65. Telegram From the Embassy in Burma to the Department of State1
1249. Supplementing Embtel 12482 following is economic outlook in Burma as we see it:
Realization of benefits US and other foreign aid depends upon crushing insurgents and establishing internal security. Success in this would ensure prosperity based on abundance rich natural resources. Ultimate dollar repayment US loans could then be made without undue strain on economy. Opportunity would be opened up for significant and mutually valuable US investment in minerals and rubber. If present state insecurity long continues, significant further improvement economic situation unlikely and degeneration into hopeless economic chaos becomes real possibility.
Putting aside this predominant consideration, rest of economic situation emerges as follows:
Exports of rice (about 80 percent total exports) have been steadily, although slowly, rising recent years. Minerals and timber exports also rising slowly. Value of imports was down in first quarter 1956, but believe when later figures become available will show rising trend due PL 480 and more generous allocation foreign exchange for consumer imports. Balance of trade favorable. Foreign exchange position, consumer price indices, current circulation appeared fairly well stabilized during last quarter 1956, but first of these moving down during first quarter 1957 due slow receipts from rice exports, while latter two moving upward due as yet unanalyzed but presumably temporary factors. GNP rising gradually. About 23 percent going for gross capital formation. Relatively good progress with steel mill, jute mill, pharmaceutical plant, [garble] refinery, and number other recently constructed plants for processing Burma raw materials in various stages approach full production. Government policies tending towards realization need encourage private enterprise and private foreign investment. Progress being made in development power, transport and communications. Barter trade with Communist bloc phasing off rapidly.
Although some progress evident, it is so slow that Burma still not back to pre-war GNP and is rapidly falling further behind rest of world. Aside from lack internal security, big problems at moment are government interference with importation and distribution consumer goods, inefficiency and lack skilled managers and technicians, inadequate means mobilizing private capital for longterm investment and [Page 103] prospect diverting some $50 million worth resources into construction of uneconomic Soviet “gift” projects.