```

[Senate Hearing 109-942]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 109-942
 
                          U.S-BURMA RELATIONS

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON EAST ASIAN
                          AND PACIFIC AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 29, 2006

                               __________

       Printed for the use of the Committee on Foreign Relations

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate

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                     COMMITTEE ON FOREIGN RELATIONS
                  RICHARD G. LUGAR, Indiana, Chairman

CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
NORM COLEMAN, Minnesota              JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio            RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee           BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
LISA MURKOWSKI, Alaska               BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                 ------                                

                       SUBCOMMITTEE ON EAST ASIAN
                          AND PACIFIC AFFAIRS

                    LISA MURKOWSKI, Alaska, Chairman

LAMAR ALEXANDER, Tennessee           JOHN F. KERRY, Massachusetts
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         RUSSELL D. FEINGOLD, Wisconsin
GEORGE ALLEN, Virginia               BARACK OBAMA, Illinois

                                  (ii)

                            C O N T E N T S

                              ----------                              
                                                                   Page

Aung, Thin Thin, joint general secretary, Women's Rights and 
  Welfare Association of Burma, New Delhi, India.................    32

    Prepared statement...........................................    36

Green, Dr. Michael J., senior advisor and Japan chair, Center for 
  Strategic and International Studies............................     8

    Prepared statement...........................................    11

John, Eric G., Deputy Assistant Secretary, Bureau of East Asian 
  and Pacific Affairs, Department of State.......................    44

    Prepared statement...........................................    47

McConnell, Hon. Mitch, a United States Senator from Kentucky, 
  opening statement..............................................     3

    Prepared statement...........................................     6

Murkowski, Hon. Lisa, a United States Senator from Alaska, 
  opening 
  statement......................................................     1

Turnell, Dr. Sean, Burma Economic Watch, Economics Department, 
  Macquarie University, Sydney, Australia; Visiting Fellow, 
  Southeast Asia Program, Cornell University.....................    16

    Prepared statement...........................................    19

              Additional Material Submitted for the Record

Responses of Eric G. John to written questions submitted by the 
  following

  Senators:

    Lisa Murkowski...............................................    55

    Lincoln Chaffee..............................................    56

Responses of Dr. Sean Turnell to written questions submitted by 
  Senator Murkowski..............................................    56

                                 (iii)

                          U.S.-BURMA RELATIONS

                              ----------                              

                       WEDNESDAY, MARCH 29, 2006,

                               U.S. Senate,
    Subcommittee on East Asian and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:33 p.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Lisa 
Murkowski (chair of the subcommittee) presiding.
    Present: Senators Murkowski and McConnell.

           OPENING STATEMENT OF HON. LISA MURKOWSKI,
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Good afternoon and welcome to the Senate 
Foreign Relations Subcommittee on East Asian and Pacific 
Affairs. Today, we are going to look at the situation in Burma, 
what impacts U.S. sanctions have had in affecting change in the 
country, and how we should move forward to further our policy 
goals.
    We have a different order in the testimony today than we 
normally would have. Eric John, the Deputy Assistant Secretary 
of State, is currently testifying on the House side this 
afternoon and will not be able to join us until later. So in a 
bit of a switch, we will hear from the nongovernmental panel 
prior to hearing from the administration's witness.
    When the subject of Burma comes up, we often think of Aung 
San Suu Kyi and her National League of Democracy party. She is 
the primary voice for political reform in a nation run by a 
repressive military junta. Yet for all the support, the 
international community has demonstrated for Suu Kyi and her 
party and the pressure applied in one form or another on the 
Burmese government, Suu Kyi remains under house arrest and the 
National League of Democracy's election victory in 1990 remains 
unhonored.
    With the purging of Khin Nyunt and hundreds of his 
followers from the government in 2004, the State Peace and 
Development Council has limited the Burmese government's 
contact with foreign officials and international sentiment. The 
sudden announcement of the capital move to Pyinmana has further 
limited the international contact, as embassies in Rangoon were 
told to communicate with officials in Pyinmana via fax even 
though there is inadequate power in the new capital to operate 
fax machines or any other machines.
    Since the student demonstrations in 1988, our policy toward 
Burma has been to sanction and isolate, with increasing 
limitations on assistance and trade. Yet the SPDC has 
effectively minimized the effect of these sanctions by playing 
interested investors off one another as it offers access to 
Burma's considerable natural resources, and nations compete to 
see who has greater influence in the region.
    The SPDC continues to have access to financial assistance 
and the means to continue its authoritative rule despite 
Burma's ranking among the poorest of the poor. Outside 
investment and assistance is moving forward in areas that are 
cause for great concern. In 2001, Russia announced its intent 
to build a 10-megawatt nuclear reactor, research reactor, in 
central Burma. An agreement was signed in 2002, but information 
on further activity has not been readily available or 
transparent. Instead, reports suggest it is North Korea who is 
now providing assistance to Burma's nuclear program.
    A November 2003 article in the Far Eastern Economic Review 
notes that North Korean technicians were seen unloading large 
crates and heavy construction equipment from trains in central 
Burma and aircraft from North Korea's national airline, Air 
Karyo, were landing at military airfields also in central 
Burma. While this information does not directly link North 
Korea to a nuclear project in Burma, it is an issue that we 
need to be paying attention to.
    The limited contacts that western governments have with 
Burma also impact other arenas. Burma's recent revelation that 
the H5N1 strain of the bird flu was found within its borders is 
surprising only in that it has taken so long for an official 
announcement. The inability of international responders to 
access Burma's bird population and provide assistance should be 
a concern to all nations. As the spring migratory path of wild 
birds from Asia will soon reach Alaska and move on to the rest 
of the United States, our lack of knowledge of the true impact 
of the bird flu in Burma makes our job in preventing its 
outbreak here in the United States that much more difficult.
    With the reality of the current situation in Burma and the 
ineffectiveness of the current sanctions, there has been some 
discussion by Burma watchers of finding another way to move 
toward openness and political and economic reform in Burma, and 
that is one of the topics that I would like to explore with our 
witnesses today. Some have suggested the possibility of 
establishing a Burma version of the Six Party Talks, bringing 
India and China as Burma's prime investors and large neighbors 
to the table with representatives from ASEAN, the EU, and the 
United States to provide a united front.
    Setting aside the pressure that it would place on Burma's 
military junta, I believe that one of the benefits of such a 
forum is a cohesive regional approach. This past January, I 
traveled to Seoul, Tokyo, and Beijing and the overarching 
message that I heard from each of the governments was that the 
North Korea Six Party Talks had created an atmosphere of 
cooperation and common ground among the parties at a time when 
there was clearly growing tension in the region. A Six Party 
Talk forum on Burma has the potential to minimize Burma's 
ability to play its suitors off against each other. It would 
also pressure the ASEAN nations to come up with a single policy 
to be represented at the forum.
    Looking at other possibilities, many are interested to 
learn more about the December 2005 U.N. Security Council 
meeting that the United States was able to achieve and whether 
the Security Council might be an appropriate forum to address 
Burma. Both scenarios are worth discussion on their merits to 
determine their potential effectiveness and pitfalls.
    A second issue I believe needs to be kept in mind as we are 
looking to make progress in Burma is the role of Burma's ethnic 
minorities. Aung San Suu Kyi tends to get the majority of media 
and political attention, but even if the results of the 1988 
election are recognized or new legitimate elections are held, 
that does not solve the armed resistance offered by groups like 
the Shan State and the Karen National Union.
    Both China and India are looking to sustain their domestic 
economic growth. Likewise, one third of Thailand's natural gas 
supply comes from Burma. These nations are eager to avoid 
turmoil on their borders. It is simply not in their interests. 
So for that to happen a resolution must be reached with the 
ethnic minority groups.
    So, with these thoughts in mind, I look forward to hearing 
from our witnesses this afternoon and gaining their insights 
into the issue. I welcome to the subcommittee this afternoon 
the Senator from Kentucky. Senator McConnell has been a leader 
on the issue of Burma, and I am quite pleased that he is able 
to join us this afternoon. With that, Senator, if you would 
care to address the committee.

               STATEMENT OF HON. MITCH McCONNELL,
                   U.S. SENATOR FROM KENTUCKY

    Senator McConnell. Thank you, Madam Chairman. I thank you 
also for your interest in this important subject and for having 
these hearings today.
    Let me say that I first became interested in this issue in 
the early 1990s about the time that Aung San Suu Kyi was 
awarded the Nobel Peace Prize. I remember reading an article 
about her in one of the weekly magazines that we have here in 
the United States and began to learn more about the situation 
in Burma. Regretfully, after some 16 years it is hard to 
quantify any significant progress at all, as you were referring 
to the election in the late 1980s. Shortly after that, of 
course, she was put under house arrest. Except for about a 1\1/
2\-year period in 2003, during which her motorcade was attacked 
and she was injured and put in a real prison for a period of 
time now she is back in her home detention arrangement, this is 
a woman who has been largely sequestered from the Burmese 
people themselves, as well as the rest of the world.
    We all know during this period her husband, who was living 
in England, became ill and passed away without her presence. It 
is a truly tragic story.
    As we all know, Burma is run by a pariah regime. If they 
had nuclear weapons or the prospect of getting nuclear weapons, 
we would be paying a lot of attention to this regime because it 
would be in the category of North Korea and Iran in terms of 
international interest and concern.
    So the question arises, what can you do? In 2003 I 
introduced, with lots of support on a bipartisan basis, a bill 
that provided for unilateral sanctions against the regime, 
knowing full well at the time that unilateral sanctions are 
rarely good enough, that you have to have the cooperation of a 
lot of others. You were mentioning the multilateral approach to 
North Korea as a potential framework for addressing the Burma 
situation. You clearly have to have broader cooperation.
    The good news is the Europeans, I think, are beginning to 
kind of wake up to the inappropriateness of interacting with 
this regime. I was in India about a year ago and raised the 
issue with them. I gather from listening to you, you raised the 
issue with others in the region in your own travels. I think it 
is becoming increasingly embarrassing to the neighborhood, 
which is a positive step.
    But beyond just being embarrassed, I think there needs to 
be some motivation for serious action. I think multilateral 
sanctions are the only way you can really squeeze this regime. 
Unfortunately, the Thais and the Indians and the Chinese are 
all basically doing business there and are not terribly 
concerned, frankly, with what internal conditions are in terms 
of human rights and abuses of other kinds. So that's the 
situation that we confront at the moment.
    With that, let me turn to my prepared text. I want to, as I 
said, thank you for having this hearing. Certainly your 
interest and support for the struggle for freedom in that 
country has ensured that no one forgets the litany of abuses 
that have been committed by this incredibly repressive and 
illegitimate regime, which has all kinds of oddball names. It 
is currently calling itself the State Peace and Development 
Council (SPDC).
    I will not recount all the horrors of General Than Shwe's 
misrule. They are well documented by the State Department, the 
U.N., and other organizations. I do want to highlight the 
tragic fact that Burmese leader Aung San Suu Kyi and over 1,000 
other prisoners of conscience are imprisoned in Burma today. 
Suu Kyi and her compatriots should be immediately and 
unconditionally released.
    This was originally to be the year that Burma was going to 
host the ASEAN meeting. At least ASEAN was too embarrassed to 
go forward with that meeting, which will not occur in Rangoon 
in 2006, and I think this shows that this regime is an absolute 
embarrassment to the neighborhood.
    The SPDC has engaged in arrests, torture, harassment, and 
intimidation of the National League for Democracy (NLD), which 
got 80 percent of the vote when the regime mistakenly allowed a 
vote to occur. I bet they regret that because it has certainly 
demonstrated where the support is.
    While the situation inside Burma remains both dire and 
opaque, analysts continue to ponder the SPDC's recent bizarre 
relocation of the capital, moving the capital to a jungle site, 
further indicating how inward-looking they are and how consumed 
they are with just maintaining power.
    Under President Bush's leadership, the State Department has 
imposed a full court press in foreign capitals across the 
globe, seeking both dialogue and action. I can tell you, Madam 
Chair, that Secretary Powell always had this on his agenda when 
he was at ASEAN meetings in the neighborhood, and Secretary 
Rice was before my Subcommittee on Foreign Operations 
yesterday, during which we also had an opportunity to discuss 
this issue. She is intensely interested in it as well. I think 
the United States is certainly doing its part here in leading. 
What we need are a few more followers.
    It is no understatement that Burma remains a priority 
talking point and the President, as I indicated, brings it up 
whenever he is in that part of the world, as does the Secretary 
of State.
    In addition to diplomacy, Secretary Rice and her team are 
keenly attuned to the humanitarian needs of the Burmese people. 
I was impressed with the State Department's rapid response to 
the outbreak of Avian influenza inside Burma, which until 
recently, represented Southeast Asia's bird flu black hole. 
Secretary Rice understands, as we do, that the root cause of 
Burma's myriad health, economic, and social problems is 
essentially political in nature. The SPDC has done little to 
invest in its own health infrastructure or to combat deadly 
diseases, including HIV-AIDS, and recently issued draconian 
guidelines that restrict the ability of the international NGOs 
to conduct programs inside the program.
    While we may all want to do more to help the people of 
Burma, our efforts essentially are stymied by the junta. 
Governments in the region, as I suggested earlier, are tiring 
of the Burma problem. Last year, Burma actually was prevented 
from becoming chairman, as I indicated, of the ASEAN 
organization, in large part because of the loss of prestige 
that grouping would have endured with the SPDC as its head.
    Frustration with the junta is palpable in some capitals, 
whether due to disbelief at the wholesale move of the capital 
out into the jungle, or because last year's sacking and 
sentencing of a Than Shwe rival, General Khin Nyunt. It is 
becoming clear to many in Southeast Asia that Burma's problems 
are becoming the region's problems, whether it is illicit drug 
manufacturing and trafficking or diseases such as HIV-AIDS, 
refugees, sexual violence against women, internally displaced 
peoples, or even Avian flu.
    So let me suggest three necessary steps to sustain support 
for the struggle for freedom in Burma over the next year. 
First, Congress ought to renew existing import sanctions 
against the SPDC. We have done that every year since 2003 and 
we will do it again. We appreciate the State Department's 
strong support for renewing sanctions and I hope we can count 
on our colleagues' support as we have every year.
    I want to be as clear today, as I have been in the past, 
that sanctions ought to remain in place until Suu Kyi and other 
Burmese champions of freedom, themselves, call for the 
sanctions to be lifted. We must take our cues from those who 
suffer for justice. Former political prisoner Min Ko Naing, who 
served 16 years in Burma's notorious prisons, recently said, 
and this is a quote: ``We categorically state today that we 
will never, never bow to injustice.''
    Second, the President and the administration must continue 
to aggressively engage foreign governments. I believe they have 
been doing that and will continue to do it. Secretary Rice is 
extremely passionate on this issue. All of our officials in the 
administration, National Security Adviser Hadley and U.N. 
Ambassador Bolton, are extremely interested in pursuing this 
issue.
    Finally, the United States needs to continue to push the 
United Nations Security Council to again discuss and debate 
myriad security threats Burma poses to that whole region. While 
last year's unprecedented briefing is a good first step, an 
important step includes formal discussion, debate, and passage 
at the U.N. of a Burma resolution. Last year, former Czech 
President Vaclav Havel and South African Archbishop Tutu 
commissioned a report entitled ``Threat to Peace: A Call for 
the U.N. Security Council To Act in Burma.'' This report serves 
as ample justification for Security Council action.
    Let me close on a somber note. The murder of former 
political prisoner Thet Naing Oo by Burmese police and fire 
officials earlier this month is absolutely despicable. In many 
respects, this murder demonstrates the SPDC's total disregard 
for the human rights and dignity of the people in Burma. If it 
can happen to him, it can happen to anybody in that country.
    The United States and all the world's democracies must make 
clear to General Than Shwe that he, he, is responsible for the 
security and welfare of all Burmese prisoners of conscience, 
particularly Suu Kyi.
    Again, Madam Chair, I want to thank you for having this 
hearing and giving me an opportunity to express myself on this 
important issue.

    [The prepared statement of Senator McConnell follows:]

   Prepared Statement of Mitch McConnell, U.S. Senator From Kentucky

    It is only appropriate that I begin my remarks with a word of 
thanks to Senators Murkowski and Kerry for holding this hearing on 
Burma. Your interest and support for the struggle for freedom in that 
country has ensured that no one forgets the litany of abuses committed 
by the repressive and illegitimate State Peace and Development Council 
(SPDC) against the people of Burma.
    I will not recount today the horrors of Burmese General Than Shwe's 
misrule as they are well-documented by the State Department, the United 
Nations and other organizations. However, I do want to highlight the 
tragic fact that Burmese democracy leader Daw Aung San Suu Kyi and over 
1,000 other prisoners of conscience remain imprisoned in Burma. Suu Kyi 
and her compatriots should be immediately and unconditionally released, 
and SPDC arrest, torture, harassment and intimidation of National 
League for Democracy activists and ethnic minorities should cease. Only 
then can a meaningful process of national reconciliation move forward. 
Together we must seek permanent irreversible steps to freedom.
    While the situation inside Burma remains both dire and opaque--
analysts continue to ponder the SPDC's bizarre relocation of the 
capital to the jungle site of Pyinmana--the march for freedom in Burma 
progresses. Under President Bush's leadership, the State Department has 
imposed a full court press in foreign capitals across the globe seeking 
dialog and action on Burma. It is no understatement that Burma remains 
a priority talking point on the President's agenda, whether he is in 
Tokyo, New Delhi or Washington, D.C.
    Secretary of State Rice has equally championed this cause. She, 
along with Assistant Secretary of State for East Asia and Pacific 
Affairs Christopher Hill and Assistant Secretary for Democracy, Human 
Rights and Labor Barry Lowenkron, have aggressively lobbied the 
Philippines, Indonesia, China, Vietnam, Thailand and Cambodia to play a 
more constructive role in support of democracy and justice in Burma.
    In addition to diplomacy, Secretary Rice and her team are keenly 
attuned to the humanitarian needs of the Burmese people. I commend the 
State Department's rapid response to the outbreak of avian influenza 
inside Burma, which, until recently, represented Southeast Asia's bird 
flu black hole. Secretary Rice understands, as do we, that the root 
causes of Burma's myriad health, economic and social problems are 
political in nature. The SPDC has done little to invest in its own 
health infrastructure or to combat deadly diseases, including HIV/AIDS, 
and recently issued draconian guidelines that restrict the ability of 
international NGO's to conduct programs inside Burma. While we may all 
want to do more to help the people of Burma, our efforts are stymied by 
the junta.
    Governments in the region are tiring of the Burma problem. Last 
year, Burma sidestepped its chairmanship of the Association of 
Southeast Asian Nations (ASEAN) in large part because of the loss of 
prestige that grouping would have endured with the SPDC at its head. 
Frustration with the junta is palpable in some capitals, whether due to 
disbelief with the wholesale move of the capital to the jungle, or 
because of last year's sacking and sentencing of Than Shwe rival 
General Khin Nyunt. It is becoming clear to many in Southeast Asia that 
Burma's problems are the region's problems--whether illicit drug 
manufacturing and trafficking, diseases such as HIV/AIDS, refugees, 
sexual violence against women, internally displaced peoples, or even 
avian influenza.
    Let me briefly outline three necessary steps to sustain support for 
the struggle for freedom in Burma over the next year.
    First, Congress must renew existing import sanctions against the 
SPDC. I appreciate the State Department's strong support for renewing 
sanctions, and I hope I can count on my colleagues' support when 
Senator Feinstein and I offer legislation in the weeks ahead to do so. 
I want to be as clear today as I have been in the past: sanctions must 
remain in place until Suu Kyi and other Burmese champions of freedom 
call for them to be lifted. We must take our cues from those who suffer 
for justice. Former political prisoner Min Ko Naing, who served 16 
years in Burma's notorious prisons, recently said: ``We categorically 
state today that we will never bow to injustice.''
    Second, the President and the administration must continue to 
aggressively engage foreign governments on supporting democracy in 
Burma. I suspect Secretary Rice will be as aggressive as she has been 
in the past, and I encourage all our officials--from National Security 
Advisor Stephen Hadley to our Ambassador to the United Nations John 
Bolton--to keep pace with the Secretary and the President on this 
issue.
    Finally, the United States must continue to push the United Nations 
Security Council to again discuss and debate the myriad security 
threats Burma poses to the region. While last year's unprecedented 
briefing is a good first step, a better second step includes formal 
discussion, debate and passage of a Burma resolution. Last year, former 
Czech President Vaclav Havel and South African Archbishop Emeritus 
Desmond Tutu commissioned a report entitled ``Threat to Peace: A Call 
for the U.N. Security Council to Act in Burma'' that serves as ample 
justification for Security Council action. I ask that the Executive 
Summary of that report appear in the record following my remarks.
    Let me close on a somber note. The murder of former political 
prisoner Thet Naing Oo by Burmese police and fire officials earlier 
this month is despicable. In many respects, this murder demonstrates 
the SPDC's total disregard for the human rights and dignity of the 
people of the Burma. If it can happen to Thet Naing Oo, it can happen 
to anybody. The United States and all the world's democracies must make 
clear to General Than Shwe that he is responsible for the security and 
welfare of all Burmese prisoners of conscience, particularly Suu Kyi.

    Senator Murkowski. Thank you. I appreciate your comments 
and again truly your leadership on this issue. I think if you 
think of one Senator out there who has really taken the lead as 
it relates to Burma and raising the discussion, it is you, and 
we appreciate that and are very thankful for your leadership on 
it. So thank you for the opportunity to be here with us today.
    Senator McConnell. Thank you, Madam Chair.
    Senator Murkowski. With that, let us move to our second 
panel. This is: Dr. Michael Green, who is the senior adviser 
and Japan Chair, the Center for Strategic and International 
Studies here in Washington, DC. We also have Dr. Sean Turnell, 
who is the co-founder and editorial board member of the Burma 
Economic Watch at Macquarie University in Sydney, Australia, 
and Ms. Thin Thin Aung, Joint General Secretary of the Women's 
Rights and Welfare Association of Burma, located in New Delhi, 
India.
    Welcome to all of you this afternoon. Thank you for taking 
the time to join us and to provide us with your insights and 
perspective on the issue of Burma. What we will do is just 
begin here with you, Dr. Green, if you can provide your 
testimony. We would ask that you try to keep it within the time 
limits and we will move in order to Dr. Turnell and Ms. Aung 
after that.
    With that, Dr. Green.

STATEMENT OF MICHAEL J. GREEN, PH.D., SENIOR ADVISER AND JAPAN 
     CHAIR, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

    Dr. Green. Thank you, Madam Chair. It is a privilege to be 
able to speak to this subcommittee, a privilege I did not have, 
of course, when I was on the staff of the National Security 
Council working these problems as the senior director for Asia 
until December. Now that I am in the academic world, I can 
speak my mind, and I appreciate the chance to do so.
    You and Senator McConnell and the members of this 
subcommittee are to be commended for keeping this issue on the 
front burner. I think--I know that it gives encouragement to 
the many in Burma who look for the day when their nation of 50 
million people will join the community of nations free and at 
peace with their neighbors and taking full advantage of their 
beautiful country.
    The demise of Burma under the junta and Than Shwe has been 
well chronicled by the State Department, by this subcommittee, 
by Senator McConnell. The ideals of the American people will 
not allow us to turn away from this. What one often hears on 
the other side of the argument is that our national interests, 
our security interests, our realist interests, would point to a 
different path, that if we were, quote unquote, ``realists'' 
about this, we would take an approach of loosening sanctions, 
of engaging the regime, of trying to keep up with China's 
influence.
    The main point I want to make today is that I think this 
argument is wrong, that when it comes to Burma our ideals and 
our national security interests are in complete harmony. I say 
this for two reasons. First, Burma is a trans-national security 
threat. The details are well documented in the pamphlet 
mentioned by Senator McConnell. From HIV/AIDS to drugs to 
trafficking in persons, internally and externally displaced 
persons, Burma is a source of instability for its neighbors.
    Now, I cannot prove this, but I suspect that, to some 
degree, this is a deliberate element of the regime's national 
security strategy, that by destabilizing its neighbors, it 
creates a situation where the neighbors are more inclined to, 
in effect, bribe the regime to try to keep these problems under 
control. It is a tactic that one sees often with North Korea, 
as well.
    The regime has spent almost no effort for resources to deal 
with the problems of Avian influenza, of HIV/AIDS, of 
internally displaced persons, which is why I think that this is 
not only a crime of omission, but may actually be part of a 
deliberate strategy. It therefore fits all of the 
characteristics one would expect for attention from the 
Security Council, and I agree completely with the testimony of 
Senator McConnell. This is under chapter 7 of the Security 
Council's responsibilities an item that should be pushed 
towards a resolution.
    I believe that it will be a move that helps us on the Burma 
issue no matter how it comes out. There are obviously tradeoffs 
in the Security Council. You have to spend efforts on issues 
like Iran. But I think this one should be right at the front of 
our agenda.
    The second reason I would argue that Burma is fundamentally 
a national security interest for us draws on the logic of the 
national security strategy that the White House just produced. 
That document makes a point that Secretary Rice and the 
President and others have made in the past, that in Asia, the 
future of stability and peace will not just be a matter of how 
we manage rivalry among great powers like Japan or China or 
India. It is going to be a matter of how ideas are formed and 
how countries define their purpose in this volatile and 
unpredictable region.
    I think when it comes to the world of ideas, the United 
States can be very proud and take great satisfaction in the 
kind of debates we are hearing in India or in Japan or in 
Indonesia. In my testimony, which I have submitted for the 
record, I chronicled how Prime Minister Koizumi or Prime 
Minister Monmahon Singh, or President Yudhoyono talk more about 
their country's purpose and interests in terms of democracy and 
values than ever before. This is a trend that we want to 
support and we want to push. This is a trend that we want to 
have define the agenda for Asia in the 21st century, because if 
it does, it is going to set the right kind of context for 
China's own involvement in Asia and in the international 
community and for other states in transition.
    In Jakarta and in Delhi and in Tokyo, the state of 
democracy and the state of internal affairs in Burma are in 
many ways the cutting edge issues or the proxy debate about how 
much democracy and how much these values should characterize 
the strategy and the agenda for our democratic friends and 
allies. So I believe it is in our interests to be pushing this 
further with all of our friends and allies. Secretary Rice and 
the President, as Senator McConnell has said, have raised this 
with every one of their leaders and counterparts in the region. 
It is a mixed picture. Japan is talking democracy, but just 
announced $42 million in aid to teach Japanese in Burma. My 
understanding is the Japanese government is undertaking a major 
review of its Burma policy to try to reconcile its new 
articulation of democracy as a foreign policy priority and its 
somewhat legacy approach of mercantilism with Burma.
    In India, of course, the Indian president was in Burma 
March 12, the week after President Bush was in Delhi, a week 
after President Bush and Prime Minister Singh agreed to a 
democracy-building agenda for our relationship. To his credit, 
the Indian president raised the status of Daw Aung Sann Suu 
Kyi, raised democracy. But the main theme that came through was 
about energy cooperation, $40 million in proposed packages for 
LNG development, and the Burma Road. These are real national 
interests for India and they are legitimate. We should respect 
them, but we need to engage India and push the Indian 
government to live up to its ideals, because I think their 
debate is in play and their strategic culture is evolving.
    In Southeast Asia, President Yudhoyono's trip, Malaysian 
Foreign Minister Hamid's recent trip, demonstrated that our 
Southeast Asian friends and especially the democracies are 
willing to push Burma, not only privately, but publicly, to 
release Daw Aung San Suu Kyi, to push for a return to 
democracy. But there again, it is a mixed signal. Foreign 
Minister Hamid came out without being able to see Aung San Suu 
Kyi, clearly a frustrated mission, but he declared it a 
success, as our ASEAN friends are wont to do. He will have to 
be honest with his colleagues. They meet on April 17th to 
review progress in Burma, and I think we should be pushing our 
ASEAN friends to be realistic about the state of play in Burma.
    In all of these countries, the Burma issue is at the 
tipping point, as Senator McConnell suggested, as you suggested 
in your opening. I would argue, even in China, the state of 
play is changing. The Chinese worry about the destabilizing 
effects of Than Shwe's behavior. I think they worry about, in a 
strategic sense, countries in the region coming together on 
this issue of democracy, and in a healthy way, we should make 
the Chinese worry. We should be pushing this agenda to get 
China to sign on as much as possible with its long-term 
interests in stability in the region, which means returning 
Burma to the path of democracy. Even if China is not going to 
be an open advocate of democracy-building in Asia, they can be 
an advocate of stability, and their interests would suggest 
they participate and cooperate.
    You mentioned, Madam Chair, the idea of a Six Party Talks 
format or a multilateral format. I was involved in the Six 
Party Talks, both the formulation and the implementation, and 
there are aspects of that that I would draw on in dealing with 
this. There are other aspects which I would try to avoid. I 
think in the case of Burma, what we want is to work assertively 
with other parties that we know share our basic values--Japan, 
the EU, I would argue many of the ASEAN nations, India--and 
break out from there, include the Chinese as we can, include 
others as we can, but push for a common set of talking points 
and a common roadmap. The word ``roadmap'' has certain 
connotations in the Burma context, but essentially a roadmap 
with concrete benchmarks.
    We ought to try to get a common picture. We've not done 
that yet. We've pushed at high levels for attention to this. I 
think it is time now to push for a common set of benchmarks 
that we expect from the regime. It obviously would include the 
release permanent and irreversible of Aung San Suu Kyi, the NLD 
leadership, ethnic leaders. It would include a sustained 
process of reconciliation leading to restoration of democracy.
    I think we should push others. I do not think we will get 
Japan or India to agree to sanctions per se, but we ought to 
push them to put sticks on the table, which would include 
controlling and limiting further investment or aid in the 
future. I think we should be prepared to put certain carrots on 
the table--incremental lifting of sanctions as progress is made 
on these benchmarks.
    The mechanics can be debated and worked out. Our colleagues 
in the State Department will know on the ground how to work 
this. It will not be exactly like the Six Party Talks, but I 
think the time is ripe to start multilateralizing this problem, 
not only in the U.N., but in the region as well.
    Thank you.

    [The prepared statement of Dr. Green follows:]

Prepared Statement of Michael Jonathan Green, Ph.D., Senior Adviser and 
      Japan Chair, Center for Strategic and International Studies

    Madame Chair, I appreciate the opportunity to address this 
committee on the situation in Burma from the perspective of 
international security. The members of this committee are to be 
commended for their consistent support for Daw Aung San Suu Kyi and the 
legitimate winners of the 1990 election in Burma. Your bipartisan stand 
for democracy and human rights in Burma is a source of inspiration for 
those who quietly prepare for the day when this nation of fifty million 
citizens can rejoin the international community as a free people in a 
beautiful and well-endowed land at peace with its neighbors.
    Today I want to call the committee's attention to the international 
security implications of the demise of Burma under General Than Shwe. 
Than Shwe and the military junta are responsible not only for the 
reversal of a democratic election result, but also for abuses ranging 
from persecution of ethnic minorities to systematic rape and the 
recruitment of child soldiers. Our ideals will not allow us to turn our 
attention from the fate of the people in Burma or to relent in applying 
pressure on the regime to return to the path of democracy.
    Some argue that these ideals are blinding us to larger strategic 
interests in Burma. They maintain that a pragmatic and ``realist'' 
national security strategy would point to a different course--one of 
increased engagement with the regime and a relaxation of pressure. They 
assert that by isolating the military junta in Burma, we are weakening 
our own strategic position in Asia.
    This argument could not be more wrong. I stepped down as Special 
Assistant to the President and Senior Director for Asian Affairs on the 
National Security Council staff in December and I come away from that 
experience firmly convinced that on the question of Burma, our ideals 
and our national security interests coincide. In short, a strong and 
unrelenting stand for democracy in Burma is an indispensable element in 
our overall strategy for maintaining peace and stability in the Asia 
Pacific region.
    I say this for two reasons. First, the tragic mismanagement of 
Burma's internal affairs by Than Shwe and his government has created an 
arsenal of transnational security problems that threaten to undermine 
stability in the entire region. Since 1996 the Burmese Army's ``Four 
Cuts'' strategy has led to the destruction of over 2500 villages and 
the internal displacement of about one million people, mostly from the 
Karen, Shan and other ethnic minorities. Millions also live in hiding 
or as open exiles in Thailand, China, Bangladesh, India and Malaysia. 
These refugee flows are a social and security burden on the neighboring 
states that are further complicated by the attendant problems of 
trafficking in persons, drugs and transmission of HIV/AIDS. The most 
chilling example of how these problems build on each other is the 
practice of drug traffickers to distribute heroin with HIV-tainted 
needles to villagers as they ply their illegal trade across the borders 
into India, China and Thailand. Avian influenza now also joins the list 
of transnational threats emanating from Burma.
    The regime in Burma has done almost nothing to address the health 
and social disasters their Four Cuts strategy has caused. I suspect 
that this is not just a crime of omission, but part of a deliberate 
strategy that parallels North Korea's own approach to China and the 
Republic of Korea. These regimes use their status as a source of 
transnational instability as tools of blackmail to deter their larger 
neighbors from stepping up pressure for reform. They are behaving like 
criminal gangs extorting money from shopkeepers in the neighborhood in 
exchange for keeping other criminal elements ``under control.'' They 
can do this because they do not care about the vast majority of people 
under their care and find that leaving potentially disloyal segments of 
the population in a state of constant fear and near-starvation is a 
useful tool for maintaining control. The neighboring states make these 
bargains with the regime out of fear of what might come next and with 
the hope that they are contributing to stability, when in fact the 
problems are just being allowed to fester and grow and will inevitably 
reach beyond the borders with tremendous security and social 
implications.
    The transnational problems caused by the regime's behavior 
represent a threat--perhaps a deliberate threat--to the peace and 
security of South and Southeast Asia. It is for this reason that the 
United Nations Security Council should take up Burma with its authority 
under Chapter VII (Article 41) of the United Nations Charter. The votes 
are there and I hope that the administration pushes with other like-
minded nations for a resolution on Burma in the current session. Even 
if the resolution fails or the Security Council does not take immediate 
action, there is merit in sharpening our friends and allies' focus on 
the state of democracy and human rights in Burma. And this is because 
the debate over Burma in these countries has significance in the 
context of the broader national security strategy of the United States 
in the Asia Pacific region.
    Let me turn to this second reason why the Burma question bears on 
our national security interests. The future of Asia is being debated in 
terms of relative power and rivalry among China, Japan, India and other 
rising states. What is often overlooked, and what will ultimately be 
just as important for peace and security in the region, will be the 
competition of ideas. China's rise thus far has been marked by a 
mercantilist approach coupled with an outmoded policy of ``non-
interference in internal affairs'' of other states. Japan and India 
once held similar views in many respects, despite their democratic 
roots. However, increasingly these two nations are defining their 
national interests in terms of the democratic ideals that distinguish 
them from China and that they recognize are critical to their own 
stakes in the international system. Even in Southeast Asia where the 
Association of South East Asian Nations (ASEAN) was created on the 
premise of ``non-interference in internal affairs''--governments and 
parliaments are debating whether they can sustain peace and stability 
in their neighborhood without pressing members to clean up their 
domestic problems and adhere to norms and rules that are fundamental to 
the region's continued economic success.
    It is a critical U.S. interest that democracies in Asia continue 
moving toward national strategies based on shared values and shared 
rules. The debate over Burma in these capitals is the cutting edge 
issue. How Tokyo or Delhi or Jakarta decides to manage the Burma 
problem--whether they stick to non-interference or step up pressure on 
Burma to adhere to international norms--will prove the major proxy 
battle of how they approach the region's broader agenda in the future. 
If Japan, India, Indonesia and other nations with influence on Burma 
choose to take a stronger stand in support of the norms that underpin 
their own democracies, this will not only accelerate the day when the 
citizens of Burma return their nation to the international community, 
it will also shape the choices of other nations in transition--
particularly China.
    Realists who argue for more ``engagement'' on Burma are right, but 
the target of that engagement strategy should be the democratic nations 
that surround Burma and not yet the junta itself. I would therefore 
like to briefly review where the debate on Burma is in each of these 
neighboring states and then suggest steps we can take to mobilize them 
into a more effective coalition.
    Japan is the most promising example of the positive evolution of 
interests and strategies that I am describing. Japan originally 
supported Burma's entry into ASEAN. Tokyo was motivated by a 
sentimental attachment to Burma dating back to the Second World War and 
by a desire to distinguish itself from Washington in the region, 
particularly in the context of U.S.-Japan trade friction and 
disagreements over how to respond to the 1997 financial crisis in the 
region. In those days Japanese strategic thinkers took pains to 
distinguished ``Asian values'' from the so-called ``global values'' 
espoused by Washington. Japan also began worrying about China's growing 
strategic influence in Burma as Sino-Japanese competition heated up and 
the Japanese government matched Chinese aid hundreds of millions of 
dollars at a time in order to keep up its own influence and not lose 
out to Beijing.
    Things have changed, however. Prime Minister Koizumi himself has 
acknowledged that the Japanese government's policy of engagement has 
not led to greater democratization. Just as important, Japanese 
political leaders have stopped alluding to distinct ``Asian values'' 
and have increasingly been pointing to Japan's own democratic values as 
critical to its national identity and international role. I would 
particularly recommend to the members of the committee Foreign Minister 
Taro Aso's December 7, 2005 speech on ``Japan as the Thought Leader of 
Asia'' in which he argued that Japan stands as a model for the rest of 
Asia based on its success through adherence to the principals of market 
economics and democracy.\1\ Political scientists can debate the causes 
of this change. It may result from a distinctly realist assessment of 
the competition with a non-democratic China or from fundamental changes 
in Japan's own domestic politics and economy. The result, however, is a 
new ferment in Tokyo and a new articulation of Japan's purpose based on 
values that should have a bearing on Japan's approach toward Burma. 
Recognizing just how important these values are, the Japanese 
government is undertaking a top-to-bottom review of its Burma policy. 
The outcome is not certain and we should be fully engaged with Tokyo on 
that process.
---------------------------------------------------------------------------
    \1\ Foreign Minister Taro Aso, ``Asian Strategy as I See it: Japan 
as the Thought Leader of Asia,'' December 7, 2005. The text is 
available on http://www.mofa.jo.ip/announc/fm/aso/speech05l2. Foreign 
Minister Aso echoes this them with respect to Sino-Japanese relations 
in a March 13, 2006 op/ed in the Wall Street Journal titled ``Japan 
Awaits a Democratic China.''
---------------------------------------------------------------------------
    The Association of South East Asian Nations (ASEAN) is undergoing a 
similar shift in thinking. Originally, ASEAN opted for a policy of 
``constructive engagement'' based on the assumption that inclusion in 
the regional grouping would incentivize the junta in Burma to make the 
right choices. For years our Thai counterparts argued that the so-
called Bangkok Process of international meetings with Burma would lead 
to concrete results, including a detailed roadmap for returning to 
democratization, the release of Aung San Suu Kyi, and inclusion of the 
NLD in the constitutional convention. It is now obvious that these 
results have not happened as Than Shwe has purged Kin Nyunt and others 
involved in the Bangkok Process.
    As a result, ASEAN and its member governments have begun recasting 
their approach to Burma, calling on the regime to release Aung San Suu 
Kyi and convincing Than Shwe last year to pass on chairing ASEAN when 
his turn came up in 2006. ASEAN leaders' embarrassment at Burma's non-
response to constructive engagement has led to even tougher words from 
the governments in the region both privately and publicly since then. 
With the first direct Presidential elections in Indonesia 2004 and 
increasing pluralism and parliamentary activism in Thailand, Malaysia 
and Singapore, the character of other ASEAN member states is itself 
changing and many within are taking their nation. These changes have 
been pushed by transnational groups within ASEAN such as the Inter-
Parliamentary Myanmar Caucus. Indonesia's new activism is most 
encouraging, with President Yudyuhono's early March visit to Burma to 
establish a joint commission between Rangoon and Jakarta with the 
primary focus of monitoring the junta's progress toward democratic 
reform. And just this week Malaysian Foreign Minister Hamid went last 
week to Burma on behalf of ASEAN to press for democracy, but left in 
frustration after being blocked from seeing Aung Suu Kyi or Than Shwe . 
He is set to report on his visit to the rest of ASEAN on April 17th and 
although he called his visit a success publicly, I expect the private 
discussion among ministers will be about how to deal with the further 
retrenchment and backsliding of the regime.
    The picture is still decidedly mixed in ASEAN, however. The 
bureaucracies and foreign ministries worry about the transnational 
problems presented by the junta's mismanagement of the Nation and 
continue to resort to the default position of paying them off with aid 
in order to avoid further troubles. The strategic mentality in these 
foreign ministries also remains mired in the non-aligned tolerance for 
bad internal governance and ideological resistance to interference in 
internal affairs from the developed world. New leaders like Susilo 
Bambang Yudyuhono in Indonesia, Lee Hsien Loong in Singapore, and 
Abdullah Badawi of Malaysia, are often more enlightened than their 
bureaucracies and recognize the need to push Burma on democracy. 
However, these ASEAN leaders are also competing among themselves for 
the spotlight and the regime is using the competition for regional 
leadership within ASEAN to divide ASEAN leaders against themselves and 
to weaken the message many are clearly carrying on the need for change. 
The growing democratic instincts of ASEAN leaders are right, but are 
still not being met with results in implementation.
    India is also embracing democracy as a central tenet of its 
international role and is moving away from older, mercantilist and non-
aligned ways of thinking about international security. Like Japan, 
India's strategic culture may be shifting because of a combination of 
internal political and economic change and the implications of China's 
rise. Prime Minister Monmahon Singh has clearly articulated this aspect 
of India's identity in speeches, declaring in 2005, for example that:

          If there is an ``idea of India'' that the world should 
        remember us by and regard us for, it is the idea of an 
        inclusive and open society, a multi-cultural, multi-ethnic, 
        multi-lingual society. All countries of the world will evolve 
        in this direction as we move forward into the 21st Century.\2\
---------------------------------------------------------------------------
    \2\ The transcript of Prime Minister Singh's remarks at the India 
Today Conclave, New Delhi, February 25, 2005 is available on http//
www.pmindia.nic.in/speeches.htm (cited in C. Raja Mohan, Impossible 
Allies: Nuclear India United States and the Global Order. Delhi: India 
Research Press, 2006, p. 93).

    This shared value with the United States has become one of the 
pillars of the United States transformed strategic relationship with 
India under President Bush. In their March 2 joint statement in New 
Delhi, for example, Prime Minister Singh and President Bush agreed to 
work together on the promotion of democracy through the U.N. Democracy 
Fund, and cooperation in international forums such as the International 
Centre for Democratic Transition (ICDT).\3\ Rhetorically, the Indian 
government has said that it wishes to see a strong, prosperous and 
democratic Burma and Prime Minister Singh has said that he would like 
to see the release of Aung San Suu Kyi.
---------------------------------------------------------------------------
    \3\ U.S.-India Joint Statement, March 2, 2006. Available at http://
www.whitehouse.gov/news/releases/2006/03.
---------------------------------------------------------------------------
    However, where the rubber meets the road the Indian government has 
been sending mixed signals to the regime. The lure of enhanced economic 
interaction with ASEAN through the Burma road and fears that Burma 
might allow cross-border destabilization of the Assam region in India 
have both led Delhi to opt for aid over pressure for real change. 
Indian President Abdul Kalam's March 12 visit to Burma with a new $40 
million aid package and a deal on natural gas was dissonant with the 
Bush-Singh joint statement on democracy, to say the least. President 
Kalam did call on his counterparts to release Aung San Suu Kyi and to 
keep on the path to democracy, but the theme he emphasized much more 
was the importance of Burma as India's ``gateway'' to Southeast Asia. 
There are also contradictory signals being sent by the Indian 
military's ongoing engagement with the Burmese Army.
    Nevertheless, I believe that India's new focus on democracy 
promotion is real and that there is an intense debate about overall 
strategic purpose and direction in Delhi. For now, the many actors in 
India's national security bureaucracy, the hard-edged realist mentality 
they bring to regional problems and the lingering NAM mentality, have 
all conspired to prevent the new strategic should therefore be a major 
topic for U.S.-India dialog at all levels. It is critical that we keep 
Burma front and center as a point for U.S.-India cooperation, 
respecting India's interests but pushing Delhi to live up to its 
ideals.
    That brings us to China. China is Burma's strongest supporter. 
China-Burma trade was $1.2 billion in 2005 (of $5 billion total trade 
for Burma) and Beijing is negotiating new investments in economic 
``free trade zones'' in Syriam and in the construction of a pipeline to 
ship Burma's untapped offshore natural gas reserves to Yunnan Province. 
In February this year Premier Wen Jiabao visited Burma and told Soe Win 
that China opposes the imposition of economic sanctions. Fears that 
Beijing might ``Finlandize'' the regime or develop military facilities 
in the Andaman Sea and Bay of Bengal have in turn been major motivating 
factors for Tokyo, Delhi and ASEAN's own counterbalancing policy of 
engagement with the regime. (I am once again reminded of North Korea, 
where fear of China's unchecked influence has propelled the Republic of 
Korea to take a more accommodating stance toward Pyongyang.) While it 
is unlikely that Beijing will adopt democracy promotion as part of its 
foreign policy toolkit anytime in the near future, I do think it is 
possible to have an influence on China's approach to Burma which is 
ultimately going to be indispensable if we are going to change the 
regime's behavior.
    First, there is growing evidence to suggest that China is unhappy 
about the self-defeating behavior of the Than Shwe regime and that 
Beijing is beginning to push quietly for internal reforms. In part this 
is because of the export of drug and HIV/AIDS problems from Burma into 
neighboring province of Yunnan. I suspect that Beijing also worries 
about the possible implosion of Burma under Than Shwe. Chinese leaders 
clearly fear the domino of ``colored revolutions'' that began spreading 
from Eastern Europe through Central Asia and would probably not like to 
see collapse of an authoritarian regime right in their own 
neighborhood. In short, Beijing has real self-interest in stopping the 
leadership in Burma from taking further steps that lead to instability 
internally and in the region.
    Second, we must make it clear to Beijing that China will be held 
accountable in Washington for the ``company it keeps.'' Deputy 
Secretary of State Robert Zoellick's Senior Dialogue with Chinese 
Executive Vice Foreign Minister Dai Bingquo on China's role as a 
``stakeholder'' in international society has been effective in this 
regard. Hu Jintao has espoused a policy of ``peaceful development'' to 
emphasize that China's concerns are internal and China seeks to be a 
benign force in international relations. Through the Zoellick-Dai 
dialog, I believe the Chinese are learning that on questions like 
Burma, a policy of commercial engagement unencumbered by expectations 
of adherence to international norms is mercantilist and therefore 
anything but benign. I also think we can convince Beijing to appreciate 
that short term accommodation of the regime may only prolong and 
complicate longer-term problems of instability emanating from Burma.
    Taking this argument directly to China is necessary but not 
sufficient. Beijing must also see that democracy and the rule of law 
are the region's agenda as well. A successful strategy to mobilize the 
regional actors that increasingly care about the internal state of 
affairs in Burma will create a coalition that Beijing cannot ignore. 
China will not want to be the anti-status quo outlier in Asia. I 
believe China will move pre-emptively for change in Burma rather than 
see the change dictated by democratic powers aligned with the United 
States. And this need not be seen in zero-sum terms in the U.S.-China 
relationship. Ultimately, action by Beijing to change the behavior of 
regimes like Burma and North Korea will provide the substance for a 
more strategic and mutual beneficial U.S. China partnership.
    Given that the Burma question is one that touches not only on 
American values, but also on our national security interests, how 
should we organize ourselves? I have three specific recommendations.
    First, the United States should press for the U.N. Security Council 
for a resolution on Burma based on Chapter VII of the U.N. Charter. 
This will take diplomatic energy and will rile some members whose votes 
we need for other Security Council debates over Iran. However, as I 
have argued here, the issue is larger and more strategic than Burma 
itself. And, frankly, it is the right thing to do.
    Second, the United States should take the lead on organizing the 
international community to provide humanitarian assistance to the 
people of Burma to contain and reverse the transnational threats of 
HIV/AIDS and Avian Influenza. In fact, the United States, recognizing 
the serious threat that HIV/AIDS poses not just to Burma but to the 
region, led the effort to get the Global Fund involved in Burma and it 
was decisions by the junta that ultimately led to the unfortunate but 
unavoidable decision to pull back. The U.S. Government has also 
provided the initial equipment necessary to help detect and contain 
Avian Influenza outbreaks and should continue to do so as necessary. 
Burma's neighbors and traditional advocates of ``constructive 
engagement'' have been far less willing to provide humanitarian 
assistance to the people of Burma to respond to these health threats. 
We should press them to do so, for example, as part of a coordinated 
international approach to meet the World Health Organization's call for 
$4 million in assistance for fighting avian influenza in Burma.
    Third, we should organize an international coalition for change in 
Burma to replace the now moribund Bangkok Process. The President has 
raised Burma with every regional leader he has met and senior officials 
like Undersecretary of State for Political Affairs Nicholas Burns and 
Undersecretary for Global Affairs Paula Dobriansky have carried on the 
message at their level. It is time to push for a common roadmap that 
can succeed through strength of numbers. I would organize this effort 
with Japan, India, Australia ASEAN and the European Union. The United 
Nations should also be involved, of course. And I would avail China of 
the opportunity to join other regional players to enhance stability by 
pushing collectively for changed behavior by Burma, but China's 
participation would have to be premised on recognizing the need to 
press for change.
    In fact, my colleagues and I began some of this process informally 
while I was at the National Security Council and found that 
counterparts in key ASEAN states were eager for more. They know that 
``constructive engagement'' and the Bangkok process have not led to 
results. They know that the status quo is fundamentally unstable and 
that they will only face more cross-border problems from Burma in the 
future. They see Than Shwe's decision to move the capital to Pyinmana 
as evidence of an increasingly delusional leadership driven by the 
recommendations of soothsayers and astrologers. They recognize that 
ASEAN's clout vis-a-vis other international actors is being weakened. 
They worry about China's growing influence, but they say that they can 
build consensus for a new approach if we can bring on board Japan and 
India. They are not yet ready to abandon engagement, but they are ready 
to look at adding more sticks to their menu of carrots.
    If we are to organize for a deliberate multilateral approach to the 
Burma problem, the goal should not be immediate ``engagement'' of Burma 
per se. Instead, we should focus our energy on the production of a 
common roadmap that outlines concrete goalposts we need to see as 
evidence of a return to democracy. These goalposts must include the 
immediate and irreversible release of Aung San Suu Kyi and the 
leadership of the NLD and ethnic leaders and their full participation 
in a transparent and sustained process of national reconciliation aimed 
at the restoration of democracy. In order to build a multilateral 
consensus even among our closest allies, we will have to include both 
carrots and sticks. The carrots can easily include reassurances about 
the territorial integrity of Burma, but will also have to involve 
incremental sanction lifting at some stage in the process. From 
regional actors we should insist on more sticks if the regime does not 
take the right steps. These sticks might include freezing further 
investment in commercial projects. We should also push for coordination 
on humanitarian relief.
    The specific mechanics of this multilateral effort should be left 
to the administration, but I think the time is ripe to put forward a 
consensus message to the regime that its neighbors are willing to 
assist with the transition to democracy, but prepared to impose 
consequences on Burma collectively for non-action.
    The Burma problem has reached the tipping point in the view of many 
of the regime's neighbors. If we work with like-minded states on an 
approach that pools our collective sticks and carrots in a systematic 
way, the regime will not be able to ignore its neighbors' collective 
will. Moreover, we will help move our friends and allies to a values-
based strategy that strengthens the prospect for continued 
democratization and adoption of the rule of law across the entire 
region.
    Thank you.

    Senator Murkowski. Thank you, Dr. Green.
    Dr. Turnell.

STATEMENT OF Dr. SEAN TURNELL, BURMA ECONOMIC WATCH, ECONOMICS 
 DEPARTMENT, MACQUARIE UNIVERSITY, SYDNEY, AUSTRALIA; VISITING 
       FELLOW, SOUTHEAST ASIA PROGRAM, CORNELL UNIVERSITY

    Dr. Turnell. First, I would just like to say, as well, how 
honored I am to give this testimony here today and also express 
my appreciation for the role that this subcommittee has played 
on Burma and its individual members.
    Today, I am going to be talking about Burma and its 
economy, and it is a topic that one would think an economist 
could bring quite a light heart to. According to the official 
figures released by the Burmese regime, in 2005 Burma grew by 
12.2 percent, on top of 12 percent in 2004, and pretty much a 
decade of double digit growth. Now, if that is the case, of 
course, then Burma is the fastest growing economy in the world. 
Not only that, over this period it used less energy, it used 
less natural resources, and it negotiated a banking crisis that 
was at least as serious as the one that brought so many of its 
neighbors down in 1997.
    So in a sense we are dealing with a miracle economy. 
Unfortunately, we are not dealing with Burma. We are dealing 
with something else that I guess escapes me.
    The real Burma, of course, is mired in poverty and despair 
and it is a poverty and despair that is the deliberate 
consequence of the policies of the regime that has been in 
place for four decades. Reconstructing some of the economic 
numbers, the group that I am a member of, Burma Economic Watch 
from Macquarie University in Sydney, we actually think that 
Burma's economy went backwards in 2003 and 2004. We think there 
is some growth in 2005 and 2006, but in a sense it is really 
technical only. It is coming from increasing exports of gas, 
which has meant that the trade balance has turned positive, but 
part of that positive turn has also come from a dramatic 
decline in imports, which tells us something about economic 
circumstances in the country. So the recent positive growth we 
do not think is necessarily suggestive of anything good going 
on in the country.
    Fifty years ago Burma was the wealthiest country in 
Southeast Asia and at the time of independence, in 1948, it was 
the country that everyone thought would make it. All of the 
trends in a sense suggested that wealth and so on would 
continue. But it has not, and that it has not is really the 
direct result of the regime, which took place in 1962.
    To give some of the broad issues about the economy in 
Burma, one of the things we can say is that the country lacks 
the institutions, such as private property rights, such as 
freedom of contract, that we know--that history tells us are at 
the heart of economic development.
    It is also the case, over the last four decades, that 
policymaking in Burma has been erratic, contradictory, and, 
frankly, irrational. It is the case that the state takes, by 
far, the lion's share of the resources in the country, but it 
does not have any legitimacy to tax and so what it resorts to 
is, in the time-honored fashion, to the printing press and the 
central bank and floods the economy with money, essentially. As 
a consequence of this, of course, Burma has a distrusted 
currency, a dysfunctional financial system, and rampant 
inflation.
    The path to wealth in Burma is not through enterprise or 
innovation. If one were to go down that route, I think you 
would find that your enterprise would be seized by the junta 
anyway. But rather, it is to use the state apparatus in various 
ways. Apart from corruption, there are many aspects of Burma's 
economy that are, in fact, just straight-out criminal, and in 
that, of course, I am alluding to the narcotics trade and 
money-laundering and so on, which I will refer to in a little 
bit more detail later.
    What I might do now is just move to some specific issues 
and specific sectors. The data for this is all in my written 
testimony. Turning first to policy, I mentioned that it was 
quite erratic and so on. In some ways it is almost a misnomer 
to talk about economic policy in Burma. There really is only 
one policy in Burma and that is to garner as much resources as 
possible for the regime. So fiscal policy and monetary policy 
are both bent to this task. Fiscal policy is just simply 
raising enough funds for the military, it plays in a sense no 
real counter-cyclical or developmental role. Monetary policy is 
in a sense rendered ineffective by the fact that the regime 
just borrows from the central bank and floods the country with 
money. But not only that, in order to keep its funding costs 
down on the bonds that it issues to the central bank, the 
Burmese regime has various interest rate caps and so on which 
are well below the inflation rate, which again just counts out 
monetary policy as being a viable tool of economic policy.
    Policymaking is, as I have mentioned a couple of times now, 
irrational, erratic, and sudden, and so on. We see lots of 
examples of this. We saw it 2 days ago with the decision to 
increase the salaries of senior civil servants by up to 1,200 
percent. That is fairly typical of decisionmaking in Burma in 
the sense everything is left to the last minute, at which there 
will be sudden and dramatic changes. Last year it was 
increasing fuel prices eightfold. At other times in the past it 
has been demonetizing whole currencies, etcetera.
    In some ways it is exemplified, I think, by exchange rate 
policy in Burma. Burma formally has a fixed exchange rate 
system which sets its currency, the kyat, at 6 kyat to 1 U.S. 
dollar, but in a sense no one really pays much attention to 
that. The focus instead is on the informal market or black 
market and the current exchange rate, as of today, is 1250 kyat 
to the U.S. dollar. So in other words, the official exchange 
rate is over 200 times overvalued.
    That is very much a moving feast, I might add, because my 
written testimony has 1100 kyat to the U.S. dollar, but after 
the announcement of the wage increases the other day that has 
blown out, as I say, to about 1250 today.
    If we look at trade and foreign direct investment, if this 
were a normal country, we would think that this would be quite 
positive. Burma is selling increased quantities of natural gas 
through its two pipelines to Thailand and there are other 
schemes about to come on line off Arakain. Unfortunately, we 
are not dealing with a normal country and, in the past, these 
windfall gains that have come from higher energy prices and so 
on have been used by the regime in all sorts of ways that are 
inimical to the country's development. Last time it was to buy 
a fleet of Mig-29s, which no longer fly, and who knows what 
might come from this particular one.
    Turning to the monetary and financial sector, this was a 
sector that until fairly recently might have been a sector that 
suggested the economy was actually making some gains. Burma's 
financial sector was ``liberalized,'' quote unquote, in 1990 
and by 2002 some 20 private banks had emerged and the numbers 
seemingly looked quite positive. Later that year, though, Burma 
underwent a substantial banking collapse which, as I mentioned, 
was as serious as we have ever seen in history, quite frankly, 
and since that time the system is essentially moribund.
    The authorities' response to that banking crisis is almost 
a checklist of what not to do in response to a banking crisis. 
Economists do not know many things about many things, but we do 
know something about how to respond to a banking system, and 
Burma seemed to go about everything to exacerbate the crisis.
    So Burma's financial system does not provide the country 
with the financial assets it needs. Trust, which is never a 
commodity that is particularly abundant in Burma, is now almost 
irredeemably lost, I suggest, when it comes to the financial 
sector.
    The financial sector is affected by something else, of 
course, and that is the shadow of money-laundering. Burma is 
one of only two jurisdictions to be named by the Financial 
Action Task Force of the OECD as a primary money-laundering 
jurisdiction. The other, incidentally, is Nigeria. Burma is 
also subject to section 311 of the USA Patriot Act, which quite 
rightly identifies Burma also as a money-laundering 
jurisdiction, and for the first time ever, actually named 
specific institutions in Burma as being money launderers. They 
were the largest and third largest of Burma's banks, 
respectively. Since then, another of the largest banks has come 
into focus as well.
    This aspect is an interesting one because it sort of 
slipped below the radar screen, I suspect. It has had a big 
impact on other countries, including China. The Bank of China, 
for example, will not handle U.S.-dollar transactions for 
Burmese firms. Again it is not something I think that has been 
widely reported.
    I will end just briefly talking about the sanctions issue. 
I would like to echo the comments of previous speakers and to 
say that I think the sanctions currently imposed by the United 
States and the European Union and some other countries are 
having an effect. I think that they are extraordinarily well 
targeted when it comes to Burma. The great majority of the 
Burmese citizens have no contact whatsoever with the traded 
goods sector or the external economy. The one group that does 
are the elite of that society. So in a sense, if sanctions are 
all about putting the appropriate incentives in place for the 
people that matter, I think we can say that that is the case in 
Burma.
    Some people have criticized sanctions because of job losses 
in the garment industry and so on. I think, if you look at the 
issue, you will see actually that most of those job losses have 
everything to do with the ending of the Multi-Fiber Agreement, 
which has seen China increase its exports in any case.
    Finally, to end, I am from Australia, but I spend a lot of 
time traveling around Southeast Asia and I can say that the 
sanctions imposed by the United States and European Union, 
things like this USA Patriot Act, catching the money launderers 
and so on, has had a big effect in the region. Countries like 
Singapore are very frightened of getting caught up in money 
laundering and other things to do with the sanctions.
    So thanks again for this opportunity to speak to you today.

    [The prepared statement of Dr. Turnell follows:]

Prepared Statement of Dr. Sean Turnell, Burma Economic Watch, Economics 
 Department, Macquarie University, Sydney, Australia; Visiting Fellow, 
               Southeast Asia Program, Cornell University

                                overview
    According to official statistics released by Burma's ruling 
military regime, the self-styled ``State Peace and Development 
Council'' (SPDC), Burma's economy grew by an astonishing 12.2 per cent 
in 2005. Beating even the previous year's stellar performance of 12.0 
per cent, and coupled with double-digit growth all the way back to 
1999, by these measures Burma is the fastest-growing economy in the 
world. What's more, Burma achieved this astonishing growth using less 
energy, less material resources and, in the middle of it all, while 
negotiating a banking and financial crisis that was as serious as any 
in history. Truly, a miracle economy indeed.
    It is, alas, also a fantasy economy. Under the SPDC, the real Burma 
is a wasteland of missed opportunity, exploitation and direst poverty. 
More realistic numbers of Burma's economic performance calculated by 
Burma Economic Watch show that far from stellar growth, Burma's economy 
actually shrank in 2003 and 2004. In 2005 Burma will likely have 
returned to growth, but at a rather more modest 2 to 3 per cent. 
Similar growth can be expected for the coming year. None of this 
growth, however, has anything to do with improved economic 
fundamentals, but with the windfall gains accruing to the state from 
the rising demand for Burma's exports of natural gas.
    The real Burma is one of the poorest countries in Southeast Asia. 
Only 50 years ago, it was one of the wealthiest. The dramatic 
turnaround of Burma's fortunes is the product of a state apparatus that 
for decades has claimed the largest portion of the country's output, 
while simultaneously and deliberately dismantling, blocking and 
undermining basic market institutions. The excessive hand of the state, 
which for many years was wedded to a peculiar form of socialism, has 
manifested itself in a number of maladies that are the direct cause of 
Burma's current disarray. These include:

   The suppression of the fundamental economic institutions--
        effective property rights, contract enforcement, the measures 
        that define the ``rules of the game'' for efficient economic 
        transactions--that history tells us are necessary for 
        sustainable long-term growth.

   Macroeconomic policymaking that is arbitrary, often 
        contradictory and ill-informed.

   A regime claim to Burma's real resources that greatly 
        exceeds its ability to raise revenue through taxation. As a 
        consequence, like many such regimes around the world and 
        throughout history, it resorts to the printing press to 
        ``finance'' its expenditure. Inflation and monetary chaos have 
        been the predictable consequences.

   A currency, and a financial system, that is widely 
        distrusted. People in Burma store their ``wealth'' in devices 
        designed as a hedge against inflation and uncertainty. As a 
        result, financial intermediation is underdeveloped and the 
        allocation of capital is distorted.

   Rent-seeking through state apparatus that offers the surest 
        route to prosperity, at the expense of enterprise. Burma's 
        leading corporations are mostly owned and operated by serving 
        and retired military officers. Corruption is endemic.

   Important sectors of Burma's economy that are starved of 
        resources. Negligible spending on education and health have 
        eroded human capital formation, and reduced economic 
        opportunities. Agriculture, which provides the livelihood for 
        the overwhelming majority of the Burmese people, is chronically 
        (and, often deliberately) starved of critical inputs.

   Economic mismanagement by the regime that means that Burma 
        attracts little in the way of foreign investment. What does 
        arrive is strongly concentrated in the gas and oil sectors, and 
        other extractive industries. Little employment is generated 
        from such investments, and there is little in the way of 
        technology or skill transfer. All of the revenues from Burma's 
        exports of gas and oil are accrued by the regime.

   At a micro-level, the almost complete stifling of economic 
        innovation by the military regime. Whenever there has occurred 
        enterprise development in particular sectors, these are 
        ``shaken-down'' for kickbacks of various kinds--usually they 
        are threatened with expropriation and even nationalisation.

    Such then are some of the broad factors that inform Burma's current 
economic circumstances. Below we will detail more closely specific 
sectors of Burma's economy, their current condition, and immediate 
prospects.
                            economic growth
    In February 2006, Burma's Minister of National Planning and 
Economic Development, Soe Tha, announced that his country's growth rate 
for 2005 would be 12.2 per cent.\1\ This topped even 2004's strong 
growth of 12.0 per cent, and made Burma (certain small oil producing 
countries excepted), the fastest growing economy in the world.
---------------------------------------------------------------------------
    \1\ Minister quoted in The Myanmar Times, vol.16, no.305, 20-26 
February 2006.

       Table 1.--Claimed Annual GDP Growth Rates, Burma 1999-2004
                                [ % p.a.]
------------------------------------------------------------------------
   1999       2000       2001       2002      2003      2004      2005
------------------------------------------------------------------------
   10.9       13.7       11.3       10.0       10.6      12.0      12.2
------------------------------------------------------------------------
Source: ADB (2004 and 2005).

If only it were true . . .

    Stating anything definitive with respect to economic growth in 
Burma is fraught with the difficulties pertaining to a country in which 
the official statistics are notoriously unreliable (even deliberately 
mis-stated), and collecting data otherwise is difficult. Burma does not 
publish national accounts statistics, and the only growth data that is 
made available is that which accompanies ministerial statements such as 
the one above. Nevertheless, we can be sure that economic growth in 
Burma is well below the Minister's claims. His boast is greatly at odds 
with even the most cursory glance at the economic circumstances on the 
ground in Burma, circumstances which point to ever deeper levels of 
poverty for the average citizen, and of an economy that at worst is on 
the verge of collapse, and at best cycles through bare subsistence.
    More substantially, however, we can dispute the Minister's claims 
through various proxy measures and indicators of economic growth. For 
instance, if Burma was truly growing along the lines claimed by the 
SPDC, one would expect to see it using more productive resources--
energy, land, labour, capital, and so on. We do not see this. Indeed, 
as the Asian Development Bank (2005:30) notes, electricity usage in 
Burma actually fell by 32.4 per cent across 2004-05. Amongst other 
indicators--in the same period cement output fell 8.5 per cent, sugar 
production fell by 2 per cent, and credit extended to the private 
sector (Table 3 below) was only fitfully recovering from its collapse 
the year before. In 2005 it is likely that manufacturing as a whole 
contracted--not a result one would expect to see (the sector 
contributes just over 10 per cent of GDP) for an economy growing in 
double-digits (EIU 2006:18). In addition to these ``internal'' proxies, 
however, if Burma was actually growing at the rates claimed by the 
SPDC, we would also presume to see certain patterns in its economy that 
history tells us to expect of rapidly growing economies (Bradford 
2004). We should see less reliance on agriculture, greater reliance on 
industry, and even the emergence of services. Of course, these are 
long-term patterns, but shorter-term trends are generally at least 
consistent with them in countries that truly have enjoyed high growth 
(and for which the Asian ``tiger'' economies and China are exemplary). 
Burma displays none of these structural dynamics. Indeed, as 
demonstrated by Bradford (2004), agriculture has assumed a greater role 
in Burma's economy in recent years. In short, either the military 
regime's claimed economic growth numbers are greatly at odds with 
reality, or the country has truly found a unique path to economic 
prosperity.
    An alternative set of growth numbers (Table 2 below), more 
consistent with our critique here (and with Burma's recent economic 
history), have been estimated by the Economist Intelligence Unit (EIU 
2006):

                Table 2.--Economic Growth Estimates (EIU)
                                [% p.a.]
------------------------------------------------------------------------
    2001         2002        2003        2004        2005        2006
------------------------------------------------------------------------
     5.3          5.3         -2.0        -2.7         2.9         1.9
------------------------------------------------------------------------

    As can be seen from the estimates above, moderate economic growth 
returned to Burma in 2005 and this will likely continue through 2006. 
Such growth is in no way reflective of any bout of economic reform in 
the country, but instead is driven by the increasing global demand for 
energy which has pushed up the price of natural gas. Burma currently 
exports natural gas only to Thailand in sizable quantities, but new 
projects are currently being brought on stream via a series of deals 
with Chinese, Indian and South Korean investors. Increasing gas prices 
and export volumes caused Burma's trade balance to turn positive in 
2005 (EIU estimate: 4.4 percent of GDP), and it was this contribution 
that was responsible for the country's estimated positive rate of 
economic growth overall. Contributions from agriculture remain flat 
(despite relatively good harvests), whilst other sectors of the 
economy--manufacturing, transport, services, tourism--are likely to 
detract from economic growth. These sectors face particular downside 
risks in 2006, ranging from further disastrous policy choices by the 
military regime, high oil prices, potential avian influenza outbreaks, 
political unrest at home and abroad (especially Thailand), capricious 
policy changes, consumer boycotts, and so on.
                          macroeconomic policy
Fiscal Policy
    Macroeconomic policymaking in Burma is coloured by one overwhelming 
fact--the irresistible demand of the state upon the country's real 
output. This demand far exceeds the state's ability to raise taxation 
revenue, and accordingly has led to a situation in which the state 
``finances'' its spending by the simple expedient of selling its bonds 
to the central bank. This policy (in economics parlance, ``printing 
money') distorts every other aspect of policymaking in Burma. Fiscal 
policy is simply concerned with the raising and spending of funds, 
monetary policy likewise with keeping interest rates sufficiently low 
(as shall be examined, negative in real terms) to minimise financing 
costs. Neither plays a counter-cyclical or developmental role, and both 
seriously blunt the functioning of the market economy.
    Table 3 below illustrates the financial demands of the state in 
Burma on the country's financial system.

                    Table 3.--State Share of Burma's Financial Resources: Selected Indicators
                                                 [Kyat millions]
----------------------------------------------------------------------------------------------------------------
                                                                                    Commercial        Public
                                                  Central bank   Commercial bank   bank lending     holdings of
                      Year                         lending to       lending to      to private      Government
                                                   Government       Government        sector           bonds
----------------------------------------------------------------------------------------------------------------
1999...........................................         331,425           12,460         188,149             378
2000...........................................         447,581           36,159         266,466             463
2001...........................................         675,040           40,985         416,176             504
2002...........................................         892,581           43,248         608,401             563
2003...........................................       1,262,588           35,546         341,547             544
2004...........................................       1,686,341           89,217         428,391             505
2005*..........................................       2,065,038           74,693         559,555           **457
----------------------------------------------------------------------------------------------------------------
*As at end--October.
**As at end--January.
Sources: IMF (2006), Myanmar Central Statistical Office (MCSO 2006)

    As can be seen from Table 3, the demands of the state upon Burma's 
financial resources swamps all others. Central bank lending to the 
government is the favoured device for financing government expenditure. 
Yet, as can also be seen from the data above, the state is also a 
borrower from Burma's (nominally) commercial banks. The latter provides 
the private sector with little more than a quarter of the funds that 
Burma's financial system provides to the central government. The small 
amount of government bonds held by the general public, an infinitesimal 
proportion (substantially less than one percent) of the bonds sold to 
the central bank, is indicative of the lack of confidence the citizens 
have in such state-created financial assets.
    In recent years the SPDC has introduced dramatic increases in the 
taxes it levies. Customs duties alone rose by over 400 percent in 2004/
05 (due to a mix of increases in tax rates, and exchange rate 
formulae--more on which below). Notwithstanding this, total central 
government tax revenue in fiscal year 2004/05 came to just K278,024 
million (EIU 2006:17). The SPDC does not publish data on its spending, 
but given that new advances to the regime from the central bank came to 
K378,697 million in roughly the same period, it is reasonable to assume 
that taxes account for little more than 40 percent of government 
spending.
Monetary Policy
    Monetary policy in Burma is formally the responsibility of the 
Central Bank of Myanmar (CBM). However, a number of factors determine 
that it is incapable of yielding any influence over monetary conditions 
in Burma.\2\ The first and most simple of these factors is that Burma 
has in place interest rate controls that cap lending rates at 15 
percent per annum, and do not allow deposit rates to fall below 9.5 
percent per annum. These rates, and the rate at which the CBM will 
provide funds to the commercial banks (the so-called ``CBM rate', 
currently at 10 percent), have not changed for a number of years 
(Turnell 2006). Given that Burma's inflation rate was (conservatively) 
put at just over 20 percent in 2005, this implies that ``real'' 
interest rates in Burma have been substantially negative (EIU 2006:5). 
The motivation of the regime for locking in such rates (which result in 
substantial distortions in capital allocation), is to minimise the 
interest rates paid on government debt. Currently, 3 and 5-year Burmese 
government bonds have fixed-yields of 8.5 and 9.0 percent respectively 
(MCSO 2006). In common with other countries with an underdeveloped 
financial system (on which, more below), the CBM is likewise unable to 
employ devices (open market operations, rediscount facilities, 
repurchase agreements) that are part of the standard tool box of 
central banks. The distrust of Burma's currency, the Kyat, has created 
parallel (black-market) foreign currency spheres in Burma, and these 
are also beyond the influence of the CBM. Finally, it perhaps goes 
without saying that the CBM does not enjoy operational independence 
from the state, and accordingly has no credibility beyond it.
---------------------------------------------------------------------------
    \2\ Not that, under the present regime, the CBM would be allowed 
any real power anyway. This fact was dramatically revealed during the 
2002/03 banking crisis, when the CBM was sidelined in favour of an 
obscure brigade commander in the (unsuccessful) attempts to manage 
matters (Turnell 2003).
---------------------------------------------------------------------------
Exchange Rate
    Burma has a fixed-exchange rate policy that officially links the 
Kyat to the US Dollar at the grossly inappropriate rate of K6:$US1.\3\ 
This official rate, however, is just one of a number of exchange rates 
applicable to Burma's currency. The most important of these rates, and 
the only one relevant to the people ``on the street'' in Burma, is the 
``black market'' or ``unofficial'' rate. Currently this rate stands at 
around K1,160:$US1, nearly two hundred times below the official 
standard promulgated by the regime. This rate is, of course, subject to 
daily, even hourly, fluctuation according to the perceptions of the 
country's prospects. Wild swings in the unofficial rate are reasonably 
frequent, to which the SPDC's counter, instead of engaging in 
meaningful currency reform, is invariably to order the rounding up of a 
cohort of ``usual suspect'' foreign exchange dealers. As a consequence 
of the United States highly effective sanctions imposed on Burma, the 
SPDC has employed various coercive measures to try to discourage the 
use of the US dollar, and in favour of the Euro, the Singapore dollar, 
the Thai Baht and the Yen. These measures have had only limited 
success, and the US dollar remains a highly prized store of value 
(especially, in this context, ``new'' $US 100 bills).\4\
---------------------------------------------------------------------------
    \3\ Technically, the Kyat is fixed to the IMF's ``Special Drawing 
Rights'' at a rate of K1:SDR8.5085--which yields are more or less 
constant K6:$US1.
    \4\ The author can confirm that the $US also remains the favoured 
medium through which larger Burmese businesses continue to conduct 
their activities.
---------------------------------------------------------------------------
    In addition to its sometimes wild fluctuations, the unofficial 
value of the Kyat has been in secular decline for some time, and in 
this it acts as something of a barometer of Burma's macroeconomy under 
the military regime. Table 4 below records its declining value vis-a-
vis the US dollar over the last decade:

                                Table 4.--Indicative (Unofficial) Exchange Rates
                                                   [Kyat/$US1]
----------------------------------------------------------------------------------------------------------------
   1997        1998        1999        2000        2001       2002       2003       2004       2005       2006
----------------------------------------------------------------------------------------------------------------
      240         340         350         500        650        960        900      1,000      1,300     *1,160
----------------------------------------------------------------------------------------------------------------
*As at March
Source: Burma Economic Watch.

    In addition to the ``official'' and ``unofficial'' exchange rates 
there are other, ``semi-official', rates that apply depending on the 
counterparties and circumstances. For instance, a rate of K450:$US1 
currently applies for all funds brought into Burma by U.N. agencies and 
international NGO's.\5\ This rate, when enforced, means that such 
organisations provide the SPDC with foreign exchange effectively at 
less than ``half-price'' (the organisations are likewise compelled to 
conduct their foreign exchange operations via the state-owned Myanmar 
Foreign Trade Bank). This same exchange rate applies, for the purposes 
of excise calculation, to many exporters and importers in Burma 
(regardless of the rate they actually conduct their business in).
---------------------------------------------------------------------------
    \5\ Information provided to the author by an official, but 
confidential, source. This matter has been subsequently reported in the 
press (Parker and Yeni 2006).
---------------------------------------------------------------------------
    The regime's multiple and divergent exchange rates are the public 
face of Burma's macroeconomic malaise. They also provide for 
extraordinary opportunities for corruption. It is clear, for instance, 
that having access to foreign currency at anything close to the 
official exchange rate presents the recipient with the potential of 
immediate windfall gains. Reforming and unifying Burma's exchange rate 
regimes, which almost certainly should mean allowing the Kyat to 
``float', should be a first-order priority in any future reform 
program. Unfortunately, such a reform program is unlikely from a regime 
that is clearly the existing system's leading beneficiary.
``Capricious'' Policy Making
    One of the most damaging features of macroeconomic policymaking in 
Burma (of all types), is that it is often made in ways that to 
observers appears highly capricious, arbitrary, selective and even 
simply irrational. Examples of such decisionmaking are legion, of which 
the following are but a small but indicative recent sample:

   In October 2005, the SPDC suddenly announces an eightfold 
        increase in the retail price of gasoline.

   In 2004, in order to stem rising domestic prices, the SPDC 
        announces a ban on rice exports. Just a year earlier the SPDC 
        had brought in measures designed to substantially liberalise 
        the avenues through which rice producers could export.

   Various announcements through 2005 that exporters/importers 
        in Burma were to henceforth use the Euro rather than the $US in 
        their transactions.

   The (numerous) changes to tax and duty levies on 
        commodities.

   Reflexive cycles of relaxation/restriction on border trade.

   Sudden arrests and purges of regime insiders when, 
        occasionally, they call attention to the regime's follies and 
        incompetence. Legal procedure scarcely matters in Burma, but 
        ``economic crime'' is the usual charge.

   The sudden announcement in 2005 that Burma's administrative 
        capital would relocate from Rangoon to Pyinmana. Not strictly 
        an economic decision, but there is little to suggest that the 
        economic dislocation costs of the move were seriously 
        entertained.
                            external sector
Trade
    As noted in the overview, it is only from the external sector that 
any growth in Burma's economy is apparent, or likely. Driven by rising 
gas export prices and volumes, and augmented by a precipitous decline 
in imports (more on which below), Burma recorded a trade surplus in 
2004 of over $US900 million. For the first 3 months of 2005, the latest 
data publicly available, the surplus in this item stood at nearly 
$US470 million (IMF 2006). With gas prices rising across 2005 and 
greater volumes likely to have been shipped, a large trade surplus just 
in excess of $US 1 billion for the year as a whole is expected. For 
2006 this trend will almost certainly continue, with the EIU (2006:5) 
predicting an annual trade surplus of $US 1.2 billion. It will be noted 
from Table 5 below, however, that imports in Burma have been falling in 
recent years. This seems unlikely to continue for much longer, 
especially as Burma imports required infrastructure to develop the new 
gas fields that have been the subject of recent deals. Table 5 also 
reveals that, to a considerable extent, Burma's trade surpluses are 
offset by deficits in services and in income payments--all of which 
diminish the overall surplus on current account. This trend likewise 
will continue into the future--driven by the repatriation of profits by 
the (largely foreign) firms investing in Burma's energy sector.

         Table 5.--Burma's External Sector: Selected Indicators
                             [$US millions]
------------------------------------------------------------------------
                                                               Current
               Year                   Goods        Goods       account
                                     exports      imports      balance
------------------------------------------------------------------------
1999.............................      1,293.9      2,181.3       -284.7
2000.............................      1,661.6      2,165.4       -211.7
2001.............................      2,521.8      2,443.7       -153.5
2002.............................      2,421.1      2,022.1         96.6
2003.............................      2,709.7      1,911.6        -19.3
2004.............................      2,926.6      1,998.7        111.5
2005*............................        836.6        364.5        296.6
------------------------------------------------------------------------
*As at end--1st Quarter, Source: IMF (2006)

    Table 6 below reveals the source of Burma's exports, and 
illustrates the dominance of gas exports over other items. The growth 
of gas exports is also dramatically revealed--their value exceeding 
that of the whole of 2004 by the end of the first quarter 2005. So far 
most of this gas is sourced from the existing Yadana and Yetagun fields 
(the product of which is exported to Thailand), but this will shortly 
be joined by gas piped from sites soon to come on stream, including 
that of the (offshore) Korean/Indian/Burmese ventures in Rakhine State. 
From Table 6 we can also see that the vast bulk of Burma's exports are 
from extractive industries of various types. Worryingly, as the EIU 
(2006:24) notes, exports of Burmese teak are likely to be substantially 
understated when one considers the pervasiveness of ``illegal'' logging 
in the country. Burma's exports of garments and textiles have 
substantially contracted over the last 2 years, overwhelmingly a 
function of the ending of the Multi-Fibre Agreement that has seen China 
increase its share of the global garment industry, at the expense of 
smaller-scale players such as Burma (Turnell 2006).

                                        Table 6.--Composition of Exports
                                                 [Kyat millions]
----------------------------------------------------------------------------------------------------------------
                         Export type                              2002         2003         2004        2005*
----------------------------------------------------------------------------------------------------------------
Gas.........................................................        4,247        5,919     \6\3,334        3,461
Teak and other Woods........................................        1,880        1,874        2,149          810
Pulses......................................................        1,898        1,744        1,407          503
Garments and Textiles.......................................        2,985        2,973        1,298          368
Shrimp and Fish Products....................................          829          829        1,003          230
Metal and Ore...............................................          288          288          503          220
Rice........................................................          754          754          112           90
Rubber......................................................           76           89           81           61
----------------------------------------------------------------------------------------------------------------
*At end--April.
Source: EIU (2004, 2005, 2006), MCSO (2006)

Investment
    Burma\6\ is not a large recipient of foreign direct investment 
(FDI). The country is regarded as a highly risky destination for 
foreign investment, and a difficult location to do business. In a 
recent report on economic freedom, the Washington-based Heritage 
Foundation ranked Burma third from the bottom (in front of only Iran 
and North Korea) with regard to restrictions on business activity. 
According to the Foundation, ``pervasive corruption, non-existent rule 
of law, arbitrary policymaking, and tight restrictions on imports and 
exports all make Burma an unattractive investment destination and have 
severely restrained economic growth'' (Miles, O'Grady and Holmes 
2006:125).
---------------------------------------------------------------------------
    \6\ This figure, based on Burmese official data, is lower than that 
suggested by Thai import data. Accordingly, it probably understates 
Burma's gas exports in 2004.
---------------------------------------------------------------------------
    As can be seen from Table 7, FDI in Burma is overwhelmingly 
directed to the gas and oil sectors. Very little FDI makes its way to 
industry, and even less to agriculture (which has received FDI of a 
mere $US34.4 million since the ``opening'' of Burma 17 years ago).\7\ 
In terms of source country, the traditional largest investors, 
Singapore and Thailand, have in recent times been overshadowed by 
China. This trend is likely to continue, albeit with China joined by 
greater investment in Burma's gas sector by Indian and Korean 
investors.
---------------------------------------------------------------------------
    \7\ This figure for agricultural investment, which is consistent 
with other sources, was rather surprisingly reported in the Rangoon-
based Weekly Eleven News in December 2005. The report was reproduced 
the same month in the online edition of The Irrawaddy, http://
www.irrawaddy.org.
---------------------------------------------------------------------------
    Thailand's role as an investor in Burma has eroded in relative 
terms as noted, but it remains a pervasive influence on Burma's economy 
nonetheless. One recent investment project with far-reaching 
implications is a joint venture agreement with Burma (signed in 2005) 
to construct four large dams on the Salween River. The dams are 
designed to provide hydro-electricity for Thailand, and foreign income 
for Burma. Unfortunately, however, the externalities of the project are 
far from benign. The dams are located in a region of Burma populated by 
Karen, Karenni and Shan--three of the largest of Burma's ethnic groups, 
and amongst the most economically marginalised. Such groups have 
greatly suffered in the past during the construction of various 
infrastructure projects in Burma, and one can only fear that they are 
likely to do so again. The United States Congress has itself found that 
the military regime's actions against these ethnic groups constitutes a 
form of ``ethnic cleaning'. Like so many of the regime's ``big ticket'' 
development projects, this one shows all the signs of being a disaster 
in the making (Akimoto 2004).
      

      Table 7.--Foreign Direct Investment Flows: Sector and Source
                             [$US millions]
------------------------------------------------------------------------
                                       2003         2004        *2005
------------------------------------------------------------------------
Sector:
  Gas and Oil....................         44.0         54.3        142.6
  Real Estate....................  ...........  ...........         31.3
  Mining.........................          3.4          1.5          6.0
  Manufacturing..................         13.2          2.8          3.5
  Transport......................  ...........         30.0  ...........
  Agriculture & Fisheries........         26.4          2.6  ...........
 
Source Country:
  China (incl. Hong Kong)........         12.9          2.8        126.6
  Thailand.......................  ...........         22.0         29.0
  Japan..........................  ...........  ...........          2.7
  Malaysia.......................         62.2  ...........  ...........
  South Korea....................          0.3         34.9  ...........
  United Kingdom.................  ...........         27.0  ...........
------------------------------------------------------------------------
*As at end--April.
Source: EIU (2004, 2005, 2006)

Foreign Exchange Reserves

                             Table 8.--Foreign Exchange Reserves: Selected Countries
                                                 [$US millions]
----------------------------------------------------------------------------------------------------------------
                                                                                              South
                           Year                              Burma     Thailand   Cambodia    Korea     Vietnam
----------------------------------------------------------------------------------------------------------------
1999.....................................................        265     34,063        393     73,987      3,326
2000.....................................................        223     32,016        502     96,131      3,417
2001.....................................................        400     32,355        587    102,753      3,675
2002.....................................................        470     38,046        776    121,345      4,121
2003.....................................................        550     41,077        815    155,284      6,224
2004.....................................................        672     48,664        943    198,997      7,042
2005*....................................................        774     50,728        939    210,317      8,602
----------------------------------------------------------------------------------------------------------------
* End 1st Quarter, Source: IMF (2006)

    Burma's trade surpluses and (to a lesser degree) the flows of FDI, 
have swelled the country's official foreign exchange reserves--from $US 
265 million in 1999, to over $US 774 million today (Table 8 above). The 
latter number, however, is still very low by global or even regional 
standards. Table 8 contains a sample of countries that, for a variety 
of reasons, Burma might be compared to. It can be seen that Burma has, 
by some margin, the lowest level of reserves ``comfort', even when 
compared to tiny and poor Cambodia. Of course, Burma's foreign assets 
must also be set against its foreign liabilities. These currently stand 
at around $US 7 billion (or around 14 times the size of the country's 
reserves), and consist for the most part of defaulted loans to the 
World Bank and other multilateral lenders (IMF 2006).
                     monetary and financial sector
    Burma's financial system, a mix of state-owned institutions, 17 
surviving ``privately owned'' banks of varying degrees of health, and a 
dominant informal sector, is failing to meet the country's need for 
capital.\8\ As noted in Table 3 earlier, the largest claimant on credit 
creation in Burma is the state. Private sector trade and industry in 
Burma can access some credit from the private banks, but the 
macroeconomic instability of the country means much of this is of a 
short-term nature only, and concentrated in such inflation-hedging 
sectors as real estate and precious metal and stone trading. Long-term 
credit for industrial development is almost completely non-existent. 
Personal credit in Burma is available from formal financial 
institutions for a handful of well-connected cronies of the regime, but 
for the average person in Burma ``credit'' is supplied by friends, 
relatives or, less agreeably, the local moneylender--for time 
immemorial a ubiquitous presence in the country (Turnell 2006). For 
agriculturalists in Burma the availability of credit is especially 
dire. According to a recent U.N. agency survey, 80 percent of Burma's 
agriculturalists are without access to formal credit of any kind.\9\
---------------------------------------------------------------------------
    \8\ Determining what is ``private'' or not is difficult in Burma--a 
country where business can scarcely escape the clutches of the regime.
    \9\ Information confidentially supplied to the author by the agency 
concerned. Of course, even if more credit was available it would make 
little difference to the circumstances of Burma's farmers in the 
absence of other reforms--notably the exit of the regime from its 
incessant meddling and demands on the rural sector. Making credit alone 
more accessible raises the risk of simply making Burma's farmers more 
indebted.
---------------------------------------------------------------------------
    To an uninformed observer, it must have seemed possible at the dawn 
of 2002 to entertain some optimism with regard to the financial system 
in Burma, particularly with respect to the private banks. These had 
emerged only since 1990, and the implementation of certain financial-
sector reforms (principally the ``Financial Institutions of Myanmar 
Law'' and the ``Central Bank of Myanmar Law'). By 2002 the private 
banks appeared to be growing strongly and, amongst the largest of them, 
the creation of a degree of trust and even ``brand recognition'' seemed 
apparent. Beneath the surface, however, all was not well. Burma's 
interest rate restrictions imposed by the regime (noted above) greatly 
hampered the private banks in traditional intermediation (taking in 
deposits and making loans), forcing them into activities of high risk 
and questionable legitimacy. That said, some of the private banks had 
been established in the first instance precisely to conduct and 
disguise unorthodox and criminal activity (regarding the latter, the 
laundering of narcotics money especially), while others were little 
more than corporate ``cash boxes'' for various entities connected with 
the regime. In 2002, however, all of this bubbled to the surface as a 
financial crisis engulfed Burma.
    At the centre of Burma's 2002/03 financial crisis was a banking 
collapse that was almost archetypal of such phenomena. However, the 
crisis did not begin in the banks. Rather, it began, in late 2002, with 
a series of failures amongst what were known in Burma as ``private 
finance companies'--in effect, ``institutions'' that were for the most 
part little more than gambling syndicates and ``ponzi'' schemes.\10\ 
Though these firms were not legally authorised deposit-taking 
institutions, they presented a tempting investment opportunity for 
Burmese seeking a non-negative return on their funds.\11\ Such 
temptation had an irrational side in promised rates of returns typical 
of ponzi schemes, but there was a rational aspect to it as well since, 
as noted, the rates the banks could pay on deposits was effectively 
``capped'' at 9.5 percent. In 2002 inflation was estimated to be in 
excess of 55 percent per annum, meaning that putting money in the bank 
was a (certain) losing proposition in real terms (IMF 2006).
---------------------------------------------------------------------------
    \10\ For a detailed account of Burma's 2003 banking crisis, see 
Trnell (2003). Ponzi schemes pay extremely high returns to their 
members out of the capital of new members. They must ultimately fail 
when the supply of new members dries up.
    \11\ That is, these schemes were not authorised under The Financial 
Institutions of Myanmar Law (1990).
---------------------------------------------------------------------------
    The crisis in Burma's private finance companies quickly spread to 
the private banks--a contagion perhaps unremarkable given the country's 
history of periodic monetary and financial crises under military rule. 
Long lines of anxious depositors formed outside the banks, a phenomenon 
that rapidly swelled into a classic ``bank run'. From this moment on, 
the response of the relevant monetary authorities in Burma (principally 
the CBM) was almost wholly destructive. Late and inadequate liquidity 
support to the banks by the CBM was overwhelmingly negated by the 
imposition of ``withdrawal limits'' on depositors that escalated into 
an outright denial of depositors of access to their money. Even worse, 
loans were ``recalled'' with little consideration given to capacity to 
repay. More potent breaches of ``trust'' in banking would be difficult 
to imagine. With a full-scale banking crisis now in play, there 
followed the usual symptoms of such events--bank closures and 
insolvencies, a flight to ``cash', the creation of a ``secondary 
market'' in frozen deposits, the cessation of lending, the stopping of 
remittances and transfers, and other maladies destructive of monetary 
institutions. By mid-2003 the private banks had essentially ceased to 
function. In 2004 selected banks reopened, some of the largest closed 
completely (including the Asia Wealth Bank and the Myanmar Mayflower 
Bank, then the largest and third largest respectively of Burma's 
private banks), and a weak recovery began.

                                                         Table 9.--Selected Financial Indicators
                                                                     [Kyat millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Time, savings and  foreign
                           Year                                    Demand deposits              currency  deposits           Money + Quasi money (M2)
--------------------------------------------------------------------------------------------------------------------------------------------------------
      1999                                                                  72,707                         216,549                         562,224
      2000                                                                 119,746                         335,574                         800,542
      2001                                                                 206,349                         450,560                       1,151,713
      2002                                                                 290,520                         541,307                       1,550,778
      2003                                                                  82,948                         386,298                       1,572,402
      2004                                                                 139,880                         594,169                       2,081,824
      2005*                                                                164,855                         693,465                       2,536,861
--------------------------------------------------------------------------------------------------------------------------------------------------------
*As at end 1st Quarter.
Source: IMF (2006) and MCSO (2006).

    Table 9 above reveals the progress thus far of this anaemic 
recovery. As can be seen, both demand as well as less-liquid deposits 
have bounced back, though the former are still below the levels of late 
2002. Taken together, in 2005 total bank deposits of K858,320 million 
were a mere 33.8 percent of the total money supply (M2)--indicating, as 
of course did the data on lending in Table 3 earlier, that the state 
remains by far the dominant actor in Burma's financial sector.
    Of course, the data in Table 9 can also be profitably employed to 
once more critique the SPDC's growth claims in recent years. For 
instance, the regime boasted that Burma's economy grew a vigorous 10.2 
percent in 2003--a year in which new lending to the private sector 
ceased, loans financing existing activities were recalled and all the 
measures of private monetary assets declined dramatically. If matters 
were not serious they could be laughable. According to the SPDC, Burma 
can not only grow strongly without the increased use of energy and 
other ``real'' factors of production--it can also do it seemingly 
without money.
                              agriculture
    Burma remains an overwhelmingly agricultural country. Agriculture 
accounts for around 57 percent of Burma's GDP and engages over 70 
percent of its labour force (UNDP 2003). Nevertheless, for many years 
it has been a sector of profound neglect and routine exploitation by 
the Burmese government. Critical inputs such as fertiliser are 
unavailable to most farmers at prices they can afford, and over 80 
percent of Burma's land under cultivation lacks irrigation of any form 
(Dapice 2003, EIU 2006:22). As noted earlier, credit from formal 
institutions is unavailable to most farmers in Burma, and at present 
less than 3 percent of bank lending in Burma is extended to 
agriculture. Inexplicably, the private banks are forbidden to lend for 
farming. Meanwhile, recent experiments in microfinance under the 
auspices of the UNDP are moving toward failure in ways sadly familiar 
to such interventions (Turnel12005).
    In 2003, Burma's military regime made great noises about 
liberalising the trade in rice, internally and externally. In practice, 
however, great interference by the state in the basic decisions taken 
by farmers--what, how and how much to produce--has continued unabated. 
Of course, in many areas of Burma a final blow is the exactions of 
Burma's military forces, the Tatmadaw, forced by the country's strained 
finances to ``live off the land'' (Vicary 2003, 2004).
    In recent years the SPDC has adopted a number of programs designed 
to increase the amount of land under cultivation in Burma. Such 
efforts, which include the so-called ``summer paddy program', and 
various schemes designed to reclaim land in the Irrawaddy Delta, have 
invariably failed to achieve their desired outcomes because of the lack 
of critical inputs noted above. Farmers without sufficient fertiliser 
to prepare new fields, or without credit to allow the construction of 
dykes, fences and other land improvements, have been unable to make 
effective the exhortations for more ``extensive'' production (Okamoto 
et.al., 2003, Thawnghmung 2004).
    The end result of these ``supply side'' problems, caused by the 
regime's inability to avoid interfering in the basic decisions taken by 
farmers, is that Burma's agricultural sector, once the jewel of its 
economy (the famed ``rice bowl'' of the British Empire) is operating 
well-below potential. Indeed, it is likely that the production of 
Burma's great staple, rice, is lagging behind even the country's 
population growth rate--bringing with it then the likelihood that in 
recent years hunger has been increasing (Dapice 2003, Aung Din Taylor 
2002, Vicary 2004).\12\
---------------------------------------------------------------------------
    \12\ Also, information privately supplied to the author.
---------------------------------------------------------------------------
                            money laundering
    The shadow of money laundering continues to linger over Burma's 
financial sector, and Burma remains one of only two countries (the 
other is Nigeria) to be deemed a ``non-cooperative'' jurisdiction with 
respect to money-laundering by the Financial Action Task Force 
(FATF).\13\ FATF, an associate body of the Organisation for Economic 
Cooperation and Development (OECD), is the world's premier agency for 
dealing with money-laundering globally. Burma has been named as a non-
cooperating country in each of FATF's annual reports since the 
organisation's inception in 1998. Some progress has been made on the 
surface--Burma now has legislation designed to counter money-laundering 
for instance--but the problem, as is so often the case with respect to 
laws in Burma, is enforcement.\14\ As yet it is simply not credible 
that Burma's military rulers are serious about eliminating a problem 
that they themselves are implicated in.
---------------------------------------------------------------------------
    \13\ This finding, re-stated in FATF's annual report for 2005, was 
confirmed most recently at a plenary meeting of FATF held in Cape Town 
in February 2006 (FATF 2006).
    \14\ The legislation concerned is the ``Law to Control Money and 
Property Obtained by Illegal Means', promulgated on 17 June 2002. For a 
review of the Law and its deficiencies, see Turnell (2004).
---------------------------------------------------------------------------
    The acute concern with respect to money-laundering in Burma is that 
the country remains one of the world's largest producers of illicit 
drugs. Burma is, indeed, the second largest producer in the world of 
illegal opium, and it is the single largest producer in Southeast Asia 
of methamphetamines (Department of State 2005). Down the years a number 
of financial institutions in Burma have been identified as money 
launderers, and in 2003 two of the countries largest banks, the Asia 
Wealth Bank and the Myanmar Mayflower Bank, were publicly identified as 
such by the United States Treasury (an unprecedented move). According 
to the Treasury, the banks were:

          . . . controlled by and used to facilitate money lending for 
        such groups as the United Wa State Army--among the most 
        notorious drug trafficking organizations in Southeast Asia. The 
        Burmese government has failed to take any regulatory or 
        enforcement action against these financial institutions, 
        despite their well-known criminal links.\15\
---------------------------------------------------------------------------
    \15\ This ruling is set out in the Federal Register, vol.68, 
no.227, Tuesday, November 25, 2003, pp.66305-66311.

    In addition to the specific naming of these two specific banks, 
however, and consistent with the FATF declarations on Burma, the US 
Treasury also announced that Burma as a jurisdiction was of `primary 
money laundering concern'. As such, the Treasury Secretary was 
authorised (under Section 311 of the USA Patriot Act),\16\ in 
collaboration with the US State Department, Department of Justice and 
various financial regulators, to direct financial institutions in the 
US to take ``special measures'' against Burma's banks.\17\ Such 
measures ``range from enhanced recordkeeping or reporting requirements 
to a requirement to terminate correspondent banking relationships with 
the designated entit[ies]'. In the case of the Burma ruling 
specifically:
---------------------------------------------------------------------------
    \16\ ``Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism'' (PATRIOT) Act, 2003.
    \17\ The Federal Register, op. cit.

          The designation of Burma is intended to deny Burmese 
        financial institutions access to the U.S. financial system 
        through correspondent accounts. Thus, the proposed rule would 
        prohibit U.S. financial institutions from establishing or 
        maintaining any correspondent account for, or on behalf of, a 
        Burmese financial institution. This prohibition would extend to 
        any correspondent account maintained by a U.S. financial 
        institution for any foreign bank if the account is used by the 
        foreign bank to provide a Burmese financial institution 
        indirect access to the U.S. financial system. In such a case, 
        the U.S. financial system would be required to ensure that the 
        account no longer is used to provide such access, including, if 
        necessary, terminating the correspondent relationship.\18\
---------------------------------------------------------------------------
    \18\ Ibid.

    In addition to the United States, many other countries (and 
individual financial institutions) have placed limitations on financial 
sector linkages with Burma out of money laundering concerns. A 
particularly notable example of which was the decision taken by the 
Bank of China, in January 2006, to terminate all $US business with both 
the state-owned Myanmar Foreign Trade Bank and Myanmar Investment and 
Commercial Bank (Ye Lwin 2006).
                           economic sanctions
    Broadly speaking, there is no a priori case, either for or against, 
the efficacy of economic sanctions in delivering desired objectives. 
History yields instances where economic sanctions have failed to 
deliver all the changes desired, but it is also replete with examples 
where they have proved decisive. Whether or not economic sanctions will 
be useful depend on circumstances and context--of the target country, 
and of the countries imposing sanctions.
    Of course, in Burma's case the most important ``context'' to be 
considered is that the country's democracy movement, the 
representatives who won 82 percent of the seats in the country's last 
parliamentary election in 1990, continue to call for them. Gainsaying 
such a call might rightly be considered as somewhat presumptuous. 
Nevertheless, of concern in these pages are the economics of the 
matter. Here too, however, the answer is, in the view of the present 
writer, unequivocal. As shall be examined below, economic sanctions are 
necessary in Burma to help dislodge the real obstacle to the country's 
economic development. This obstacle, the regime that has been 
oppressing the country for four decades, has never given any hint that 
it can engage in meaningful economic reform.
    Burma is presently subject to economic sanctions from a number of 
countries. The most rigorous economic sanctions on Burma, however, are 
imposed by the European Union and the United States. Under the so-
called ``Common Position'' of European Union Foreign Ministers, member 
countries ban EU investment in state-owned enterprises (broadly 
defined), effectively veto lending to Burma by agencies such as the 
World Bank and IMF, preclude travel to the EU by SPDC officials and 
their families, and freeze European assets held by the same officials 
and family members.\19\ The United States sanctions are authorised 
under the ``Burmese Freedom and Democracy Act'' of 2003, and indirectly 
via measures to control money laundering (noted above, and captured 
under Section 311 of the Patriot Act). The United States goes one step 
further than the EU, by imposing a ban on imports from Burma. Other 
countries, including New Zealand, Canada and others, impose various 
restrictions on their activities in and/or with Burma, most concerned 
with aid allocation, the activities of Burmese financial institutions, 
and travel by members of the regime.
---------------------------------------------------------------------------
    \19\ As an example of the ``broad'' definition of ``state-owned 
enterprise', is the EU ban on dealings with companies associated with 
Burmese-military controlled entities such as Union of Myanmar Economic 
Holdings. Two of Burma's banks, Innwa Bank and Myawaddy Bank, have been 
caught in this particular net. It should be noted that material support 
to Burma from both the World Bank and IMF would be on hold for reasons 
unconnected to sanctions--given that the country is currently in 
default on its loans from these institutions.
---------------------------------------------------------------------------
    Unlike some other sanctions regimes, EU and United States sanctions 
on Burma are carefully calibrated so as not to block critical exports 
to the country of food, medicine and similar essential supplies.
    All of the above said, sanctions alone are not going to bring about 
the change required in Burma, but in the view of this author they are a 
critically important component of a multi-faceted strategy that must 
contain ``sticks'' as well as ``carrots'. This support for sanctions is 
based on the following propositions:

   The existing sanctions on Burma are well-targeted. 
        Certainly, it is true that a small number of Burmese workers 
        have lost their jobs because of sanctions, mostly in the 
        garments industry. Such numbers affected, however, are an 
        infinitesimal proportion of Burma's population, the vast bulk 
        of whom have no contact whatsoever with the traded goods 
        sector. Moreover, an important simultaneous development to the 
        levying of sanctions--to wit, the ending, on 1 January 2005, of 
        the Multi-Fibre Agreement on Textiles (MFAT)--would have meant 
        that the few jobs that were lost from sanctions would almost 
        certainly have been lost anyway. The MFAT had previously 
        limited the exports of various textile categories by assigning 
        countries ``quotas'' of the principal textile consuming 
        markets. The effect of the MFAT above all was to thus 
        artificially limit the exports of China (by a large margin the 
        cheapest producer) in all sorts of textile categories. The 
        lifting of these quotas caused the long-expected surge in 
        China's exports, and a whole host of ``marginal'' exporters 
        such as Burma, who were previously viable principally because 
        of the quota system, to lose market share. In short--even 
        without sanctions, Burma's garment-exporting industry would 
        have greatly contracted. Of course, the proof of this can be 
        seen in the dramatic fall in Burma's garment exports beyond the 
        United States--a consequence not of sanctions, but the 
        ``squeeze'' imposed by China (Turnell 2006).

   It is the elite of Burma's economy, instead, who are most 
        affected by the sanctions thus far imposed on the country. A 
        sizable number of this elite are ``connected'' with the ruling 
        regime in Burma, and a high proportion are personally related 
        to the members of the SPDC itself. Sanctions are likely to 
        contribute to a successful policy when the relevant incentives 
        of important groups are consistent with the change desired. The 
        sanctions currently imposed upon Burma, by the EU but most 
        effectively by the United States, seem to meet this 
        requirement.

   Burma's poverty is solely a consequence of the policies of 
        the military regime that has ruled the country for four 
        decades. Poverty in Burma (in a nation unusually blessed with 
        natural resources) is the result of a political-economy that 
        has been consciously shaped by a regime in ways that are not 
        conducive to growth. Stated simply, the military regime has 
        actively undermined and prevented the development of the 
        institutions that history tells us are necessary for growth. 
        Such institutions include:

          -- secure property rights (including of the person) which 
        encourages saving, investment, innovation, entrepreneurship;

          -- a stable and responsive government--not necessarily 
        democratic, but a government that acts according to rules 
        rather than individual caprice, and which will address at least 
        the primary concerns of the populace;

          -- relatively honest government--the market is the venue for 
        trading, rather than the state;

          -- limited government--keeping the state's claim on the 
        nation's surplus to merely that required to fulfil a consensus 
        of ``reasonable'' functions;

          -- a primacy, of rationality and reason in national 
        decisionmaking.\20\
---------------------------------------------------------------------------
    \20\ A similar list, to which the author is indebted, is provided 
by the eminent economic historian David Landes in his 1998 book, The 
Wealth and Poverty of Nations (1998:217-218)

    It takes but a moment's reflection to conclude that Burma enjoys 
scarcely any of these attributes. Burma's problems manifestly did not 
and do not come from the sanctions that countries impose upon it. 
Overwhelmingly, Burma's economic problems are home-grown, but they 
require fundamental political reform to solve. The efficacy of 
particular measures in bringing about such fundamental reform--whether 
sanctions or any other device--should be the criteria against which 
judgments are made.
    It is the case, at the time of writing, that sanctions combined 
with increased diplomatic activity under Secretary Rice at the U.N. 
Security Council, are having an impact. Equally important, the Burmese 
Freedom and Democracy Act of 2003, as well as the subsequent efforts to 
refer Burma to the U.N. Security Council, have stirred Burma's 
neighbours into doing something about a country that imposes all sorts 
of problems on them (from narcotics and people trafficking, to the 
flows of refugees across their borders). In 2005 the countries of the 
Association for South East Asian Nations (ASEAN), undertook a number of 
measures designed to bring about change in Burma--including; pressuring 
Burma to relinquish its ``turn'' to chair ASEAN, appointing a number of 
special ASEAN delegates to meet with Burma's leaders and promote 
dialog, calls for political reform and the release of political 
prisoners by the highest ASEAN bodies, and so on. Beyond ASEAN, at the 
United Nations and in approaches to Burma even from countries such as 
China and India, change does seem to be ``in the air'. Rewarding Burma 
through the removal of sanctions, despite its leaders' recalcitrance 
yet at the moment that pressures upon them seem to be building, is 
surely ill-advised.
                               references
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    no.6, June, available online at: http://www.irrawaddy.org/
    aviewer.asp?a=3757&z=102.
Asian Development Bank (ADB) 2004, Asian Development Outlook 2004, 
    Manila, ADB.
Asian Development Bank 2005, Asian Development Outlook 2005, Manila, 
    ADB.
Aung Din Taylor, D. 2002, ``Signs of distress: Observations on 
    agriculture, poverty, and the environment in Myanmar,'' paper 
    delivered to the Conference on Burma: Reconciliation in Myanmar and 
    the Crises of Change, School of Advanced International Affairs, 
    Johns Hopkins University, Washington D.C., 22 November 2002.
Bradford, W. 2004, ``Fiant fruges? Burma's sui generis growth 
    experience,'' Burma Economic Watch, no.2 2004, pp.6-14.
Dapice, D. 2003, ``Current economic conditions in Myanmar and options 
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    London: EIU.
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    online at: http://www.fatf-gafi.org/dataoecd/41/25/34988062.pdf.
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    Transition to Market Economy,'' mimeo, Institute of Economic 
    Research, Hitotsubashi University, October.
Parker, C. and Yeni 2006, ``Rangoon agencies await their fate,'' The 
    Irrawaddy, 8 February 2006, available online at http://
    www.irrawaddy.org
Thawnghmung, Ardeth Maung 2004, Behind the Teak Curtain: 
    Authoritarianism, Agricultural Policies and Political Legitimacy in 
    Rural Burma, London: Kegan Paul.
Turnell, S.R. 2002, ``Reforming the banking system in Burma: A survey 
    of the problems and possibilities,'' Technical Advisory Network of 
    Burma, Working Papers 7, Washington D.C.: The Burma Fund.
Turnell, S.R. 2003, ``Myanmar's banking crisis,'' ASEAN Economic 
    Bulletin, vol.20, no.3, December, pp.272-282.
Turnell, S.R. 2004, ``Burma bank update,'' Burma Economic Watch, No.1 
    2004.
Turnell, S.R. 2005, ``A Survey of Microfinance Institutions in Burma,'' 
    Burma Economic Watch, no.1/2005.
Turnell, S.R. 2006, ``Burma's economy 2004: Crisis masking 
    stagnation,'' in T.Wilson (ed), Burma Update 2004, Singapore: 
    Institute of Southeast Asian Studies.
United Nations Development Programme (UNDP) 2003, Human Development 
    Initiative, Myanmar: Report of Independent Assessment Mission, New 
    York: UNDP.
United States Department of State 2005, International Narcotics Control 
    Strategy Report, Washington D.C., State Department, available 
    online at http://www.state.gov/r/pa/prs/ps/2005/43018.htm
Vicary, A.M. 2001, ``Foreign direct investment and the garments 
    industry in Burma,'' Burma Economic Watch, no.1 2001.
Vicary, A.M. 2003, ``Economic non-viability, hunger and migration: The 
    case of Mawchi Township,'' Burma Economic Watch, no. l 2003.
Vicary, A.M. 2004, ``The state's incentive structure in Burma's sugar 
    sector and inflated official data: A case study of the industry in 
    Pegu Division,'' Burma Economic Watch, no.2 2004.
Ye Lwin 2006, ``Traders urged to use Euro for transactions,'' The 
    Irrawaddy, 6-12 February 2006.

    Senator Murkowski. Thank you, doctor.
    Now let us at least go to Ms. Thin Thin Aung. Welcome.

 STATEMENT OF THIN THIN AUNG, MEMBER OF THE PRESIDIUM, WOMEN'S 
                        lEAGUE OF BURMA

    Ms. Aung. Thank you, Madam Chair, for inviting me here 
today to discuss the situation in Burma and Burma-India 
relations and how Burma represents a new and nontraditional 
security threat to the region. I also want to express my 
gratitude to Senators Mitch McConnell and Dianne Feinstein. All 
freedom-loving Burmese welcome and honor their efforts and 
actions to promote democracy in Burma. Their work is widely 
known and deeply appreciated.
    By way of background, I am Burmese. I participated in the 
nationwide pro-democracy uprising in Burma in 1988. After the 
military coup and the crackdown on the peaceful demonstrators 
by the military regime, I had to flee my country for India, 
where I have been living for nearly 18 years. I belong to an 
organization called Women's Rights and Welfare Association of 
Burma, based in New Delhi, and currently I am a member of the 
presiding board of the Women's League of Burma, which is an 
umbrella group of exiled women's organizations from Burma.
    I came to India not only to flee from the arrest of the 
military regime, but also to get help from the Indian 
government for the restoration of democracy in Burma. The 
Indian government was extremely supportive of Burma's democracy 
movement. India was the first neighboring country to extend 
active support to the pro-democracy movement in Burma and the 
Indian government provided refuge to Burmese students who came 
to India after the wake of the 1988 uprising that was brutally 
crushed by the military.
    India internationally also condemned Burma's authoritarian 
military regime when it refused to hand over power to Aung San 
Suu Kyi and her party, the National League for Democracy, 
following the 1990 general elections. The NLD won those 
elections with over 80 percent of the vote.
    Because India and Burma have centuries-old historical 
connections, the two nations have enjoyed mutual contact and 
ties in the realm of religion, culture, trade, law, political 
philosophy, and togetherness in their struggle for independence 
from colonial rule. In 1993 the Indian government honored Aung 
San Suu Kyi with their highest civilian award, the Jawaharlal 
Nehru Award for International Understanding.
    Madam Chair, what was once a noble policy towards Burma 
based on democratic values has been replaced during the last 
decade by one that marginalized aspirations for freedom of the 
Burmese people and our ethnic nationalities. Since the mid-
1990s the Indian government has sought to develop its 
relationship with Burma's military generals. Successive Indian 
governments have refused to acknowledge or speak out against 
the horrors that Burma's military regime is inflicting on my 
country.
    Due to a perception within Indian national security circles 
that better relations with Burma's military regime is needed to 
check its own insurgency and Chinese influence, India's 
relationship with Burma has considerably warmed. For example, 
India is now providing military training and reportedly selling 
arms and military hardware to the ruling junta. This apparently 
is to check the Chinese push to acquire more Burmese bases so 
it can project power into the Indian Ocean.
    It is unbelievable that the relationship between India, the 
largest democracy in the world, and the ruling junta in Burma 
lacks any discussion of democracy, political pluralism, or even 
the simple fact that murdering political prisoners is wrong. 
Earlier this month when former political prisoner Thet Naing Oo 
was bludgeoned to death in a political killing by the regime 
militias, international condemnation was swift, but India's 
silence was deafening.
    Today Burma is ruled by a group of thugs who lack any 
political legitimacy and use liberal doses of terror and 
intimidation to maintain their grip on power. The state they 
have created is what I call a nontraditional threat to our 
region. For example, Burma's SPDC spends billions of dollars on 
arms that are used to oppress the people and outfit the second 
largest military in Southeast Asia.
    Madam Chair, the budget for HIV/AIDS in Burma is reported 
by head experts as less than $25,000 per year. Burma is the 
epicenter of new streams of drug-assisted HIV/AIDS that are 
transferred to China, India, and throughout the region through 
illicit narcotics smuggling routes. The same routes that bring 
Burmese opium and methamphetamines, often grown and 
manufactured in junta-controlled regions, to flood the region 
are also bringing these new strains of HIV/AIDS.
    The recent announcement of bird flu is another example of 
the danger the regime poses to the region. On March 17, 2006, 
Burmese authorities announced that they found the H5N1 strain 
and were culling chicken and duck flocks. However, it was 
already happened 5 days before they made official announcement 
to the Burmese people. This delay could have, and we are still 
not sure if it has not, opened the door to the spreading of the 
disease throughout the country and made the jump into 
Bangladesh, India, China, and other neighboring states. There 
is no doubt about that that we need to convince the Indian 
government that its own national interests are best met, not by 
coddling a murderous regime, but using its resources to help 
realize the aspirations of the Burmese people for a state based 
on democracy, individual liberties, and human rights.
    A Burma under a democratic government can address the 
social ills within the country and create dynamic economic 
conditions that can provide new markets for Indian and regional 
products while providing energy and materials that both India 
and China need to fuel their growing economies.
    The formation of the Indian Parliamentarians for Democracy 
in Burma, IPFDB, last December was an important step in this 
direction. This group of Indian members of parliament is 
dedicated to raising the issues of Burma in the parliament and 
questioning the government for its policy towards Burma. I hope 
that the forum will be able to increase the amount of pressure 
on the government of India to review its policy towards Burma, 
especially as more and more members of parliament join the 
effort. I hope that the U.S. Congress can strongly encourage 
the Indian parliamentarians to continue their great work.
    I want to congratulate President Bush on raising Burma 
during his trip this month to India. It is encouraging to learn 
that President Bush and Prime Minister Monmahon Singh agreed to 
call for the regime to release our leader, Aung San Suu Kyi. I 
want to ask the United States to use its close relationship to 
convey to India the threat posed by the regime and encourage 
the country to play a meaningful and responsible role in the 
restoration of democracy in Burma.
    I want to spend a moment discussing the horrible human 
rights situation in Burma. The military regime, SPDC's, 
violations of human rights include the destruction of villages, 
massive forced relocation, rape of ethnic women and girls by 
the SPDC soldiers, and widespread forced labor. There are more 
than 1,100 political prisoners, including 13 members of 
parliament elect, languishing in various jails inside Burma. 
Harassment of political activists, torture and murder continue 
unabated.
    Almost 700,000 refugees have poured out of Burma in recent 
years as a result of the military's attacks against ethnic 
groups and political oppression. As reported by Thailand-Burma 
Border Consortium, TBBC, between 600,000 and 1 million ethnic 
peoples are hiding in the jungles and mountains in the eastern 
part of Burma to avoid the killings of the Burmese army.
    Recently, the Burmese military attacked villages in Karen 
State and caused more than 1,000 villagers to flee their homes 
to become internally displaced persons. According to Human 
Rights Watch, more than 70,000 children are forcibly recruited 
into the Burmese army.
    The report ``License to Rape,'' produced by the Shan 
Women's Action Network, SWAN, and the Shan Human Rights 
Foundation, SHRF, in 2002 documents 173 incidents of rape and 
other forms of sexual violence involving 635 girls and women 
committed by the SPDC troops in Shan State, mostly from 1996 to 
2001. The majority of rape incidents were committed in the 
areas of central Shan State, where over 300,000 villagers have 
been forcibly relocated from their homes since 1996 as part of 
an anti-insurgency campaign.
    The report ``Shattering Silences'' by the Karen Women's 
Organization, published in April 2004, documents 125 cases of 
sexual violence committed by the SPDC military troops and Karen 
State from 1998 until 2004.
    Other sexual violence by the Burmese military and 
trafficking of women and girls are also documented in ``Driven 
Away,'' produced by the Kachin Women's Association, Thailand; 
``Catwalk to the Barracks'' by the Human Rights Foundation of 
Monland, Burma, and the Women and Children's Rights Project, 
Southern Burma.
    These reports expose how the military regime is allowing 
its troops systematically and on a widespread scale to commit 
rape with impunity in order to terrorize and subjugate the 
ethnic peoples of Shan, Mon, Kachin, and Karen States. All 
reports conclude that the restoration of genuine peace, 
democracy, and the rule of law in Burma are necessary to end 
the systematic sexual violence.
    Here I would like to offer several policy options. First 
and foremost, continue the economic sanctions against Burma, 
and I urge bringing Burma up for a resolution within the United 
Nations Security Council. Please continue regional efforts to 
hold ASEAN accountable for the actions of the regime. ASEAN 
accepted Burma into its ranks 10 years ago with the belief that 
constructive engagement would bring political change.
    Finally, use U.S. diplomatic weight to engage the Indian 
government at all levels to convince India that a democratic 
Burma is in India's long-term strategic interest.
    In closing, I here would like to express gratitude to the 
U.S. Congress and government for their efforts to help restore 
the democracy stolen from us by the military junta. Today, a 
sit here proudly on behalf of the millions of Burmese to say 
thank you for the U.S. Congress and U.S. administration for 
your words, your deeds, and steadfast determination to stand 
with us during our hours of darkness.
    Thank you very much.

    [The prepared statement of Ms. Aung follows:]

Prepared Statement of Thin Thin Aung, Member of the Presidium, Women's 
                            League of Burma

    I want to thank you, Madame Chairwoman, for inviting me here today 
to discuss the situation in Burma, Burma-India relations, and how Burma 
represents a new, non-traditional security threat to the region. I also 
want to express my gratitude to Senators Mitch McConnell and Dianne 
Feinstein. All freedom loving Burmese welcome and honor their efforts 
and actions to promote democracy in Burma. Their work is widely known 
and deeply appreciated.
    By way of background, I am a Burmese. I participated in the 
nationwide pro-democracy uprising in Burma in 1988. After the military 
coup and brutal crack-down on the peaceful demonstrators by the 
military regime, I had to flee my country for India where I have been 
living for nearly 18 years.
    I belong to the organization called Women Rights and Welfare 
Association of Burma based in New Delhi. I am a member of the Presidium 
Board of the Women's League of Burma which is an umbrella group of 
exiled women organizations from Burma.
    I came to India not only to flee from the arrest of the military 
regime but also to get help from the Indian government for the 
restoration of democracy in Burma. The Indian government was extremely 
supportive of Burma's democracy movement. India was the first 
neighboring country to extend active support to the pro-democracy 
movement in Burma. The Indian government provided refuge to Burmese 
students who came to India after in the wake of the 1988 uprising that 
was brutally crushed by the military. India internationally also 
condemned Burma's authoritarian military regime when it refused to hand 
over power to Aung San Suu Kyi and her party National League for 
Democracy following the 1990 general elections. The NLD won those 
elections with over 80 percent of the vote.
    Because India and Burma have a centuries-old historical connection, 
the two nations have enjoyed mutual contacts and ties in the realm of 
religion, culture, trade, law, political philosophy and togetherness in 
their struggle for Independence from colonial rule.
    In 1993, the Indian government honored Aung San Suu Kyi with their 
highest civilian award, the Jawaharlal Nehru Award for International 
Understanding.
    Madam Chairwoman, what was once a noble policy toward Burma based 
on democratic values has been replaced during the last decade by one 
that marginalizes aspirations for freedom of the Burmese people and our 
ethnic Nationalities.
    Since the mid 1990s, the Indian government has sought to develop 
its relationship with Burma's military generals. Successive Indian 
government has refused to acknowledge or speak out against the horrors 
that Burma's military regime is inflicting on my country.
    Due to a perception within Indian national security circles that 
better relations with Burma's military regime is needed to check its 
own insurgency and Chinese influence, India's relationship with Burma 
has considerably warmed. For example, India is now providing military 
training and reportedly selling arm and military hardware to the ruling 
junta. This apparently is to check the Chinese push to acquire more 
Burmese bases so it can project power into the Indian Ocean.
    It is unbelievable that the relationship between India, the largest 
democracy in the world, and the ruling junta in Burma lacks any 
discussion of democracy, political pluralism, or even the simple fact 
that murdering political prisoners is wrong. Earlier this month, when 
former political prisoner Thet Naing Oo was bludgeoned to death in a 
political killing by the regime militias, international condemnation 
was swift, but India's silence was deafening.
    Today, Burma is ruled by a group of thugs who lack any political 
legitimacy and use liberal doses of terror and intimidation to maintain 
their grip on power. The state they have created is what I call a non-
traditional threat to our region.
    For example, Burma's SPDC spends billions of dollars on arms that 
are used to oppress the people and outfit the second largest military 
in South East Asia. Madam Chairwoman, the budget for HIV/AIDS in Burma 
is reported by health experts at less than $25,000/year. Burma is the 
epicenter of new strains of drug resistant HIV/AIDS that are 
transferred to China, India and throughout the region through illicit 
narcotics smuggling routes. The same routes that bring Burmese opium 
and methamphetamines (often grown and manufactured in junta controlled 
regions) to flood the region are also bringing these new strains of 
HIV/AIDS.
    The recent announcement of Bird Flu is another example of the 
danger the regime poses to the region. On March 17, 2006, Burmese 
authorities announced that they found the H5N1 strain and were culling 
chicken and duck flocks--however, it was already happened 5 days before 
they made official announcement to the Burmese people. This delay could 
have--and we are still not sure if it has not--opened the door to the 
spreading of the disease throughout the country and made the jump into 
Bangladesh, India, China and other neighboring states.
    There is no doubt about that we need to convince the Indian 
government that its own national interests are best met not by coddling 
a murderous regime, but using its resources to help realize the 
aspirations of the Burmese people for a state based on democracy, 
individual liberties and human rights. A Burma under a democratic 
government can address the social ills within the country and create 
the dynamic economic conditions that can provide new markets for Indian 
(and regional) products while providing energy and materials that both 
India and China need to fuel their growing economies.
    The formation of the Indian Parliamentarian's Forum for Democracy 
in Burma (IPFDB) last December was an important step in this direction. 
This group of Indian members of parliament is dedicated raising the 
issues of Burma in the parliament, and questioning the government for 
its policy toward Burma. I hope that the Forum will be able to increase 
the amount of pressure on the government of India to review its policy 
toward Burma, especially as more and more members of parliament join 
the effort. I hope that the US Congress can strongly encourage the 
Indian parliamentarians to continue their great work.
    I want to congratulate President Bush on raising Burma during his 
trip this month to India. It is encouraging to learn that President 
Bush and Prime Minister Manmohan Singh agreed to call for the regime to 
release our leader Aung San Suu Kyi. I want to urge the US to use its 
close relationship to convey to India the threat posed by the regime 
and encourage the country to play a meaningful and responsible role in 
the restoration of democracy in Burma.
    I want to spend a moment discussing the horrible human rights 
situation in Burma. The military regime, SPDC's violation of human 
rights include the destruction of villages, massive forced relocation, 
rape of ethnic women and girls by the SPDC soldiers and widespread 
forced labor.
    There are more than 1100 political prisoners, including 13 Members 
of Parliament elect, languishing in various jails inside Burma. 
Harassment of political activists, torture and murder continue 
unabated. Almost 700,000 refugees have poured out of Burma in recent 
years as a result of the military attacks against ethnic groups and 
political oppression. As reported by Thailand-Burma Border Consortium 
(TBBC), between 600,000 and one million ethnic peoples are hiding in 
the jungle and mountains in Eastern part of Burma to avoid the killing 
of the Burmese army. Recently, Burmese military attacked villages in 
Karen State and caused more than one thousand villagers to flee their 
home to become Internally Displaced Persons. According to Human Rights 
Watch, more than 70,000 children are forcibly recruited into Burmese 
military.
    The report ,``License to Rape'' produced by the Shan Women's Action 
Network (SWAN) and Shan Human Rights Foundation (SHRF) in 2002 
documents 173 incidents of rape and other forms of sexual violence 
involving 625 girls and women, committed by the SPDC troops in Shan 
State, mostly from 1996-2001. The majority of rape incidents were 
committed in the areas of Central Shan State where over 300,000 
villagers have been forcibly relocated from their homes since 1996 as 
part of an anti-insurgency campaign.
    The report ``Shattering Silences'' by the Karen Women's 
Organization published in April 2004 documents 125 cases of sexual 
violence committed by the SPDC's military troops in Karen State from 
1988 until 2004. Other sexual violence by the Burmese military and 
trafficking of women and girls are also documented in ``Driven Away'' 
produced by the Kachin Women's Association Thailand (KWAT), ``Catwalk 
to the Barracks'' by Human Rights Foundation of Monland (Burma) and 
Women and Child Rights Project (Southern Burma). I would like to submit 
these reports for the record.
    These reports expose how the military regime is allowing its troops 
systematically and on a widespread scale to commit rape with impunity 
in order to terrorize and subjugate the ethnic peoples of Shan, Mon, 
Kachin and Karen States. All reports conclude that restoration of 
genuine peace, democracy and the rule of law in Burma are necessary to 
end the systematic sexual violence.
    I would like to offer several policy options:

   First and foremost, continue the economic sanctions against 
        Burma;

   I urge bringing Burma up for a resolution within the United 
        Nations Security Council.

   Please continue regional efforts to hold ASEAN accountable 
        for the actions of the regime. ASEAN accepted Burma into its 
        ranks 10 years ago with the belief that constructive engagement 
        would bring political change.

   Finally, use US diplomatic weight to engage the Indian 
        government at all levels to convince India that a democratic 
        Burma is in India's long-term, strategic interest; and

    In closing, I here would like to express gratitude to the U.S. 
Congress and Government for their efforts to help restore the democracy 
stolen from us by the military junta. Today, I sit here, proudly, on 
behalf of millions of Burmese to say ``Thank You'' for the U.S. 
Congress and U.S. administration for your words, your deeds and 
steadfast determination to stand with us during our hours of darkness.
    Thank You.

    Senator Murkowski. Thank you. I appreciate your comments, 
certainly your very specific suggestions.
    Dr. Green, a couple of questions for you. There has been a 
fair amount of discussion about the ASEAN nations and the 
various relationships with Burma. Is there a divide within the 
ASEAN members on how to approach Burma, and if that is the 
case, what does this mean in the long run for ASEAN as a 
regional forum to deal with the Burma issue?
    Dr. Green. I think there is a division not only within 
ASEAN, but within each ASEAN state, on how to handle Burma 
because it touches on how these states characterize their own 
values, their own roles, their own institutions. ASEAN itself 
was created on a principle of noninterference in internal 
affairs. It was an organization created so that these countries 
with multi-ethnic, multi-religion populations within in many 
cases colonial borders, so that they would not interfere in 
each other's affairs, and it succeeded in making war among 
Southeast Asian nations very unlikely. They got that part.
    The strategy was to bring in Burma and through cooperative, 
constructive engagement to socialize Burma to this same 
concept. I think what many in ASEAN now are realizing is that 
this principle of noninterference in internal affairs just is 
not good enough, that they are going to be as governments less 
effective, that ASEAN itself will have less clout vis-a-vis the 
United States or the EU. You also have new parliamentary 
leagues growing across the borders of these states.
    So, in many ways, the debate is within many of these ASEAN 
capitals. My experience in the White House suggests to me that 
many of the leaders of ASEAN are among the more enlightened 
thinkers on this in their countries. President Yudhoyono, for 
example, is, I think, quite forward thinking and his trip, I 
think, was probably on balance a good thing in having 
Indonesia, a successful democracy, pushing harder for 
democracy.
    But this is an area of ferment and debate and I do not 
think that ASEAN as a whole has figured out how to organize 
themselves for it. That is why the United States can, I think, 
helpfully play a role in helping ASEAN come to the right 
approach and the right conclusions and organize themselves to 
push more deliberately for democracy.
    There are some divisions among the leaders, I think, that 
the junta is exploiting. Traditionally Indonesia was the heart 
and soul and leader in ASEAN. There was a period where that was 
not the case and I think Prime Minister Yudhoyono is coming 
back and trying to put Indonesia at the center. Prime Minister 
Takshin would like for Thailand to play a leading role. 
Abdullah Bedali, in Malaysia, would like to play that role. 
There is a certain amount of competition for the spotlight 
among these ASEAN leaders and I think the regime is exploiting 
that to some extent, trying to play them against each other.
    But on the whole, I think the debate is moving in a 
direction that we should encourage through very active 
engagement with ASEAN as a whole and with individual member 
states to get more concrete about what we expect from Burma. I 
think that's one of the main points or recommendations I would 
like to leave.
    We need to start putting on paper with like-minded states 
what we expect, what we are willing to do if they do not 
perform, what we are collectively willing to do if they do 
perform, begin putting that together. The Six Party Talks 
analogy that does not work. In the Six Party Talks we brought 
North Korea in from the beginning and North Korea caused the 
rest of us to use a lot of our diplomatic leverage to pay them 
just to show up, and we had to pull our punches to get them to 
show up. I would not worry about whether Burma participates in 
this process. In fact, I expect they will not want to 
participate at all. The important thing is to start working 
with ASEAN and India and others to start setting in concrete a 
roadmap we can all live with and work on together. Then we will 
worry about how to structure the engagement with the junta.
    Senator Murkowski. Well, recognizing just the competition 
that does go on for the resources, for the natural resources 
that exist within Burma, and recognizing that everybody is 
coming into it with a different need does make it a much more 
complicated relationship there. Now, a fair amount has been 
discussed today, certainly the India relationship, a fair 
amount about China's relationship with Burma. How much 
attention should we be giving to other geopolitical relations 
within the area, other countries that may be perhaps selling 
military equipment to Burma or constructing military 
capabilities within Burma? Are we forgetting about those or are 
they in the midst of the discussions as well?
    Dr. Green. That is an excellent point. I want to ask for my 
testimony back so I can pay more attention to it. I think you 
are absolutely right. Senator McConnell briefly touched on the 
North Korea connection. That is very worrisome. The regime, 
both regimes, are clearly beginning to mirror each other in 
terms of criminal activities, misuse of their own people to 
create instability for their neighbors for negotiating 
purposes. The autarchy that the junta seeks in Burma I think 
would lead them in directions where they will seek weapons of 
mass destruction or nuclear weapons. They are not interested in 
opening and engaging. They are interested in not changing and 
in deterring and defying the world, and I think this is a junta 
that is extremely paranoid, that is worried that we or others 
will attack them, and one that is interested in weapons.
    They are not, as Professor Turnell said, they are not a 
resource-rich country in terms of cash, but they do have 
resources. They have food, they have things that North Korea 
wants. It's a connection that I think we should be watching 
very, very carefully.
    Senator Murkowski. Do we really know that much about the 
relationship between the two or is a lot of what we are saying 
assumptions, supposition?
    Dr. Green. You know, I think both North Korea and Burma are 
hard intelligence targets in the traditional sense. On the 
other hand, they both have policies that create refugees, that 
create dissatisfied people. I think information is starting to 
come out about both places. There is some evidence, as Senator 
McConnell suggested, that there are North Koreans active in 
Burma. I do not think we know a lot about what they are doing, 
but I think we should be trying to learn more.
    We also need to put a little bit of pressure on our Indian 
friends and on our Thai friends, who are developing 
relationships with the Burmese military for the purpose of 
dealing with these transnational or transborder problems, but I 
think they are sending the wrong signals and enabling the 
military. They are not, obviously, doing the kind of thing 
North Korea would do, but it is another area that bears careful 
watching.
    Senator Murkowski. We have not had an ambassador there in 
Burma since 1991. How has this affected the formulation, the 
implementation of any U.S. policy towards Burma?
    Dr. Green. I think what is far more important is how we 
interact with the Japanese or the Indians or others on the 
ground and also in those capitals. Our charge, as I understand 
it, is doing an excellent job, and it is a traditionally 
important part of the role of the mission in Rangoon to start 
comparing notes. If we are going to multilateralize this 
problem and build a coalition, I do not think you have to have 
an ambassador. You have to have a very good charge, a very 
effective team that can work with other capitals.
    The engagement we should be worrying about at this point is 
not with the regime; it is with the other players who have 
influence on the regime, and I think we are configured to do 
that.
    Senator Murkowski. Thank you.
    Dr. Turnell, I appreciated your comments and the 
description of the miracle economy, when actually, looking at 
it, that they have actually gone backwards rather than this 
incredible forecast that they have presented. It causes one to 
wonder what kind of training in economics the Burmese have and 
what they teach in terms of economic factors in their schools. 
But we appreciate your review of it.
    When you speak of the level of corruption, the criminal 
activity, the extent of money laundering, and just the effect 
that this has on a society, on an economy, when you look to 
those western companies, for instance, that go in to operate, 
go in to do business into a country, into Burma, I have to 
assume that they do have a positive impact on the society 
there. That is the assumption that I have been making. But when 
you have the level of corruption and criminal activity that you 
have, what kind of--what kind of an effect, what kind of an 
impact do you have when you have these western companies coming 
in to do business into an economy like you have in Burma now?
    Dr. Turnell. A very good question because we normally do 
have that presumption, of course. I think the first thing to 
say about that is that there is not that many western companies 
involved in Burma anyway.
    Of the small number that are, most are involved in 
extractive industries of various kinds, whether it be mining or 
logging and so on. So those good things of corporate governance 
and so on which we might think might be shared by western 
companies being involved in Burma essentially don't happen just 
because of the nature of those industries. Those industries are 
not about trying to secure customers or develop new products or 
ideas or anything like that. It really is just about extracting 
resources in some way.
    So unfortunately some of those, the good aspects of 
business involvement in a particular country, I think are just 
not there in the case of Burma because of the nature of the 
activities that they are engaged in.
    Senator Murkowski. If western companies should decide to 
divest their operations in Burma, what happens? Who comes in?
    Dr. Turnell. A mixture of things happen. Sometimes 
companies from other countries come in and take over. Sometimes 
the economic activity, whatever it is, just ceases. That very 
often happened around a decade ago when many of the western 
companies were leaving Burma, simply because those activities 
were fairly marginal in any case. So sometimes some of the 
companies were in there for various legacy reasons and that is 
particularly relevant in the case of the U.K. There were lots 
of--the U.K. still to this day appears quite high up on the 
list of countries involved in Burma, but it really goes back to 
that colonial period and so on. So for various historical 
reasons there were British companies involved.
    A lot of those left around a decade ago and essentially 
whatever it was they were doing just ceased to function.
    Senator Murkowski. You mentioned that there is just not 
that many western companies that are operating there, and when 
you recognize just the financial uncertainty of any investment 
in Burma, what percentage or what is the ratio of the private-
owned enterprises versus state enterprises?
    Dr. Turnell. I think one thing I should say is that data on 
Burma of course is almost completely unavailable. So what you 
have to do is use various proxies to try and work out what is 
going on. So in answer to your question, I think we can say 
that around two-thirds of the economy is owned by the state. We 
can do that just simply by looking at the amount of financial 
assets created in the country--borrowing, lending, deposits, 
etcetera. Roughly two-thirds of that is commanded by the state, 
leaving a third for the private sector.
    So we are dealing with a country, in other words, that 
notwithstanding so-called reforms begun in the 1990s, is still 
very much a state-controlled economy.
    Senator Murkowski. There has been a couple mentions of the 
fact that this radical suggestion to move the capital--what is 
that going to do to the economy? Any ideas?
    Dr. Turnell. I think that is a wonderful example of the 
arbitrary and irrational policymaking that goes on in the 
country. My understanding is that there was, for instance, not 
one single economic assessment of that move, not a single 
thing.
    Senator Murkowski. Is there anything out there? I looked on 
the map and it looks like an area that is not around what are 
identified as the larger cities. Does this build up an area 
that needs to be built up? Is there anything economically to be 
gained from this?
    Dr. Turnell. I have heard some stories from time to time 
that it is somehow on various trade routes from China and so 
on, but my understanding is in fact that that is not the case. 
It is roughly halfway between Rangoon and Mandalay. There is an 
age-old historical episode to do with Aung San during the 
Second World War and it was where his troops turned against the 
Japanese and so on. But apart from that, it certainly has no 
economic importance at all, and the move just from an economic 
point of view makes no sense whatsoever.
    Senator Murkowski. One last question for you. You had 
mentioned in your comments that Singapore has shown great 
concern over the money laundering issue. Is Singapore the 
biggest player, if you will, in Burma? Do you see them 
continuing in that role or do China and India overshadow what 
is happening with Singapore and Burma relationships?
    Dr. Turnell. I think the whole issue of Singapore really 
nicely illustrates what we are saying, actually. Singapore used 
to be the biggest player in Burma, but it has withdrawn at a 
rapid rate. If we look at new investments in Burma, we find 
that Singapore has been completely pushed aside in favor of 
China, to some extent India and South Korea, but in those 
countries it is very, very limited and just relates to a couple 
of projects.
    So it is really interesting, I think, the Singapore 
withdrawal from the country, which is directly as a 
consequence, I think, of the pariah status and in particular 
the problems with money laundering and so on. Singapore is very 
anxious to set itself up as a clean and honest financial hub in 
Southeast Asia and I think, to be honest, it largely is. So the 
movement of Singapore out of the country over the last years I 
think is really indicative of some of the things going on there 
and some of the reactions of Burma's neighbors to Burma.
    Senator McConnell mentioned at the start that Burma is 
increasingly becoming an embarrassment to its neighbors and I 
think the situation with Singapore is perhaps the best example 
of that.
    Senator Murkowski. Thank you. I appreciate your response.
    Ms. Aung, you commented about the change in India's 
behavior toward Burma, in part because of China's influence 
within the region. As we look to ways to, whether it is Six 
Party Talk type of a format or whatever the negotiation might 
be, is it possible for change to occur in Burma without 
including both India and China at the negotiating table? Do 
they both have to be there?
    Ms. Aung. India and China are very important, as was said, 
and if you can bring Indian government into that it is very 
important, because India is a democracy, but at the moment they 
are using the policy, on the one hand they are allowing us to 
live there and we have freedom of movement there, but on the 
other hand they are dealing with the military regime for 
business and other security measures. But India has sympathy 
for Aung San Suu Kyi and also for democracy movement also. I 
think it is possible that if you can use your close 
relationship with the Indian government, because the prime 
minister also said that they are working for the release of 
Aung San Suu Kyi.
    Senator Murkowski. A great deal has been spoken and, Dr. 
Turnell, you certainly indicated that there is no fiscal policy 
in Burma; basically the policy is get as much money to the 
regime as possible. Recognizing this, that the vast majority of 
the resources have gone to the military, has there been any 
effort by the military junta to provide for the health, the 
well-being of the citizens in your opinion?
    Ms. Aung. The several reports, we can clearly see that the 
military regime of Burma uses most of its GDP. In Burma, 40-
plus percent of the budget is for the military, compared to 
health and education which is less than 1 percent.
    Senator Murkowski. Less than 1 percent?
    Ms. Aung. Yes. So in 2001, they said that they have 
increased, but 0.3, 0.5 percent is for the social sector. But 
still it is very much behind the minimum standards.
    Senator Murkowski. One last question. In terms of the 
ethnic minority groups, is there much contact at all with the 
National League of Democracy with the ethnic minority groups at 
all? Are the ethnic minorities part of the leadership in any 
way? Is there any relationship there where they are included?
    Ms. Aung. Aung San Suu Kyi had the CRBB be formed, the 
committee representing the parliament people and the 
parliament, where she was able to bring all the ethnic 
nationality political bodies and won in the 1990 elections in 
Burma. So they are all discussing for a common strategy against 
military rule in Burma. It is very much collected.
    Senator Murkowski. I am told that we have about 5 minutes 
left on a vote, so we are going to take a brief recess here. 
This concludes the questions that I have for this panel. I 
thank all of you for your testimony, for your time, and for all 
your work in this area.
    I am told that we will have Mr. John with us when we come 
back. So if we can just take about a 5-minute break here and we 
will resume. Thank you.

    [Recess from 3:47 p.m. to 4:01 p.m.]

    Senator Murkowski. Good afternoon again. Sorry for the 
short delay. I would like to welcome to the committee Eric 
John, the Deputy Assistant Secretary for the Bureau of East 
Asian and Pacific Affairs for the Department of State. I am 
going to apologize ahead of time, Mr. John. I am told that we 
are going to have another vote here shortly, but we do not know 
when ``shortly'' is. So until that time, you certainly have an 
opportunity to present your testimony, and hopefully, I will 
have a chance to get some of my questions in before we have to 
go.
    But I appreciate your flexibility with the schedule this 
afternoon. We heard some good testimony from our panelists. 
Senator McConnell was with us. And I understand that you have 
been over on the House side keeping busy, so we appreciate your 
taking the time to join us this afternoon.

 STATEMENT OF ERIC G. JOHN, DEPUTY ASSISTANT SECRETARY, BUREAU 
     OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

    Mr. John. Thank you very much, Madam Chairman. I thank you 
for the invitation to update you and the committee on the 
situation in Burma and the administration's strategy for 
effecting meaningful change in that tragic country. I would ask 
that my entire testimony be submitted for the official record.
    Senator Murkowski. We will include it as part of the 
record.
    Mr. John. Thank you.
    Before I delve into the substance of our policy, I would 
first like to relate a recent event that highlights the 
violence the people of Burma face on a daily basis. Less than 2 
weeks ago, Burmese security officials accosted a former 
political prisoner, Thet Naing Oo, accusing him of public 
indecency. They provoked a confrontation with him in full view 
of numerous horrified onlookers and in the end beat him to 
death.
    Incidents such as this weigh the Burmese people down with a 
palpable sense of fear and oppression, reminding us of the 
regime's brutality and the need for the international community 
to do all it can to bring about change there. Burma remains a 
high priority for the President and Secretary Rice. We are 
working intensively and closely with partners and others in 
Asia and with the U.N. to maximize diplomatic pressure on the 
junta to initiate genuine political reform. While there have 
been signs of some progress, the road to bringing freedom, 
peace, and democracy to Burma remains uncertain.
    To fully understand the tragedy that Burma has become, we 
should look back 60 years to a time when Burma enjoyed some of 
the highest rates of scholastic enrollment in Asia and boasted 
a well educated, highly regarded civil service. It was rich 
with natural resources and was one of the world's leading rice 
exporters. Sadly, Burma's leaders did not capitalize on these 
assets and the country's potential. Instead, a series of 
generals have for over 40 years implemented irrational and 
repressive policies that have caused the Burmese people to 
suffer needlessly.
    As Secretary Rice recently said in Jakarta: ``A country 
that was once the jewel of Southeast Asia is now out of step 
with the entire modern experience of its region. A once 
thriving economy has collapsed. Universities that once 
attracted the best Asian minds are locked shut. The Burmese 
regime is now literally retreating into the depth of the 
country, closing its people off from the world and robbing them 
of their future.''
    The latest chapter in Burma's increasingly depressing story 
is the advent of Avian influenza. Although the regime cannot be 
blamed for the Avian influenza outbreak, its failure to devote 
adequate resources to the health sector, its repressive 
policies and restrictions on the delivery of humanitarian 
assistance greatly increase the risk of this and other 
outbreaks spreading.
    On a much broader scale, the junta's policies and corrupt 
practices have severely hurt the economy, exacerbated the 
deterioration of social conditions, led to a steady outflow of 
refugees and illicit narcotics, thwarted peace among ethnic 
minority populations, and forced the Burmese people to live in 
a state of perpetual fear. On the political front, the regime 
continues to promote a sham political process.
    So how do we bring about a transition from the repressive 
isolationist Burma of today to a free and democratic country 
integrated into the global community? Although there are no 
easy solutions, we have developed a bilateral and multilateral 
strategy predicated on maximizing the international pressure on 
the regime to reform. This approach includes sanctions, 
diplomatic pressure, and statements of public support.
    Perhaps the most important component of our strategy is our 
intensified diplomatic efforts. We continue actively to engage 
with partners and key players to develop support for a common 
message to the regime on the need for an inclusive and credible 
peace process--political process. We have stressed that the 
first steps would have to be the release of political prisoners 
and the regime's engagement in a genuine political dialogue 
with the opposition and ethnic minorities.
    At the Trilateral Strategic Dialogue on March 18, Secretary 
Rice, Japanese Foreign Minister Aso, and Australian Foreign 
Minister Downer underscored the need for progress in 
democratization in Burma. Following Indonesian President 
Yudhoyono's visit to Rangoon, senior Indonesian officials 
confirmed that he intends to use his influence to press the 
Burmese regime to release Aung San Suu Kyi and pursue a 
democratic transition. We will continue to work with New Delhi 
at the highest levels on this issue. We believe India should 
press the regime to take meaningful steps rather than appearing 
publicly to accept the status quo.
    Multilaterally, we continue to work for ways to keep Burma 
on the United Nations agenda, actively exploring ways to build 
U.N. Security Council consensus on the need for further 
discussions and possible Council action in follow-up to the 
December 16 landmark Council briefing. As we do so, we have 
been considering factors such as the results of the just-
completed visit to Burma of Foreign Minister Hamid and other 
events. We also continue to advocate discussion of Burma in 
other U.N. bodies and to encourage U.N. Secretary General Kofi 
Anan to remain engaged.
    We continue working with the U.N. Secretariat to identify a 
successor for the Secretary General's former special envoy and 
to strengthen the special envoy's mandate.
    Another component of our strategy is sanctions. Let me 
state clearly for the record that the administration fully 
supports the renewal of the import ban contained in the Burmese 
Freedom and Democracy Act. Failure to renew it absent 
meaningful reforms by the regime would send the wrong political 
message. Our sanctions continue to play a critical role, 
reminding the regime that its behavior is unacceptable and that 
its leaders will remain isolated as long as they continue this 
behavior. They also provide important moral support for the 
democratic opposition in Burma and ensure that American 
companies will not help fund the luxurious lifestyles of a 
select few.
    Our strategy also includes public support for Burma's 
democratic opposition. The United States has spoken out for 
years against the regime's repression of the Burmese people and 
its imprisonment of Aung San Suu Kyi and other courageous 
advocates for democracy. Just last week, we highlighted the 
horrific March 17 fatal public beating of Thet Naing Oo, 
calling on the regime to renounce the use of violence and 
engage all elements of Burmese political life in a meaningful 
dialogue that empowers the people to determine their own 
future.
    Partners and other key players also are speaking out. After 
his recent visit to Burma, Malaysian Foreign Minister Hamid 
expressed public concern about the pace of reform and the 
regime's failure to allow him to meet Aung San Suu Kyi. Just 
last month at the time of the Burmese prime minister's visit to 
China, Beijing for the first time publicly called for national 
reconciliation in Burma.
    Madam Chair, because of the regime's self-imposed isolation 
and apparent imperviousness to outside pressure, it will take 
an extraordinary effort by the international community to 
persuade Burma's rulers to begin and sustain a process of 
credible and full national reconciliation. While we still are 
not all on the same page, we are much closer than we were. The 
administration is engaged at the highest levels. Key countries 
in the region have begun to speak out and international 
pressure on the regime to change its misguided policies is 
slowly mounting.
    Burma's road to democracy is neither short nor straight, 
but by pressing on with our intense efforts we believe we can 
effectively shorten the time it will take to achieve the 
freedom, prosperity, and security for which Burma and its 
people so desperately yearn and richly deserve. The brutal 
killing just days ago of Thet Naing Oo reminds all of us how 
high the stakes are there.
    Thank you.

    [The prepared statement of Mr. John follows:]

Prepared Statement of Eric G. John, Deputy Assistant Secretary, Bureau 
         of East Asian and Pacific Affairs, Department of State

    Madam Chairman, members of the subcommittee,
    Thank you for the invitation to come before the subcommittee today 
to update you on the situation in Burma and the administration's 
strategy for effecting meaningful change in that tragic country.
    Before I delve into the substance of our policy toward Burma, I 
would like to take a moment to relate a recent event that highlights, 
in a very human and tragic way, the oppression and violence that the 
people of Burma face on a daily basis. Less than 2 weeks ago, several 
security officials accosted a former political prisoner named Thet 
Naing Oo, accusing him of public indecency for relieving himself near a 
Rangoon teahouse. In most countries, urinating in public might warrant 
a citation or a warning. Not in Burma. The security officials provoked 
a confrontation with Thet Naing Oo, and in the end, beat him to death, 
in full view of numerous horrified onlookers.
    Incidents such as this hang over the heads of all Burmese people, 
weighing them down with a palpable sense of fear and oppression. They 
remind us of the brutality of the regime, and of the need for the 
international community to do all it can to bring about change.
    Burma remains a high priority for the President and Secretary Rice, 
and, as I know, for many Members of Congress as well. We are working 
intensively and closely with like-minded partners and others in Asia, 
and with the U.N. in New York, to coordinate and maximize diplomatic 
pressure on the Burmese regime to initiate genuine political reforms. 
While there have been signs of some progress in recent months among our 
international partners--and I will cover that later in my testimony--
the road to ultimately bringing to Burma and its people the freedom, 
peace and democracy they so richly deserve remains long and uncertain. 
However, it is a path the United States and others will continue to 
traverse no matter what the obstacles.
    To fully understand and appreciate the tragedy that Burma has 
become, we should look back 50 or 60 years, when that country seemed 
poised to play a significant and positive role in the region and the 
world. Burma enjoyed some of the highest rates of enrollment in primary 
and secondary schools in Asia, and boasted a well educated, highly 
regarded civil service. It was rich with natural resources, and was one 
of the world's leading rice exporters.
    Sadly, Burma's leaders did not capitalize on these assets and the 
country's potential to be a regional leader. Instead, a series of 
generals have, for over 40 years, implemented irrational and repressive 
policies that have caused the needless suffering of Burma's more than 
50 million people. As Secretary Rice recently said in Jakarta, ``A 
country that was once the jewel of Southeast Asia is now out of step 
with the entire modern experience of its region. A once thriving 
economy has collapsed. Universities that once attracted the best Asian 
minds are locked shut. The Burmese regime is now literally retreating 
into the depths of the country, closing its people off from the world 
and robbing them of their future.''
    The latest chapter in Burma's increasingly depressing story is the 
advent of Avian Influenza. On March 12, Burma reported an AI outbreak 
in poultry near Mandalay. to the World Organization for Animal Health 
(OIE), and requested assistance from the international community. In 
response to its ``immediate need'' request, we made available to the 
UN's Food and Agricultural Organization (FAO) up to 2,000 units of 
protective clothing and disinfectant with sprayers for use in Mandalay 
to contain the outbreak. Others in the international community are 
responding as well, albeit not as rapidly. A WHO/FAO team was sent in 
to investigate. Sadly, more than 56 commercial farms have since been 
infected, and the regime has had to suspend the sale of ducks, chickens 
and quails in affected areas.
    Although the regime cannot be blamed for the AI outbreak itself, 
its failure to devote an adequate share of budget resources to the 
health sector, along with its repressive policies--including 
unnecessary restrictions on U.N. agencies, NGO's and other health-
related organizations within the country--greatly increase the risk of 
this and other outbreaks spreading, both within Burma and to 
neighboring countries.
    On a much broader scale, the regime's policies and corrupt 
practices have contributed to a host of other ills, severely hurting 
the economy and exacerbating the deterioration of social conditions. 
They have led to a steady outflow of refugees and illicit narcotics, 
thwarted peace among Burma's ethnic minority populations, and forced 
the Burmese people to live in a state of perpetual fear. This downward 
spiral is increasingly worrying not only to Burma's people, but to the 
region and the world.
    On the political front, the regime continues to promote a sham 
political process from which the opposition is barred--one that 
prohibits free and open debate and includes only delegates hand-picked 
by the military. Over 1,100 Burmese are still detained for peacefully 
expressing their political views. Freedom of press, assembly, religion 
and movement continue to be greatly restricted. Forced labor, rape, 
torture, and conscription of child soldiers remain prevalent as tools 
of the regime, particularly in ethnic minority areas.
    Ironically, as the suffering of the Burmese people worsens, the 
regime continues to insulate and isolate itself from the harsh 
realities of life in Burma--for which it is responsible--and from the 
international community as well. There is no example more indicative of 
this trend than the regime's bizarre decision last year, without notice 
to its people or the world, to move the capital to a heretofore 
undeveloped town in the hinterland some 200 miles north of Rangoon. Of 
course, governments have the right to move their capitals, but the way 
in which the regime made the move is both troubling and emblematic of 
the character of the quixotic regime. It did not notify the Burmese 
people, let alone its ASEAN partners or other foreign governments or 
embassies, and it forced civil servants to leave their families behind 
indefinitely to make the move.
    Madam Chairman, in such a dynamic region as Southeast Asia, which 
is enjoying strong economic growth, increased freedom and democracy, 
and an enhanced role in global affairs--Burma stands out as a glaring 
exception. The international community has reached out repeatedly to 
help Burma get back on its feet, but the regime has rejected all of 
these efforts.
    So how do we bring about a transition from the repressive, 
isolationist Burma of today to a free and democratic country--one that 
is integrated into the global community and poses no risk to the 
stability of the Southeast Asia region? Although there are no easy 
solutions here, we have developed a bilateral and multilateral strategy 
predicated on maximizing international pressure on the regime to 
initiate credible reforms. This multi-pronged approach includes 
diplomatic pressure, sanctions, and statements of public support for 
those struggling for freedom and democracy in Burma. We also continue 
to use funds appropriated by Congress to support democratic ideals 
through programs that promote democratic values, human rights, the rule 
of law, and good governance.
    Perhaps the most important component of our strategy is our 
intensified diplomatic efforts focused on building international 
pressure on the junta to reform. Over the past several months, we have 
actively engaged with like-minded partners in Europe and key countries 
in the Asia region, including Japan, ASEAN members, China, India and 
Australia, to develop support for a common message to the regime on the 
need for launching a truly inclusive and credible political process 
leading to a democratic transition. We have stressed that the first 
steps would have to be the release of political prisoners, including 
Nobel Laureate Aung San Suu Kyi, and the regime's engagement in a 
genuine political dialog with the opposition and representatives of 
Burma's ethnic minorities.
    It is our sense that elements of our message are getting through to 
the regime. We strongly supported the firm public stance taken by ASEAN 
back in December, and welcomed Malaysian Foreign Minister Hamid's visit 
to Rangoon last week. At their Trilateral Strategic Dialogue on March 
18, Secretary Rice, along with Japanese Foreign Minister Aso and 
Australian Foreign Minister Downer, underscored the need for genuine 
progress in democratization in Burma, including the release of 
political prisoners. Indonesian President Yudhoyono's visit to Burma in 
March provided another opportunity to press the regime. Following the 
visit, senior Indonesian officials confirmed that President Yudhoyono 
intends to use his influence--and Indonesia's example--to press the 
Burmese regime to release Aung San Suu Kyi and pursue a democratic 
transition. We will continue to work with New Delhi, at the highest 
levels, on promoting a democratic transition in Burma. We believe India 
should press the regime to take meaningful steps such as releasing Aung 
San Suu Kyi, rather than appearing publicly to accept the status quo.
    Multilaterally, we continue to look for ways to keep Burma on the 
U.N. agenda. We believe the Security Council has a critical role to 
play in promoting positive change there, and we have been actively 
exploring ways to build UNSC consensus on the need for further 
discussions and possible Council action in follow-up to the December 16 
landmark Council briefing on Burma. In our internal discussions on next 
steps, we have been considering factors such as the results of the 
just-completed visit to Burma of FM Hamid and other events.
    We also continue to advocate discussion of Burma in other U.N. 
bodies, such as the Economic and Social Council (ECOSOC) and the Third 
Committee. Last year, the United States co-sponsored the European 
Union's annual Burma human rights resolution at the United Nations 
General Assembly, which called for ``a genuinely inclusive'' political 
process through the ``unhindered participation of all political parties 
and representatives of ethnic nationalities,'' as well as the immediate 
and unconditional release of political prisoners. Separately, we are 
supporting the International Labor Organization's request to place 
Burma on the 2006 ECOSOC agenda.
    We will continue to encourage U.N. Secretary General Kofi Annan to 
remain engaged in Burma, and to work with the U.N. Secretariat to 
identify a successor for the Secretary General's former Special Envoy 
to Burma, Razali Ismail, who, along with the U.N. Special Rapporteur 
for Human Rights, has not been permitted by the regime to visit Burma 
for the past 2 years. We will also strive to strengthen the Special 
Envoy's mandate to include coordination with other governments.
    Another component of our strategy is sanctions. Let me state 
clearly for the record, Madam Chairman, that the administration fully 
supports the renewal of the import ban contained in the Burmese Freedom 
and Democracy Act. Failure to renew it, absent meaningful refoims by 
the regime, would send the wrong political message. Our sanctions 
continue to play a critically important role, reminding the regime--and 
everyone else concerned with Burma--that the junta's behavior is 
unacceptable, and that its leaders will remain isolated as long as they 
continue this behavior. These measures also provide important moral 
support for the democratic opposition, the vast majority of whom favor 
tough international sanctions; and they ensure that American companies 
will not help fund the luxurious lifestyles of a select few.
    Our strategy also provides public support to Burma's democratic 
opposition. The United States has spoken out for years against the 
regime's repression of the Burmese people and its imprisonment of Nobel 
Laureate Aung San Suu Kyi, U Tin Oo, Hkun Htun Oo and other courageous 
advocates for democracy. We have encouraged others to do so as well. 
Just last week, we highlighted the horrific March 17 fatal public 
beating of Thet Naing Oo, calling on the regime to renounce the use of 
violence and engage ``all elements of Burmese political life in a 
meaningful dialog that empowers the [Burmese] people to determine their 
own future.''
    Partners and other key players have also been speaking out. On 
February 28, the European Union issued a statement calling for the 
immediate release of Aung San Suu Kyi and all political prisoners and 
for a genuine dialog between the regime, the National League for 
Democracy, and ethnic minority representatives. The statement also 
expresses the EU's support for national reconciliation and respect for 
human rights. Just last month, at the time of the Burmese Prime 
Minister's visit to China, the Chinese government, for the first time, 
publicly called for national reconciliation in Burma.
    Madam Chairman, because of the regime's self-imposed isolation and 
apparent imperviousness to outside pressure, it will take an 
extraordinary concerted and coordinated effort by the international 
community--the U.S., the countries of Southeast Asia, China, Japan, 
India, South Korea, the European Union, the United Nations, and many 
others--to persuade Burma's rulers to begin and sustain a process of 
credible and full national reconciliation that the country so 
desperately needs. While we still are not all on the same page, we are 
much closer than we were: the administration is engaged at the highest 
levels; key countries in the region have begun to speak out about the 
need for reform; and international pressure on the regime to change its 
misguided policies is slowly mounting. Burma's road to democracy is 
neither short nor straight, but by pressing on with our intense 
efforts, we believe we can effectively shorten the time it will take to 
achieve the freedom, prosperity, and security for which Burma and its 
people so desperately yearn and richly deserve. The brutal killing just 
days ago of Thet Naing Oo reminds us all of how high the stakes are.
    Thank you.

    Senator Murkowski. Thank you, Mr. John. We appreciate those 
comments and the reminder of the kind of regime that we are 
dealing with at this time.
    You have made several comments about the efforts by the 
international community, the need for intensified diplomatic 
pressure by those within the neighborhood. What are your 
thoughts--you were not here when I gave my opening statement 
where I said that there are those that are considering a Six 
Party forum type of approach to dealing with Burma, somewhat 
along the lines of the North Korea Six Party Talks. What are 
your thoughts about that type of a forum?
    Mr. John. I would be concerned that the efforts, the 
diplomatic efforts that would go into setting up just the 
mechanics of a multiparty forum, no matter how many parties it 
would be, would detract significantly from the time we need to 
spend on the diplomatic efforts to pressure Burma to reform the 
regime. Obviously, the issues in North Korea and Burma are 
quite different. In Burma it is a fairly black and white issue 
about what needs to be done. There needs to be national 
reconciliation, in Burma. The Burmese do need to give greater 
access to NGOs. They need to allow the U.N. into Burma.
    There is a variety of steps that need to be taken. I would 
not like to detract from the bilateral and multilateral efforts 
that we have. I think the UN, however, does provide an existing 
mechanism for bringing that multilateral dialogue to the 
Burmese about what needs to be done.
    Senator Murkowski. Well, what do you think the odds are of 
achieving any kind of action by the Security Council, then?
    Mr. John. Well, I think it is a step by step process. 
First, the December 16th briefing was action in and of itself. 
It is the first time ever that the United Nations Security 
Council has taken up the issue of Burma. Just by receiving a 
briefing on what is occurring in Burma is significant, because 
heretofore one of the problems that we have had with getting 
international pressure on Burma is that you have a lot of 
nations who have been willing to effectively turn a blind eye 
to what is happening in Burma and stating that it is just 
really an internal matter for the Burmese to deal with and it 
is not our responsibility.
    The fact that at the United Nations Security Council is 
hearing an authoritative briefing on what is happening on the 
ground in Burma, how the regime's policies are hurting the 
Burmese people, and how in the end it is destabilizing for the 
region, makes the case that there is an obligation for other 
nations to be interested and be involved in finding a solution 
for Burma.
    Moving on from there, I think we need to go back and 
redouble both bilateral efforts with members of the Security 
Council, and with other nations who are not members of the 
Security Council, to develop a consensus approach in the 
Security Council about a solution in Burma.
    I think one of the important things in the UNSC is to work 
on consensus, to make sure that we do not have any efforts that 
we bring to the UNSC blocked by lack of it. Therefore, in sort 
of a long way to get back to the original question, it is hard 
to predict an exact timeline, diplomatic timeline, when we 
would get these actions at the United Nations. But we are 
looking at the UNSC, other U.N. bodies, and we want to keep up 
that pressure as long as it takes.
    Senator Murkowski. Can you speak publicly about any of the 
conclusions that were reached at that December U.N. Security 
Council meeting?
    Mr. John. Let us see. The briefing--I would rather take 
that question and just give you a more thorough answer about 
what the results of the briefing were, if I may. One of the 
conclusions was that ASEAN should take a leading role in 
resolving, helping to resolve the situation in Burma.
    Since that briefing, we have had a couple of remarkable 
developments regarding ASEAN's attitude toward Burma. Again, up 
until our concerted diplomatic efforts on Burma the ASEAN 
nations adhered to the principle of noninterference in member 
nations' affairs. Starting with late last year at an ASEAN 
foreign ministerial meeting, the foreign ministers did express 
concern about what was going on in Burma and did express the 
need for the Burmese to develop a real democratic roadmap. They 
also expressed the need for the release of Aung San Suu Kyi and 
other political prisoners.
    The visit of Foreign Minister Hamid to Burma is important 
because he went in his capacity as representing the ASEAN 
foreign ministers, the first time that the ASEAN nations have 
directly confronted the Burmese regime on what is going on 
inside Burma. ASEAN is beginning to recognize that what is 
going on in Burma is no longer simply the internal affairs of 
the regime, but a matter of concern to the region.
    Senator Murkowski. With the second panel that we had, one 
of the comments--this was from Dr. Green--was that he believed 
that there was a divide or a split within ASEAN members as to 
really how to approach Burma on the issue. Do you sense that 
they are coming closer to a consensus as to how to approach 
Burma or is that still an issue for us to deal with, 
recognizing that you have different nations certainly with very 
different interests as they relate to Burma?
    Mr. John. I think that remains an issue, about how ASEAN is 
going to approach the Burmese problem. I would say that there 
are two things that ASEAN needs to wrestle with. One is 
recognizing that there is a problem in Burma and the second is 
therefore developing an approach to resolving that problem.
    I would say up until recently ASEAN members were not united 
in thinking--as to the question of whether there is a problem 
indeed in Burma. Now I would say there is. There might be 
differences in how they would grade the degree of the problem. 
I cannot speak for ASEAN, but I would say that there is 
consensus among the members, based on my conversations, that 
there is a problem there in Burma, that the political 
opposition should not be in jail, that the regime should begin 
a political dialogue for national reconciliation, and that what 
is happening in Burma does have the potential for destabilizing 
the region.
    To get to the next level of what ASEAN is going to do about 
it, what type of approach they are going to take, there is a 
difference still, I think. There is no consensus on that.
    Senator Murkowski. You mentioned the reported outbreak of 
bird flu in Burma. Have we, has the United States, had any 
contact with Burma directly or through any international 
organizations to talk about what the situation is there in 
Burma? Do we have any idea how widespread the outbreak may be?
    Mr. John. The U.N. FAO and WHO have, first of all, made an 
appeal for resolving the Avian influenza issue. We in response 
to that, immediately provided 2,000 protective suits that the 
Burmese could use in culling the chickens from the farms. We 
have had a USAID Avian influenza expert and a USDA employee 
travel to Rangoon and Mandalay earlier this month with FAO and 
WHO personnel to assess the situation on the ground.
    That said, the real problem I believe still remains with 
the regime. They reported it a month ago. You do not know how 
long it had been between the outbreak, detection, and the time 
they decided to report it. It is a problem of their isolation 
and their lack of willingness to have international 
organizations, NGOs, go out into the countryside and do the 
work they need to do.
    Hopefully, on Avian influenza that would be different, and 
we are working with FAO, WHO, and other donors on what, if 
necessary, we would need to do. But I believe that other U.N. 
agencies should take the lead in addressing Burma's needs here 
and other donor nations as well.
    Senator Murkowski. Discussion about the moving of the 
capital and the difficulty in communication, moving from 
Rangoon to this location. I asked a little bit earlier, is 
there an economic benefit to this? Is this something that needs 
to happen? Dr. Turnell indicated from his perspective there was 
certainly no economic advantage to doing it; it was just yet 
another example of the regime's volatility.
    What kind of difficulties have our officials in the U.S. 
embassy in Rangoon encountered in communicating with the 
Burmese government officials in the new location? I understand 
they do not have--they are saying communication by fax, but we 
do not have the ability to even do that.
    Mr. John. That is correct, because they will not give us 
the fax number. They moved last November. They moved from 
Rangoon to Pyinmana. I think last week they changed the name of 
the capital from ``Pyinmana'' to ``Naypyidaw.'' So I am not 
really sure what it will be called next month.
    Senator Murkowski. Is it still in the same spot, so far as 
we know?
    Mr. John. It is in the same spot, but it is kind of growing 
in a mushroom-like fashion in there, and it is done under the 
cloak of darkness. It is a very unfortunate situation.
    No, it does not make any economic sense. You are moving 
from what was once, decades ago, a thriving city and one that 
had international connections throughout Southeast Asia and the 
world, to one that is 240 miles inland in the middle of a 
jungle, that is mosquito-infested and ridden with malaria. It 
is separating government workers from their families. It is a 
forced relocation of those who work for the regime.
    There is really no political rationale, no economic 
rationale that we can ascertain. One theory is that throughout 
history in Burma the old rulers--as you would have a new 
dynasty come into place in Burma, the ruler would move the 
capital to assert his new regime in Burma. And unfortunately, 
in a way the SPDC, led by Than Shwe, by moving the capital is 
almost acting like a monarchy in moving the capital to the 
jungle and establishing a new regime. I think it is largely a 
political step driven by a backwards-looking mentality. It is 
terrible.
    Senator Murkowski. I am told that we just had our vote 
start, so I have got one last question for you before I have to 
excuse myself. It has recently been reported that Burmese 
refugees who were to be resettled here in the United States 
have hit a snag because of their material support for 
opposition groups within Burma. Of course, the Patriot Act 
denies entry to those who provide material support to a 
terrorist or to an armed rebel group, so those groups that were 
resisting the Burmese military junta end up now being included.
    I do not think that this was the intent of the Patriot Act. 
So my question to you, Mr. John, is whether or not the State 
Department is doing anything to address this scenario?
    Mr. John. We are. The administration as a team is 
addressing this issue. You are correct, that was not the intent 
of the Patriot Act at all and everybody realizes that, and we 
are trying to find a way to best resolve it. The Department of 
State is led by the Bureau of Population Refugees and Migration 
(PRM), and working very closely with the Department of Homeland 
Security because DHS has the lead on this.
    It is a cooperative effort, though, and I am quite 
confident that we are going to find a way to resolve this that 
is equitable.
    Senator Murkowski. Do we have a handle on how many refugees 
we are talking about?
    Mr. John. I cannot state with clarity. I think the number 
we are looking at right now is about 9,000 or so--9,800.
    Senator Murkowski. So it is a fair number.
    Mr. John. It is, it is. It is a large number, but obviously 
even if it were just one, it would not be right and we would 
still be working on it.
    Senator Murkowski. Good. Well, I am glad to hear that that 
effort is under way.
    I appreciate your time here this afternoon and all that you 
have given us. I appreciate the good work that you are doing as 
it relates to Burma and the situation on the ground there.
    With that, the subcommittee is adjourned. Thank you.

    [Whereupon, at 4:26 p.m., the subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              

              Additional Material Submitted for the Record

                              ----------                              

        Response by Eric John to Question from Senator Murkowski

    Question. In December 2005 the United Nations Security Council took 
an important step forward by considering the situation in Burma for the 
first time. The Security Council action came soon after a 
groundbreaking report by Archbishop Desmond Tutu and former Czech 
President Vaclav Havel which made a compelling case that Burma presents 
a transnational threat to regional security in Southeast Asia. The 
report called for a binding Security Council resolution on Burma in 
2006. The State Department was instrumental in getting the Council to 
even consider Burma, which was a useful first step, but I hope we can 
go further this year. Will the U.S. support efforts to pass a binding 
Security Council resolution calling for constructive action on Burma?

    Answer. We are continuing to work with partners and key players in 
the region to raise Burma again in the U.N. Security Council, and to 
discuss what Council action would be appropriate. At this time, despite 
growing concern among Council members about the situation in Burma, 
there would not be sufficient support in the Council for a resolution 
to pass. Some Council members clearly stated they viewed the December 
Security Council briefing as a ``one-time'' exercise and would not 
support efforts to bring Burma before the Council again.
    We worked hard last year to gain consensus for the Council 
briefing, and that discussion had a significant impact in terms of 
intensifying international pressure on the regime. Now, with several 
new members on the Council, we are working to maintain consensus in 
that body for continued Council engagement on Burma. At the same time, 
we also continue to coordinate our bilateral diplomatic efforts with 
partners and key players in the region, and seek to shine a spotlight 
on Burma in other U.N. organizations; for example, the appalling 
situation of forced labor in Burma is on the Economic and Social 
Council's agenda for its meeting this July.
                               __________

         Response by Eric John to Question from Senator Chaffee

    Question. Two weeks ago, a leading Burmese human rights activist, 
Bo Kyi, who spent over 7 years in prison, traveled to Rhode Island. 
While there, he shared his powerful story with many of my constituents. 
It is a tragedy that Nobel Laureate Daw Aung San Suu Kyi and more than 
1,000 other prisoners of conscience remain imprisoned in Burma. They 
should be immediately released and the human rights abuses should stop. 
While in Rhode Island, Bo Kyi asked that the United States lead an 
effort to press for a U.N. Security Council resolution on Burma. What 
are the administration's plans for pursuing U.N. Security Council 
action?

    Answer. As we have said consistently, we believe the U.N. Security 
Council has a critical role to play in pursuing a resolution to the 
deteriorating situation in Burma and the problems the country poses for 
its neighbors and the region. That said, some Council members clearly 
stated they viewed the December 16 Security Council briefing as a 
``one-time'' exercise and will not support our efforts to bring Burma 
before the Council again.
    We worked hard last year to gain consensus for the Council 
briefing, and that discussion had a significant impact in terms of 
intensifying international pressure on the regime. Now, with several 
new members on the Council, we are working to maintain consensus in 
that body for continued Council engagement on Burma. At the same time, 
we also continue to coordinate our bilateral diplomatic efforts with 
partners and key players in the region, and seek to shine a spotlight 
on Burma in other U.N. organizations; for example, the appalling 
situation of forced labor in Burma is on the Economic and Social 
Council's agenda for its meeting this July.
                               __________

   Responses by Dr. Sean Turnell to Questions from Senator Murkowski

    Question. Can you describe the social and environmental problems 
that could result from these dams being built?

    Answer. Burma's ruling military regime, the ``State Peace and 
Development Council'' (SPDC), has been waging war for decades against 
ethnic peoples (including the Karen, Karenni and Shan) living in 
eastern Burma. All of the projects (including dams) that are currently 
located in these areas are associated with ongoing patterns of human 
rights abuses such as rape, forced labor, forced ``portering'' (for 
Burmese army operations), extrajudicial executions, and torture. When 
the new dam projects on the Salween proceed, additional Burmese troops 
inevitably will be brought in to ``secure'' the areas. In Burma, such 
an increase in military deployment invariably leads directly to an 
increase in human rights violations. The construction of the dams will 
permanently displace tens of thousands of people, causing yet another 
influx of refugees into Thailand as well as a sharp increase in the 
number of internally displaced persons within Burma.
    By damming the Salween--the longest free-flowing river in Southeast 
Asia--much of eastern Burma will be inundated or otherwise impacted by 
the dams themselves, and related construction. The dams will have 
irreversible impacts on the environment such as a loss of wildlife 
habitats, diminished biodiversity, and harm to fisheries. These impacts 
will destroy local people's means of living, such as fishing, farming, 
and transportation. Burma's regime has a poor record of infrastructure 
maintenance, and in the past excessive ``siltification'' of rivers has 
been a reliable aftermath of dam construction.
    The SPDC is most likely to spend income generated from the dams to 
finance expansion and modernization of its military. Since 2002, when 
it began receiving revenue from the export of natural gas to Thailand, 
Burma's generals have purchased hundreds of millions of dollars on 
weapons and arms. By comparison, in 2004, the HIV/AIDS budget in Burma 
was $22,000, one of the lowest levels of national spending on HIV/AIDS 
in the world.
    As these answers were being compiled a U.N. report\1\ has just been 
released that has found a link between hydropower projects and the 
spread of bird flu. The postulated connection is that the destruction 
of habitat for wild birds for hydroelectric projects forces wild birds 
on to alternative sites, such as farm ponds and paddy fields, bringing 
them into direct contact with (infected) domestic poultry. Burma's 
irresponsible ``policies'' with respect to bird flu are, of course, the 
subject of much concern in the region.
---------------------------------------------------------------------------
    \1\ The Report, by the United Nations Environment Programme, was 
released on 11 April. It can be found at: http://www.unep.org/
Documents.Multilingual/Default.asp?DocumentID=475&
ArticleID=5255&1=en

    Question. What are the mechanisms by which local residents and 
stakeholders living in potentially impacted areas, have opportunity to 
---------------------------------------------------------------------------
provide input into the decisionmaking process for these dams?

    Answer. No such mechanism have been established. No consultations 
have been held with local stakeholders in Thailand (much less Burma) 
during the decisionmaking process over the Salween dams. Thai 
authorities so far have proceeded with the dam projects in a secretive 
and non-transparent manner, withholding vital information on 
construction plans such as feasibility studies, environmental and 
social impact assessments, and co-financing agreements.
    In Burma, of course, there has not only been no consultation, but 
any questioning of the project places the ``questioners'' in the 
gravest danger. All of the information we have on the Burmese-side of 
the Salween dams project has come to us via clandestine sources.

                                 

      
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