A COUNTRY REPORT ON BURMA TO THE SPECIAL AD HOC COMMITTEE BY THE SUBCOMMITTEE FOR THE NEAR AND MIDDLE EAST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002900100001-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 27, 2016
• Document Release Date: July 31, 2013
• Sequence Number: 1
• Publication Date: April 1, 1947
• Content Type: REPORT

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A COUNTRY REPORT ON
BURMA
TO 71,2
3 0
SPECIAL AD HOC COMMITTEE
BY THE
SUBCOMMITTEE FOR THE NEAR AND MIDDLE EAST
ILLEGIB
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NO-01?IANGE IN CLASS. 0
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CLASS. OrIANC:,EI7.4 TO: TS S C
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ATift PA-1Q-'? 34 6707
DAT:: _ rif.R7',7,V1177;? 09+7454'jr
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STATE-WAR-NAVY COORDINATING COMMITTEE
SPECIAL AD HOC COMMITTEE
Reference: SWN-5278
BURMA
BACKGROUND
I. ANALYSIS OF THE SITUATION IN BURMA.
1.. Basic Forces
A. Political
Burma's present Interim Government which was estab-
lished as a result of the Anglo-Burmese London agreement of
.January, 1947 has as .its legal basic Section 139 of the
GOvernment of Burma Act, 1935 (a section which permits the
Governor in an emergency to assume .most of the powers of
the: Government'of? Burma). The Interim Government has in
practice however, by consent of ?the British virtually full
autonomy. It is headed by Aung San who is also head of the
Anti-FasCist Peopl6s1 Freedom League (AFPFL), members Of
Which hold all the portfolios in the present government..
An election waa held on April 9, 1947 in which the AFPFL
won 191 of a total of 210 seats in the Constituent Assembly,
.the body responsible for framing Burma's new constitution.
Of the remaining 19 seats the Communists won 7 and non-party
candidates. 12. These,results indicate that the AFPFL is by
far the strongest political party in Burma although the League's
popular support ib doubtless not as great as its success at
the polls would suggest.
The League, whose position is moderately left of center,
is opposed from both the left and the right. The. oppOsition
from the right consists of a loose coalition of prewar parties
headed by old-line politicians. These -parties have very little.
popular support, no positive program, and are united only?by
their dislike of Aung San and the AFPFL, They constitute no
threat to the continuance of the League'is power. From the
left the AFPFL is opposed by Burmals two Communist parties:
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The Burma Communist Party (the "White Flag" Communists) headed
by Than Tun and Thein Pe, and the Communist Party (Burma) (the
"Red Flag" Communists) headed by Thankin,Soe. The latter
party which is the more extreme has baen banned, but continues
an active existence underground.
The relations between the League and the "White Flag"
Communists are somewhat obscure. There have from time to
time been rumors and other indications of a possible rapproache?
ment between the Burma Communist Party and the AFPFL ever
since the two separated in October, 1946, but des-,Ate the
fact that there is some personal contact between Aung San
and Than Tun the breach between the League and the Communists
has tended to widen. It is reported that Aung San has recently
been threatening to extend the ban against the Communist
Party (Burma) to :the !:White Flag" Communists.
, Although there is no proven direct contact between
Burmese Communists and the USSR, the Burma Communist Party
may be presumed to be in fairly close touch with the Communist
Party of India because of the fact that the Burmese Communist
newspapers faithfully reflect the International Communist Party
line. Than Tun has been accused of taking orders from Josh',
the General Secretary of the Communist Party of India. This
seems likely and there can be no doubt that the Burmese
Communists draw inspiration, advice and moral support from
their comrades in India. There are also said to be contacts
between Burmese and Chinese Communists, but if such exist
their nature is obscure and their significance unknown.
The Communists, although far less strong than the League,
nevertheless enjoy greater popular supPort than their meager
success in the April elections would suggest. The Government
of Burma for which the League is now fully responsible is
compelled by the present situation to take rigorous, and
consequently generally unpopular, measures against such
conditions as lawlessness, strikes, and the non?payment of rents
and taxes. It is possible that the Communists may be able
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to,utilize'the unpopularity-of these measures to alienate
sufficient support from the League to embarrass, or even to
cause the collapse of, Aung San's Government. Should this
occur a chaotic condition would ensue as neither the Com-
munists, nor any other party: nor coalition of parties, would
then be able to form a stable government. Burma's political
progress and economic rehabilitation are, therefore, for the
next 3 to 5 years dependent upon the continuance in power
of the AFPFL, the only stable party other than the Communist.
Burma's Constituent Assembly convened on June 10, 1947.
As a draft Of the new constitution has already been drawn
up by AFPFL leaders the Assemblyts deliberatins are not
likely to be prolonged and it is proposed to have the news
constitution ready for submission to the British Parliament
before that body adjourns in October. Inauguration of the new
constitution at or before the beginning of 1948 seem. prObable.'
Bo Economic
The Government of Burma is heavily in debt; the country's
1947 budget siloWs a huge deficit; the national economy which
was completely disrupted by the war has been only very par-
? tially restored; and extensive reconPtruction and rehabili-
tation are still necessary,
Most of the lines of the Burma Railways are once more
in use but only to a limited extent because of the poor
condition of the roadbed and the shortage of locomotives and
rolling stock; River transport has also been only partially
restored. Motor transiDort, however, has regained, or possibly
even surpassed, its prewar level".
Burma's industrial installations were severely damaged
,during the war and have as yet been only
very partially re-
stored,: Agriculture which.is 13urthas Chief occupation suffered
greatly as.a result of the war. 'It is recovering steadily
but is still far from normal.. The 1946-47 rice crop amounted
to 3,885,500 tons of paddy,'an increase.of more than a million
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one hundred, thousand tons over the 1945-46 crop 9f 2.7
million tons, but less than half the record 1940-41 production
of more than 8 million tons.
Burma is r ch e du 1 e d to export .8 to 9 hund'red thousand
tons. of rice in 1947 which is roughly one quarter of Burmats
prewar annual export of 3.5 milliOn tons of rice Rice will
be Burtats only important export during 1947, although doubt?
less some tin, tungsten and timber will also be exported. '
There will, however, be no lead, silver or petroleum sent
abroad all of which were important exports before the war.
Despite the greatly reduced( volume of Burma' s exports in 1947
their value (approximately 355 million rupees or L 25 million)
due to the high price of rice will probably amount to more
than half the prewar value of the country s exports.
Prices which were extremely high immediately following
the reoccupation declined gradually during 1946. At the end '
of December, 1946 the price index (based on 1941) had fallen
to 282, but since that time there has been a slight rise in
prices.
Following the reocoupation ,of Burma the British Govern?
ment made available to the Government of Burma, a credit of
L 85.4 million (frequently incorrectly referred to as an
L 87 million loan) for use during the fiscal years 1945-46
and 1946-47. As .of the end of April 1947 onlY about L 44
million had actually been utilized and of this, apparently,
all but L 8.5 million had been repaid.
It was announced early in April that the Burma budget
' for the year ending September 30, 1947 showtd? a deficit of
more than R. 1,072,000 000 (approximately $321,600,000)
made' up as follows: revenue deficit (deficit on the ordinary
budget) Rs. 192,290 000; government loans to agriculturists
Rs. 306,688 000; capital expenditures and ?expenses for re?
habilitation Rs, 573,400,000. This deficit does not include
Burmats outstanding debt to Iridia of Rs ,48l455,000, nor
Burmats contribution to the British Government for defense
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which is assessed at Rs. 90,000,000. The estimated income
of the Government of Burma is Rs. 536,178,000 made up of
revenue, Rs. 253,199,000 and returns from loans Rs. 282,990,000.
An Anglo-Burmese financial agreement was concluded in
May 1947 the terms of which provide that the British Govern-
ment will contribute an amount notexceeding 16 million pounds
(approximately 160 million rupees) to Burma's ordinary budget
and make an interest free loan for rehabilitation of 18,375,000
pounds. This loan presumably replaces the unutilized portion
of the original British credit of 85.4 million pounds.
It would appear from the foregoing figures that even
after taking into account British financial aid the Burma
budget will still show a deficit of more than 250 million
rupees, the greater part of which will be on account of ex-
penditures for reconstruction and rehabilitation.
Notwithstanding the extent of Burma's devastation, the
slowness of rehabilitation, and the present budgetary diffi-
culties of the Government of Burma there is every reason to
ex7)ect the gradual restoration of Burmese economy during the
next few years provided political stability and' effective
administration can be maintained, A steady increase of
exports Of rice, timber, tin and tungsten may be anticipated,
and, within five years Burmals oil fields and refineries
should again be in operation. The eventual restoration of
a favorable balance of trade appears assured although it may
be some years before Burma again enjoys as favorable a balance
it did before the war.
2. Objectives of Other Great Powers.
A. Great Britain
It now appears nearly certain that British efforts to
retain Burma as' a willing partner within the British Common-
wealth have failed and that the Constituent Assembly will
vote for Burma's complete independence. The British will
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doubtless endeavor to establish close and friendly relations
with independent Burma by negotiating treaties of friendship,
commerce, and military, aid as favorable to themselves as
possible, They likewise desire Burma's cooperation in the
British Empire defense system. Britain hopes to retain Burma
within its sphere Of influence, to guide Burma's foreign policy,
and to exert some influence on the countryltinternal affairs:.
Britain will also .eek safeguards and preferences for British
commercial interests in Burma. In implementing these ob-
jectives Britain will take advantage of the long,established
connections between the two countries, Burma's need for a
powerful ally and spokesman, and the country's economic de-
pendence on, and f'inancial obligations to, the UK.
B. India.
India is as yet too much occupied with internal problems
to have formulated any policy with respect to Burma, but there
is an increasing tendency among Indians to regard Burma as
a field for Indian exploitation and an area to be brought
within the Indian ambit, India's immediate objectives with
respect to Burma appear to be (1) the conclusion of a satis-
factory agreement with respect to Indian immigration into
Burma, (2) the safeguarding of the political and economic
rights of Indians resident in Burma, (3) the negotiation of
an agreement relating to Burmals debt to India, (4) the
obtaining of an equitable settlement for the Indian miney-
lenders, and (5) the procurement of adequate quantities of
Burma's rice.
C. China.
China like India is too disturbed internally to give
much thought to Burma. Chiang Kai-Shek has denied that China
has any designs on Burma, but the Burmans are nonetheless
fearful of Chinese expans on either by force of arms or
peaceful Penetration. The imperfectly defined China-Burma
border is likely to become a source of contention between
the two countries.
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D. Russia
Russia presumably has no specific policy toward Burma,
its policies toward that country being the same as those for
South East Asia generally.
II. ANALYSIS OF ASSISTANCE ALREADY RECEIVED.
The only assistance which Burma has already received from
the US is that given by the Surplus Property Settlement signed
in London on February 28, 1947. This settlement was based on
the desire of the US to make a reasonable and useful disposition
of its surplus property in Burma and on a consideration of
Burmats need and limited ability to pay.
According to the terms of the settlement Burma received
goods, whose value when new was between 15 and 20 million
dollars, for the sum of five million dollars to be paid over
a twentY year period. All or most of this sum will be paid
in Burmese currency and will be expended locally for the
purchase of real estate for the use of the US Government and
for the implementation of the Fulbright program in Burma.
No economic assistance to Burma is now pending or con?
templated, but the Burmans have unofficially expresrzed their
hope that the US will support a Burmese application for a
loan from the International Bank. The amount that might be
requested was not indicated.
The goods made available to Burma by the Surplus Property
Settlement, particularly the locomotives, have contributed
materially to the rehabilitation of Burma, but they consti?
tute only a small part of the aid in reconstruction which
Burma has received and a still smaller part of the total aid
needed.
The Surplus Property Settlement was on the whole fairly
well received in Burma and appreciation for American gener?
osity was expreSsed, but in some quarters doubts and suspi?
cion of ulterior motives were voiced.
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III. OBJECTIVES OF THE US IN BURMA.
The US desires the continuance of Burma's constitutional
progess in accordance with declared British policy and the
desires of the Burmese people, which envisage "e exjpeditioub,
peaceful and orderly attainment of full self-government by
Burma either within or without the British Commonwealth of
Nations as the Burmese people prefer. The US further desires
that the Government of Burma should he stable; democratic,
pacific, friendly to its neighbors and to the US, and free from
the undue influence of any foreign power or international
communism. It is an objective of the US that the Government
and people of Burma should understand and cooperate with the
policies of the US and develop confidence in American democratic
institutions. The US regards the speedy restoration of Burma's
war-shattered economy to at least its prewar level as highly des-
irable both as an element in the restoration of world economy
and as a means of promoting the country's political stability.
PROGRAM
IV. MEANS OF REACHING US OBJECTIVES IN BURMA.
40 long San and his party, the AFPFL, alone appear
likely to be 'able to bring about those conditions in Burma,
which the US desires, the implementation of US policy must
in fact consist in strengthening as far as legitimately
possible the stable government now in power. To this end
the US has already agreed to exchange diplomatic representa-
tives with the Government of lurma even during the present
interim period. The Government of the US has also taken
occasion to express its satisfaction with the London agree-
ment of January, 1947 which established the present Interim
Government of Burma and to felicitate the Constituent Assembly
which convened on June 10, 1947 to draw up Burma's new
constitution. The US should continue by appropriate diplomatic
means to support the current regime. It may nevertheless be
advisable for US representatives in Burma to seek suitable
occasion tactfully and informally to urge upon hung San
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the desirability of avoiding any type of action, which might
give color to the charges of those of his political opponents
who .accuse him of fascist tendencies.
The Burmans have shown a great desire to participate in
world affairs and to join the UN and other international
organizations. As such participation and membership will
enhance the prestige of_ Aung San's government with the Burmese
people the US should cordially support British initiative in
securing BurWs membership in the UN and other international
organizations,.
The US should provide upon request limited,technicall
informational and cultural assistance to Burma, including
education in the US for promising Burma students. ?
A further means of strengthening the AFPFL government
Of Burma in view of its present financial difficulties would
be a loan, in particular a dollar loan, from US? or internaT.
tional sources. From both- the Burmese and US points of view
a loan from an international source is preferable. The
Burmans are .jealous of their independence and. suspicious of
strings which may be attached to foreign aid. They would
therefore prefer if possible not to borrow from any nation
which might use the loans as a means of penetration or obtaining
a preferred position, Burmese Communists and the Burmese
Communist press, joined probably by certain other newspapers and
political leaders opposed to the 'PFL, will Certainly condemn
any form Of economic?aid from the US as ndollar imperialism.
A loan from an international source would have the advantage
from the print of view of US policy of obviating, or at least
minimizing, the opportunity for attacks of this sort upon
the US. The US Government should, therefore, Support any
application made by Burma to?the International, Bank for a
loan of reasonable size provided the AFPFL government can
give evidence bf its ability to stabilize the countryls
administration and economy.
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Should it prove impossible for Burma to obtain a loan
from the International Bank',;-- a contingency which seems
unlikely in view of the fact that Burma, given political
stability, appears to be a better "business risk" than many
of the countries currently receiving loans from international
and US sources -- efforts should be made to assist Burma in
obtaining a loan from the Export?Import Bank, and failing
this an, allocation of analogous aid. These alternatives
are, however, considerably less desirable than a loan from
international sources for the reasons indicated above.
In order to better assure that any financial aid will
enable the Burmese economy to adjust itself to present day
conditions with a minimum of delay and, at the same time
contribute to long?range stability of the country, such
program of expenditure should be based upon a maximum of
indigenous initiative. Steps should also be take to enable
Burmans to make appropriate contacts with American suppliers
of machinery and with American technical skill,
V. MAGNITUDE, ANTURE AND TIMING OF THE MEASURES REQUIRED
WITHIN THE NEXT THREE TO FIVE YEARS TO REACH US OBJECT?'
IVES IN BURMA,
The available evidence indicates that Burma will need
a loan of one to two hundred million dollars within the next
three years in order to regain her economic position of 1941.
This loan might be made available in installments as follows:
Total
100,000,000
/50,000,000
First Year Second Year altira.Yeor
50,000,000 37,500,000 12,500,000
75,000,000 50,000,000 25,000,000
Under the provisions of the Fulbright Act, it is anti?
cipated that $200,000 per year, over a period of 20 years,
will be expended in Burma rupees to finance studies, research,
instruction and other educational activities of or for citizens
of Burma in American schools outside of the US and US
possessions.
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The Mundt sill will make possible the appropriation of
US funds for the exchange of students, teachers, trainees,
technical experts; for assistance to schools, libraries,
and community centers in Burma; and, for the dissemination
in Burma of information about the people, institutions and
policies of the United States.
VI. PROBABLP AVAILABILITY OF ECONOMIC AID FROM EXISTING
SOURCES UNDER PRESENT POLICIES.
If a Burmese apPlication for membership in the Interna-
tirnal Bank is successful, Burma should be able to qualify
on economic grounds for a loan from that Bank. liowever, in
the absence of International Bank aid, it is possible that
moderate credits for sound economic projects could be obtained
from the Export-Import Bank. There is virtually no probability
of the successful flotation of securities in the New York
market by the Government of Burma. Several American businessmen
have shown some interest in establising connections with
Burma. Some technical aid' may, therefore, be available to the
BurMans without US Government assistance.
It is unlikely that large US direct credits will be,made
available tr Burma since no case exists for such credits on
political and strategic grounds.
It appears unlikely that the UK will within the next
few years extend any further credit to Burma beyond that
already provided by the May, 1947 financial agreement.
Moreover, in view of the Great Britain's own financial diffi-
culties it seems evident that the US would be the original
source of any loan which the UK might make to Burma. It
is desirEble that any sum lent to Burma of which the origi-
nal source was the US should be made through the agency
of the International Bank or the Export-Import Bank rather
than through the British Government in order that credit
for the loan may be properly placed.
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VII. ADDITIONAL MEASURES REQUIRED FROM THE UNITED STATES.
It is unlikely that any US aid in addition to those
contingent measures diScussed above will be required for
the attainment of US objectives in Burma.
VIII. NATURE OF ARRANGEMENTS WITH THE GOVERNMENT OF BURMA
TO ASSURE THE ACCUMPLISHAENT OF OUR OBJECTIVES IN
TAKING SUCH MEASURES.
On the assumption that all or most of the financial
aid required. by Burma can be secured from the International
Bank, or similar organization-, no special arrangements with
the Government of -Burma appear tO be.required. Any special
arrangements with the Burmese Government should be held to a
minimum in order to avoid, the appearance of encroachment on
Burmese sovereignty,
IX. EFFECTS UPON BURMA AND UPON US FOREIGN POLICY OF US
REFUSAL TO GRANT AID OR FAVOR A PROGRAM UNDERTAKEN.
Failure of Burma to secure substantial loans from the
International Bank or other British and American sources
would probably result in prolonging the present adverse
economic situation in Burma. Failure to remedy the present
situation would be unfavorable to the continuance of the
present regime, and hence to political stability. The per?
petuation of economic distress and the weakening of govern?
mental authority might enable the Communists to increase in
strength, and might eventually result in the appearance
of a Communist?drminated government whose formation would
greatly weaken the position of the US and the UK in Southern
Asia, and give the Soviet Union a base for the propagation of
Communist Ideology in that area,
X. POSSIBLE EMERGENCY SITUATION WHICH SHOULD BE ANTICIPATED
AND RECOMMENDED COURSE OF ACTION OF THE UNITED STATES.
None.
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? 8U112,IARY OF ANALQGatrsAt
PAPER FOR BURMA
' Burma's -pre sent interim government hab in PraCtice virtually
full autonomy, although the British Governor May abbume full
powers in an emergency. The Anti-Fascist people's Freedom League
(AFPFL) holds all portfolios in the 60vernment as a result of
sweeping the. April 1947 elections to the Constituent Assembly.
This party is-mode., ately left of center, the chief opposition
being two communist- parties at least one of which appears to be
in touch with Moscow through the Indian Communist Party.
Communist strength is probably greater .than meager communist
successes in the April. elections would suggest. Moreover, the
necessity for the AFPFL to take strong measures against lawless-
ness, strikes, and non-payment -of rent and taxes may cost it loss
of further popular support which may go to the communists. There
is no party to the right of the AFPFL which has any prospect of
forming a stable government.
Burma' s constituent assembly- is now meeting and is expected
to present 'a constitution ? to the British Parliament. in August..
Burmese economy was completely disrupted by ale War, and the 1947
ipudget, shows a huge deficit in the face of extensive 'reconstruc-
.
tion and rehabilitation needs. Agriculture was least damaged by
the war but loss of cattle, deplorable transport conditions, and
lack of 1..al?r and order in many places cause the present rice export
to be approximately 1/4 of normal. Mineral exports have been
even harder hit by demolition and bombing of refineries, etc.
There is no apparent danger of runaway inflation, but prices have
started to .rise again after falling to about three times the 1941
level. Heavy British loans have been made to bolster the Burmese
economy, Burma's long run prospects for economic'recovery are
excellent as the sources of rice, timber, tin, and tungsten have
not been permanently damaged.
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British efforts to retain Burma as a willing partner within
the Comonwealth have apparently failed and the constituent
assembly will probably insist on complete independence. Britain
may nevertheless retain Burma within its sphere of influence?
There is an increasing tendency among Indians 't regard Burta
as a field for Indian exploitation and an area to be brought within
the Indian ambit. Burmans resent this attitude. BUrmans are also
fearful of Chinese aggression, but China is too distUrbed
internally to be of much immediate concern to Burma.
the surplus property settlement concluded between the United
States and Burma on tlebrUary 28, 1947 provides that the rupee
equivalent of 5,000,000 will be paid over a twenty year period
to the United States Government for buildings and for educational
exchange under the Fulbright Act. Burmans have unofficially
expressed their hope that the United States will support a Burmese
application for a loan from the International Bank.
The United States desires the continuance of Burmats con-
stitutional progress and that the Government and people of Burma
shall understand and cooperate with the policies of the United
States and develop confidence in democratic institutions.
In the absence of any'practicable alternative, the United
States will support, by all appropriate means, existing Govern-
ment. We have agreed to exchange Ambassadors with Burma, and we
shall, support British initiative in -.securing Burmese membership
in the United Nations and to the internatidnal organizations.
Limited technical, informational, and cultural assistance should
be provided by this country. It is preferable, however, that any
-loan should be made by the Internaional Bank although it is
possible that special circumstances may dictate the necessity of
a loan from the Export-Import Bank. Burma appears to need to
borrow at least two to three million dollars for rehabilitation in
the near future. The basic soundness of Burmese economy suggsts.
the possibility Of securing a loan from the International Bank on
strictly economic grounds.
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411
Failure of Burma to secure substantial loans frOm the Inter-
national Bank or other. British or American sources probably would
result in prolonging the present economic situation in Burma with
very serious repercussions in the fields of politics and law and
order. Should the Communist menace become considerably more
apparent than it is at, present or should either India or China
become Communist, it is possible that military equipment) teOhni-
cians, and training for the BurmanS may be called for follawing
the pattern of Greece; Turkey, and Iran. This seems a rather
remote po68ibility at present. -
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