Thursday, October 25, 2007

Burma cannot avert undesirable consequences over soaring fuel prices

The unabated crack down on protests against soaring fuel prices is evidence that the regime is unwilling to resolve the plight of Burmese citizens, under severe long-term economic mismanagement. In truth, the military junta showed its true colours in carrying out the attack on its own citizens. Its lackeys (members of the Union Solidarity and Development Association and Swan Arrshin) are no better than common criminals who are more than willing to resort to street violence against the practicing of democratic principles and basic rights. Without a doubt the ruling generals will continue to implement a rule of terror and coercion against its own citizens as they have done in the past.

Instead of looking towards rapid economic adjustment and finding a solution to the country's economic malaise, the regime is trying to escalate tension with opposition groups and civilian populations. If the regime is not held accountable on the failure of its own aggressive energy policy and the public's anxiety over fuel prices, there cannot avert possible undesirable consequences. Those consequences are: increasing fuel price will impact on the whole macro-economy, and the economic insecurity can rapidly lead to social and political instability.

Higher oil prices would undoubtedly drive up the prices of other fuels, magnifying the overall macroeconomic impact. Naturally, the higher the oil-price increase, and the longer higher prices are sustained, the bigger the macroeconomic impact. Definitely, higher oil prices will lead to inflation. It will increase input costs and reduce non-oil demand. Tax revenues fall and the budget deficit increases, due to rigidities in government expenditure. Also, higher oil price will increase typically leads to upward pressure on nominal wage levels. Wage pressures together with reduced demand tend to lead to higher unemployment, at least in the short term. The lower exchange rates and lower real output will also affect the overall impact on the economy over the longer term. In addition, a loss of confidence, lower consumer spending power and inappropriate policy responses could amplify the economic effects in the medium term. The energy price hike would therefore have a negative impact on the economic interests, and this economic weakness can make the economy more vulnerable to financial turmoil.

To make matters worse, the junta's recent announcement No. 1/2007, which blamed demonstrations against the fuel price hike and promised to take effective action in accordance with the existing laws to crack down on the dissidents, clearly stated that the citizens have no space to express their views openly and peacefully. This announcement evidently defied the international community by refusing to pursue democratization and national reconciliation. When the real representatives of the people, together with 1,500 other prisoners of conscience, are still under lock and key, there will be no progress in democratic transition. The whole world has recognized that. At the same time, economic prosperity can't take place in a country where the people are prisoners in their own country.

Finally, the higher prices are inflicting substantial damage on the country's economy. It is not a political issue; it is purely an economic issue where the ordinary citizen is peacefully and openly addressing the problems of their daily lives. The regime must release all those who were arrested in the protests against the recent sharp hike in fuel prices. The majority of the people in the country are suffering. Lip service to this issue, blaming the opposition, and attacking its own citizens will not take the place of substantial reforms and will not resolve the country's problems. The regime must clean up its own mess in a civilized manner, and must take responsibility for the brutal crack down on its own citizens.

(The writer Myat Soe is the Research Director of Justice for Human Rights in Burma. He graduated from Indiana University, and is a MBA from Indiana Wesleyan University .)


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