Reuters-ANALYSIS-W.Bank action pres

[hlaing@xxxxxxxxxxxxxx]

ANALYSIS-W.Bank action pressures Myanmar generals 
06:09 a.m. Sep 07, 1998 Eastern 

By David Brunnstrom 



BANGKOK, Sept 7 (Reuters) - Myanmar's ruling generals will find it even
more difficult to raise badly needed foreign funds after the World Bank
announced last week that it was cutting financial ties with the country,
analysts said on Monday. 



The bank, one of the world's lenders of last resort, said on Friday it
would not consider giving Yangon any more money because it had defaulted on
repayments of past loans. 



Diplomats and economists said the announcement was in a sense symbolic
since Myanmar has received no new assistance from international lending
institutions since its military rulers crushed a pro-democracy uprising in
1988. 



But they said it was a loud alarm bell for foreign investors as it showed
Myanmar to be a considerable investment risk. 



``Burma (Myanmar) had always kept up servicing its debt to the World Bank,
but recently it stopped doing so,'' said a diplomat in Yangon. ``It's a
confirmation that the economy has reached a very serious position. 



``It doesn't send a good signal to any investors thinking of putting in
money here. If it's not even able to come up with the small amount of money
necessary to keep servicing its debt, that's a pretty worrying sign.'' 



Diplomats and economists say that despite rosy government figures, the
economy has stagnated in the past two years due to mismanagement,
corruption, infrastructure inadequacies and Asia's financial crisis. 



The government faces a host of problems, including soaring inflation, a
plummeting currency and foreign reserves recently estimated as low as two
weeks of exports -- perhaps $100 million or less. 



In a rare and severe step, the World Bank said it placed loans and credits
to the Myanmar government in ``nonaccrual'' status, meaning it would have
to clear arrears estimated at $14 million before even being considered for
new loans. 



``There were a number of reasons, based on more political grounds, why the
bank couldn't have made loans,'' the diplomat said. ``But this is an
economic reason why it couldn't extend loans even if it wanted to.'' 



The bank did not make clear when Myanmar went into default, but a country
goes into non-accrual status if payment on any loan or credit is overdue by
more than six months. 



``The effect will be that whatever is left of the government's
international creditworthiness will get much worse,'' said an economist in
Yangon. ``Even some of its Asian investors will be rather nervous about
it.'' 



Myanmar has borrowed more than $700 million from the World Bank since 1956.
Other countries with protracted arrears include Iraq, Liberia and Syria. 



A leading Myanmar businessman criticised the bank's decision. 



``Cut-offs by multilateral institutions can only be negative,'' said
Bernard Pe Win, the chief executive officer of Myanmar Investments
Holdings, which has interests in hotels, tourism and real estate. 



``I think they should be finding ways to engage the government,'' he told
Reuters. 



The announcement came as the government has been facing mounting pressure
from the opposition National League for Democracy to recognise the results
of a general election the party won by a landslide eight years ago. 



The NLD has put itself on collision course with the government by vowing to
call a parliament this month. 



Pe Win said that if the bank's aim was to promote democracy, its move would
have little effect. 



``The country is quite self-sufficient in terms of feeding its people, so
in terms of survival, I don't think shutting off by the World Bank will
have any meaningful result,'' he said. 



``But one thing's sure, that if there's no foreign investment and if
foreign investment dwindles to nothing and foreign businesses are put under
pressure to the point some leave, the end result will be less democracy
than there is now,'' he said. 



Pe Win said the economy was not in good shape but conditions were not as
grim as many news foreign news reports suggested, as there was a
substantial invisible economy. He said a repeat of the political unrest
seen 10 years ago was unlikely. 



``I don't think we see imminent signs of disturbances like in 1988. There
is some talk and no doubt there there is some tension, but it doesn't look
like it to me.'' 



The Myanmar government spokesman in a brief response to a Reuters query
said that Myanmar had not made any request for loans from the World Bank. 



``Even if Myanmar repays her old debts, is the World Bank in a position to
resume loans? If not, why bother to put Myanmar in nonaccrual status,'' he
said in a statement.