A jewel in the imperial diadem

In the preface to a ‘comprehensive treatise’ on Burma published in 1901, a former British official declared the territory to be ‘one of the richest provinces of our Indian Empire’, adding on a later page, rather more poetically, ‘one of the brightest jewels in the Imperial diadem of India’. There was much to sustain that view. To judge by the near-relentlessly rising production and trade statistics, the vast rural expanses under commercial cultivation, and the crowded wharves and hectic commercial streets of the capital, Rangoon, Burma at the beginning of the twentieth century was indeed a prosperous possession, a notably valuable component in Britain's eastern empire.

Colonial Burma's economic position was built mainly on the cultivation and export of rice. In the first decade of the twentieth century, Burma exported on average 2.17 million tons of rice and paddy (rice grain still in the husk) each year, making it by some distance the single most important rice-exporting country in the world. Just over one-third of those exports was sold in Europe, partly for use as food and fodder, in brewing, and in the manufacture of starch, but also for re-export, after re-milling, to Cuba, the West Indies, West Africa, and South America. A further quarter or more was shipped to India and Ceylon, for India, prone to scarcity and famine, had long regarded Burma as a granary from which any large or unexpected demand could at once be supplied. The final substantial markets for Burma's rice in the first decade of the twentieth century were China and Japan and, more importantly, South East Asia. Rice shipped to South East Asia – Singapore was an important initial destination – fed the populations of immigrant Chinese and Indians in the Malay States, Straits Settlements, and the Netherlands East Indies engaged in the production, processing, and shipping of those territories’ principal commodity exports, tin, tobacco, sugar, and rubber.

Military rule and the establishment of the Burmese Way to Socialism

In April 1958, the AFPFL government of U Nu, in power since Burma had regained its independence in January 1948, split into a ‘Clean’ faction, led by U Nu and the Minister of Agriculture and Forests, Thakin Tin, and a ‘Stable’ faction led by the socialists U Ba Swe and U Kyaw Nyein. U Nu's parliamentary position was now precarious – he scraped through a vote of confidence in June, but in August was forced to use a presidential decree to pass the annual budget – and in late September the prime minister was convinced by two senior Rangoon-based staff officers to transfer power to an army caretaker government under the army commander, General Ne Win, pending the holding of elections. It was a coup with pressured consent. The formal transfer of power took place in late October 1958.

The caretaker government set itself three main objectives, in its own words, ‘to bring about law and order; secondly, to combat economic insurgents; and thirdly, to hold a fair and free election’. And it was broadly successful in meeting those objectives. Serious crime fell by one-third, and economic crimes, notably ‘black-marketeering rackets’, were more rigorously investigated and brought to the courts; over 150,000 squatters were removed from Rangoon's slums and settled in new satellite towns; and a national election was held, even if not altogether fair and free and somewhat later than first intended, in February 1960.

Reform and its limitations

In March 1989, the State Law and Order Restoration Council (SLORC), the new military government that had taken power the previous September, revoked legislation of 1965 that had established the socialist economic system. The stated ambition of the new administration, in contrast, was to secure the evolution of a market-oriented economy. A key figure in this apparently major realignment was Brigadier General David Abel, at that time Minister of Trade and Minister of National Planning and Finance, and who, in the 1990s, would be ‘the most articulate and internationally well-known spokesman for the SLORC’. But in fact the dismantling of the socialist economy had begun in the final year of BSPP rule, for, as noted in the previous chapter, on 1 September 1987 the BSPP had removed the long-established controls on domestic trade in nine agricultural commodities, including, crucially, rice.

A year later, in October 1988, the SLORC lifted the ban on the private export of agricultural commodities – although not the export of rice. The following month, the new government made it clear that, after almost three decades of near-total exclusion, Myanmar would again allow, indeed would encourage, investment by foreign private capital. The Foreign Investment Law of November 1988 made provision for full foreign ownership of concerns operating in Myanmar – it did not insist on joint ventures – with approval of investment applications from foreign interests being overseen by a Foreign Investments Commission. In the first decade, the fiscal years 1989 to 1998, over 300 FDI (foreign direct investment) applications, with a total value close to $7,200 million, were approved, principally in oil and gas exploration and extraction, hotels and tourism, manufacturing and light industry (notably garment manufacture), real estate, and construction.

In 1987, Burma applied to the United Nations for classification as a Least Developed Country (LDC), a status that would make it eligible for relief on its international debt as well as eligible for additional financial assistance from UN agencies. The application was successful. But although clearly impoverished, Burma was in fact strikingly rich in natural resources, including teak, jade, rubies, oil and natural gas, lead, zinc, tin, but above all rice, cultivated in the vast, extremely fertile delta of the Irrawaddy River. Moreover, in the first decades of the twentieth century, Burma, if judged by the production and trade statistics, had been among the most prosperous territories in the East. Yet now, towards the close of the century, it was classified among the poorest nations in the world, grouped by the United Nations with, for example, Lesotho, Burkina Faso, and Rwanda. It was a humiliation.

It was not difficult to identify what, or rather who, was responsible for Burma's economic failure. Freed from British colonial rule in January 1948, Burma had had a parliamentary civilian government for the first decade and more of independence, save for a brief military caretaker administration at the end of the 1950s. But then on 2 March 1962, the military had seized power, and for the following quarter of a century had pursued an isolationist-nationalist, doctrinaire-socialist economic strategy – ‘infantile disorder’, in the later words of a group of Burmese economists – that eventually brought the country to ruin. The dominant political figure in this period was General Ne Win, autocratic and politically ruthless but also unpredictable and capricious, and who, it is said, sought the advice of astrologers on important government decisions.

War and the end of British rule

From the outbreak of war in South East Asia in early December 1941, it took the Japanese just six months to drive the British from Burma, although in truth, the British fate was settled long before the final end. On 15 December, a week or so after the attack on Pearl Harbor, Japanese troops crossed the border from Siam and seized Burma's most southern town, Victoria Point, and, crucially, its airfield. From there, the Japanese put out of action the airfields to the north at Mergui and Tavoy, opening the way for the further advance of Japanese forces from the south-east and towards Rangoon. On 23 December, Rangoon was bombed from the air, causing considerable casualties – some 2,000 were killed in the attack and many injured – and extensive physical destruction. Thousands of Indians, the labourers, menials, traders, and shopkeepers without whom Rangoon could not function, fled the city. Two days later, on Christmas Day 1941, Rangoon was again bombed. Then, in mid-January 1942, the main Japanese force, accompanied by units of the newly formed Burma Independence Army, crossed the border from Siam from the south-east. The first major objective of the Japanese force, the port of Moulmein at the mouth of the Salween, fell on 31 January. And then in late February, the British Seventeenth Indian Division, falling back to a position to hold the advancing Japanese, was caught at the Sittang Bridge. When the order was given to destroy the bridge, to deny the crossing to the Japanese, ten of the division's twelve battalions were left on the wrong side of the river.