Myanmar (Burma – renamed Myanmar in 1989) has never seen sustained conflict-free periods since its independence in 1948. The military has ruled the country since 1962. In 1988, pro-democracy protests were crushed. In 1990, free and fair national elections were held in Myanmar for the first time in 30 years. The National League for Democracy, the main political movement led by Mrs Aung San Suu Kyi (1991 Nobel Peace Prize laureate), won 62% of the votes and 82% of the seats in elections.[1] While the purpose of these elections was never made fully clear (either to create a Constituent Assembly or a legislative Parliament), the military regime refused to honour the result. Since then, the senior political leaders and the army have remained the beneficiaries of the country’s self and externally imposed isolation. The population continues to live under political oppression, aggravated by economic difficulties. Detentions, intimidation and political oppression of activists are common place. In 2003, the military government presented a seven-step ‘roadmap’ for constitutional and political reform towards a ‘disciplined democracy’. The first face of this ‘roadmap’ was launched in 2004, with the reconvening of the National Convention to deliberate on basic principles for a new Constitution. Then in December 2007, the process of drafting a Constitution, based on those basic principles, began.[2] Unlike other political groups invited, the NLD refused to take part in the process. Although these first steps might indicate progress, the roadmap has come under criticism for being non-inclusive and lacking credibility. The economic situation stays highly problematic and potentially de-stabilising. The poor data quality and dubious government’s statistics, which point to double-digit economic growth, are highly misleading to outside observers and attempt to obscure the country’s dire humanitarian situation. Because of political constraints, donor assistance levels to Myanmar remain grossly insufficient to cover the needs of the general population. In mid-August 2007, as a result of the dismal economic situation, street demonstrations were sparked over a sudden increase in fuel prices. The demonstrations grew into a nation-wide protest against the regime’s policies. The Myanmar Sangha – an influential institution in society – showed overwhelming support for the protests. The government responded with a violent crackdown on the peaceful protests. This crackdown was condemned by the international community, which consequently renewed its pressure on the regime for political reform. As a result the European Union extended their existing sanctions on Myanmar in November 2007. Thus far, European sanctions do not seem to have pushed the government in the desired direction, and they may even have produced counterproductive effects. These include a hardened stance by the government, negative impact on Myanmar civil society and an undermining of the economy at large. It’s often said that sanctions are, in and of themselves, a form of violence, employed as a political tool used for rhetoric rather that to create meaningful change. Nevertheless, it is questionable whether Myanmar’s progress towards a functional democracy would be accelerated by the absence of economic sanctions. The military government adheres to its Roadmap to ‘disciplined democracy’, which can best be described as a fully controlled, slow transition to semi-civilian rule. This proceeds at the pace conducive to the generals in charge, protecting their interests and largely disregarding external criticism or pressure. In the government’s point of view, Western sanctions are a hostile reaction towards its declared intention for a (controlled) transition. Since the SPDC can rely on sources of income outside the purview of sanctions (energy, commodities, etc.) it is hard to imagine that the regime will deviate from its declared goals as a reaction to sanctions or Western pressure. While experts often argue that economic sanctions have no impact on a targeted country, this report seeks to provide evidence of sanctions applied against Myanmar that have an economic, social and the political impact. For supporting this thesis the focus will be on the restrictive measures imposed by the European Union. It reviews the European Unions existing policies ‘supporting Myanmar to become a peaceful, democratic and prosperous country’. Moreover, it will show that it is not enough to wait for a political breakthrough. Evidence suggests all sides, including the international community should have the courage to move away from these entrenched positions and try a different approach. After having given the necessary background and having shown why restrictive measures are applied by western communities, this report will provide recommendations for a different approach towards democracy in Myanmar.

1. Background

In June 1989, the ruling military junta changed its name from Union of Burma to Myanmar, one year after the brutally suppressing of pro-democracy protests, where thousands were killed. The military junta claimed this name would be more neutral for a state of a huge ethnic diversity. Thus it would lead to greater harmony among the country’s desperate people and provide them a feeling of release from their British colonial past. The capital’s name was also changed from Rangoon to Yangon.[3] The new name was accepted by most countries, including the United Nations, as a privilege of the Burmese government in power, but was not accepted by the United States.[4] Both terms are commonly used, with some people referring to the country as Burma and others referring to it as Myanmar. The same is also true for Rangoon; most people are more familiar with this name than Yangon. Myanmar is the largest country in Southeast Asia and in many ways a country defined by its geography, isolated and yet with a wealth of opportunities to work with its neighbouring countries. The country borders China, India, Bangladesh, Laos and Thailand. Much of the country is the valley of the Irrawaddy River, which runs north to south, from the icy eastern curve of the Himalayas down over a thousand miles to the brackish tidal waters of the Andaman Sea.[5] To better understand modern Myanmar and the reasons behind its self-imposed isolation, their needs to be a greater focus on historical context. The inherent complexity of the issues involved is easier to understand if the various historical forces are analysed separately. The different strands of history, described below, will finally come together and shape the present and show that current issues which today concern the state are mainly rooted in the country’s complex and often dubious institutions and history. Indeed, it can be argued that the country’s current situation is a result of often well-meaning but definitely foolhardy attempts to apply popular political measures to a fragile system of social imperative. “Nationalism”, “socialism”, and “autarky”, as well as “federalism”, “autonomy” and “centralisation”, are systems that have been used by political rulers in post-colonial Myanmar.[6]

1.1 Colonial Past

Myanmar was relatively distinct, coherent, and autonomous for almost 1,000 years before the British annexed the country in the 19th century.[7] The first Burmese empire was founded in the 11th century. Many communities which lived in remote places were rarely brought under central domination, but remained relatively distinct from each other in matters such as language, culture, patterns of production, and political traditions.[8] Burman kings built glorious capitals like Pagan and Mandalay and ruled over a rich and thriving civilisation. Moreover, they benefited from an increasing population and revenues, providing significant military and economic advantages over neighbouring polities. Several wars in the eighteenth century led to territorial expansion, which further strengthened the Burmese state and created a distinctive Burmese cultural identity. At the same time, the growth of external trade, both with China and the western world provided further revenues. But the era of Burman kingdoms could not last forever and ended in 1885 when the British deposed the last King Thibaw in Mandalay and made Burma a province of British India. With the invasion of the British, new powerful political concepts and models for later leaders were introduced.[9] The British annexed Burma in 1886 and divided the country into two main administrative areas: Ministerial Burma, which was mainly populated by the Burman majority, and the Frontier area.[10] The British wanted to establish law and order through a low cost central administration. They secured their economic interest by rationalisation and commercialisation of agriculture. The British occupation did provide certain stability, by unifying diverse indigenous ethnic groups under colonial rule. Nevertheless, the British colonial system significantly changed and damaged the Burmese social structure. The precolonial social organisation largely rested on the authority of local chieftains and Buddhists monks. Buddhism as the common faith shared among the Burman majority, the Arakanese and most Shan and Karen people, was the main source of social stability as this faith emphasises self-reliance and righteous behaviour. Moreover, education was offered by monks to all.[11] With the British occupation, authority of local chieftains was replaced by weak influence of salaried officials, who were more responsible to local government rather than to the local communities.[12] The influence of the monks was weakened and they were soon deprived of their main social function. In order to protect the interests of minorities, the British assigned them some key functions which the Burmans, the dominant ethnic group, could not participate. For example, the British mainly recruited Karens, Kachins and Chins in the colonial army and administration, whereas the Burman were kept out of such activities. According to Josef Silverstein, minority groups living on the frontiers were administered directly by the central British administration. They were separated from the rest of the country, and those living in Ministerial Burma were granted seats in the legislature.[13] Thus, ethnic minority groups were divided along occupational lines.[14] Moreover, the British displaced indigenous and non-indigenous to the South in the fertile delta region. Deprived of their traditional social structure, those newly established cultivators fully adopted the imported rule of law, tenancy rights and money lending practices. These British policies made the Burmese people conscious of their ethnic and cultural differences for the first time. This led to social division that had not existed in the pre-colonial period.[15] With the British annexation of Burma the structures of foreign trade changed, as well. The Burmese economy under the informal empire had become dangerously dependent on the export of view primary commodities -cotton and teak in particular. At the same time, rice was being imported in ever larger quantities, and soon Burma became the world’s largest rice exporter. However, as a consequence, an exodus of landless farmers in 1930 led to competition between ethnic groups and violent intra-communal riots. The world depressions of the 1870s led to a dramatic decline in the relative prices of nearly all primary commodities, including all of Burma’s main exports. But nevertheless, international rice prices stayed the same or even rose. Thus, at this time of attempted reform, in contrast to Siam (Thailand) which enjoyed the profits of growing international trade, Burma was plunged into increasing economic hardship and fiscal collapse.[16] Efforts to promote economic development failed as the state lost its autonomy to colonial powers and the economy became more fully integrated into global markets. Local reactions to European expansion lead to crisis and intervention. The failure of British rule in Burma, instability and state insolvency were caused largely due to underpayment by Western countries for goods and services. The rise and fall of cotton prices and, more generally, dependence on western markets, weakened the Burmese government, desperate to find the funds with which to finance reform.[17] This demonstrates that these conditions created an opportunity for Western nations to dominate the country, eventually leading to British colonial rule. Following the British withdrawal, the Japanese occupied Burma in summer 1942. But throughout their four years of control over Burma during the Pacific war, the Japanese did not succeed in bringing the Burmese population under their rule, nor could they manage to lessen the external menace of allied forces. To secure their position they promised to bring independence to Burma and support an indigenous army. By not following through on their promises, the Japanese precipitated the emergence Burmese nationalists, who consequently allied with the British. In March 1945, the Anti-Fascist People’s Freedom League was formed. Aung San, Chief of this Burmese army, became the head of the Anti-Fascist People’s Freedom League. The AFPFL was first a resistance movement founded on Buddhist philosophy and open to all Burmese regardless their ethnic background, their political or religious beliefs. It later became a leading political party calling for national unity and federalism. During this transitional period to democracy, a Burmese government was created to handle administrative matters.[18] After the Japanese occupation ended in August 1945, the Burmese feared a regression to the British colonial economic order. Strikes and negotiations led in January 1947 to a meeting in London. There it was decided that a constituent assembly should be elected in April, and those living in Frontier Areas would have to decide whether or not to join Ministerial Burma. In a second meeting in Panlong on the 12th February 1947, the Chin, Kachin and Shan agreed to join the future federal union as autonomous communities. However, the Karen, Karenni, Rakhine (or Arakanese) and the Mon did not sign the Panglong agreement, which seriously challenged its credibility. To this day, dialogue between the Burman majority and ethnic minority groups is a rare and difficult proposition. As expected, the AFPFL won the elections, and Aung San was put in charge of writing the constitution, which espoused “unity in diversity” that could only be achieved by a federal system. His assassination in July 1947, as well as the deaths of other officials, left Burma without the means to pursue the democratisation process. And so, the declaration of Burma’s independence from the Commonwealth on the 4th January 1948 did not prevent the hope of national unity to fall apart. After the Japanese occupation during World War II, the country gained independence from the British in 1948.[19]

1.2 Myanmar and its Ethnic Diversity

With its estimated population of 50 million, Burma is one of the most ethnically diverse countries in the world. Due its central location, settlers from many different backgrounds have migrated to Burma. Today about two thirds of the population is Burman (Bamar) and the remaining one-thirds are ethnic minorities. This ethnically diversity is more than ever a critical issue and thus the ground of most of the country’s problems. Largely due to the fact that throughout history, Burma has experienced a great deal of inter-ethnic mingling.[20] Discussions about ethnicity are related to terms, such as “nationalities” and “national races”, referring back to the course which was introduced into Myanmar during the colonial era and became concretised with the country’s independence in 1948 when various constitutional models for multi-ethnic states were being discussed. The examples of Yugoslavia, Stalinist Russia, and the United Kingdom were considered as alternatives for Myanmar. It started in the 1930s when ideas of socialist and Marxist concepts had been introduced into Myanmar which took power in 1948 as the essence of the critique of British imperialism and colonial rule. The disproportionate wealth that European and Asian foreigners had gained during the colonial period, creating a situation where the Burmese were poor people in their own rich land, meant that the removal of alien economic domination became a key goal of nationalist policy.[21] The 1974 constitution, which is now being revised, divided Burma into seven ethnic states- the Rakhine, Shan, Mon, Chin, Kayin, Kayah (formerly Karenni) and Kachin – and seven divisions, where ethnic Burman people held the majority.[22] Furthermore, the military junta distinguishes 135 sub-ethnic groups among the seven major ones. According to Analysist and social scientists the s can be distributed as following: Bamah 65%, Karen 9%, Shan 7% , Chin 2%, smaller groups like the Mon, Kachin and Wa at 1% each, and Indian 7% at least.[23] Due this huge ethnic diversity, locked into this small geographic zone, over hundreds of different dialects and languages have been identified. Most of the people would not be aware of such classification, if the countries military junta would not use this nomenclature for discriminative purposes. Ethnic minority groups are not excluded in cities populated by Burmans, but with the juntas assimilation into the Burmese Buddhist system, called “Burmanization”, they are faced severe discriminations, such as the deny of social, cultural and religious rights of ethnic minorities.[24] Moreover, with its xenophobia and oppressions against minorities, the military rule is responsible for the eclipse of huge parts of the people’s history. Minorities culturally and racially different from the dominating Burmans have been uprooted from their localities under the pretext of being “Kula”, “non- natives”, or even outright “foreigners”. In a multiethnic country like Myanmar, instead of following the democratic policy of unity and diversity, the military junta uses Burmanization as a guide and prosecutes the minorities, renames places, destroys minority places and replaces them with their ethnic names. The discrimination of minorities is reinforced by religious consideration, especially Christians, Hindus and above all Muslims communities are often target of many human rights abuses. Christianity is often associated with the Chin, Kachin and Karen, Hinduism with Indians, and the Islam, accounting for about 13% of the population, is mainly represented in Arakanese, Indian and Pakistanis communities. They often have no access to certain jobs, mainly in administration and in the army. Those who live in the remote zones are subjected to atrocities committed by unleashed military groups. The juntas’ propaganda portrayed ethnic minorities as trouble makers, and ordinary Burmans, besides the Tatmadaw, progressively share this view. Most popular targets of discrimination are the Royhingas, who are Muslims in religion and live in the Mon-State, bordering to Bangladesh.[25] ‘One party, one blood, one voice and one command’ was already the slogan of the Dobama movement, a motto which still lives on in the Burmese armed forces, the Tatmadaw.[26] Nevertheless, given the fact that Burma is struggling with ethnically and political problems it may be impossible to build unity with such a slogan, especially when 40% of the population is not seen as part of the Burmese society.

1.3 Post Colonial Era

The country has been ruled by military dictatorship since 1962, when General Ne Win seized power from the Prime Minister U Nu. Only between 1974 and 1988 there is the exception of a period of one party rule. Ne Win introduced the “Burmese Way to Socialism”, which systematically referred to the decent of a country which had a 90 percent literacy rate and was rich in natural resources. Together with its regime, he dismantled the independent judiciary, the legislature, the multiparty system and finally cut Burma off from the outside world. This regime has been engaged in military operations against the Communist Party of Burma and various ethnic minorities fighting for autonomy or independence from the central government, which has traditionally been dominated by ethnic Burmans.[27] The current executive body, the State Peace and Development Council is a group of a dozen high-ranking soldiers. On state and division level, military Regional Commanders enjoy a limited autonomy granted by the regime. On township and village level, local Peace and Development Councils exist. In the cease-fire areas, ethnic leaders determine and implement policies, depending on the degree of their autonomy vis-à-vis the Regional Commanders and SPDC. Although the system of government seems centralised, from the outside world, in reality, it is highly fragmented, with opaque decision making procedures and means of governance.[28] The military is entrenched in every instant and institution of the state, including the Union Presidency, the Union Government, the Union Assembly and the Regional or State Assemblies. The constitution is fleshed out with repetitions and irrelevant provisions. In many respects the constitution is vague and confusing and open to conflicting interpretations. The military is above the constitution and above the law. The Chief of staff of the Defence Forces is the most powerful person under the constitution. His appointment and removal are not referred to the constitution. It is anticipated that he will be beyond the control of a civilian government. The Chief of staff of the Defence Forces and the military are regulated by the military’s own regulations, which enables them to override the constitution and serves as a justification for the military regime to stay in power. The President appoints the Chief Minister for each state and region. A partially elected Legislative Assembly is also established in each state and region.[29] The military regime, then under the name of State Law and Order Restoration Council, seized power in 1988. In August, widespread popular riots against the military regime, which were initiated by university students in Rangoon, were brutally suppressed and thousands were killed. People took to the streets and demanded an end to decades of military dictatorship and international isolation. The protests have been rumbling on for months, starting with students at the select Rangoon Institute for Technology, spreading through the sprawling capital and then upcountry. The price of food skyrocketed, and a mood of opportunity and imminent upheaval fused with long-pent-up anger and resentment against the authorities. In 1990 the SLORC held elections for a multiparty parliament. The NLD as the main political movement under the leadership of Mrs Aung San Suu Kyi won 82% of the seats in the National Assembly. However, the results of the elections were never recognised by the military regime which maintained power. The military refused to step down and since then have kept tight control of the country. Aung San Suu Kyi has been under house arrest most of the time and only the leadership and the army have benefited from self-imposed and external isolation.[30] In October 1992 the SLORC formed the Commission for National Convention in order to draft fundamental principles of constitution. These principles underscoring six major points: 1. Solidarity of the Union for Myanmar 2. Solidarity of the national unity 3. Perpetuation of national sovereignty 4. Development of parliamentary democracy 5. Development of justice, freedom and equality in the political arena 6. The participation of Tatmadaw in the future state’s national politics. To determine these basic principles above, the SLORC convoked National Convention for Myanmar’s new constitution in August 1993.[31] The convention assembled less than 15% of the representatives elected in 1990 and the principles which were discussed had to conform to the objectives of the convention, pre-defined by the SLORC. Western States have passed many resolutions to encourage the junta to give a timetable for the convention. But so far, there is no clear sign of its near conclusion, and the NLD, which has left the Convention in 1995 due to undemocratic procedures, has been banned permanently from the convention by the SLORC. The SLORC was officially dissolved on 15 November 1997, reformulating itself as the State Peace and Development Council.[32]

2. Recent Development

During the last four decades the regime has been effectively functioned under self-imposed isolation in an attempt to revitalise the ailing economy and avert popular pressure for political reform. To do so the regime operates without any respect of humans’ basic freedoms and rights. It is in particular the absence of an effective judicial system, and with that the fact that rule of law is not guaranteed by any means, which makes a transition to democracy incessant. The military junta keeps all media under tight control and limits the development of civil society. Torture and extra-judicial executions as well as forced labour also remain widespread measures in the regime’s fight against political opponents and certain ethnic groups. By that, forced village relocations and armed resistance of especially Karen and Shan populations continue to cause internal displacement and a refugee influx in particular into Thailand.[33] The lack of good economic governance has led to widespread poverty among Myanmar’s population, structural un- and underemployment as well as under-funded health and education systems. Engagement of the international donor community remains limited due to the country’s political situation. It is also worrying that the junta spends high percentage of its budget for military hardware; as opposed to the few resources spend for public health and education. Concerns by the international community are aggravated by the widespread corruption inside the country as well as the uneven distribution of opportunities in urban and rural areas. So far, military rulers have been resisted external demands to turn over power to a democratic government and it seems that pressure from the international community has been mainly failed. Obviously it could not prevent the junta to seek almost total autonomy, although it seems that the present regime has opened up the country to some extent. However, the regime remains suspicious of and resistant to external criticism and interference. This chapter seeks to present the country’s recent development on the economic and political front. It shows Myanmar from the perspective of the international community. Moreover, it will provide a deeper understanding in Myanmar’s economic structure and thus gives a basic background to understand how EU measures affect the country.

2.1 Myanmar’s Recent Economic Development-An Analysis

With a real Gross Domestic Product (GDP) of 4.0 per cent in 2008, Myanmar is one of the poorest nations in the world.[34] Today, Myanmar’s economy is based on agriculture, gems, timber and oil. Although, the country is rich in natural resources, it has only weak linkages to the global economy. Over the past four decades, deep structural problems caused by the military-inspired policies and the absence of any rational economic and developmental strategies have led to diminishing living standards and widespread poverty among the general population in Myanmar. Political repression and impoverishment have drastically reduced the ability of communities to handle political or social change.[35] To give an economic overview and analysis of Myanmar, the focus in this section will be on macroeconomic indicators, such as GDP growth, exports and imports, inflation, investment and interest rates. Economic data, including s on foreign debt and investment are scarce. Data from the state’s Research Centre are mostly inaccurate or distorted. This can be explained partly through the fact that the SPDC are noted to be using older methods of calculating some key indicators, which are therefore difficult to compare to data used by most other nations today. For instance, the IMF suggests that official s used are significantly overestimated.[36]

GDP Growth:

According to the IMF, over the period 1997/98-2007/08, GDP growth has remained at an annual average of around 5 per cent, with the exception of 2003/04 when the banking system belatedly to fall out of the Asian Markets Crisis of 1997. The annual growth of 5 per cent would be considered quite healthy in comparison to regional GDP growth, were it not for the rampant inflation in the country, which dramatically undermines any gains made. To clarify, any additional GDP revenues would be swallowed up by the even higher rising costs. The EIU suggests that there has been solid growth in the energy and mining sector as well as significant growth in the service sectors over the last decade.[37] This would be somewhat encouraging, were those gains not negated by inflation. Evidence supporting this can be found by looking at the continued poor social development indicators and widespread poverty in the country.[38] A household survey conducted by UNDP shows that union-wide 32 per cent of the population lie below the poverty line and 10 per cent below the food poverty (i.e. cannot afford to buy food for basic nutritional requirements). This is also well illustrated by the fact that across the union 34.4 per cent of children under 5 years of age suffer from moderate malnutrition.[39]

GDP by Sector:

About 70 per cent of enterprises and firms (small and middle sized businesses) are in private poverty, the remaining 30 per cent (in particular large scaled enterprises) are still owned by the state, which work more often in deficit. The private sector is dominated by business people who are trusted by the government and often employ relatives of senior SPDC members. It has a share more than 90 per cent of the economic performance. However, Myanmar’s economy is predominantly shaped by agriculture.[40] Therefore the agricultural sector gains approximately 50 per cent of the country’s GDP. An estimated two thirds of all citizens are working as farmers or labourers. Contrary, the industrial sector including natural gas export segment contributes only 20 per cent of GDP and trade and services 36 per cent.[41] Myanmar’s economy was fully regulated by the state, but obviously the government is taking approaching steps to liberalize agriculture. Though it has ended some production controls and mandatory procedures as well as allowing to grow rice as a dry-season crop in irrigated areas. Some of the state owned enterprises which are contributing to the processing and supplying inputs of agriculture have been privatized. Myanmar has been one of the major rice exporters in the world until the government banned exports of rice and some other agricultural products to held domestic prices down. Only in 2006, the export ban could relax a bit and eased further in 2007.[42]

GDP by Capita and Purchasing Power:

As the chart below clearly shows, Myanmar’s GDP per capita in 2006 was, by some significant margin, the lowest in the region. This is partly down to the low levels of annual GDP gained by the economy. This could be attributed to numerous factors, such as poor productivity levels, significant trade restrictions and consequent low levels of trade, poor foreign direct investment and poor taxation collection system. According to the Central Intelligence Agency (CIA) and IMF estimates, Myanmar has the lowest GDP per capita at Purchasing Power Parity (PPP) of all neighbouring countries (as shown below). To clarify, PPP is an indicator designed to negate the relative costs of living in the country data and show a comparable income level per person on an equitable basis. Needless to say, the low relative GDP per capita, even at PPP rates shows how low general income levels are and why assistance is needed in key areas. For instance, although officially low, the fees for primary school education are extremely difficult to afford as additional unofficial fees for teachers, books, uniforms etc. are stacked on top to provide enough income to support schools.[43] This out-prices many parents, particularly in rural areas, and causes very high drop-out rates. This combined with language barriers between staff and students in many regions in the country and the financial necessity of children working to help support families has resulted in drop-out of about half the students that enrol. This is against the UNDP estimates of 85 per cent enrolment of students to begin with.[44] Although the average of 71 per cent in South East Asia and the Pacific is somewhat lower, a significant smaller drop-out rate highlights the dangers of not addressing this situation. This is a long-term issue and needs urgent addressing or else only around 40 Unemployment is not determined by the government, but is estimated to reach at least one-third of the working population, whereas the principle of day-taller is widespread. As mentioned above the population is affected by poverty, especially in rural areas. However, the IMF ranks high budgetary deficits to the structural problems of Myanmar’s economy. The Burmese government hardly publishes data of the national budget. It is expected that national expenditures are mainly used for the military. Expenditures for education and health belong to the lowest in the world; only 1.3 per cent of GDP is spent for education and only 0.3 per cent of GDP for health.[46] According to the German Federal Foreign Ministry Office, Myanmar has current foreign debts of 7.7 billion USD. Loans given by the Asian Development Bank and World Bank are currently not served by the country and in general Myanmar’s access to international capital is extremely limited. The country does not receive any support from international financial institutions and sanctions imposed by the international community rather have a negative than positive effect to the country’s economy.[47]


Myanmar has strong export industries in oil and gas, which are likely to strengthen, significant sales of pulses to India, and hardwood, shrimp and fish to regional buyers. Textile exports used to be a major income generator for Myanmar, but its main market, the USA, has imposed sanctions on Myanmar preventing textile exports to US markets. This has significantly reduced the success of the industry, reduced its importance as a major export and reduced workforce in this sector by 100,000.[48] In the last couple of years, Myanmar could receive a trade surplus due its gas exports.[49] It is expected that this surplus will be decreased by the end of 2009 beginning of 2010 as an effect of the world crisis. Gas exports, mainly to Thailand, represent 40 per cent of total exports.[50] Also, as mentioned earlier, revenues from gas exports are negligible due to the use of the official exchange rate, but have increased foreign exchange reserves. Exports to Myanmar were 5.183bnUS$ in 2006/07, lower than all its neighbours other than Laos. It is ridiculous that a country with such abundant natural resources would be exporting so much less than comparable resource poor countries around it. Exports for Myanmar were 5.183bnUS$[51] in 2006/07 vs. China 969.7bnUS$[52], India 123.208bnUS$[53], Thailand 128.213bnUS$[54], Vietnam 39.97US$[55], Bangladesh 11.528bnUS$[56] and Laos 0.593bnUS$[57], who have a much smaller population than Myanmar (6.5m people vs. 52.4m in Myanmar) and fewer resources.


There is some importing of machinery and transport equipment and refined oil, which surged in 2006/07 due to oil price rises, make up the majority of imports into Myanmar, although there are some food and consumable goods imported mainly from Thailand as well. Thai consumer goods and food accounted for 22 per cent of imports in 2006, despite low domestic demand and income. The fact that this represents such a high proportion of imports does not suggest that there is high consumption, but that the total level of imports is relatively low overall. Also, imports from Singapore account for 16 per cent of imports and include significant machinery and technical equipment. Imports as a whole are small in relative terms and are likely to remain so in the current low income climate. As mentioned in the previous section, the SPDC have recently released additional income generation that can be gained from using exchange rate closer to the floating exchange rate. This has resulted in additional tax revenues over the 2006-2007 periods. In 2006/07 imports were 2.937bnUS$ vs. China which is 751.9bnUS$, India 184.362bnUS$, Thailand 113.4bnUS$, Vietnam 40.676bnUS$, Bangladesh 14.32bnUS$, with only Laos having lower import levels of 1.092bnUS$[58], but a much smaller population. This is a significant indicator highlighting the lack of domestic demand for foreign goods caused by low income levels in the country.

Inflation and Interest Rates:

Price constraints have been increasingly putting pressure on both the business community and population at large. The very high levels of inflation point to the lack of monetary control the government has over prices within the economy and the difficulty it has in maintaining sufficient income generation to reverse the economic decline of the past decade. In 2008, inflation rate was recorded to be 27 per cent, much lower than in the previous year.[59] Controls, subsidies and printing more money are the predominant means of controlling prices, but this significantly reduces trade, and even fuels inflation in its own right, consequently drastically reducing government income generation. Reducing inflation levels would greatly enhance the SPDC’s ability to invest in more activities, infrastructure and follow its own strategic plan. Interest rates have essentially remained relatively constant for many years, only moving from 10 per cent to 12 per cent in 2006/07, largely to counteract the additional inflationary pressure of a pay rise to civil servants and military officers in 2007 (a rise of between 500 and 1,200 per cent[60]). This situation makes it very difficult to maintain a stable economy without simultaneously crippling its exports potential and income.

Foreign Direct Investment:

According to statistics of the junta, the supply of foreign direct investments doubled itself in the first nine months of 2008. The value of the authorized investment projects rose in this period from 502bnUS$ to 974bnUS$. The main part of this amount (855bnUS$) was spent in the mining industry (digging gems) by Chinese companies. Besides, Russia and Vietnam spent together 114bnUS$ in the oil and gas sector. Outside of the mining and energy sector there are practically no foreign investments.[61] The development of the new offshore-gas fields in the Gulf of Bengal as well as new investments in the infrastructure and water power may lead to new investments in the next few years. The main proportions of investments so far, have Thailand, Singapore and China. Myanmar is regarded as highly risky for foreign investments.[62] The problem for Western investors might be beside the ban on investments that nothing exciting will happen on the economic front until there is some movement towards political reform. However, prospects are exciting regarding the 2010 elections.

2.2 European Union – Myanmar Trade – Recent Trade s and Trends

As mentioned before, Myanmar is a natural resource rich country but, due to its political situation, suffers from significant trade sanctions imposed by the EU and US. The US trade ban of 2003 has had a large impact on the textiles sector, which lost an estimated 100,000 jobs as a result of the ban. Trade restrictions laid out in the EU Common Position have curtailed trade between the EU and Myanmar for the past 12 years, modestly to begin with, and then more recently to a greater extent. As it will be discussed in more detail at a later point the EU Common Position outlines the following restrictions to trade with Myanmar, based on its lack of movement towards a democratic system of governance, respect for human rights and national reconciliation. The sale, supply, transfer or export of arms and related materials of all types as well as assistance or services related to these activities is prohibited to Myanmar. There is a ban preventing investment in any State Owned Enterprise (SOE) or enterprises owned or controlled by the regime and entities associated with the State. It is prohibited to export to or finance companies in the logging, timber, metal/mineral mining industries as well as the mining of precious and semi-precious stones. This is equally applicable to imports from these industries.[63] In comparison to other Asian trade partners, such as Thailand, China and Singapore, the trade between the EU and Myanmar plays only a minor role. In 2008, exports from the EU to Myanmar reached €105m (vs. Thailand €17,172.3m, vs. China €247,857.6m, vs. Singapore €16,178.0m) while imports have been accounted to be €185m (vs. Thailand €8,487.8m, vs. China €78,467.1, vs. Singapore €22,018.3m).[64] Imports from Myanmar to the EU are now almost exclusively either textiles/clothes or agricultural goods, while exports to the country are dominated by machinery and chemicals. One table and two graphs are shown below, indicating the situation and the changes in trade patterns between 2002 and 2009.

EU exports to Myanmar

(€ million) EU imports from Myanmar (€ million) 2004 77 2004 461 2005 84 2005 288 2006 81 2006 306 2007 164 2007 263 2008 105 2008 185 2009Q1 19 2009Q1 45 2009Q2 20 2009Q2 34 As can be seen in the table the trade between the EU in Myanmar decreased significantly between 2004 and 2009. From the exports point of view, there is an increase between 2004 and 2007 this could be due to the recovering from the banking crisis in 2003. As the graph above illustrates, there has been a notable increase in exports from the EU to Myanmar between 2004 and 2008, rising from €77m to €105m over the period. Export of machinery and transport equipment to Myanmar have seen a sharp drop over the period 2004 to 2006, from €43m to €37.6m[65], although it is unclear exactly why this has occurred. It is possible that the completion of the new capital, Naypyitaw, has caused a decreased need for such equipment, or perhaps the tightening of the EU Common Position has resulted in diminished flows of transportation equipment to State Owned Enterprises and or State-affiliated organisations. As the graph above shows, there has been relatively steady pattern of imports from Myanmar to the EU in agricultural goods and textiles and clothing. The decline in exports of agricultural goods is probably caused by a rise of rice prices after cyclone Nargis hit the Irrawaddy Division in early 2008. This said the total amount of imports to the EU from Myanmar has felt sharp between 2004 and 2009, falling from €461m to €34m, largely as a result of a decline in Myanmar textile and clothing imports into the EU.[66] This sharp fall of imports between 2008 and the second quarter of 2009 might be result of the global financial crisis which led to a decline in not only European but also worldwide trade. Additionally, with increased public awareness and criticism of the Myanmar authorities in the international community, consumer boycotts and negative feeling towards imports from Myanmar resulted in this significant reduction in imports to the EU.

2.3 Myanmar in the Focus of the International Community

In 1997, Myanmar joined ASEAN. By doing so, the military government was seen to strike a new path towards regional rapprochement. Yet, Myanmar’s relations with ASEAN members are not free of frictions. However, despite more and more vocal expression of concern and criticism, the ASEAN member states are likely to refrain from interference in Myanmar’s domestic affairs as long as the country’s ASEAN membership does not tarnish the alliance’s international reputation. The government has refrained from taking up its role as ASEAN Chair in 2006. In 2004, Myanmar joined ASEM. Myanmar enjoys a certain “comfort zone” with its most immediate neighbors. China provides vital support to the regime and is Myanmar’s most important defense ally, supplying part of its military hardware and training. The economic influence of China is significant, particularly in the North and East of the country. Like China, India and Bangladesh pursue a strategy of fostering regional stability and securing economic advantages, i.e. access to Myanmar’s important natural resources, while refraining from only criticizing the country’s domestic policy stance. Among others, Russia supplies arms. Japan follows an approach of constructive engagement in the form of development cooperation.[67] In May 2002, faced with disastrous economic conditions and intense pressure from the international community, the military junta released Aung San Suu Kyi from house arrest and also released several hundred prisoners. During the eighteen-month period of Aung San Suu Kyi’s latest house arrest, the SPDC leadership held secret meetings with her and her senior colleagues that were facilitated by the United Nation’s Special Envoy for Myanmar (Malaysian diplomat Razali Ismail, as mandated by the United Nations General Assembly resolutions). The UN-led initiative, coupled with Aung San Suu Kyi’s release in May 2002, raised hope that the two sides would move to substantive political dialogue, together with ethnic minorities, leading to agreement on transition to democratic government. However, the regime remained unwilling to begin serious political dialogue with the NLD. Under General Than Shwe (the current ultimate authority in the ruling junta), the SPDC arrested a dozen democracy activists early 2002, but then released 21 political prisoners several months later. More than 1,300 political prisoners remain behind bars. Most of the population continues to live under political suppression, aggravated by an economic downturn.[68] In 2003, the military regime presented a seven-step ‘roadmap’ for constitutional and political reform. The first step to the transition to democracy was launched with the reconvening of the National Convention to deliberate on a new constitution in 2004. This national convention is neither representative nor inclusive, and debate is circumscribed. Given the asymmetric power and resource relationship between the regime and its detractors it is likely that political change occurs through a slow process of “regime transformation” rather than “regime change” as advocated by the military’s opponents. On the international front, the United States and European Union remain unconvinced that Myanmar had progressed in the areas of human rights, forced labour, human trafficking, religious freedom, child soldiers, and drug eradication, despite the government’s immense efforts to prove otherwise. Furthermore, the continue issue, and Western sanctions have been extended and bilateral and multilateral official development assistance (ODA) continue to be denied by the United States, EU, Japan and influential Western governments.[69] The principal demands of Myanmar’s ethnic groups are to gain genuine autonomy for their home areas and to achieve a significant voice in the affairs of the country as a whole. Since the 1988 coup, the military has negotiated 17 cease-fire agreements with armed ethnic groups, giving them varying degrees of autonomy and in some cases permission to retain their own armies. In many of the ceasefire-areas, uneasy truces prevail. The two major groups maintaining their armed resistance against the military are the KNU and the SSA, both increasingly losing controls over once “liberated” zones. At the same time the SPDC convoked the final session of the National Convention, which produced a set of charter guidelines for a shift to democracy. But it turned out that these guidelines were more than less a guarantee for the military’s continued dominance. But the document further ensures that the military will remain in power, wherever the road map leads. Under the guidelines, the military will control major ministries, hold large blocks of unelected seats in all legislative bodies and has the right to declare state of emergency and seize power at any time. This document also fails to meet the expectations of minority groups who have been demanding autonomy and other rights. The document also attempts to limit opposition by setting requirements for political office that seem tailored specifically to bar Aung San Suu Kyi and members of her opposition party, the National League for Democracy. The protests in August/September 2007 were sparked by a rise in fuel prices. The ensuing clampdown has dampened active protest since then, but the general economical and humanitarian situation will continue to breed political instability. Civil society groups, prodemocracy groups, ethnic minority groups and some Buddhist groups in the country all play a part in advocating and exerting pressure for change in Myanmar.[70] The military regime organized a referendum on the Constitution in May 2008. The results of the referendum, officially 99% voter turnout and 92.4% voting in favour, are suspected to be significantly inflated. Multi-party elections are to take place in 2010.[71]

2.4 Ongoing Abuses of Human Rights

Myanmar has a very high occurrence of violation and human rights abuses. The military junta systematically denies citizens basic freedoms, including freedom expression, association, and assembly. The imprisonment of political activists and human rights defenders is widespread. Thus, the toll of political prisoners nearly doubled to more than 2,150, in 2008. On May 27 Aung San Suu Kyi, which was under house arrest for five years by then, had her house arrest extended for another year. According to several reports her health condition is deteriorating and the regime denies her visitors or any contact with the outside world. In September 2008 the SPDC yield to national and international pressure and announced the release of 9,002 prisoners, of which only seven were political activists. Only few days later, the SPDC arrested five members of the NLD. In October and November, more than 70 political activists, monks, nuns, labour activists, and journalists were trialled in secret proceedings in prison or closed sessions in court. Most of them received harsh sentenced for offences in the 2007 demonstrations; 14 of them were sentenced to 65 years each. Members of the 88 Generation Students faced 22 charges, which compiled contacts with exiled political groups and unlawfully publishing documents. They have been sentenced to 150 years in prison. Four lawyers, which have been represented the political activists were also jailed for contempt of court after they attempted to withdraw from legal representation to protest the unfair proceedings.[72] The military violates not only the rights of political opponents, but also of civilians in ethnic conflict areas. Abuses such as extrajudicial killings, forced labour, sexual violence against women and girls, torture and beatings, as well as confiscation of land and property without any process are still common. In 2008 the army displaced more than 40,000 civilians in these areas. There are an estimated 450,000 to half a million internally displaced people (IDPs) in eastern Myanmar. The Burmese and non-state armed groups extensively use land mines near civilian settlements and food production sites to chase civilians away. This is a clear violation of general accepted human rights. In western Myanmar’s Arakan State, the Rohingya Muslim minority also faces widespread right violations including religious persecution, forced relocation, land seizures, as well as the denial of citizenship and identity papers.[73] Drug trafficking as well as the recruitment of child soldiers, especially by non-state armed groups, is still widespread. Indeed, the number of drug production, in particular of opium has been decreased, but the trade with these narcotics substances is still a serious issue.[74] Myanmar’s already dismal situation has been worsened following the devastation of cyclone Nargis in the night of May 2-3, 2008. The storm affected 2.4 million people across 37 townships and left those homeless or in need of food or medical assistance with an estimated 84,000 dead and 53,000 missing. In response, the SPDC raised tight controls against emergency and blocked international assistance while they have pushed through a constitutional referendum in which basic freedoms were denied.[75] The basic needs such as food, water, shelter remained unmet in many communities and were often inadequate, infrequent in distribution or insufficient in quality. There were many reported barriers due government interference in local and international attempt to provide relief to the affected communities. These included travel restrictions (government denied visas to disaster relief experts and aid workers and prevented them from travel inside Myanmar), numerous checkpoints along routes to the Delta, combined with “fees” to access the Delta, which delayed and dissuaded relief work. Furthermore, the Burmese grass-root organization E.A.T. reported about confiscation and theft of relief supplies by authorities in Myanmar. The military also obstructed delivery of aid to survivors of cyclone Nargis through intimidation and arrest of relief workers. A major concern for relief workers was the inability to access reliable information. This was exacerbated by information released through the state-controlled official media outlets, which frequently minimized or obscured the extent of the disaster or needs of the victims. Relief workers were restricted in their communication due the banning of the import of communication equipment by the government. The government allows the local NGOs only 10 CDMA phones, maximum. Cases of land confiscation by the government were reported by many interviews, and included reports that military personnel forced inhabitants from their land. (Landownership in the Irrawaddy Delta is complex: most of the farmers do not own land but have long-term leases from the government for farming and fishing rights). Survivors, mainly men but also women and, in some cases, children were forced to provide labour for the reconstruction phase, which included repair of military bases as well as schools, roads and other infrastructure projects.[76] As already mentioned, the SPDC announced in February 2008 that its long awaited constitutional referendum would take place on 10th May. The constitution itself was published in April, but under limited distribution. The new constitution strengthens military rule and limits the role of independent political parties. Moreover, it empowers the commander-in-chief to appoint military officers to a quarter of all seats in both houses of parliament, and gives the military even broader representation in the section of the president and two vice-presidents. With that the military regime has already saved half of its seats no matter how the result of the 2010 elections would be. Despite the country was suffering from the devastation of the cyclone, the referendum took place throughout Myanmar on May 10, with a delayed vote on May 24, for 47 townships affected by the storm. There were no independent international observers and Burmese and foreign media could only cover a sparse of it. The referendum was characterised by irregularities of the voter registration, coercion and intimidation in communities and at polling stations, as well as widespread government corruption including ballot stuffing. Then, in late May the SPDC announced a national voter turnout of 98.12 per cent, of which 92.48 per cent voted in favour of the constitution. Widespread international condemnation denounced the referendum as a shame. With the referendum and the announcement of multi-party elections for 2010, the SPDC completed the fourth step of its “Seven Road Map to Democracy”.[77] On 14 May 2009, Aung San Suu Kyi was arrested after John Yettaw, a United States citizen swam to her compound on May 3. The terms of her house arrest forbids visitors. Thus she went on trial on 11 August 2009, and was found guilty and sentenced to 18 months under house arrest. According to the BBC South-East Asia correspondent Jonathan Head, it seems to be a pretext to keep her detained until elections in 2010, which could give the generals a legitimacy to maintain power.[78]

3. Sanctions on Myanmar

Economic sanctions have long been a tool of foreign policies and equally long a controversial topic when it comes to their effectiveness, desirability and morality. With the world now economically but not politically integrated, policymakers may rely on sanctions even more. While comprehensive sanctions have been used for several decades in forms of blockades and embargoes, the new type of targeted sanctions has only been developed recently. Increasingly awareness of the impact of sanctions among the overall population may have resulted in using “smart” sanctions by targeting certain entities or individual members of a targeted government. Lessons can be learned from the Iraq when the UN imposed sanctions during the 1990, which have been a humanitarian disaster. Thus, policymakers may have recognized that for any future political sustainability of sanction human costs have to be limited. In general, targeted sanctions are designed to isolate certain entities such as companies, rebel groups or criminal networks from access to needed resources. They are seen as a political measure that includes economic initiatives in which a “sender” takes an explicit action against a particular “recipient” in an effort to make the latter comply with international norms, standards and practices. Mostly, sanctions are targeted at individuals, both privately and in their official capacity.[79] They can be applied for a variety of reasons, such as to punish or weaken a target, to avoid war, or in response to ethnic conflict, human rights violation, drug trafficking, terrorism, or nuclear proliferation. Economic sanctions mostly include tariffs, trade embargoes that prohibit all merchandise and/or service trade between the sender and target, more limited trade bans on certain goods or services, restrictions on investment and other financial flows, limitation on travel, and limits on the transfer of assets between nations.[80] Economic sanctions can be imposed for particular policy goals, either related to trade, or for non-economic policies such as the European Union’s sanctions applied against Myanmar, based on a lack of democracy and human rights violations. The EU has been imposed sanctions against Myanmar gradually since 1996 and it was Aung San Suu Kyi who called first for economic sanctions against the junta. After a couple of key events, she attempted to make it clear that economic changes are not possible without political change.[81] The European Union have adopted several Common Positions since then, with attempts to condemn the violation of human rights by the Burmese government. However, regional cooperation and support have more than compensated for negative impact of Western sanctions, which, thus far, remained unabated. Obviously the military regime stays confident that it could ride out the storm of Western sanctions with the help of neighbouring states and increased exploitation of its natural resources. Ironically, Myanmar’s fledgling modern market-orientated urban sectors such as manufacturing, banking and external trading are bearing, the brunt of those sanctions. On the other hand, Myanmar still has sufficient counterpoise in form of food security, relatively productive rural agricultural sector, natural resources and the informal sector which enables the economy to subsist at a low level of equilibrium. This, in turn allows the regime to withstand the overall impact of western punitive measures. Possessing a very high pain threshold, it is highly unlikely that the regime would give in to the West’s pressures in the near future. It may even be counterproductive, as the self-reliance mentality would be further reinforced.[82] Indeed the international response was strong and actions have varied greatly, but somehow the international pressure on Myanmar has weakened over time. The question is whether smart sanctions applied by the EU can achieve significant results? This chapter gives a fundamental framework for the EU sanctions applied against Myanmar. While the broader consents is about why and how sanctions are used by the EU, the second part deals with the response of the EU to Myanmar and its new sanctions applied recently.

3.1 Legal Framework

To take restrictive measures under a Common Strategy, Common Position or Joint Action it needs EU legislation. There exist a wide range of legal instruments which allows the EU to take sanctions. But only within the Framework of the Common Foreign and Security Policy (CFSP), the EU is able to apply a variety of restrictive measures against governments of third countries, or non-state entities and individuals (such as terrorist groups). Within this framework there are procedures for different types of sanctions. While economic and financial sanctions fall under community law, travel and diplomatic sanctions are decided on the member state level. For sanctions that needed to be regulated by community law, the European Commission has to propose the necessary measures, which are then adopted by the Council of the European Union. The main legal instruments of the CFSP are indicated by article 13, 14 and 15 of the Treaty on European Union as well as the objectives, which are set out in article 11. The objectives under this article may be objectives to safeguard the common values, fundamental interests, independence and integrity of the Union which are conform with the principles of the United Nations Charter. Further objectives are strengthening the security of the Union, preserving peace, strengthening the international security, promoting international cooperation, developing consolidate democracy and the rule of law and respects for human rights and fundamental freedoms.[83] In general, sanctions are an Instrument of a diplomatic or economic nature which seeks to bring change in activities and policies of governments of third countries such as violations of internal law or human rights or policies which do not respect the rule of law or democratic principles. Restrictive measures imposed by the EU comprise arms embargoes, other specific or general trade restrictions (import and export bans), financial restrictions, restrictions on admission (visa or travel bans), or other appropriate measures. Currently, the EU is applying sanctions for instance against Belarus, Haiti, Iran, Iraq, Sudan and Zimbabwe. Using the CFSP framework, the 27 EU Member States commit to the implementation of sanctions decided on by the Security Council of the United Sanctions under Chapter VII of the UN Charter. The UN Charter confers on the Security Council powers to decide in a manner binding for all UN members restrictive measures required in order to maintain or restore international peace and security.[84] Indeed, the EU and the UN have similarities in their capabilities to apply sanctions. In terms of reasons for imposing sanctions there are differences. This can be referred back to the composition of these two organisations. While the UN as a global organisation has global interest and imposes sanctions on the basis of the Charter, the EU as a regional organisation follows mainly regional interests. The UN imposes mandatory sanctions under article 39 and 41 of Charter VII of the UN Charter. Article 41 specifies the measures which include “complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and severance of diplomatic relations”. Whereby article 39 emphasises that the purpose of such measures is “to maintain or restore international peace and security”. Contrary, the EU has a much wider range of formal objectives in context of sanctions. According to Mr Karel Kovade, member of the External Relations Directorate of the European Commission, the principles of EU sanctions are described as follows: “If necessary, the Council will impose autonomous sanctions in support of efforts to fight terrorism and the proliferation of weapons of mass destruction … and … to uphold respect for human rights, democracy, the rule of law and good governance”.[85] Furthermore, the EU “… imposes autonomous sanctions in the absence of a UN Security Council mandate, in cases where the UN Security Council is not empowered to take action or is prevented from doing so by a lack of agreement amongst members; stressing in this regard the obligation incumbent on both the UN and the EU to impose sanctions in conformity with international law”.[86] The EU and its Member States can take autonomously sanctions on the basis of Common Positions and Joint Actions and their implementation of national or EU legislation.[87] Autonomous sanctions used by the EU have a quite young history. Before 1990, Member States of the EU took individually or collectively sanctions against certain countries without a prior UN Security Council decision. After 1990, sanctions imposed by the EU have had to be conform with the UN legislation. Up to now there has been a steady growth in sanctions imposed under the Charter, in particular with a view to protect human rights, democracy, labour conditions or more generally good governance in third countries. While in the case of Iraq, EU sanctions are imposed under the UN Charta; those applied against Myanmar are autonomous sanctions.

3.2 Response of the EU to Myanmar

In the case of Myanmar where the political situation has been unstable and insecure for at least half a century, the EU did not adopt a Common Strategy “to set objectives and increase effectiveness of EU actions through enhancing the overall coherence of the Union’s policy (…) in areas where the Member States have important interests in common”.[88] Nevertheless, the EU adopted several Common Positions on Myanmar. The first kind of restrictive measure against Myanmar has been imposed by the EU on 18 September 1988, when the SLORC was placed under suspension by international institutions and the donor community, after the violent crackdown of thee 88-demonstrations by the junta. The EU, for its part, ended all its non-humanitarian and development projects with Myanmar in respect to promote democracy and the release of all political prisoners. In response to the ‘undemocratic’ elections in 1990, the EU decided the removal of all military staff from Myanmar’s diplomatic missions in all Member States as well as the withdrawal of all military attach©s from Member States’ missions in Myanmar. Later this year the EU Member States decided to impose an embargo on arms in purpose to end violations of human rights and acceptance of the 1990s election results by the military junta. In October 1996, the EU introduced a visa ban on senior members of the SLORC and their families. High-level governmental visits to Myanmar were also suspended. One year later, on March 24, 1997, as a result of international and European labour union’s reports on the massive use of forced labour in Myanmar, the EU removed Myanmar from its GSP. This action was not traditionally included in the targeted sanctions toolbox. It meant that Burma was not granted special tariff reductions for goods exported to the EU or benefit from duty and quota-free access to the EU-market for exports as one of the ‘Least Developed Nations’. The EU emphasized that these restrictions would be lifted if Myanmar would cease the use of forced labour. These steps have been motivated by the regime’s refusal to permit the elected government to take power and numerous violations of human rights. In the same year Myanmar became a member of ASEAN. While the EU had acted on a sanctions strategy to provide a change of government policy, ASEAN acted more hesitated with a view on a long term approach and with hope that cooperation within the organisation will stimulate a transition to democracy. The European approach on issues related to the protection of democratic values, human rights and rule of law is not compatible by any means with the ASEAN diplomatic principles, which determine that ASEAN member states should not interfere in each others’ internal affairs. The so-called “principle of non-interference” is formulated in the ASEAN-Charter. Myanmar’s admission to ASEAN was, by many of the international community, seen as a way of giving the regime international legitimacy. Moreover, the EU pushed for the establishment of political criteria to not allow Myanmar the admission to ASEAN. This had in turn weighed heavily on ASEAN-EU relations. In 2000, after an EU Special Envoy had visited Myanmar, the EU strengthened its sanctions as there was little sign of democratic progress. In April 26, 2000, the EU imposed a ban on the supply of equipment that might be used for internal repression or terrorism. Within the Common Position 2004/730 (CFSP) the EU provided a ban on EU enterprises and organisations which finance investments or have shares in capital of Myanmar’s government owned or controlled enterprises. Since 1996, the EU is continuously extending the sanctions which are already in place.[89] Nevertheless, it should not be undermined that the EU has also made public declarations to welcome positive developments in Myanmar, such as in May 2002 when the junta released Aung San Suu Kyi, or call on the junta to comply with internationally recognised human rights standards, like recently, when her house arrest was extended for further 18 months in August 2009. Other tools available for the EU to apply sanctions are the additional preferences the so-called Social Incentive Agreements, which are provided by Article 7 of the GSP Regulations. These are granted to countries applying certain standards laid down by ILO Conventions.[90] According to the Regulation of application of the Generalized System of Preferences adopted by the council in December 2001 “The special incentives arrangements for the protections of labour rights should require effective applications of all standards referred to in the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work”. This enables the European Union to suspend the accessibility of these privileges to countries such as Myanmar that seriously and systematically violate these principles.[91] In addition, in July 2001, the Commission released a Green Paper in which it is “Promoting a European Framework for Corporate Social Responsibility”, in which it emphasizes the strong human rights dimension, in particular in relation to international operations and global supply chains.[92] To develop social responsibility, in particular in countries where such regulations do not exist, the Commission motivated European firms to adopt codes of conduct, addressing working conditions, human rights and environmental aspects, which would cover their subcontractors and suppliers. These initiatives should be based on the ILO fundamental conventions and the OECD guidelines for Multinational Enterprises, as well as the involvement of local social partners. Indeed, the initiatives addressed in this Green Paper are not binding obligations for European companies. However, autonomous actions at the community level are limited by the Treaty on the European Union. The European Commission as an executive body only has access to some of the tools and cannot unilaterally initiate measures that it thought would be the right. Thus it is highly dependent on members States good will.

3.3 The EU’s new Sanctions

In response to the brutal repression against peaceful protesters by the regime’s authorities on 15 October 2007 and the unchanged human rights situation in Myanmar, the EU deemed it necessary to further increase direct pressure through stronger means as well as additional restrictive measures. These measures concerning exports, imports and investments in the sectors of logs and timber and mining of metals, minerals, precious and semi precious stones, are named in the Council’s Common Position of 19 November 2007 that is an amendment of the Common Position 2006. This package of measures, targeted to those responsible for the violent crackdown and the overall political stalemate.[93] On 27 April 2009 the EU extended its current Common Position and with that the sanctions for another year. Besides they also renewed calls for the release of Aung San Suu Kyi and all other political prisoners as well as a peaceful transition to a legitimate civilian system of government. The European Union is considering to ease its sanctions if it sees a democratic progress. However, Myanmar’s authorities have still to take necessary steps to make the planned elections in 2010 a credible, transparent and inclusive process based on international standards. After Aung San Suu Kyi was sentenced for another 18 months in detention, the EU broadened its sanctions against Myanmar for the second time in this year on 14 August 2009. With an extension of the visa ban and asset freeze they want to target authorities of the regime and businesses. The EU based its decision on the fact that the trial of Aung San Suu Kyi was unjustified. To observe the country’s state of play, the EU sub-ordered a Special Envoy, who is responsible for the country’s political affairs and goes regularly on mission and meet with the authorities. So far, several Special Envoys have been sent to Myanmar by the EU. In other words, the EU sent representatives’ delegations, sometimes in a confidential or informal manner. The latest was Piero Faccino in 2009, when he attended in consolidation with SPCD seniors. Faccino was appointed on 6 November 2007, by Javier Solana, EU High Representative for the Common Foreign and Security Policy as EU Special Envoy for Myanmar. Pierro Fassino, an MP and former Italian Minister of Justice, coordinates the European Union’s efforts to bring about positive change in Myanmar. This appointment underlines the importance that the EU attaches to democratic change, reconciliation, the improvement of the human rights situation and development in Burma/Myanmar. Mr Fassino works in close coordination with Ibrahim Gambari, Special Adviser to the UN Secretary-General on Myanmar.[94]

4. Analysis of the Sanctions

Although, Aung San Suu Kyi and the NLD are supporting the current economic sanctions, this support should not be seen as a representation of all Burmese citizens. The EU should give more weight to the views of those who are critical of its sanctions. Myanmar might become less repressive, and gradual reform might occur, if there would be a process of economic engagement that led to increased prosperity and development of a middle class. Indeed, current EU sanctions do not prevent engagement through programmes related to health, education and poverty alleviation, and the EU provides significant aid in these areas. In 2009 the EU was providing 40.5 million Euros (52.4 million USD) in humanitarian aid to Myanmar.[95] In general, the question of imposing economic sanctions is controversial and invites heated debates. So far, the EU does not have published any substantial analysis of its sanctions policy on Myanmar. However, it should undertake such analysis to decide whether it is worth to continue or not. Moreover, it should find out whether sanctions achieve their objectives and who is affected by these measures. To undertake such analysis it’s necessary to consider the benefits and limitations. The decision whether to continue with sanctions or not depends on the costs of sanctions and its effectiveness.[96] This section seeks to give a brief analysis of sanctions, including an identification of its scope. Moreover it will show how applied measures affect the social, economic and political life of Myanmar. Therefore, impact of sanctions on the country will be divided into three types: counter-productive effects, social costs and opportunity costs.

4.1 Benefits and Limitations


From a political point of view, sanctions may have provided additional legitimacy and important moral support for the pro-democracy forces. Moreover, they have shown the regime how seriously many Western governments and international organisations think in respect to the generals’ breach of international standards of behaviour. They have also created an implicit space for negotiations with the military government, such as the dialogue between Thein Sein and Faccino in early February 2009. Indeed, the regime stays suspicious against international institutions, and negotiations only happened to some little extent, but nevertheless this is little gesture to listen to the opponent parties. This might be result of international pressure or just the anxiety of cuts in foreign aid. The actual impact on the political and human rights situation is hard to assess. Sanctions may have helped to protect the top leaders of the NLD and keep the party alive. They have probably also encouraged the military government to adopt the terminology, if not the practice, of democracy and human rights. Another milestone is definitely that the junta started to invite international institutions such as the UN and EU Special Envoy, the UN Human Rights Rapporteur, the International Committee of the Red Cross (ICRC) and, most recently UN Secretary General Ban Ki Moon into the country. These little gestures have been made, although international governments and individuals were urging it, but may at the same time in its own interest, to demonstrate a minimum of cooperation with the international community. Besides, Japan, Australia, Malaysia and other ASEAN governments have played a key role in this process. As they have moderate voices in the U.S. and Europe, which have given the military government some hope that it might be possible to normalise relations with the West without sacrificing its core values. However, these are only early steps in a longer-term socialisation process leading to improvements in human rights.[97]


It is true that sanctions provided by the EU’s Common Position may be more targeted than other measures. Nevertheless, on the second sight, means such as the visa ban and freezing of assets of Myanmar’s top leaders have only minor impact. Those officials rarely travel to Europe and may have no assets there. Talking about investment and import sanctions it may only affect small and middle sized enterprises and thus the working population.[98] The ban on investment is only applied to certain state run companies listed in an attached annex of the Common Position 2006/318/CFSP. These enterprises listed, include a brewery, a pineapple juice company, several steal companies and a number of mines and mills, but it excludes several of the largest state-run companies such as Myanmar Oil and Gas Enterprise (MOGE), Myanmar’s Timber Enterprise (MTE) and Myanmar Post and Telecommunication (MPT). Thus, European companies are able to fund these enterprises. For instance, France’s oil giant Total was in 2008 expected to provide MOGE with an estimated $459 million per year through investments.[99] Already in 1999, Total (France), Premier Oil (U.K.) and IHC Caland (Netherlands) have been major stakeholders in the Yadana and Yetagun gas field projects. Yadana alone was then expected to generate $200 million per year for the military junta.[100] In 2009, Total and Chevron (US) are still investing in the Yadana pipeline which is known to generate $4.83 billion for the Burmese regime. According to the Burma Campaign UK, Total investments are assumed to be the biggest European shares in Myanmar.[101] It is also said, investments by these two companies fuel the use of forced labour, killings and corruption by the junta.[102] Through this failure of addressing large state-run enterprises in the EU’s Common Position, funding of the military junta by European (as well as US) companies will continue and thus gives the junta legitimacy to stay in power. Indeed, the removal of Myanmar from the General System of Preferences increased the price of Burmese exports to the EU. However the EU plays just a minor role when it comes to Myanmar’s trade relations. The country is not dependent from EU trade as long as Myanmar can sustain trade with its main partners in the region. Thus, it has only a minimal effect on the Burmese economy. The EU’s embargo on arms serves only little purpose, as the regime is well supplied with weapons and military equipment from regional trading partners China, Russia and India. It is likely that more substantial improvements depend on the emergence of domestic pressure groups as part on an overall strengthening of political and civil society, something which sanctions may obstruct. So far, the regime has done little to change its will or capacity to maintain power and continues with its repressive policies. It is also questionable if sanctions brought their desired results to influence high ranked Generals and bring them to rethink their behaviour. Sanctions have not significantly diminished the military elite’s personal welfare. They can travel free, and their families have access to everything they need in the region, including tertiary education. Contrary to many other military-ruled states, they remain hesitant to embrace foreign investment fully, although it is an extremely lucrative arena for rent-seeking.[103] Sanctions have of course placed some constraints on the economy, such as hampering the GDP due to a decline in domestic demand, severe power shortages and double digit inflation.[104] Nevertheless, according to the International Crisis Group, economic development is secondary to the generals’ security objectives (national unity and sovereignty). These objectives, so they believe would be undermined by giving in to foreign demands for democracy. It does not seem that the top leaders are worried about economic failures. Moreover, they appear to be proud of what they have achieved under these “difficult” conditions of sanctions and international criticism. They are not under serious internal pressure from groups hurt by the sanctions, who give in to foreign demands for political reform. Even the banking crisis and virtual collapse of the private banking sector in 2003 did not lead to resistance by citizens. Although many people have lost their money and overall economic activity has been contracted, there are no signs of major political stress, no angry middle-class demanding the resign of the government. Obviously, people are simply shifting back to a traditional economy, investing in hard assets, and moving money through the informal hundi system.[105] In fact, that sanctions have hurt the economy, they have contributed to the budgetary constraints that repressed a fuller expansion and modernisation of the armed forces. At present, the state relies less on its army, but more on its comprehensive organisational reach through its military intelligence, police and other informer and control networks.[106] Over the last years the EU has pushed for an immediate transition to democracy, while taking the risk of a total collapse of Myanmar’s economy. Moreover, the EU’s measures do not consider crucial aspects such as the link between power and economies. Most of the population is living at a subsistence level, while most of the upper class, including generals and their families making their money from rent-seeking activities, rather than production and services. Indeed, there might be a limit to how long the state is able to print money to cover its budget deficit. Nevertheless, the first sectors affected by a collapse would be the already dismal health and education sector. Have this said high ranked generals who meant to be targeted by EU sanctions are principally insensible for the impact of sanctions. It is the general population who seems to be under EU target and suffers most from its applied restrictive measures.[107]

4.2 Counterproductive Effects

It seems that international sanctions have reinforced the siege of highly nationalistic leaders. Most officers are fiercely proud of Myanmar’s historical resistance to imperialism and extremely sensitive to any attempt by foreigners to dictate its internal policies. Their value to resist to the pressure of the Western community is very high. Moreover, it is a matter of personal face and national ride. No leader wants to lose face and gives in to outside pressure. However, the regime’s hard-line views may have been strengthened by Western governments who first gave credits for progress in several areas, including the ceasefire agreements with some two dozen ethnic nationalist armies, increased opium eradication efforts, acknowledgement of the HIV/AIDS crisis, and expansion of popular access to electronic communication and information, but at the same time condemn the junta for a slow transition to democracy. The direct political and economic support for Aung San Suu Kyi, the NLD and dissident groups in exile may have tainted the democracy movement in the eyes of nationalistic leaders. Sanctions may have also contributed to the general’s impression that the country is under attack and thus they might be confirmed in their belief in the correctness of their cause. Moreover, it has strengthened the role of the armed forces in protecting the nation against external enemies. To some extend, sanctions have reduced the pressure on the top leaders by allowing them to blame the economic crisis on external actors and ignore their own mismanagements. The self-imposed isolation has also made it easier for the regime to insulate its members from the kind of discomfiting exchanges with critics that would have required them to defend and possibly begin to question their perceptions of economic and political realities.[108] As said before, the failure of the EU’s Common Position to address certain companies run by the junta, has a counterproductive effect. By financing gas and oil projects in Myanmar, European companies may support Burmese working “standards” which includes forced labour. Additionally, revenues made by these companies are provided to the Burmese government which is using more than half of its general income on national defence, compared to health (0.3%) and education (1.3%). Nevertheless, imposing sanctions and with thus the withdrawal of Western industrial and commercial businesses, provides competitive advantages to foreign companies, in particular in the region that end up exploiting trade and investment opportunities which are denied to European as well as American companies.

4.3 Social Costs and Opportunity Costs

With the multiplier affect of sanctions, the impact is entirely felt by the rural population who generally live outside the “formal” economy. The economic burden of sanctions has to a large extent been shifted to the general population through money printing (which fuels inflation), cuts in government social spending and forced labour. While the government obviously is primarily responsible for this, sanctions have thus had an indirect negative effect on poverty, health and education standards. This problem has been compounded by the strict limitations on foreign aid, since no agencies have been able to work seriously for economic reform or pick up the slack from reduced government spending.[109] Thus, neither funds nor expertise are available to restructure the economy, stabilise the fragile banking sector, and provide the resources needed for a nationwide programme of infrastructural rehabilitation of the country’s economy. Ironically, in the 1990s, Myanmar was host for many multinationals. Meanwhile, many of them have been withdrawn as a result of political pressure. With the extension of the U.S. and EU sanctions in 2003 most international companies divested their interest in Myanmar’s economy. Finally, the closure of small and medium sized textile facilities has lead to some 20,000 textile workers who lost their jobs.[110] Job loss resulting from trade and investment sanctions is a specific, very serious problem in particular for the urban poor, who have few employment opportunities outside the informal sector. Most labour in Myanmar, as in every developing country, is very poor paid and often members of ethnic minority groups get forced to labour. For many families even a minimal income makes the difference between a decent life and daily hunger and illness. A serious issue is that most labourers in the garment factories are unskilled young women with only few job opportunities. With sanctions the opportunity to get employed and trained by international companies has been taken away. Moreover it pushes a significant number into prostitution, which is often the only available alternative for many young women. Furthermore, sanctions which keep Western companies out of the country, while others invest, have worsen average salaries, benefits and working conditions in factories. There are also considerable costs to both; individuals and the country, from the inability of university graduates to find challenging jobs, consonant with their educational level, with international organisations and foreign companies. Many leave the country, thus contributing to a damaging brain drain. Those who stay frequently suffer from intellectual stagnation and loss of motivation. Joining the army seems for most young men the only alternative to gain social and professional advancement.[111] While Western governments and civil society actors, in imposing sanctions, have expounded the general objectives of democracy and human rights, they have generally defined or operationalised these in rather narrow terms such as implementation of the 1990 election results, release of Aung San Suu Kyi and all political prisoners. The structural causes of authoritarian rule and many of the complex emergencies facing the country, and in particular the rural population have been largely ignored. Western governments have done little to promote conflict resolution, institution-building or economic reform. They have limited basic needs assistance to a narrow definition of ”humanitarian” that excludes areas such as education and reconstruction of war- torn communities and economies in the border areas. The preoccupation with the political agenda has also delayed action against transnational crime, including drugs and human trafficking, which threatens the international community, Myanmar and its society. These omissions are detrimental to the cause of democracy and to the broader welfare and security of Myanmar’s people.[112]

5. Conclusion

The sanctions currently applied against Myanmar by the EU differ from those that were applied against other countries such as Iraq. Sanctions against Myanmar are autonomous, and applied outside the UN framework, with little support from countries in the Southeast Asian region. These sanctions were triggered by the regime’s refusal to permit the elected government to take power in 1990 and its numerous violations of human rights. They include an arms embargo, a ban on exports of equipment for internal repression, a ban on certain services, freezing of funds and economic resources, restrictions on admission of Burmese products to the EU, a ban on financing of Burmese state-owned companies, suspension of selected aid and development programmes, suspension of high-level bilateral governmental visits, and a reduction of diplomatic relations. As a measure tailored to increase costs to the SPDC and impact on the general populace, “smart sanctions” have been applied in an attempt to redress the perceived ineffectiveness of sanctions in the past. It could be asserted however that, in the case Myanmar, smart sanctions still can harm the overall population of a targeted country as well as lead to a diversion of funds from public goods in response to the arms embargo that increases cost of arms procedures. Although, EU measures are quite targeted, this pressure has, as yet, not pushed the SPDC leadership towards a more accommodating approach. The military government adheres to its Roadmap to ‘disciplined democracy’, which can best be described as a fully controlled, slow transition to semi-civilian rule. This proceeds at the pace conducive to the generals in charge, protecting their interests and largely disregarding external criticism or pressure. In the government’s perception Western sanctions are a hostile reaction to its independence from “foreign pressure” and declared intention for a (controlled) transition. Since the SPDC can rely on sources of income outside the purview of sanctions (energy, commodities, etc.) it is hard to imagine that the regime will deviate from its declared goals as a reaction to sanctions or Western pressure. Opponents of economic sanctions argue that sanctions, especially trade-related sanctions, hinder the country’s economic development which could lead to higher income levels among the population, and have a positive domino effect on the general standards of living and human rights practices. In spite of trade with other ASEAN countries as well as India and China, the overall population has remained in poverty while high ranked Generals gain significant profits from external trade. Indeed, the Burmese economy mainly relies on subsistence agriculture with most of the population living on their own crops. There is, however, still a certain proportion of the population that produce agricultural goods for sale. It could be deduced from this, that sanctions hamper the ability of these people to sell their agricultural products and so undermine their ability to maintain living standards. The EU has listed all state linked or owned enterprises in its Common Position, but this register has been accused of containing private businesses unrelated to the state, who are likely to suffer the most from sanctions. This situation can be verified by the 100.000 (approx.) people who lost their jobs in the private-sector dominated textile sector when the US imposed a ban on imports of textile products in 2003. Those sectors most associated to the state, such as banking and oil and gas, have felt only limited negative impacts and have become the cornerstones of the present economy. Furthermore, there is a huge contradiction between imposing sanctions, aiming to promote human rights and democracy, while allowing European companies to provide investments to state owned enterprises (in particular in the gas and oil sectors), and thus supporting human right abuses, corruption and a junta which spends its revenues on national defence. The form of “carrot and stick” strategy used by the EU may have damaged any possibility of a transition to democracy. This report has also shown that sanctions applied against Myanmar have an impact on the countries prosperity and intensify conflicts over wealth distributions which in turn lead to social tension among the Burmese population. Sanctions in principle hamper free trade and less developed countries, such as Myanmar with less economic diversification and with little foreign exchange and capital transfer, suffer the most from sanctions. Moreover, sanctions have lead to higher economic adjustment costs in Myanmar where economic policy is shaped by a lower flexibility among enterprises and state interference in the market is quite common. In response to these restrictive measures, Myanmar has limited its expenditures on health and education, reducing the quality and coverage services in these sectors. Social conflicts are also fueled by the fact that legally or illegally imported goods are mostly allocated to the elite of the government, while opposition groups and the overall population with little political and economic influence have extremely limited access to these goods. According to informed observers, political change in Myanmar can only come from inside the country – and within the existing parameters of military rule – and not through external imposition or pressure. European sanctions and those by other nations do not seem to have pushed the government in the desired direction, and may even have produced counterproductive effects, by hardening the stance of the government and by negatively impacting on Myanmar’s civil society and economy. Myanmar’s problems cannot be solved in a short-term, and there is presently no strategy that can provide swift and dramatic solutions. Thus, new long-term strategies on how to deal with Myanmar need to be identified. This should also involve a consistent strategic plan designed to better handle crisis situations. This should be a longer-term, comprehensive international strategy which works pro-actively with both government and society. Not only should this address immediate political issues, but also expose weaknesses within the current system.

6. Alternative Measures

Sanctions and engagement both are important interests to support Myanmar’s process of reconciliation. According to the history of sanctions, economic sanctions are mostly ineffective and do not bring the desired political change especially in a short term. The chances that sanction result into changes of system are very slim. For instances, the Castro regime in Cuba survived economic sanctions for nearly five decades as well as Saddam Hussein who survived a decade of economic sanctions. In the case of Libya, sanctions did not prevent the country from pursuing its unconventional weapon program, which finally reached an immeasurable dimension. Iran has also been targeted by different US sanctions during the Iraq-Iran war. But neither the regime changed nor does the state adopted democratic structures. A study conducted in 2007 by the Washington Institute of International Economics observed 174 cases of sanctions from the World War I until 2006. They found out that success, which is defined in a regime’s change to democracy, was only achieved in 31 per cent of the cases.[113] Especially in the case of Myanmar, economic sanctions tend to strengthen the regime’s control of the economy and thus the population. Moreover, they give the regime a tighter control over the distribution of goods within the country. It seems that the junta have learned to live with these external restrictive measures and as long as it maintains this control over its country and its trade relations with regional partners, the junta will not give up its power. This misleading of sanctions may be explained by, that none of the applied measures addresses the root causes of the country’s political and economic malaise. While pushing for an immediate transformation to democracy, Western governments seem to ignore the history of conflict which in turns led to the current situation. Besides, Myanmar’s regional partners may underestimate the role of military rule in shaping and sustaining the existing conflict. The EU and other Western governments should consider that Myanmar’s crisis is rooted in the interface between political and historical, social and economic structures.[114] Indeed, the EU shows engagement in providing Myanmar assistance with a wide range of tools, which follow different objectives. They are mostly targeted to the civil society and the poor among Myanmar’s citizens, and consist of training (i.e. political and economical), humanitarian aid, food security, training and support to local NGOs and Non-State actors, support to human rights defenders, and destruction of weapons. Nevertheless, the EU should rethink its strategy and find alternatives of more effectiveness for an approach towards Myanmar.

6.1 Recommendations

Often sanctions are adopted without any sense of how and objectives that mean to be achieved. Therefore, the EU should rethink its objectives and ensure that they are clear and realistic. It would be also helpful to set benchmarks for sanctions and incentives. Even more important is it to create a positive environment where change is possible. As already mentioned, Myanmar has suffered from an inability of transformation to a peaceful and democratic state. Indeed, the option of a revolutionary transformation brought by another popular uprising seems very attractive as well as a split off in the armed forces. But both seems to be unlikely. Moreover, they would just reinforce the cycle of the regimes violence and the already fragile relations between Myanmar and the EU, and other Western governments as well as negotiations involving all significant political groups could break up. The five decades of continuous political and military conflict has left its traces and caused an almost total breakdown of communication between the military government and pro-democracy forces. The fact that violence is involved has further tightened the confrontational positions and created an atmosphere of alienation, distrust and a lack of understanding and empathy. The continuity of the armed conflict and the fact that most of the problems remain unsolved is challenging for the reconciliation process. Therefore, Myanmar needs to enhance communication among all political actors and communities in order to establish trust which is necessary to move forward together. With that the transition to democracy plays an important role but is no guarantee for conflict resolution and as long as there is no peace it would be significantly constrained. It is also important that Myanmar’s neighbours continue with creating a constructive environment for further ceasefire agreements and peace talks between the military authorities and insurgent groups. The EU and other international donors should expand its humanitarian assistance to ethnic minority areas and develop a long-term plan for post-conflict reconstruction. The EU should also continue with providing training and assistance to aid and participation of ethnic minorities in the future constitutional negotiations.[115] Nevertheless, the EU should also continue with aid programmes specified in training and support of individuals working in key independent sectors, such as media, business and politics. Furthermore, as conditions allow, the EU could support the idea of scholarships, study trips, and longer-term placements for Myanmar’s nationals. Such programmes should be targeted to government’s officials, as well as members of political parties, civil society organisations, and the next generation of (social) leaders and administrators.[116] Training should be also provided to those who are working in the State Research Information Centre. With the rebuilding of this Institute modern standards can be achieved and the quality of data improved. The EU should also continue with the training of trainers (ToT) to upgrade the countries/people’s capacity. This training could be provided overseas by experienced western trainers to guarantee an exchange of knowledge and experiences. The poverty that affects Myanmar and its society is another fundamental obstacle in the progress in policies, governance and human rights. Therefore, broad-based socio-economic development is needed to sustain the emergence of a democratic and peaceful state. Together with other donors, the EU should establish an aid group, responsible only for Myanmar and appoint a prominent economic envoy, as it was the case after cyclone Nargis with the “Tri Partie Group”, who could play a role similar to that of Pierro Fazzino and is responsible for political and human rights issues. By that, the main focus should be on economic policy dialogue and the establishment of proper conditions for the effective application of future technical and economical assistance.[117] While maintaining the ban on loans for Myanmar until it can meet the benchmarks, the International Financial Institutions (IFIs) should be able to open offices in Yangoon in order to conduct a critical political dialogue with the government. This could be also helpful for future plans and negotiations.[118] For the reconstruction and demobilisation of the banking-sector the state should allow micro-loans to the overall population. On a township level, political, environmental and business training provided to civil society may be a good opportunity for the EU to support enlightenment and understanding of Myanmar’s society and finally the transition to democracy. Another crucial problem is the lack of communication between the military regime’s generals in Yangoon and township’s generals in the black areas. Often generals in the townships are left on their own devices and mostly without any control by the regime. Thus, abuses of power by township generals are not uncommon. To diminish this occurrence of abuses and to close the gap of communication between the state and township level, the EU should also provide training to the military. On the international level, member states of ASEAN should be more involved in the process of Myanmar’s transition to democracy. Besides, other initiatives such as the Greater Mekong Subregion (GMS) project should acquire greater importance if no external sources invest directly in Myanmar.[119] Humanitarian aid to vulnerable parts of the population should be channelled through local agencies, including ASEAN. Close cooperation and consultation with other donors could also lead to a substantial basement for debates. Although, China does not have an unlimited influence on Myanmar’s generals, dialogue could be channelled over China in a mid to long- term. Moreover, it should be seen as a potential partner in dealing with regional issues. In the framework of the EU-China strategic partnership, talks on Myanmar should be deepened, and greater understanding and common interests developed. The EU should pursue dialogue with individual ASEAN states. Such dialogue among ASEM could be an effective way forward as long as it does not aim to further divide ASEAN on the issue.[120]

6.2 Prospects and Opportunities for International Actors

So far, the European Union has only played a minor role due to its lack of connection to Myanmar. The effect of the EU’s sanctions policy is rather minimal and has only a symbolic value. So far, the applied measures did not lead to the desired objective of transition to democracy and the respect of human rights. This could be due to a lack of connection to Myanmar or just because the European Union is using wrong measures which do not work in the case of Myanmar. The most basic problem with sanctions as a dominant strategy for change is that they freeze a situation that may not contain seeds of its own resolution. The military, despite its many policy failure, has stayed in power since 1962, and there are no indications that the past twenty years of external pressure have changed its will or capacity to continue for the foreseeable future. The pro-democracy movement will remain alive with its “symbol” Aung San Suu Kyi. However, under the existing depressed political, social and economic conditions, it does not have the strength to produce political change. In terms of consistency and persistence, ASEAN might have been far more successful. Due its chosen path of sanction policy the EU no longer has any real leverage over the regime. Sanctions may provide moral support, but they also contribute to the overall stagnation that keep most people trapped in a daily survival battle. Moreover, sanctions may be helping the regime to sustain military rule. The generals have got used to and learned to live with isolation, internal dissent and an economy of survival in a poor. The real threat to reactionary leaders is the modernity and development that might come from more involvement with the outside world.[121] Nevertheless, more radical measures such as military interventions have never been an option. The outcome and aim of such interventions might be questionable and any moves in this direction would most likely blocked by China due to its interest in safeguarding potential trade routes (Myanmar is located between India and Northwest China) as well as exploiting oil and gas. Despite broad agreement, stronger coordination among the international community on policy toward Myanmar is needed. Talks between the EU and Myanmar should become more frequent. There is great potential, especially in context of ASEM to pursue approach towards Myanmar. For instances, future dialogue can be channelled through China as a main political and economic partner of Myanmar. In the near future donations of humanitarian aid should be channelled through local agencies including ASEAN. Close cooperation with other donors could also lead to a broader discussion of other issues.[122] After the seven months review of its sanctions policy, the UN will change its approach towards dialogue and engagement because sanctions alone have not worked in the past. Indeed, first approach towards this direction could happened when Barack Obama met with the ASEAN leaders, including Myanmar’s Prime Minister Thein Sein in November 2009 and started substantial dialogue. Nevertheless, discussions in the past leave a range of approaches for pursuing the common objectives of bringing change in Myanmar. Already the vast engagement of international organisations after cyclone Nargis has shown that goals can be achieved together in the international community. Now this approach should be used for further engagement and cooperation in/with Myanmar. Especially, the elections scheduled in 2010, should be considered as a new window of opportunities to obtain engagement among all international actors. [1] Mathea Falco, Chair; Burma: Time for Change; Report of an Independent Task Force , Council on Foreign Relations, New York, 2003, p.7 [2] European Commission, The EC-Burma/Myanmar Strategy Paper (2007-2013), 2007, p.5 [3] Official capital since 2006 is Naypyidaw (Pyinmana). [4] Steinberg, David I., Burma the State of Myanmar, Georgetown University Press, Washington D.C., 2001, p. xi [5] Thein, Myat; Economic Development of Myanmar, Institute of Southeast Asian Studies, Singapore, 2004 p.1 [6] Taylor, Robert H., Myanmar: Beyond Politics to Societal Imperatives, Institute of Southeast Asian Studies, Singapore, 2005, p.1 [7] Burma was defeated by the British in 1826 and fully annexed in 1886 [8] Matthews, Bruce, Ethnic and Religious Diversity: Myanmar’s unfolding Nemesis, Institute for Southeast Asian Studies, Singapore, 2001, p. 3 [9] International Crisis Group, Myanmar: The Military Regime’s View of the World, Asia Report No. 28, 7 December 2001, p. 2 [10] Myint -U, Thant, The Making of Modern Burma, Cambridge University Press, Cambridge, 2001, p. 196-202 [11] Turnan Kahin, George Mc, Governments and Politics in Southeast Asia, Cornell University Press, 2nd edition, Ithaca, 1964, p.78 [12] Ibid., p.80. [13] Ibid., p.82-83 [14] Ibid., p.83 [15] Ibid., 1965, p.83 [16] Myint-U, Thant; The Making of Modern Burma, Cambridge University Press, Cambridge, 2001, p. 249 [17] Ibid., p.143-148 [18] Ganesan, N.;Hlaing, Kyaw Yin, Myanmar: State, Society and Ethnicity; Institute for Southeast Asian Studies, Singapore, 2007, p.82,83 [19] Ibid., p.78-83 [20] Matthews, Bruce; Ethnic and Religious Diversity: Myanmar’s unfolding Nemesis, Institute of Southeast Asian Studies, Singapore, 2001, p.3 [21] Taylor, Robert H., Myanmar: Beyond Politics to Societal Imperatives, Institute of Southeast Asian Studies, 2005, p.3 [22] The Constitution of the Socialist Republic of the Union of Burma 1974, printed by Printing and Publishing Corporation, Rangoon 1974, Chapter III, Article 30, Article 31 [23] Matthews, Bruce; Ethnic and Religious Diversity: Myanmar’s unfolding Nemesis, Institute of Southeast Asian Studies, 2001, p.3 [24] International Crisis Group, Ethnic Minority Politics, Asia Report No 52, 7 May 2003, p.20-22 [25] Matthews, Bruce; Ethnic and Religious Diversity: Myanmar’s unfolding Nemesis, Institute of Southeast Asian Studies, Singapore, 2001, p.4-5 [26] Yi, Khin; The Dobama Movement in Burma (1930- 1938), Southeast Asia Program (SEAP), 1988, p.3 [27] Mathea Falco, Chair, Burma: Time for Change; Report of an Independent Task Force , Council on Foreign Relations, New York, 2003, p.8 [28] European Commission, The EC-Burma/Myanmar Strategy Paper (2007-2013), January 2007, p. 5 [29] The Military’s Constitutional Principles: Strengthening Military Authoritarianism, p. 2-3 [30] Mathea Falco, Chair; Burma: Time for Change; Report of an Independent Task Force , Council on Foreign Relations, New York, 2003, p.7 [31] Ganesan, N.; Yin Hlaing, Kyaw, Myanmar: State, Society and Ethnicity, Institute of Southeast Asian Studies, Singapore, 2007, p.271 [32] International Crisis Group, Burma/Myanmar: How Strong is the Military Regime?, Asia Report No. 11, 21 December 2000, p.4 [33] European Commission, The EC-Burma/Myanmar Strategy Paper (2007-2013), January 2007, p.5-10 [34] International Monetary Fund, World Economic Outlook 2009, Washington D.C., 2009, p.15 [35] Taylor, Robert H., The State in Myanmar, NUS, National University of Singapore, Singapore, 2009, p.455 [36] International Monetary Fund, Myanmar- Staff Report for the 2007 Article IV Consultation, IMF, 06.11.2007, p.7 [37] Economist Intelligence Unit, Country Profile 2007, Myanmar (Burma), 2007, p.25 [38] International Monetary Fund, Myanmar- Staff Report for the 2007 Article IV Consultation, IMF, 06.11.2007, p.6 [39] UNDP, Integrated Household Living Conditions Survey in Myanmar, UNDP, 06.03.2006, p.v and p. xix respectively [40] Auswärtiges Amt, Myanmar: Wirtschaftspolitik, April 2009, (accessed on 29.10.2009), available at: Myanmar/Wirtschaft.html [41] OECD/WTO, Aid for Trade at a Glance 2009: Maintaining Momentum, 2009, p.230 [42] Asian Development Bank, Asian Development Outlook 2009, ADB, 2009, p.246 [43] Economist Intelligence Unit, Country Profile 2007, Myanmar (Burma), p.16 [44] Ibid. p.20 [45] Ibid. [46] International Monetary Fund, Myanmar- Staff Report for the 2007 Article IV Consultation, IMF, 06.11.2007, p.8 [47] Auswärtiges Amt, Myanmar: Wirtschaftspolitik, April 2009, (accessed on 29.10.2009), available at: Myanmar/Wirtschaft.html [48] Economist Intelligence Unit, Country Profile 2007, Myanmar (Burma), p.26 [49] Taylor, Robert H., The State in Myanmar, NUS, National University of Singapore, Singapore, 2009, p.453 [50] International Monetary Fund, Myanmar- Staff Report for the 2007 Article IV Consultation, IMF, 06.11.2007, p.9 [51] Ibid. p.26 [52] Economist, Country Briefing China, economic Structure, (accessed on 01.11.2009), available at: %2DEconomic%20Structure [53] Economist, Country Briefing China, economic Structure, (accessed on 01.11.2009), available at: %2DEconomic%20structure [54] Economist, Country Briefing China, economic Structure, (accessed on 01.11.2009), available at: %2DEconomic%20Structure [55] Economist, Country Briefing China, economic Structure, (accessed on 01.11.2009), available at: e%2DEconomic%20Structure [56] Economist, Country Briefing China, economic Structure, (accessed on 01.11.2009), available at: %2DEconomic%20Structure [57] US Departement of State, Bureau of East Asian and Pacific Affairs,Background Note: Laos, October 2007, (accessed on 01.11.2009), available at: [58] Ref: Same sources as the export data. [59] Auswärtiges Amt, Myanmar: Wirtschaftspolitik, April 2009, (accessed on 29.10.2009), available at: Myanmar/Wirtschaft.html [60] International Monetary Fund, Myanmar- Staff Report for the 2007 Article IV Consultation, IMF, 06.11.2007, p.14-15 [61] Auswärtiges Amt, Myanmar: Wirtschaftspolitik, April 2009, (accessed on 29.10.2009), available at: Myanmar/Wirtschaft.html [62] Skidmore, Monique; Wilson, Trevor, Myanmar: State, Community and the Environment, Asia Pacific Press, Canberra, 2007, p.122-123 [63] Council Common Position, 2007/750/CFSP, 19. November 2007, p.1-2 [64] European Commission Trade, Myanmar: EU bilateral Trade and Trade with the World, 22. September 2009, DG Trade, p.5 [65] European Commission Trade, Myanmar: EU bilateral Trade and Trade with the World, 22. September 2009, DG Trade, p.9 [66] Ibid. p.8 [67] International Crisis Group, Myanmar: The Military Regime’s View of the World, Asia Report No. 28, 7. December 2007, p.10-32 [68] Mathea Falco, Chair, Burma: Time for Change, Report of an Independent Task Force, Council on Foreign Relations, New York, 2003, p.9 [69] Than, Maung Maung, State Dominance in Myanmar, Institute of Southeast Asian Studies, Singapore, 2007, p.351 [70] Human Rights Watch, Vote to Nowhere: The May 2008 Constitutional Referendum in Burma, Human Rights Watch, 2008, p.21 [71] Ibid. p.49 [72] Human Rights Watch, World Report 2009, p.224-227 [73] Ibid., p.227 [74] United Nations, World Drug Report 2009, United Nations Office on Drugs and Crime, 2009, p.312- 313 [75] Human Rights Watch, World Report: Events of 2008, HRW, 2009, p.223 [76] E.A.T and JHU CPHHR, Report: After the Storm,6. 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December 2001, p.33 [91] Council Regulation (EC) No 2501/2001, 10. December 2001, p.2 [92] Green Paper: Promoting a European Framework for Coperate Social Responsibility [COM(2001)366], 2001 [93] Council Common Position 2007/750/CFSP of 19 November 2007, p.1 [94] Council of the European Union, Piero Faccino, EU Special Envoy for Burma/Myanmar, (accessed on: 18.11.2009), available at: id=1377 [95] Thaindian, EU gives $52mn in aid to Myanmar, (accessed on: 10.11.2009), available at: [96] International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26. April 2004, p.15-16 [97] International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.16 [98] Win, Kin Zaw, edited by Ganesan, N; Hlaing, Kyaw Yin, Myanmar: State, Society and Ethnicity, Southeast Asia Studies, Singapore, 2007, p.283 [99] House, Robert L., Geneser, Jared M., Michigan Journal of International Law, Are EU Sanctions on Burma Compatible with WTO Law?, 19.09.2008, p.13 [100] The Irrawaddy, Oil Companies Investing in Burma Under Fire in Europe, June 1999, (accessed on 7.11.2009), available at: [101] Burma Campaign UK, Totally Immoral: Day of Action against Total Oil over Burma links, 23 November 2007, (accessed on 7.11.2009), available at: [102]Earthrights International, ERI Report on Yadana Project in Burma Receive Unprecedented Attention and Lead to Critical Changes, 28 October 2009, (accessed on: 7.11.2009), available at: [103]International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.15,16 [104]European Commission, The EC-Burma/Myanmar Strategy Paper (2007-2013), 30 January 2007, p.11 [105]Hori, Masahiro; Wong, Yu Ching, Efficiency Costs of Myanmar’s Multiple Exchange Rate Regime, IMF Working Paper WP/08/199, International Monetary Fund, August 2008, p.5 [106]International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.16 [107]Ibid., p.16 [108]International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.18 [109]International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.17 [110]Ganesan, N., edited by Hlaing, Yin and Taylor, Robert H., Myanmar: Beyond Politics to Social Imperatives, Institute of Southeast Asian Studies, 2005, p.35 [111]International Crisis Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.18 [112]Ibid., p.18 [113]Elliott, Kimberly Ann; Hufbauer, Gary Clyde; Oegg, Babara; Schott, Jeffrey J., Economic Sanctions Reconsidered, 3rd Edition, Peterson Institute for International Economics, Washington, 2007, p.2,159 [114]International Crisis Group, Myanmar: Sanctions, Engagement or Another Way Forward, Asia Report No. 78, ICG, 26 April 2004, p.25 [115]International Crisis Group, Myanmar: Sanctions, Engagement or Another Way Forward, Asia Report No. 78, ICG, 26 April 2004, p.6-7 [116]International Crisis Group, Myanmar: Sanctions, Engagement or Another Way Forward, Asia Report No. 78, ICG, 26 April 2004, p.7 [117]Ibid., p.7 [118]Ibid., p.7 [119]The Greater Mekong Subregion includes Myanmar. The engagement of China, in particular of the South-western province Yunnan, might help to open up and integrate Myanmar’s markets to the broader Indochinese region. China is managing this through direct investment and infrastructure projects ranging from road and rail networks, the constructions of dams and navigation channel on the Mekong, telecommunications technology and basic industrialisation. [120]Berger, Bernt, Reorienting strategies towards Burma/Myanmar, European Union Institute for Security Studies, 28 Mai 2008, p.2-4 [121]International Crisi Group, Myanmar, Sanctions, Engagement or Another Way Forward?, ICG Asia Report No 78, 26 April 2004, p.21 [122]Berger, Bernt, Reorienting strategies towards Burma/Myanmar, European Union Institute for Security Studies, 28 Mai 2008, p.4

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