE 23
Union Government Current Expenditure(Million Kyats)
Total 1043 1065 .1125 1148 1176 1245 1303 1375 1448
Source: Ministry of Planning and Finance.
-/Including expenditures for Culture, Relief & Resettlement, & Religious Affairs.
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194. Over the last eight years, the Agricultural Corporation has con-sistently shown a deficit. The current surplus of the state manufacturingenterprises over the last four years represent the coming-on stream of newinvestment projects. The transport agencies have shown a rising net surplusfrom 1962/63 to 1968/69 but net receipts have levelled off during the lasttwo years indicating that the agencies are reaching the point where they canno longer operate their over-aged equipment efficiently. After the heavycosts of nationalization were met in 1962/63 and 1963/64, the Trade Councilhad its largest surplus in 1964/65; the decline in 1966/67 and 1967/68reflected the drop in agricultural production and the losses in 1968/69 and1969/70 were due to the fall in the export price of rice. The Trade Councilshowed a large surplus (K169 million) last year and an equally large one isexpected this year due to the improvement in the export market for rice.However, the operation of the Trade Council is among, if not the most, in-efficient of the state enterprises. The level of stocks of the Trade Coun-cil amount to about 40 percent of sales.
195. Taken together, the state enterprises have shown a net currentsurplus over the last four years but this has not been sufficient to covertheir capital expenditure and over the last eight years, the state enter-prise sector has shown an overall deficit in every year except 1964/65.The main reasons for the continuing deficits of the state enterprises aretheir lack of autonomy and the rigid pricing policy of the Government. Thepolicy that goods produced are to be sold at costs to the Trade Corporationsmeans that the enterprises can make no provision for future investments. Inaddition, under the present system there is no incentive for efficiency.Agencies which make a surplus do not get any preferential treatment in theallocation of investment funds. A more serious problem, however, is thefact that cost accounting hardly exists in the state enterprises and theex-factory prices do not necessarily reflect costs. Production costs in-clude depreciation and interest on foreign loans but no interest is chargedon the funds provided by the Government. The theory presumably is that nocharge is made for the use of the state's capital since the enterprisebelongs to the state but even the state's capital has an opportunity cost.It could at the very least be deposited overseas and earn an interest. Amore economic operation of the state enterprises would entail greater autonomyin the use of earned income; a charge on loans for working capital and for
expansion, and greater autonomy in price fixing to reflect more adequatelyrising costs and market conditions. None of these guidelines for more ef-ficient operation are inconsistent with the policy of state ownership andclose control,over wages, pricing policy and general standards of operation.
Capital Expenditure
196. For the purpose of analysis, we have excluded expenditure on defensefrom the Government capital expenditure in Table 24. This was not done inTable 21 since it would make no difference to the level of the budget deficit.
197. Over the last eight years, public sector investment increased fromK347 million to K734 million at 9.9 percent per annum. Union Government ex-penditures which account for about 20 percent of the total, grew much moreslowly, at about 3.7 percent per annum. The bulk of these expenditures wentto social and economic services which increased from K90 million in 1962/63to K145 million in 1970/71. The capital expenditure of the States and LocalBodies account for only 3.5 percent of total and have remained constant overthe last eight years.
198. The capital expenditures of the state enterprises dominate thebudget, rising from K195 million in 1962/63 to K552 million in 1970/71 at13.9 percent per artnum. The Boards and Corporations accounted for more than75 percent of total public sector investment in 1970/71. The pattern ofpublic investment reveals the priority given by the Government to industri-alization and halting the deterioration of (if not expanding) physical assetsin infrastructure. The bulk of the investment has gone to the manufacturingsector. Capital expenditure on the industrial enterprises increased fromK36 million in 1962/63 to K275 million in 1970/71 and accounts for about halfof the capital expenditure of the state enterprise sector (Appendix Table 5.4).Most of the remaining expenditure went to the infrastructure sectors, mainlytransport and power. The allocation to agriculture did not increase very muchover the period.
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Fiscal Performance and Prospects
199. The fiscal budget generally appears in three versions. The originalestimates, the mid-year revised estimates and the actuals. The original es-timates have been invariably optimistic in estimating revenues and the revisedestimates show the reductions in planned expenditure that the government hasdecided to make in order to avoid excessive deficit financing. Over the lastfive years. the inflationary impact of rising budget deficits has been obviatedby a draw-down in reserves.
200. The growth of tax revenues has not kept pace with the increases incurrent expenditures which have generally been cut back to minimum levels andthe prospects for any significant increase in tax revenue are not very bright.The income tax schedule is extremely progressive but this is not a revenueearner since incomes are more or less equally distributed and have not beenincreasing. The tax base could be widened if the exemption level was lowered,but the government may be unwilling to do this for reasons of distributivejustice. However, improvement in the procedures for the assesment and col-lection of taxes could lead to an increase in reveneus.
201. The structure of customs duties is also progressive: rates arelowest for essential goods and highest on luxury goods. However, revenuefrom customs duties depend solely on the trend in imports and in Burma,almost directly on the trend in export earnings, since imports are generallycut back in the light of the availability of foreign exchange earnings. Thegrowth of revenues from sales taxes and excise duties depend mainly on thegrowth of the economy and improving the efficiency of the Trade Council.
202. The main hope for a substantial increase in government revenueslies in an increase in the surplus of the state enterprise. The governmentis aware of the importance. and urgency of this problem and expects that theadministrative reorganization and the introduction of the Working CapitalScheme will bring about the necessary improvements. The Working CapitalScheme (WCS) was introduced in 1969/70 and is now applicable to the 230 firmsnationalized over the last two years and all the transport agencies. Underthe WCS, enterprises or agencies submit quarterly estimates of their workingcapital requirements, production program, cash-flow, credit position (receiv-ables and repayables) and inventories. The Ministry of Finance then attemptsto monitor performance, make suggestions for improvements and even solve someof the operational problems. The aim of the scheme is to establish some con-trols over the flow of working capital and create some financial disciplinein the operation of the entities. The authorities feel that some improvementshave already been achieved but the limitation of the scheme is that it has noauthority to apply sanctions if performance targets are not met. The agenciesstill obtain funds according to their budget allocations and any with-holdingof funds by the Ministry is only a temporary phenomenon. The government hopesto make the WCS applicable to all state enterprises and its management is tobe transferred to the People's Bank. The government is also considering a
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proposal to make the agencies finance part of their working capital needs fromown funds and borrow the remainder from the People's Bank. This proposal, ifaccepted will introduce several forms of sanctions into the operation of thescheme.
203. No major increases in expenditures are currently expected althougha Pay Committee has been established to study a revision in pay scales andthe Committee is likely to recommend a general salary increase. The currentFour Year Plan has conservatively contained annual capital expenditures atthe 1970/71 level but it is widely recognized that the share of investment inGNP needs to be considerably increased in order to bring about an expansionin the overall rate ,of economic growth. In view of the present constraintsto mobilizing greater domestic resources for investment, the government isseeking foreign assistance to finance the investment program. Over the lastdecade, the government has made little use of foreign borrowing, either inthe form of new committments or in drawing down existing loans, but Burma'sapproach to the Bank Group and other aid donors signals an important changein this policy.
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XI. MONEY AND CREDIT
Banking System
204. In 1963, the Government nationalized all financial institutions in-cluding 24 private banks (14 foreign and 10 domestic) and between 1966 and1970, all financial institutions were gradually_amalgamated into a singlebank - the People's Bank of the Union of Burma. 1/ The Bank performs a widevariety of functions. In addition to the normal function3 of any centralbank, the People's Bank is the sole commercial, industrial and agriculturalbank; it is also a savings bank, consumer-finance company and an insurancecompany. To carry out this large number of functions, the Bank has estab-lished 11 divisions, each headed by an Executive Director.
205. At the end of last year, the capitalization of the Bank consisted ofan initial share capital of K200 million and a reserve fund of K85 million.The Bank is allowed to transfer 25 percent of any surplus on its operationsto the reserve fund until such time as the reserve fund is equal to the origi-nal capital. Thereafter all surplus funds will be transferred to the Govern-ment. The operation of the Bank has been subject to two major constraints.Firstly, the requirement that the Bank should hold foreign exchange reservesequal to at least 25 percent of currency in circulation and secondly, thatannual advances to the Government should not exceed 15 percent of estimatedbudget revenues. The regulations for monetary cover were suspended in March1971 and the restriction on lending to the Government is meaningless since theGovernment could obtain funds in any amount by simply selling securities tothe Bank.
206. The Bank has 54 branch offices (at least one in each of the 48 ad-ministrative districts) and the Government plans to increase the number ofbranch banks to 200 by 1974/75. The branch banks more or less carry out thesame functions as the central bank, except for foreign exchange transactions.Depending on their size, the branch banks are allowed to keep cash on handat minimal levels vazying from K1-3 million and to make personal securedloans in amounts varying from K20,000-50,000 and unsecured loans in amountsvarying from K2,000-5,000. All deposits in excess of cash requirements(which are centrally determined) are transferred to Rangoon.
207. By creating a unified banking system, the Government hoped to im-prove the mobilization of resources and exercise greater control over theoperations of financial institutions. The Bank manages the Union ConsolidatedCash Fund to which all state enterprises transfer receipts and from which allo-cations are made in accordance with budget authorizations. The Bank thereforeacts as a fiscal agent of the Government and the executive arm of the Ministryof Finance. All Government Treasuries have been absorbed by the Bank and theBank has little authority over the amount or composition of credit expansion.Once the Working Capital Scheme and lending to the cooperatives gets underway,the Bank will probably have greater autonomy in credit control.
1/ The name of the bank was changed to the Union of Burma Bank as ofSeptember 30, 1972.
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Money Supply
208. Over the last decade, the Government gave high priority to pricestability and control of the money supply was an important instrument incontaining inflation. Early in 1962/63, inflationary pressures began tobuild up mainly as a result of the tremendous increase in agricultural loans,most of which were used to repay old loans and increase consumption. Thelarge export surplus in 1962/63 and equally large budget deficit (financedmainly by domestic borrowing) were only partially offset by the reductionin commercial bank credit. By the end of the year, the money supply hadrisen to K2.2 billion and it continued to rise in 1963/64 with the national-ization of the private sector. The deflationary measure adopted by the Gov-ernment was the Demonetization Order of May 1964. All bank notes in denomina-tions of K100 and K50 were declared no longer legal tender. The amountoutstanding was estimated at K1,202 million. Partly as a result of the panicand serious social discontent which ensued, the Government declared that re-imbursements would be made for the surrender of notes totalling K500 per personand that holdings in excess of K4,200 were liable for income taxes. It was asimple matter to get around this regulation by simply distributing notes forsurrender to all and sundry, for a small fee. Notes valued at K998 millionwere returned, out of which the Government refunded (over a period of twoyears) all except K100 million for taxes. The K204 million which were notsurrendered represented a profit to the Government and was kept in a suspenseaccount until most of it was transferred to government revenues in 1969.
209. The demonetization order resulted in a 10 percent decline in themoney supply between 1962/63 and 1963/64 but it was more than offset by therecord increase of expansionary borrowing by the Government in 1963/64(Table 25). In the following two years, the money supply increased by be-tween 8 and 9 percent per annum, mainly because of nationalization, but since1965/66, the stock of money has been more or less constant at about K2.4-2.5billion. Over the period (1962/63-1970/71), the increase in the money supplywas less than 2 percent per annum, but this moderate rate of increase wasonly made possible by the continual decline in net foreign assets. Over theperiod, net borrowing by the Government increased two and half times fromK1.6 billion in 1962/63 to K3.1 billion in 1970/71, and this was financedlargely by the decline in net foreign assets from K918 million in 1965/66to K3 million in 1970/71.
/1 Including SDR's./2 Subscription to the IMF less securities held by the IMF.
Source: People's Bank.
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210. Another feature of monetary policy during the sixties was the steadyincrease in the velocity of circulation of money (the ratio of GNP to the stockof money) from around 3.5 in 1962/63 to 4.3 in 1970/71. The increase was mainlydue to the consolidation of all Government funds in the Union Consolidated CashFund; the growth of non-cash transactions among the boards and corporations andthe increase in lending and repayment in kind between the corporations andstate-supervised private sector operations in industry and agriculture.
Savings
211. The main instruments of saving offered by the People's Bank aresavings deposits, 12-year saving certificates, 5-year cash certificates andsavings stamps.
212. In October 1964, a uniform tax-exempt interest rate of 2 percentwas paid on savings deposits. The following year, the interest rate onpostal savings, which were also tax-exempt was reduced from 3 to 2 percentand the ceiling on individual accounts was lowered from K100,000 to K50,000.Last year, the ceiling on individual accounts was abolished but interest isonly paid on deposits within the limit of K50,000 per year and provided thatnot more than K10,000 has been deposited in any one month. The amount out-standing in savings deposits was K362 million at the end of 1970/71. Theinterest rates on time deposits vary from one-half of one percent for depositsheld for 6 months to 3 percent for deposits held for 3 years, and- the interestrate on time deposits are not tax-exempt. Over the last ten years, the levelof time deposits has decreased from K162 million in 1961 to K41 million in1971.
213. The amount outstanding on 12-year savings certificates was K238 mil-lion in 1970/71. These certificates are offered in denominations varying from5 Kyats to 100,000 Kyats and carry a tax-exempt interest of 4.5 percent perannum payable after 12 years. No interest is paid on certificates refundedin less than one year. Certificates cashed in before 12 years receive in-terest varying from 1.75 percent per annum. The amount outstanding on the5-year cash certificate which bears an interest of 2.5 percent per annum isonly K2.5 million. This is roughly the same as the amount outstanding onsavings stamps, which are not refundable but can be used to open a savingsaccount.
214. Table 26 gives the trend in savings held in the banks over the lastdecade but the figures are not very meaningful. The data does not reallyindicate a three-fold increase in savings but rather an increase in coverage.The data before 1965 only represent figures made available to the Governmentand does not include deposits held with foreign and other private banks. Thedata for 1965 and 1966 represent deposits held with commercial banks and theincrease since then mainly reflects more complete coverage with the unifica-tion of the banking system. The data in fact suggest that there has beenlittle increase in savings held in deposits.
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Table 26
Total Savings Held in Banks(Million Kyats)
Year Ending Savings 12 Year Saving 5 Year CashSept. 30 Total Deposits /1 Certificates Certificates
215. The Government has rejected any proposal for an increase in interestrates on savings and time deposits. The Government feels that such a measurewould benefit only the rich and the black marketeers and would not necessarilymobilize much more savings. It is also felt that given the stability of pricesand the tax-exempt nature of interest on deposits, that the existing structureof interest rates is not out of line with the cost of capital. Greater emphasisis therefore being put into expanding the number of branch banks and savingsand credit cooperatives. A promising avenue for mobilizing resources is theinsurance operations of the Government. The Bank manages all the insuranceoperations in fthe country and the insurance fund has increased from K212 mil-lion in 1965/66 to K340 million in 1970/71. At the present time, only 25 per-cent of Government employees have life insurance coverage and the Governmenthopes to expand the coverage to 50 percent over the next five years.
Credit
216. No accurate data is available on the increase in loans and advancesby the banking system over the last decade. As in the case of deposits, thecoverage is incomplete. The only accurate data is for the last two yearswhich show a slight increase in total loans and advances from K537 millionto K557 million.
217. Most of the lending of the banking system to the private sector goesto agriculture. Since the Government undertakes all major land improvementand mechanization projects, these loans are all short-term (less than one year).
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Agricultural loans are made either through a Village Bank or directly by theAgricultural Corporation. Members of a Village Bank are farmers in a villagetract who each contribute an initial share capital of 5 Kyats. The number of
Village Banks increased from 3,500 in 1961/62 to 11,100 at the end of 1970/71and the membership increased from 350,000 to 1.7 million. There are some14,000 village tracts and where no Village Bank exists, lending is made through
agricultural cooperatives. Village Banks are supervised by the AgriculturalFinance Division of the People's Bank from which funds are obtained at 3 per-
cent per annum. These loans are relent to the farmer at 9 percent. The 6percent differential, in addition to the compulsory savings of one percent ofthe loan advanced which the farmers make, are held as savings deposits withthe People's Bank. These deposits have increased from K12 million in 1971/72
to K90 million in 1970/71 and amounted to 60 percent of the loans advancedlast year. The intention is that the Village Banks will one day finance theirloans through their own savings but this is not yet the case.
218. During the fifties, the Government extended credit to the farmersbut these loans were too small to relieve the peasants from their heavy re-liance on private borrowing. Between 1961/62 and 1963/64, the Governmentlaunched a massive credit program aimed at replacing usurious private lendingin the rural areas. Over the three years, the amount of new loans more thandoubled from K152 million to K359 million (Table 27). However, less thanhalf of these loans were repaid and the amount outstanding jumped from K125million in 1961/62 to about K400 million in 1963/64. The poor repayment re-
cord was attributed to a number of factors. The Government accused the farmersof using the money on increased consumption and the farmers complained that theinadequacy of public credit forced them to repay their private debts first in
order to maintain their creditworthiness. The unpaid loans at the end of1963/64 were consolidated into 5 yearly installments but at the end of lastyear, 68 percent (K136 million) was still outstanding. Some of these loansdate back to 1953/54 and might as well be written off.
Table 27
Agricultural Loans /1(Million Kyats)
Loans Repayment/New Loans Repayment Outstanding New Loans
/1 Lending by the Agricultural Division and other government sources.
Source: Mission estimates 1961/62-1964/65; IMF Report, 1972 for 1965/66-1970/71.
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219. Since 1964/65, the amount of new loans has been considerably reducedto between K150-200 million per year. The Government took steps to reducearrears, and repayments on new loans now average 85 percent. Between 1965/66and 1969/70, members of cooperatives and Village Banks were held collectivelyresponsible for repayments. To qualify for a new loan, Village Banks had torepay 75 percent of the loans made in each year. This regulation was liftedin 1969/70 since it was considered unfair to penalize the whole group for thedefaults of a few farmers and the repayment record had considerably improved.Farmers are now given extensions of up to one year before they are cut offfrom further public credit. It is difficult to assess the adequacy of thelevel of agricul,tural credit extended by the Government. No data is avail-able on private lending but various reports suggest that the farmers stillrely on private money lenders for about 40 percent of their credit needs.
220. As a matter of Government policy, the People's Bank does not makecommercial loans and overdraft facilities are limited. Since the national-ization, no new commercial loans have been made except for renewals of up to12 years on old loans and only those industrial enterprises supplying goodsto the Government are entitled to these renewals. The interest rates chargedon outstanding overdrafts and commercial loans are 6 percent and 5-1/2 percentrespectively. An additional half percent is charged for loans outside Rangoonto cover inter-bank charges. The only other lending to the private sector isthrough the Small Loans Division. This division took over the functions ofthe 139 pawn shops which were nationalized in 1963. The interest rates chargedare rather high, around 2-3 percent per month even with jewellery placed inthe bank as collateral. The growth in the amount of loans disbursed from K83million in 1961 to K180 million in 1971 (Appendix Table 6.1) even at theserates, gives some indication of rates charged by private money lenders andof the demand for credit.
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XII. THE EXTERNAL. SECTOR
Foreign Trade
221. Burma is probably the only country in the world whose dollar valueof exports Is still below pre-war levels. -iExports averaged K519.2 million($189 million) 1/ between 1936 and 1941, rose to a post-war peak of K1297.2million ($272 million) in 1952/53 and have since declined to a low K521 mil-lion ($108 million) in 1967/68, rising only.,slightly over the last 3 yearsto K579 million ($120 million) in 1970/71.: In addition to the decline inthe value of exports; the pattern of trade is different from the pre-warsituation in many oth6t respects. Before-thife war, the outstadding featuresof Burma's foreign trade were: (i) the high dependence of the economy onforeign trade; (ii) the importance of r)ice 4and oil in total exports; (iii)the importance of India as a trading partner; (iv) the large trade surpluses,
and (v) the control of the sector by British,and Indian merchants. With theexception of the predominance of rice in total exports; all of these featureshave changed.
222. Foreign trade is now completely monopolized by the State. TheMyanma Export-Import Corporation (MEIC) is the official agency handling allexports and imports. However, several Government agencies such as Trade
Corporation No. I (Agricultural Products) and the State Timber Board handletheir own exports. For these and other agencies which do their own procure-ment of imports, MEIC acts as a clearing agent. In effecting payments for
imports and exports, letters of credit have to be opened by or with thePeople's Bank. All receipts and payments must be made to and by the People's
Bank.
223. The foreign trade sector accounted for more than 70 percent of
domestic production before the war; exports accounted for 50 percent and im-ports for 25 percent of GDP. However, throughout the post-war period, theforeign trade sector had declined in importance and in 1961/62, exports and
imports accounted for only 30 percent of GDP. Over the last 9 years, theirshare continued to decline and amounted to only 14 percent of GDP in 1970/71(Appendix Table 3.1). Before the war, Burma was a major exporter of rice,
crude oil, minerals and timber. Rice and oil accounted for 70 percent oftotal exports with timber and minerals accounting for another 19 percent.Table 28 shows the changes which have taken place in the composition of ex-ports since 1938/39. Rice maintains a predominant position in the share of
exports while exports of crude oil have completely disappeared. The post-war production of crude oil has been barely enough for self-sufficiency.Last year, Burma imported K34 million of crude and refined oils. Exports
of teak have replaced oil in share of total exports even though the volumeof teak production has not yet regained pre-war levels. The output ofminerals has declined the most and exports of minerals were less than 30
Oil 23.0 - - -Timber 6.9 10.3 19.4 24.0Base and Metal Ores 11.9 3.6 5.6 5.5Others 4.2 2.9 2.7 3.8
Total Exports 100.0 100.0 100.0 100.0
Source: Central Statistics and Economics Department.
Exports
224. Over the last 9 years, Burma's export performance was extremelypoor. The total value of exports declined by an average annual rate of 9percent (Table 29). This was mainly due to the slow growth of agriculturalproduction (exports of agricultural products account for 67 percent of totalexports), the decline in mineral production, the stagnation in timber extrac-tion and the general lack of priority given to export promotion. Little ef-fort has been made to take advantage of existing market conditions for Burma'sexports or to explore the possibilities of new markets and new commoditiesfor export.
225. The major decrease was in the value of rice and rice products whichdeclined by nearly 13 percent per annum. The share of rice in total exportsis still around 50 percent even though the volume of rice exports in 1970/71was four times less than the pre-war level of 3 million tons. The post-warrecovery began in 1947/48 when rice exports amounted to 1.3 million tons androse to a peak of 2.0 million tons in 1956/57. Thereafter, rice exportsfluctuated around 1.5 million to 2.1 million tons in 1959/60. However, overthe last 9 years, rice exports have shown a steady decline from 1.8 milliontons in 1961/62 to around 350,000 tons in 1967/68 and 1968/69 and have sincerecovered to around 750,000 tons (Appendix Table 3.2). Paddy output has beengenerally stagnant since 1964/65 while domestic consumption has been increas-ing at around 3 percent per annum.
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TABLE 29
Value of Major Exports by Commodity(Million Kyats)
Source: Customs Data Central Statistics and Economics Department.
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226. Burma's reliance on rice as the principal export has been the majorcause of her foreign exchange hardships. During the fifties, rice accountedfor 75 percent of total exports and the Government's efforts to increase theexportable surplus were met by a sharp decline in the export price from E60per ton in 1952/53 to 032.5 in 1959/60. During the sixties, these problemswere compounded by a decline in the exportable surplus due to the combina-tion of increased consumption, bad weather, and the inadequate pricing policyand mechanism for procurement. The country was also unfortunate in that theincrease in the exportable surplus in 1968/69 coincided with another sharpdrop in world prices (E29 - E25 per ton) and increasing competition from theU.S., Japan and the EEC in some of Burma's traditional markets. The worldmarket situation has improved somewhat over the last 2 years, and if effortsare made to increase procurement and/or restrain the rate of growth of domes-tic consumption, Burma should be able to sell 1 million tons of rice per yearover the next 5 years. The real adjustment however, must come from a diver-sification of production and of exports.
227. Other agricultural products (pulses and beans, rubber, oil cake,cotton and jute) account for about 17 percent of total exports. With theexception of jute, the export of all these commodities also declined overthe last 9 years. The decline in exports of pulses and beans was due tothe slow growth of production, the increase in domestic consumption and thedeterioration in quality. The land suitable for the cultivation of beansand pulses in Central Burma is constantly being eroded by floods and theGovernment does not have an established Bureau of Standards to assist farmersin the grading of production for export. The decline in the exports ofanimal feed-stuff is also a supply problem. The production of rubber hasbeen constant at aro-und 14,000 tons per year over the last 9 years. Thetrees are ancient and yields per acre are one-tenth those of Malaysia.Rubber can be grown successfully in the Tenasserim area, but the Governmenthas made little effort to expand the area under rubber cultivation. This ispartly due to insurgency in the area but lack of interest seems to be themain problem. Cotton exports have declined with the increase in the domes-tic demand for locally produced cotton textiles. Jute is a new export.Last year, 5,000 tons were exported and the Government hopes to take up someof the market lost by Bangladesh by extending the area under jute cultivationin the Delta area.
228. Teak has been the only commodity to show an increase, ever soslight, of 1 percent per annum over the last 9 years. Export prices havebeen rising but the Government has been unable to take advantage of theexcellent market conditions for teak exports because of production problemsand a policy of selling to traditional buyers according to long establishedquotas. Exports of minerals have declined with production and Burma is un-able to take advantage of the favorable market conditions for tin, tungsten,lead, and zinc because of the run-down state of the mines, the shortage oflabor and insurgency activity in the mining areas.
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Imports
229. The trend in imports has been less pronounced than in exports. Be-tween 1936 and 1941, the average value of imports was K251 million ($92 mil-lion); imports rose steadily during the post-war period, to a peak of K1322million ($278 million) and then declined to K1044 million ($219 million) in1961/62. Over the last 9 years, the value of imports declined at an averageannual rate of 2.5 percent, amounting to K833 million ($173 million) in 1970/71, but the movement over the period was not uniform. The level of importsremained roughly constant between 1961/62 and 1963/64, then increased bynearly K400 million the following year and declined even-more sharply by K600million in 1965/66. Over the last 5 years, imports have remained at aroundK800 million (Table 30).
230. The major change has been the composition of imports. Before thewar, consumer goods imports (mainly foodstuffs and textiles) accounted fornearly 80 percent of total imports. During the fifties, the share of cap-ital goods increased in line with the Government's emphasis on developmentprojects and defense. By 1961/62, the share of imports of consumer goodshad decreased to 60 percent. Imports of foodstuffs were cut back to essen-tials - flour and milk foods, but textiles still accounted for 25 percentof total imports. The commodity composition of imports reflects the prior-ity given by the Government to producer good imports (Appendix Table 3.5).Imports of foodstuffs registered the sharpest cuts declining by 11 percentper annum; imports of edible oils also declined except for the tremendousincrease in 1964/65 due to the drop in domestic production. Textile importsshowed a slight decline but still account for 22 percent of total imports.Altogether, the share of consumer goods imports declined to 52 percent in1970/71. The emphasis given to reconstruction and development is perhapsmore clearly reflected in the two-fold increase in the share of machineryand equipment to 36 percent of total imports in 1970/71. In fact, the onlytwo import categories to register increases were machinery and equipmentand minerals (mainly crude oil). Chemical imports declined with the declinein imports of pharmaceutical products and fertilizers. The former are-sup-plied by the black market and the latter are now mostly domestically pro-duced. Imports of rubber goods, paper and paper products maintained theirshare of total imports of 5.6 percent and suggest possible lines of futureimport substitution. Capital goods imports currently account for 48 percentof total imports. No breakdown of intermediate goods imports is availablebut rough estimates suggest that the import content of public sector invest-ment is about 35 percent.
231. There is no real policy on imports except that in general importsare severely restricted. The Trade Council decides on the level of essentialconsumer goods imports, which is nowhere near to existing demand. The variousGovernment agencies submit their import requirements annually to the Ministryof Finance which prepares the foreign exchange budget. The function of thebudget is mainly to curtail imports to levels permitted by the forecast offoreign exchange earnings and loan disbursements. Capital goods importswhich are tied to loans are automatically approved but the Government has
Source: Customs data. Central Statistioe aeLd Economics Department.
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consistently over-estimated foreign exchange earnings and the Finance Min-
istry is continually occupied with the task of cutting back imports. Prior-ity is given to imports of spare parts, raw materials and new equipment.
Pattern of Trade
232. The pattern of trade has not altered significantly except that Indiais no longer the major trading partner. Before the war, India accounted formore than 50 percent of total exports and over 60 percent of total imports.
The decline in exports to India, which accounted for 12 percent of total ex-
ports in 1970/71, was due to the success of the "green revolution" and theadvent of India's self-sufficiency in rice production. However, the decline
in exports to India was offset by the increase in exports to other Asian
countries, mainly Ceylon and Indonesia. Asia, including China and Japan,currently accounts for 59 percent of Burma's exports (Appendix Table 3.7).The decrease in share from 67 percent in 1961/62 is mainly due to the declinein the share of Western Europe from 17 percent in 1961/62 to 26 percent in
1970/71 is due to the increase in the share of timber exports which go mainly
to the United Kingdom and Northern Europe. During the fifties, Burma madeseveral attempts to sell rice on a barter basis to Eastern European countries;however, by the beginning of the sixties, barter trade was practically non-
existent and the Eastern Bloc now accounts for only 4 percent of total ex-ports. The success of Burma's efforts to find new markets for rice resultedin the increase in the share of the Middle East from 2 percent to 4 percent
over the last 9 years. Exports to North America have always been negligibleand account for less than half a percent of total exports.
233. -The pattern of imports has also not shown any marked change over the
decade (Appendix Table 3.6). Asia accounts for 55 percent of total imports and
India has been replaced by Japan, which now accounts for 30 percent of all im-
ports. China's share of total imports declined steadily from 13 percent in
1961/62 to 3 percent in 1968/69, began to increase over the last 2 years and
now accounts for 7 percent of total imports. The share of Western Europe has
increased by 2 percent to 29 percent in 1970/71, while Eastern Europe increased
its share from 5.9 percent to 7.5 percent. The share of imports from North
America have remained constant at 5 percent.
Terms of Trade
-234. The terms of trade deteriorated by nearly 34 percent over the last
3 years. This was caused by a 28 percent decline in the export price index
while the import price index rose by nearly 9 percent. The single most im-
portant cause of the decline in export prices was the 42 percent drop in the
average price of rice exports.
Balance of Payments
235. Before the war, Burma had sizeable trade surpluses (usually about
twice the size of imports), much of which were paid abroad in the form ofprofits and capital remittances. Except for the surplus registered in the
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early fifties - the period of high world prices for rice - the ratio of ex-ports to imports has steadily declined. In 1970/71, the ratio of foreignexchange receipts to payments on imports of goods and services was 63 percentcompared to 123 percent in 1952/53 and 104 percent in 1962/63 (Appendix Table3.8).
236. Over the last 8 years, the balance of payments has shown a risingdeficit on current account (Table 31). The value of merchandise exports de-clined steadily up to 1967/68 and has since shown a modest increase of 2percent per annum. Over the period, merchandise exports declined by 9 per-cent per annum; imports also decreased but the rate of decrease was muchslower. The nationalization of trade and of the other economic sectors hasreduced capital remittances to negligible proportions. Private remittancesare also small because of the large-scale emigration of Indian and Pakistaninationals in the early sixties. However, Burma still makes sizeable net pay-ments abroad on account of invisibles. The largest item in the payments onnon-factor services is Government transactions, which covers some purchasesof defense stores. In 1970/71, the deficit on invisibles accounted for 26percent of the trade gap on goods and services.
237. Sizeable inflows of official grants have had some impact in reduc-ing the deficit on current account. Nevertheless, the current account deficithas risen from K95 million ($20 million) in 1966/67 to around K300 million($62 million) in 1970/71. The deficit has been financed by increased for-eign borrowing and a draw-down in reserves. Gross disbursements on foreignloans have been increasing but repayments of principal which are fairly largein relation to disbursements, have been rising even faster. Over the last 4years, Burma has had four drawings from the IMF totalling $38 million 1/ inaddition to two allocations of SDR's amounting to $7.9 million in 1969/70 and$6.4 million in 1970/71. Burma has also considerably increased her outstand-ing liabilities with foreign banks from zero in 1966/67 to K200 million ($41.6million) in 1970/71. Altogether, net capital inflows financed about 50 per-cent of the current account deficit over the last 4 years.
238. The prospects for an overall improvement in the balance of payments,in the near future, are not very favorable. Much will depend on the worldprice of rice, the success of the Government in increasing production andthe exportable surplus and the inflow of foreign aid on concessionary terms.The output of teak and minerals is severely constrained by the shortage offoreign exchange and the existing level of reserves would not permit an in-crease in imports to the required level.
Reserves
239. The deteriorating balance of payments situation resulted in a sharpdrop in reserves from about K900 million in 1966/67 to K300 million in 1970/71.
1/ Drawings were made in 1967/68 (US$15 million); in 1968/69 (US$4.5 mil-lion); in 1969/70 (US$12.0 million) and in 1970/71 (US$6.5 million).Of these purchases, US$33 million remain outstanding.
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TABLE 31
Balance of Payments(Million Kyats)
Year Ending Sept. 30 IJ la 130 1i k 1967 1968 1969 1970 1971
I. Exports of Goodel/ 1,271 1,094 1,041 975 726 545 542 573 572
II. Import of Goods / 1,087 1,111 1,269 790 749 785 836 871 846
S/ See Appendix Table./ Includes borrowing from the IMF./ Plus sign denotes an increase in reserves.
Source: People's Bank
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Gross reserves are currently equal to about three months imports, atthe present low rate. The decline in reserves has to be consideredin the context of a long established policy of maintaining reservesat levels often considered excessive by outside observers. Burma's tradesurpluses before the war and during the early fifties permitted the accumula-tion of reserves often exceeding the value of annual imports. During thefifties, gross reserves declined by K400 million between 1952/53 and 1959/60to K767 million. Between 1959/60 and 1962/63 reserves increased sharply mainlybecause of an increase in the export surplus. Between 1962/63 and 1968/69,with declining exports and imports, reserves were maintained at levels equiv-alent to between 8 and 14 months of imports. Gross reserves declined by K250million in 1969/70 but were still equal to nearly 7 months of imports. TheGovernment's policy on reserves during the sixties was dictated by the impor-tance given to maintaining the value of the Kyat, the monetary regulationswhich required the Central Bank to hold reserves equal to at least 25 percentof currency in circulation and partly to apprehensions about a sharp drop inexport earnings. These considerations have some merit but it is not clearwhy gross reserves should have been maintained at these high levels at thecost of increasing short-term liabilities abroad. Some indications of amore reasonable policy are: (i) the suspension of the monetary regulationsin March 1971; (ii) the containment of short-term liabilities abroad at aroundK200 million; (iii) the request for longer-term financing, and (iv) the recentdevaluation of the Kyat.
240.. At the end of the last year, following the devaluation of thedollar and the realignment of major international currencies, the Kyat wasdevalued by 18 percent in terms of gold and 11 percent against the dollar.The par value of the Kyat had been fixed at K4.76 per dollar since 1949 andthe new rate of K5.35 per dollar represents an effective depreciation ofabout 10 percent in relation to Burma's major trading the developed countries.It is not yet clear what effect the devaluation will have on the balance ofpayments situation. The problem with exports is more one of supply than ofprices and it is not possible to calculate import elasticities of demand. Upto the present time, there has been no change in the domestic price of exportsand imports but a Price Committee has been established to make recommendationsfor price changes to reflect the realignment of currencies.
External Debt
241. Burma has received very little foreign assistance during thepast decade. External assistance in the form of grants (mainly Japanesewar reparations) amounted to $194 million over the decade. As ofSeptember 30, 1971 the total debt was $257 million, including an undis-bursed balance of $135 million. Of the total loans!committed, about 72 per-cent is extended by various governments and 23 percent by private supplier'scredit. As Table 32 shows, nearly 40 percent of the official loans (equiva-lent to $73.6 million) was committed by the People's Republic of China in theform of concessionary aid for economic development. This loan was contractedin 1960 and it is noticeable that $50 million is still undisbursed. The nextlargest donors are Japan and the Federal Republic of Germany, which have ex-tended long-term loans of $42 million and $27 million, respectively. Most
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of the official loans from Japan are undisbursed while 50 percent of the of-ficial loans from Germany have been disbursed (Appendix Table 4.1). In recentyears, Burma has substantially increased her borrowing from private suppliers,mainly in Japan and Germany, to finance new industrial projects.
Table 32
External Public Debt as of 9/30/71(US$ million)
Major Donor Government Suppliers TOTAL(%) ' (%J (x)
China (People's Rep. of) 73.6 (39.6) - - 73.6 (28.6)
GRAND TOTAL 186.0 ( 72.3) 58.9 ( 22.9) 257.2 (100.0)
Source: Economic Program Department, IBRD.
242. The weighted average terms and conditions of the loans have onthe whole been favorable to Burma. A comparison of the average terms andconditions of various types of loans is as follows:
The loan from China which accounts for the largest share of official loanshas a 20-year grace period, a maturity period of 30 years and bears no in-terest. It would be difficult to improve on these terms. Official loansfrom Japan carry a 6-year grace period, maturities of 21 years and an averageinterest rate of 3.4 percent. The loans from Germany carry a 7-year graceperiod, 24 years of maturity and an interest rate of 2.9 percent. Althoughprivate suppliers' credit account for only 23 percent of the total loan com-mitments, the repayment periods are shorter and the average terms moreonerous. These loans generally carry a grace period of less than 2 years,maturities of 9 years, and an interest rate of 5.8 percent.
243. Accurate data is not presently available on the trends in disburse-ment and repayment of foreign loans over the last decade. The Mission is un-able to reconcile the data in the balance of payments with the budget data.However, the overall trend is clear. Both disbursements and repayments havebeen growing although repayments (on account of supplier's credit) have beengrowing faster and in recent years have been equal to more than 80 percentof gross disbursements. It is also clear that the recourse to short-termborrowing from private creditors is responsible for the substantial increasein projected service payments (Appendix Table 4.2). Over the next 5 years,service payments on existing debt will be in the range of $20-25 million, ofwhich the share of suppliers' credits will exceed 50 percent. Even if oneassumes that there is a turning point in the trend in export earnings and thatforeign exchange receipts will continue to grow at an average annual rate of2 percent experienced over the last 3 years, the debt service ratio will risefrom around 13 percent in 1970/71 to 18 percent in 1973/74. In view of thisalready high debt burden, the prospects for the balance of payments and Burma'slevel of per capita income, future borrowing which Burma greatly needs, shouldbe on long-term concessionary terms.
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XIII. PERFORMANCE, POLICIES AND PROSPECTS: APPRAISAL
244. The visitor coming from Kabul or Kathmandu is immediately struck
by the bounty of Burma's natural resources. Coming from Teheran, Delhi or
Bangkok, one gets the feeling that the pace of life has slowed down to a
near standstill. The truth lies somewhere in between. Burma's potential
for vastly increased levels of output is solidly based on the country's
economic geography and population but the economy shows no signs of dynamic
growth; on the contrary there are too many signs of the deterioration of
physical assets because of the failure to achieve a sustained increase in
economic growth. However, the assessment of performance cannot be limited
to the criterion of economic growth but must take into account all of the
country's objectives.
Performance
245. The main preoccupation of all post-war Burmese governments has
been to lay the foundations of what a government spokesman called "socialist
power." This entailed a continuing struggle to unify and politicize the
populace, to nationalize the means of production and to ,create a.socialist
welfare state. In the effort to achieve these goals, the government, par-
ticularly over the last decade, was willing to eschew the path of high growth
rates. This was not deliberate policy; it simply evolved in the course of
things that economic development was secondary to the achievement of social
and political objectives.
246. On the political front, Burma successfully isolated itself from
external pressures, and any benefits thereof, by maintaining a policy of
strict neutrality. At home, insurrection in the border areas continues to
divert a large part of the nation's resources into defense and to obstruct
the development of mining and forestry resources. However, a great deal of
political stability and unity has been achieved and several recent develop-
ments indicate a renewed air of self-confidence in the government. The
Chairman of the Revolutionary Council has relinquished his military title
and all military officers holding cabinet positions have followed suit.
The first draft of a new constitution is being circulated for comments
throughout the country and over the last two years, Burma has considerably
increased diplomatic, cultural and trade representations with other coun-
tries. The period of isolation, both at home and abroad, seems to be coming
to an end.
247. Over the last decade, the Government continued the process which
had begun at independence, of constructing a socialist economy by the
Burmanization and nationalization of the means of production. Burmanization
basically meant the expulsion of foreigners from commercial and money lending
activities and no foreign participation in production. Nationalization of
all the sectors has been almost fully accomplished with one notable exception.
Agriculture has not been collectivized and it is unlikely that the sector
will be taken over by the State. The remaining private sector activity in
retail trade, small-scale industry, inland water transport and trucking is
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to be gradually replaced by the establishment of cooperatives and by the in-crease in public sector investment in transportation. The transformation ofthe economy has been accomplished but at the cost of considerable economicdisruption, particularly in domestic trade and its economic benefits are yetto be reaped.
248. Burma's unique success has been in the provision of advanced socialservices for a population of about 30 million with a per capita income of about$80. The government exerted its main efforts to raising the standard ofliving by reducing inequalities in the distribution of income, keeping theprices of basic commodities stable and widening the scope of education andhealth services. The uniform pricing policy for rice ensured the avoidanceof starvation; in fact the per capita consumption of rice went up by 20-30percent over the decade. Disparities exist but incomes are more or lessequally distributed and in the field of health and education, Burma hasachieved successes which surpass those of much richer countries. Expenditureon health and education doubled over the decade bringing about tremendousincreases in the number of hospitals, doctors, schools, teachers and students.Medical care was taken to the rural population through an extensive network ofrural health services and MCH clinics. At least 9 years of education areprovided free and minimal fees are charged for those who qualify for highereducation. The literacy rate of the adult population is nearly 70 percent.
249. These achievements are quite considerable, particularly when onesees them in the context of declining foreign trade and little relianceon foreign borrowing. At the same time, the rate of growth of the economybarely kept ahead of population growth and per capita incomes are at, ifnot below, the 1964/65 level. The lack of priority given to economic develop-ment is revealed in the fact that only 12 percent of GNP is allocated toinvestment. This has not been the only factor impeding growth. Even moreserious were the consequences to the economy of policies dictated by otherconsiderations. The decline in the exports of rice during the first halfof the decade resulted from the inability of the government to increaseprocurement and in general, Burma failed to take advantage of excellentworld market conditions from her exports of teak, minerals, beans, pulsesand other agricultural products because of a lack of effective policies todevelop export possibilities. For most of the decade, imports of badly neededspare parts and replacement equipment were cut back while reserves weremaintained at levels equivalent to 8-14 months of imports.
250. The policy of maintaining price stability undoubtedly was ofbenefit to consumers but it was also one of the factors contributing to theslow growth of agricultural production and to the inability of the State en-terprises to accumulate a surplus for investment. The inefficiency of theState distribution system has been the single most harmful consequence ofnationalization and the situation is cause for serious concern. The systemis overburdened with excessive costs, insufficient storage and transportationfacilities, a lack of information on demand and supply and a shortage of qual-ified personnel. The inadequacy of the distribution system creates artificialscarcities and price distortions and has been an important obstacle todevelopment.
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251. The government's policy towards agriculture has been directed atthe welfare of the rural population rather than to increasing productivity.The agrarian reform gave to the peasants the right to cultivate the land andto transmit it to their heirs but the government is just beginning to realizethat land reform may be a necessary, but it is not a sufficient condition forgrowth. Industrialization has also been a major goal of all post-war Burmesegovernments. Industrialization in Burma is synonymous with independence andself-reliance and was never clearly conceived as a means of modernizing anddiversifying the structure of production to increase the overall rate ofeconomic growth. During the sixties, the government launched an ambitiousprogram allocating most of what little investment resources and foreign bor-rowing there was to establishing new industries. However, the policies guid-ing the operation of the sector seem designed to ensure a continuation of itspoor performance. This is not to say that the focus of industrial policy,which is the development of industrial raw materials and import-substitutingconsumer good industries, is incorrect; but it is not an optimal use of re-sources to allow the capacity of existing industries to deteriorate whileinvesting in additional capacity and the lack of financial and managerialautonomy of the state industries ensures their inefficient operation.
252. Over the decade, fiscal and monetary policies have been carefullymanaged to meet the government's objectives. The pattern of currentexpenditure reveals the priority given to social and economic services anddefense. The overall policy has been to restrain the rate of growth ofexpenditure in line with revenues. However, in recent years, tax revenueshave not been sufficient to cover expenditures and this, in addition tothe overall deficit of the state enterprise sector has meant rising budgetdeficits. In the interest of price stability, the government has invariablycut back expenditure in order to avoid excessive deficit financing and overthe decade, the expansion in the money supply was less than 2 percent perannum. The resource gap was financed by a continual draw down in reservesand, in recent years, by an increase in foreign borrowing. However, forthe most of the decade, Burma made little use of foreign borrowing. Themanagement of external debt consisted of the timely repayment of loans, theslow disbursement of existing loans and an unwillingness to make new commit-ments. This policy was dictated by political considerations but over thelast four years, with the continued worsening of the balance of paymentssituation, the government has had to rely increasingly on foreign borrowing,mostly of short-term supplier's credits. This however, is not a course ofaction which can be pursued further. Repayments are already dangerouslyclose to the level of gross disbursements and the debt service ratio, al-ready at 15 percent is rising rapidly.
253. The major economic problems have been and still are: (i) the slowgrowth of agricultural and industrial production (ii) the inefficiency of thedistribution system (iii) the lack of foreign exchange and (iv) the shortageof domestic savings. All of these problems are interdependent and compoundthe difficulty of breaking out of the vicious circle of low incomes and lowgrowth. Agriculture is the major source of income and foreign exchangeearnings; more than 70 percent of industrial production is the processingof agricultural commodities and the shortage of foreign exchange has made itdifficult for the government to maintain existing assets, let alone expandcapacity.
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254. This recounting of the past indicates that performance over thelast decade has been one of mixed successes and failures. The successeshave mainly been in the attainment of social and political objectives. Sincethe achievement of a higher growth rate was not an objective of the Govern-ment, it is difficult to call non-achievement a failure. The fact remains,however that policies dictated by other priorities have had depressingeffects on economic growth. More importantly, and without question, thetime has come when the lack of progress in economic growth may endanger thesocial progress that has been made.
Policies
255. The major policy problems confronting the government are to improvethe management of the public sector and to increase the mobilization of domes-tic resources for investment. These problems require a serious reassessmentof policies and the taking of some difficult decisions which are necessaryfor increasing the rate of economic growth.
256. Improved management of the public sector is inseparable from an im-provement in the overall planning process. Though this is the eleventh yearof the Revolutionary Government, the first four-year Development Plan is onlyin its first year, and much experience remains to be gained. The Plan's over-all objectives are commendable and modest (perhaps too modest). However, itis not at all clear how the specific production targets have been derivedfrom the overall objectives, nor how they are related to each other. In par-ticular, the present mechanisms for planning do not ensure the smooth coor-dination of the efforts of the public sector enterprises. The continual de-cline of the existing capital stock of some enterprises, which continues whilenew equipment is being imported and built, is an indication that somethingmight be wrong. A fundamental re-examination of the mechanisms of economicplanning is urgently needed.
257. The planning problem is all the more acute as even the most detailedeconomic decisions concerning the public sector are taken centrally. For eachpublic sector enterprise, the Government determines the type and volume ofproduction, prices, wages, the purchaser and the supplier, as well as the pur-chase and supply schedules. Not only does the Plan framework not seem to pro-vide a solid enough basis for such detailed central decision-making but knowl-edge of the economic circumstances of individual firms is also inadequate.The accounting methods used are generally old; accounts are finalized inor-dinately late; depreciation is almost universally understated; capital costsare disregarded, and very few firms practise any cost accounting at all. Thewhole pricing process is geared to the cost of production but those costs aregenerally poorly defined and their estimates systematically biased downwards.Even the best informed Government, equipped with the best conceivable plan-ning framework, could not effectively centralize decision-making to the ex-tent currently practiced in Burma. Conversely, even if individual firms aregiven more autonomy, better accounting practices are essential to improvedmanagement. Also, as the complexity of the economy grows, it will be in-creasingly wasteful to centralize all decisions in Rangoon. Decentralizeddecision-making and a clear allocation of responsibilities are urgently needed.Far from weakening the central planning process, this would strengthen it by
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allowing the authorities to focus their energies on the problems-which must
indeed be centrally decided.
258.' The institution of the new administrative system might be a tenta-
tive first step in the desired direction. However, certain specific conse-
quences of present policies need to be tackled rapidly. One is the running
down of the existing capital stock. This must be given high priority andthe responsibility for it must be clearly allocated. It is 'difficult to see
where the basic responsibility could fall if not on the managers of individualcorporations, who would in turn require that economic policies be clearly
defined and that individual firms be given some control over-'the depreciation
funds they generate.. The need to improve management practices is particularlyacute in the trade 4ector. It is indeed well recognized in-Burma that this is
the sector whose management is the most deficient, thus amplifying scarcities
well beyond what would be inevitably imposed by the slow growth of production.These scarcities act not only as a disincentive tb productive efforts, par-
ticularly in agriculture but they also encourage the growth of the black mar-
ket, thus protecting and enriching the socially most undesirable privateactivities.
259. Even with improved management of the economy, the current levels of
investment cannot lead to dynamic growth; indeed they will barely be enough
for the task - which cannot be postponed much longer - of overhauling and re-
newing the overaged capital stock. Success in securing more foreign aid will
of course help, though at first this will not do much more than substitutefor the draw down of reserves practiced in recent years. Burma has to tackle
the problem of raising more domestic savings. Additional private sector sav-
ings could be generated possibly through the use of interest rate policy or
by devising and implementing new pension and insurance schemes. However, in a
country aiming to become a socialist welfare state, private savin'gs are likely
to play, at best a secondary role. The main source of savings will be thesurplus of the public sector enterprises and current budget revenues.
260. Efforts will have to be made to increase budgetary savings. There
is no further scope for reducing expenditures, which have generally been cut
back to minimum levels. Furthermore, increases in capital expenditures will
require conmensurate increases in current expenditures on social and economic
services. The problem therefore has to be tackled from the revenue side.
The role of direct taxes is likely to be limited, as in practice only
Government employees are subject to them. Customs duties were once an
important source of revenue but now most imports are taken by the Govern-
ment, so that import duties make little net contribution to government re-sources. This situation can, of course, improve but only in the long run ifsuccessful export promotion efforts provide additional resources for imports.
Indirect taxes on consumption goods therefore seem to be the most important
potential source of additional revenue over the next few years. An increase
in indirect taxes will increase prices but this may perhaps reduce the short-
age of goods in the Government's shops. An alternative course of action
might be the use of additional deficit financing but - particularly in view
of the Government's emphasis on price stability - this would be even more
disruptive.
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261. In addition to increased savings, the need for foreign exchange isalso great, perhaps even greater. Burma is showing signs of a new realismin approaching foreign sources of development finance although it isimportant that the Government should remain extremely prudent towards increas-ing reliance on short-term borrowing. For a country whose exports, in currentdollar values, are still below their pre-war level, it is axiomatic that ex-port promotion should have high priority. This is not yet the case. Exportmarket potentials need to be vigorously investigated and continuously moni-tored and the possibilities for individual commodities need to be transmittedto the producers. In agriculture and handicrafts, which are still dominatedby the private sector, this should take the form of adequate price incentives.At the present time, the movement of domestic prices of tradeable goods seemto be only incidentally related to changes in foreign prices, thus ensuring acomplete lack of correspondence between productive efforts and export poten-tial. Planners and producers at all levels must be made aware of the benefitsof exports - through the appropriate translation of foreign to domestic prices,and if feasible, also through other means. Export promotion must be givenhigh priority, primarily in the availability of raw materials, investment goods,access to foreign exchange, but also in terms of the flexibility in interpretingspecific rules when they are in hindrance.
262. The needs of export promotion are greatly affected by the organiza-tion and management of the public-sector. At present, exports are the mono-poly of the Government's trade organizations; but the production of exportsis the responsibility of other agencies, while the policy framework in whichthey all operate, including price levels, credit ceilings, etc., is determinedby the Government proper. Thus, no particular organization or sector can beblamed for failure (or rewarded for success) in exporting any particular com-modity. In the short run, giving priority to export promotion may hamper thepursuit of some other aims of the Government; but in the long run - a matterof a few years, not of decades - there is not a single objective which wouldnot suffer if exports continued on their past course.
Prospects
263. How does one assess the present situation and the prospects for theimmediate future? The government seems to be aware of these problems andis trying to do something about them. There is evidence of improved policiesregarding the development of the agriculture sector and the operation ofthe state enterprises. The government has had modest success in encouragingcrop diversification and increasing agricultural productivity. Procurementprices have been increased; tractors, which the state had been unable tooperate efficiently, are being sold to the farmers and the government didnot discount the possibility of creating institutions for channelling mediumand long-term credit to agriculture. Within the public sector (or, morespecifically, in transportation, industry, forestry and the social sectors)the entities are generally well run and operate efficiently within theoverall policy framework and foreign exchange constraints. In the industrialsector, several proposals are being considered to improve efficiency. Theconsumer cooperatives are the latest experiment for dealing with the problemof distribution but this is a problem which defies easy solutions and inadequatedistribution is likely to remain-"for some time.
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264. In looking ahead, the current Four Year Plan (1971/72 - 1974/75)may be taken as a point of departure. Burma has had several experiences indrawing up development plans but little in implementation. The Two-Year Planof 1948 and the Comprehensive Development Plan of 1954 was never implementedbecause of difficulties arising out of the lack of foreign exchange, admin-istrative incapacity and political disorder. Several 'plans' were preparedduring the sixties but they were shelved even before they reached the print-ing press because of the lack of foreign exchange. The present plan wasdrawn up by the economic committee of the Burma Socialist Program Party.The Plan was drawn up with the assistance of the various Ministries and onceapproved by the Party Congress, it was sent to the Cabinet. The actual im-plementation of the Plan is administered by the economic committee of theMinistry of Planning and Finance under Cabinet supervision. The Plan docu-ment gives a detailed description of the role of the public sector in theeconomy and defines,the method of plan implementation right down to thevillage level. However the Plan guidelines are particularly lacking ineconomic analysis and prescription. This is just as well since both thestatistical basis and the methodology of the plan do not bear too closeexamination. The objectives of the plan are to consolidate and improve onthe existing pattern of production and to increase reserves and employment.The plan sets modest targets for an increase in GDP at 4 percent per annumand an increase in per capita income at 2 percent per annum. Sectoral out-put targets are defined for agriculture, forestry, livestock, fishery, indus-try and mining and the Plan delineates whit needs to be done to improve theefficiency of the other sectors. The major weakness of the Plan is that itdoes not adequately translate these objectives into investment projects nordoes it have any discussion about financing. Both the amount and the dis-tribution of investment over the four-year period are to be maintained atthe same level as in 1970/71. However, these resources will not be suffi-cient to achieve the targeted rates of growth. The Plan is, neverthelessan important document, in that it is the first clear statement of the im-portance given by the Government to economic development and it attempts tooutline sectoral priorities within the contraints of available foreign ex-
change.
265. A more meaningful strategy of development would require in addi-tion to policy improvements, an immediate increase in capital expenditureto about 15-20 percent of GNP. In view of the present constraints to mobil-izing greater resources for investment, long term concessionary finance willhave to be relied on. Throughout this report, recommendations have beenmade for achieving higher rates of growth. In agriculture, increasedexpenditure on flood control works, land reclamation and irrigation isrequired, in addition to an expansion of credit for the purchase of tractorsand inputs of fertilizers, seed, etc. and a more flexible pricing policy.Industrial development requires a reorientation of emphasis to improve thecapacity of existing industry through an increase in the procurement ofspare parts and replacement equipment. Considerable inflows of foreigncapital and technology are required to develop the mineral sector. Thedevelopment of forest products which have good export prospects requiresinvestment in replacement equipment at all stages of production. Transportationhas been a major bottleneck to development and the shortage of capacity is
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likely to worsen over the next four years. An expansion of transportationfacilities and an increase in storage facilities would alleviate someof the problems of distribution. Finally, the report recommends anincrease in technical and vocational education, a revision of pay scales,an export promotion policy and considerable improvement in the policiesgoverning the operation of state enterprises.
266. There are signs of change but it is still difficult to assess whatinfluence political considerations will bear on taking the steps necessaryto increase economic growth. However, there is no question about Burma'sneed for IDA assistance nor of the country's ability to effectively absorbforeign aid in certain sectors. Burma has never come anywhere near toexploiting its enormous resource potential, and if the country is now (asit seems to be) at a turning point, assistance now would be both timely andfar-reaching.
STATISTICAL APPENDIX
Table No.
I. POPULATION, MANPOWER AND EMPLOYMENT
1.1 Land Area 1969/701.2 Population Estimates (1961-1971)1.3 Vital Statistics (1946-1976)1.4 Vital Statistics in Selected Urban Areas1.5 1971 Population: Age and Sex Composition1.6 Labor Force 1969/701.7 Skill-Mix of the Labor Force - Public Sector, 1969/701.8 Number of Registrations, Placement and Vacancies
II. NATIONAL ACCOUNTS
2.1 Gross Domestic Product (Current Prices)2.2 Shares of Gross Domestic Product by Industrial Origin
(at Current Prices)2.3 Expenditure on Gross National Product (Current Prices)2.4 Gross Fixed Capital Formation2.5 Price Index (1969/70 = 100)
III. BALANCE OF PAYMENTS
3.1 Share of Merchandise Exports and Imports in GDP3.2 Volume of Major Exports by Commodity3.3 Destination of Exports3.4 Exports and Imports3.5 Shares of Major Imports3.6 Origin of Imports3.7 Changes in the Pattern of Trade3.8 Foreign Exchange Receipts, Payments and Gross Reserves3.9 Balance of Goods and Non-Factor Services Account
IV. PUBLIC DEBT
4.1 Exte,rnal Public Debt Outstanding as of September 30, 19714.2 Projected Repayments on Existing Debt
V. PUBLIC FINANCE
5.1 income Tax Schedule5.2 Averiag.e Import Tariff5.3 Union Gov.ernment Capital Expenditure5.4 Budget of the Boards and Corporations
VI. MONETARY STATISTICS
6.1 Small Loan Division: Loans, Repayments and BalanceOutstanding 1960/61 - 1970/71.
VII. AGRICULTURAL STATISTICS
7.1 Number of Farming Units7.2 Agriculture Production Index7.3 Sown Acreage Under Various Crops7.4 Paddy Production and Rice Exports7.5 Prices of Selected Crops7.6 Production of Timber7.7 Conservation of Forests7.8 Timber Felling, Extraction and Milling Capacity7.9 Value of-Livestock and Fishery Production
VIII. STATISTICS ON OTHER SECTORS
8.1 Volume and Trends in the Production of Selected ManufacturedGoods, 1961/62 - 1970/71.
8.2 Production of Minerals8.3 Age Distribution of Transport Equipment8.4 Capital Expenditure in the Transportation Sector (1961/62-1970/71)8.5 Financial Performance of the Main Transport Boards8.6 Summary of Traffic by Main Public Transport Agencies8.7 Planned Investment in Transportation (1971/72 - 1974/75)8.8 Summary of the Program Proposed to the Bank Group8.9 Power Generation (1962-1971)8.10 Power Generation and Consumption (1962-1971)8.11 Investment in the Electricity Sector (1962-1971)8.12 Investment in the Electricity Sector (1971/72 - 1974/75)8.13 Expenditure on Education and Number of Schools8.14 Number of Schools, Teachers and Students8.15 Selected Comparisons of Pupil/Teacher Ratios8.16 Expenditure on Public Health8.17 Number of Hospitals, Doctors and Nurses8.18 Selected Comparisons of Population Per Hospital Bed and Doctor8.19 Health Services
IX. PRICES AND WAGES
9.1 Producer and Consumer Prices of Decontrolled Commodities in July 19719.2 Trade Corporations9.3 Monthly Wage Structure 1970/719.4 Average Monthly Earnings Per Worker
TABLE 1.1
Land Area 1969/70
Million Acres Percent
I. Forests 95.94 57.4
(i) Productive 73.66 44.1
(ii) Reserves 22.27 13.3
II. Suitaole for Agriculture 47.15 28.2
(i) Area under Crops 19.51 11.7
Of which irrigated 2.02 1.2
(ii) Area fallow 5.57 3.3
(iii) Cultivable waste 22.07 13.2
III. Other Lands 24.10 14.4
IV. Total 167.19 100.0
Source: Report to the People, 1971/72;Handbook on Burma, 1968.
TABLE 1.2
Population Estimates (1961-1971)
Year Total Population Annual Growth Rate(o0o) -
1961 22,278 2.1
1962 23,253 2.1
1963 23,735 2.1
1964 24,229 2.1
1965 24, 732 2.1
1966 25,246 2.2
1967 .25,811 2.2
1968 26,389 2.2
1969 26,980 2.2
1970 27,584 2.2
1971 28,201
Source: Report to the People, 1971/72.
TABLE 1. 3
Vital Statistics 1946-1976
Birth Rate Life Expectancy PoDulation AnnualYear per 1000 Male Female (million) Growth
1946-1951 43 34.4 38.1 19.1 1.5
1951-1956 43 36.9 40.7 20.7 1.7
1956-1961 43 39.2 43.4 22.8 1.9
1961-1966 43 417- 46.o 25.2 2.1
1966-1971 43 44.1 48.6 28.2 2.2
1971-1976 43 46.4 51.3 31.7 2.4
Sources Burma Health Report, August. 1971
TABLE 1.4
Vital Statistics in Selected Urban Areas
_ 2~~~~~~~~~~~~~~
Year Birth Rate2 ! Death RateV Infaft Mortali Maternal Mortali p
1961 38.5 18.4 123.6 3.8
1962 36.2 16.0 137.4 3.8
1963 42.7 18.3 121.8 4.7
1964 41.0 17.9 115.4 3.5
1965 444.8 17.9 114.5 2.5
1966 41.1 14.1 92.3 2.1
1967 41.0 12.2 66.5 1.6
1968 40.4 12.9 65.8 1.1
1969 39.3 12.2 65.0 1.2
1970 36.2 10.8 62.8 1.3
Source: Burma Health Report, August 1971.
- Per 1 ,OOO population.
2/- Per 1,000 live births.
TABLE 1.5
1971. Population: Age and Sex Composition(Million)
Age Group Male Female Total
0- 4 2.25 2.24 4.49
5- 9 1.85 1.86 .3.71
10-14 1.60 1.61 3.21
15-19 1.39 1.40 2.79
20-24 1.19 1.22 2.41
25-29 0.92 0.95 1.87
30-34 0.89 0.95 1.84
35-39 0.81 0.83 1.64
40-44 0.70 0.72 1.42
45-49 0.57 0.63 1.20
50-54 0.48 0.56 1.04
55-59 0.41 0.47 0.88
over 59 °077 0.92 1.69
Total 13.84 14.36 28.20
Source: Burma Health Report, August 1971.
TABLE 1.6
Labor Force 1969/70(000's)
Public Private
Sector Total % Sector % Sector %
Agriculture 7,252.7 66.7 70.8 6.7 7,182.0 73.2
Livestock andFishery 171.2 1.6 3.2 0.3 168.0 1.7
Forestry 169.4 1.6 130.6 12.3 38.8 0-4
Mining 28.2 0.3 26.4 2.5 1.8 0.0
Manufacturing 745.1 6.9 77.1 7.3 668.o 6.8
Power 10.6 0.1 10.6 1.0 - -
Construction 151.2 1.4 108.9 10.3 42.3 0.5
Transport andCommunications 346.5 3.2 74.2 7.0 272.3 2.8
Social Services 139.6 1.3 139.6 13.2 - -
Administration 324.7 3.0 324.7 30.7 - -
Trade 962.7 8.9 92.2 8.7 870.5 8.9
Workers n. i.e. 565.o 5.0 - - 565.o -
Total 10,866.9 100.0 1J058.3 100.0 9,0. 100.0
Source: Report to the People, 1971/72.
TABLE 1. 7
Skill-Mix of the Labor Force - Public Sector, 1969/70
Ratio ofUniv. and Ratio of
University Diploma Skilled toand Diploma Semi- Graduates Semi- andGraduates 'killed Skilled Unskilled Part-Time Total to Total Unskilled
