PROBABLE DEVELOPMENTS IN BURMA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A008000030001-1
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 23, 2016
• Document Release Date: May 28, 2013
• Sequence Number: 1
• Publication Date: April 10, 1956
• Content Type: NIE

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NIE 6 1-5 6
10 April 1956
-SEeliCsiT
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 61-56
PROBABLE DEVELOPMENTS IN BURMA
Submitted by the
N
is.:1111:
DATE_311/ REV EWER: Q.4.,.
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY commrrrEE
on 10 April 1956. Concurring were the Special Assistant,
Intelligence, Department of State; the Assistant Chief of
Staff, Intelligence, Department of the Army; the Director
of Naval Intelligence; the Director of Intelligence, USAF; and
the Deputy Director for Intelligence, The Joint Staff. The
Atomic Energy Commission Representative to the IAC and the
Assistant Director, Federal Bureau of Investigation, abstained,
the subject being outside of their jurisdiction.
01111CRIr
gm 3
COPY NO. 24
ASSISTANT DIRECTOR.ONE
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CENTRAL INTELLIGENCE AGENCY
DISSEMINATION NOTICE
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June 1953.
WARNING
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wanewerly
TO ALL HOLDERS OF NIE 61-56: PROBABLE DEVELOPMENTS IN BURMA,
published 10 April 1956
The footnote on page 9 of the published estimate should be
corrected to read as follows:
This projection includes a supplementary ar-
rangement with the USSR, signed in April 1956,
which raises Burmese rice exports to the USSR
from 150-300,000 tons to 400,000 tons for each of
the next four years, and a 3-year agreement with
Rumania, signed in February 1956, for around
20,000 tons of rice annually.
CENTRAL INTELLIGENCE AGENCY
4 May 1956
%maw
329
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PROBABLE DEVELOPMENTS IN BURMA
THE PROBLEM
To analyze recent trends in Burma and to estimate probable developments over
the next few years, with particular emphasis on Burma's international orientation.
CONCLUSIONS
1. The political life of Burma is and will
probably continue for the next few years
to be dominated by a handful of leaders
who share a common outlook based on
Marxist economics, Western political
principles, and Burmese nationalism. Al-
though in terms of basic values Burma
identifies itself with the free world, resid-
ual anticolonial sentiment and fear of
provoking Communist China have led it
to adopt a neutralist position. (Paras. 9,
11, 53, 64)
2. Both the current stability and the fu-
ture growth of Burma's economy are
heavily dependent on the export of rice.
The world price of this commodity has
fallen substantially in the last couple of
years and Burma has had difficulty in
marketing its rice. Burma's economic
development will remain limited not
only by the price of rice, but also
by the lack of competent administrators
and trained technicians and by the in-
ternal disturbances which hamper trans-
portation and disrupt agricultural pro-
duction. However, it ?is unlikely that
economic conditions will seriously affect
political stability during the next year
or so. (Paras. 34, 38, 42, 52, 67-68)
3. Although Burma's need for markets
for its rice has provided ,the basis for a
significant expansion in Bloc-Burmese
relations, particularly in the trade and
technical assistance fields, Burma will
almost certainly try to continue to bal-
ance its economic and political relations
between the West and the Bloc. While
trade with the Bloc will account for a
large share of total Burmese trade and
carries potential dangers, Burma's eco-
nomic involvement alone will not, at least
for the next year, be so great as to destroy
Burma's freedom of maneuver. (Paras.
49-50, 70)
4. However, Burma is now a major Bloc
target, and over the longer run there is
danger of a substantial increase in Bloc
influence as a result of economic arrange-
ments already concluded or under nego-
tiation and Burma's likely receptivity to
further Bloc offers of trade and technical
geingrz.
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assistance. Other factors which may in-
crease Burma's vulnerability are: (a) the
probable susceptibility of Burmese stu-
dents and other potential leadership
groups to the current pattern of Commu-
nist propaganda; (b) Communist China's
ability to exert diplomatic or if necessary
military pressures on Burma; and (c)
IJ Nu's apparent belief that he can deal
with the Bloc without losing his freedom
of action. (Paras. 69, 71-73)
5. The extent to which the Communists
realize their potential in Burma will de-
pend in part on the actual economic gains
realized by the Burmese and in part on
2
the skill and restraint with which the
Communists comport themselves; pre-
mature efforts to apply pressure could
result in alarming Burmese leaders. The
Burmese have been disturbed by Com-
munist China's sale of rice to Ceylon, and
this concern would be intensified should
the Bloc re-export increasing amounts of
Burmese rice to traditional Burmese mar-
kets. But to a major extent, Burmese
receptivity to Communist offers and in-
fluence will depend on the ability of
Burma to dispose of its export commodi-
ties, especially rice, in non-Communist
markets. (Paras. 75-77)
DISCUSSION
6. For several years after its peaceful transi-
tion to independence in 1948, the Union of
Burma maintained a precarious and uncertain
existence. Following the assassination in 1947
of Burma's strongest leader and popular na-
tional hero, Aung San, there was danger that
the small leadership group would fall apart in
personal struggles for power. Due to the al-
most complete wartime destruction of Bur-
ma's small modern industrial sector and to the
widespread disorders that hindered agricul-
ture and transport, production fell to less than
half of prewar levels. The ethnic minorities
which constituted one-third of the total popu-
lation of 19 million posed serious problems of
control. Insurgency was rife, and for a time
Communist and other rebel forces frequently
operated within sight of Rangoon.
7. Despite these handicaps and the reluctance
of the strongly nationalist government to seek
major assistance from the West, the govern-
ment has retained its cohesion and has made
steady progress in rehabilitation and internal
security. Although insurgency and chronic
banditry are still serious, the government's
major concern is to develop economic stability.
The failure to dispose of a heavy rice surplus
in traditional non-Communist markets led to
a considerable budget deficit, balance of pay-
ments difficulties, and curtailment of the large
economic development program to which the
leadership had committed itself.
8. These circumstances have provided an
opening for the economic, political, and prop-
aganda tactics of the Bloc. Over the past year,
the Bloc has agreed to take large amounts of
Burmese rice in exchange for Bloc goods and
technical advisors, and Burma is being sub-
jected to various Bloc political and prop-
aganda moves designed to reduce western in-
fluence, to increase the acceptability of Com-
munism, and to prepare the ground for an in-
crease in direct Bloc influence. In this situa-
tion, the key question is the extent to which
Burma will be responsive to Bloc offers and
susceptible to Bloc pressures and propaganda.
I. PRESENT SITUATION
The Political Situation
9. The political life of Burma is dominated by
a handful of top leaders in the Anti-Fascist
People's Freedom League (AFPFL) , the war-
born coalition of nationalists that in 1946
threw off Communist attempts to control it,
in 1947 negotiated the country's independence
and drafted Burma's constitution, and in 1948
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452=Mil 3
formed the provisional government. Since
the first election in 1951-1952, the AFPFL
has enjoyed a parliamentary majority of about
80 percent.
10. The stability of the government since in-
dependence has been made possible not only
by the commanding majority of the AFPFL,
but also by the strength and discipline of its
principal component, the Burma Socialist
Party (BSP) , which controls nearly half of
the seats in parliament. Most of the impor-
tant Burmese political leaders, except Prime
Minister U Nu, are BSP members. Ba Swe,
Minister of Defense and Minister of Mines,
is a member of the party presidium and
leader of the influential Trade Union Congress
(Burma) , which has successfully kept most
union locals from affiliation with the Com-
munist controlled Burma Trade Union Con-
gress. Kyaw Nyein, Minister of Industries
and ofttimes acting Foreign Minister, is the
party's secretary-general and the leading
party theoretician and planner. U Nu, the
most important member of the coalition,
remains the best known and most popular
leader in Burma. His prestige among Bud-
dhist circles and minority peoples has served
to offset some of the distrust which these
groups feel towards the dominant BSP.
11. Most of the AFPFL leaders share a com-
mon outlook based on Marxist economics,
Western political principles, and Burmese
nationalism. They worked together in the
nationalist movement at the University of
Rangoon during the 1930's and through study
groups came to accept Marxist-Socialist ideas
on imperialism and economic development.
However, in large measure because of British
influence and in part by reason of their own
Buddhist heritage, Burmese leaders tended to
reject Leninist-Communist concepts of party
organization and political struggle. Although
the constitution is based on doctrinal socialist
provisions for state ownership or regulation
of most of the economy, Burmese socialism
has in practice resembled the more pragmatic
approach of the British Labor Party. Finally,
the peaceful granting of independence weak-
ened the extremist influence in nationalist
circles. However, anticolonial sentiments con-
tinue to exert a significant influence on for-
eign policy, and have contributed to the
development of neutralist attitudes.
12. The AFPFL has no significant conserva-
tive opposition, and the attitude of the major-
ity of the Burmese toward the government is
one of passive acceptance. The weak and in-
experienced civil administration is gradually
being improved through technical training,
strengthened central control, and the reduc-
tion of insurgency.
13. Administration of the ethnic minorities,
who were given special protection by the Brit-
ish and who fear loss of their cultural identity
in a Burman 1 state, has posed the most serious
political problem. To mitigate the fears of
these groups and to win their loyalty to the
Union the constitution provided special ad-
ministrative regions for the largest of the mi-
nority groups: Shan, Kayah (Karenni) , Ka-
ren, and Kachin States, and the Chin Hills
Special Division (see map) . Moreover, the
constitution gives to the first three of these
states the right to secede from the Union after
January 1958, though the procedure pre-
scribed would be complicated and time con-
suming. The powers of the states are lirriited
to those specifically granted in the constitu-
tion, and the Union Prime Minister appoints
the state executives. In practice, the AFPFL
has been able to insure the protection of na-
tional interests in the minority states by se-
curing the election of acceptable candidates
to important state offices and to the central
parliament.
14. Although there have been personal fric-
tions and differences on tactics, the leaders
generally share the same concepts and beliefs.
Kyaw Nyein has been more inclined to take
a hard line with domestic Communists than
Ba Swe, and is. reported to question some of
U Nu's arrangements with Moscow. There
have also been differences within the coalition
on the pace of economic development, on mi-
nority policies, and on U Nu's lavish use of
1 Throughout this estimate the term Burman is
used to describe the majority ethnic group; the
term Burmese is used to describe all nationals of
the Union of Burma.
algitorpriv.
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$11M109*Pr? 4
government funds to foster a Buddhist revival.
Although these issues are not likely to split
the AFPFL before the national elections sched-
uled for April-May 1956, or even to attain the
level of major intraparty disputes, they could
become significant issues in the future if
economic progress were stalled. They also
provide an opening for possible Communist
efforts to split the coalition.
15. Communism as a political force. The
Communist movement in Burma has been
divided since 1946 into two main factions.
The smaller and less important group?Com-
munist Party, Burma (CPB) ?led by Thakin
Soe, split off at that time over personal and
tactical issues and has since operated pri-
marily as a minor guerrilla movement. The
Burma Communist Party (BCP) , led by Than
Tun, is primarily a guerrilla organization. It
also has links into a legal political front, the
Burma Workers and Peasants Party (BWPP) .
The BWPP membership and the Communist
insurgent groups combined probably number
no more the 10,000. The BCP and the BWPP
have been responsive to the international
Communist line on all important issues.
16. During the prewar period Burma's Com-
munists worked within the nationalist move-
ment and, until Burma entered negotiations
for independence in 1946-1947, nationalist
leaders were generally unaware that the Com-
munist leaders had separate political aspira-
tions. Some of the. key present-day Com-
munists played leading roles in forming the
wartime resistance movement which in 1944
evolved into the AFPFL. Than Tun was the
first secretary-general of the AFPFL, and was
at one time acclaimed by U Nu to be the most
able man in Burma. Nationalist suspicions
were aroused by Communist activities within
the AFPFL, however, and by 1947 all impor-
tant Communist leaders had been expelled.
Following the call to armed insurrection is-
sued by the Communist Asian Youth Confer-
ence in 1948, Than Tun and his BCP went
underground. Communist attempts to over-
throw by violence the anticolonial, newly in-
dependent government had a profoundly dis-
illusioning effect on non-Communist leaders.
Poorly planned and harshly executed attempts
by the Communists to conduct "land reform"
and their continued raiding for supplies alien-
ated much of the peasantry. These tactical
blunders, together with government measures
to safeguard peasant ownership of land and to
improve peasant welfare, and possibly the in-
fluence of Buddhism, have combined to de-
prive the Communist movement of mass
appeal.
17. Although the government has conducted
a continuing campaign against the Commu-
nist insurgents, it has permitted the Commu-
nist-front BWPP to operate as a legal politi-
cal party since its formation in 1950. The
BWPP has an estimated membership of 4,500
and controls several minor peace, cultural,
and labor fronts. It has a nine-man parlia-
mentary delegation. The BWPP is strongest
in Rangoon, where it receives guidance and
support from the Chinese Communist and So-
viet embassies.
18. The Communists also control the Ran-
goon University Students Union and other
student groups throughout Burma. Although
we have no evidence that Communist electoral
successes within the Student Union indicate
more than student protests against specific
situations on the campus, the government is
concerned about Communist influence on the
campus. The BSP students on the campus
have been unable to displace Communist con-
trol of the students' Organization. Because
of the shortage of trained Burmese, students
assume positions of relatively great impor-
tance almost immediately upon graduation.
The Communist line as it develops in the
current phase of Sino-Soviet Bloc tactics may
have a more profound influence on the stu-
dents. Khrushchev's speech at Rangoon
University and his offer to build and staff a
technical institute in Burma are indicative
of Communist efforts to exploit their already
favorable situation among the students.
19. The BCP and the BWPP have been de-
manding a "coalition" government for several
years. In the past few months the BCP has
intensified its efforts to obtain recognition as
a legal party in return for cessation of guer-
rilla activity. These recent maneuvers, which
may have included direct contact with some
"Ows'ai
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AFPFL leaders, are consistent both with the
current Bloc emphasis on united front tactics
and with a realistic appraisal of the diminish-
ing fortunes of the guerrilla movement. The
Communists probably hope to promote a
united front movement and to split the
AFPFL, thus opening the way for eventual
Communist participation in a new coalition
government.
20. The Communist efforts to obtain more
liberal terms for surrender have achieved some
success, but the government still insists that
the insurgents must give up their arms and
renounce the use of force, terms which the
guerrilla leaders have been unwilling to meet.
Although the government's surrender offer ex-
pired March 31 and the government is main-
taining heavier pressure than heretofore on
the Communist guerrillas, it may be willing
to moderate its terms, since U Nu appears to
believe that Communism as a legal political
movement would be less troublesome than the
costly insurrection.
21. Overseas Chinese. The integration into
the Burmese community of the 300,000 Chi-
nese who reside in the country is further
advanced than elsewhere in Southeast Asia,
and the majority of the Chinese appear at
present not to be concerned with politics.
However, the Chinese press in Burma gener-
ally reflects pro-Communist sympathies, and
Communists hold influential positions among
the Chinese organizations in Rangoon and
other cities. Chinese Communists control a
large number of the Chinese schools. In
addition some 4,000 young Chinese have gone
to Communist China to attend school, al-
though the rate of departures has declined
since 1952 following Burmese government
action to deny re-entry.
Problems of Internal Security
22. Communist rebels, minority dissidents,
and Chinese Nationalist irregulars continue
to place a serious burden on government re-
sources, to frustrate rehabilitation and devel-
opment in important areas, and to complicate
Burma's foreign relations. However, insur-
5
gent strength has declined by two-thirds since
1949 and in total probably does not now exceed
15,000.
23. Communist insurgents. Over-all Commu-
nist rebel strength is about 5,500, of which the
3,000-man BCP is the most important group.
Efforts to weld Communist insurgent unity
during the past several years have achieved
only limited success because of personal rival-
ries and doctrinal differences. Although
skilled in guerrilla tactics, the Communist
rebels are handicapped by a paucity of arms
and supplies, and have been dispersed into
small groups by the government forces. They
apparently have not received significant as-
sistance from the Chinese Communists. The
BCP leadership probably has little expectation
of receiving such support during the current
phase of Sino-Soviet tactics.
24. Minority insurgents. Dissatisfaction with
the dominant Burman character and policies
of the National government has produced
armed rebellion among certain ethnic minori-
ties and has prompted rumors that Shan State
and Kayah State, both located in east-central
Burma, may attempt to secede from the Union
in 1958. The Karen National Defense Organi-
zation (KNDO) , with about 4,500 armed men,
is the most important minority insurgent
group. With the passive or active support
of many of the estimated 2,000,000 Karens,
the KNDO has carried on a guerrilla struggle
to attain greater autonomy for the Karen
people. The KNDO has been weakened by
the loss of its major centers, by the disper-
sion of its armed forces, by personal rivalries,
and by discord over the issue of collaboration
with the Communists. However, it continues
to hamper government administration and
economic development in southern and east-
ern Burma.
25. The government also has a difficult task
with the frontier tribesmen who cross the
poorly demarcated boundaries to mingle with
their ethnic kin in Yunnan, Laos, and Thai-
land. The movement of the north Burma
tribes complicates the government's problem
of extending its control over the border areas
which Peiping considers are part of China.
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26. Chinese Nationalist irregulars. After the
Communist victory in China, some 12,000 Chi-
nese Nationalist troops entered Burma under
Nationalist General Li Mi. Following a Bur-
mese appeal to the UN for relief, some 7,000
of these troops were evacuated to Taiwan in
1953-1954 under the auspices of a joint US-
Thai-Chinese Nationalist committee and with
Burmese cooperation. Another 2,000 are in
agricultural settlements in Thailand under
surveillance by the Thai government, and sev-
eral hundred are believed to have crossed into
northern Laos.
27. Burmese military operations against the
remaining 3,000 irregulars who are scattered
in small pockets along the Thai border and
in the southern Shan State have not been
very successful, and the government now ap-
pears willing to negotiate with them. The
Burmese apparently have no objection to the
Chinese staying in their present areas if they
give up their arms, but so far they have
refused to do so.
28. The partial evacuation of Chinese Nation-
alist troops has largely eliminated the once
heated question of US assistance to these
troops as a complicating factor in Burmese-
US relations. Burmese-Thai relations have
also been improved by cooperation along the
border during Burmese army operations
against the Chinese forces. Nevertheless,
their presence in Burma provokes continued
fears of possible Chinese Communist pressures
and of internal meddling by Taiwan and
the US.
29. Security forces. Since 1948 the Burmese
armed forces have been committed almost
entirely to the restoration of internal security.
During the past three years Burmese armed
strength has increased from about 60,000 to
about 78,000 men (including an estimated
60,000 in the army, 14,000 in the National
Union Military Police, about 2,200 in the navy,
and 1,900 in the air force) , but the army still
lacks sufficient strength to mount simultane-
ous offensives against all the insurgent forces
in Burma. Funds allocated to defense have
averaged 30 percent of government expendi-
tures in the past several years, and in fiscal
6
1956 defense funds account' for 35 percent of
the total budget.
30. The morale and prestige of the army have
improved over the past five years largely be-
cause of operational successes which reflect
a greater degree of combat effectiveness.
However, poor training and lack of equip-
ment continue to handicap the army. It has
the capability gradually to reduce the in-
surgent menace, but could offer no serious
resistance to a Chinese Communist invasion.
31. The Burmese navy, with 29 miscellaneous
small ships, is capable only of support opera-
tions in coastal and inland waters. The air
force of 86 aircraft (including 33 old piston
fighters, 16 transports, and 8 jet trainers)
provides fairly effective support to the ground
forces in operations against insurgents.
32. Burma depends almost completely on
foreign sources for its military equipment.
Until 1954 Burma obtained such equipment
entirely from the UK. In that year the Bur-
mese, uneasy at the degree of British influ-
ence implicit in this situation and dissatisfied
with the rate of British deliveries, terminated
the exclusive arrangements. Burma has
since purchased arms from Italy, Switzerland,
Israel, and Yugoslavia, as well as from the
UK. These purchases have further diversified
the arms supply and have complicated train-
ing, maintenance, and operations.
33. The Burmese would like to modernize
their armed forces. However, Burma has in-
sufficient funds to support simultaneously a
major modernization program of its armed
forces and a modest rate of economic develop-
ment. As the government is probably un-
willing to accept a substantial cut-back in its
economic program, Burmese military leaders
are likely to seek arms on a credit or a re-
duced-price basis from the US. If this ap-
proach fails the Burmese may turn to the
Bloc, if necessary using a portion of the
credits accumulating under existing rice
barter agreements for military rather than
consumer goods.
The Economic Situation
34. The Burmese economy fits the general
pattern of an underdeveloped country: agri-
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culture is the primary occupation, the export
of a single commodity ? rice ? provides the
main source of foreign exchange and govern-
ment revenues, and per capita income is well
below $100 per year.
35. Burma suffered heavy damage during
World War II. The rail system was wrecked,
most of the oil installations (including all five
refineries) were destroyed, and the principal
mines which produced lead, zinc, silver, tin,
and wolfram were heavily damaged. Much
rice land reverted to jungle. In the postwar
period, widespread civil strife and banditry
has handicapped efforts to restore transporta-
tion and communications facilities and has
continued to disrupt agricultural production.
Rehabilitation has been further retarded by
the lack of incentive for foreign private capi-
tal.
36. As a result, Burma has not been able to
restore its economy to prewar levels ? the
gross national product of about $1 billion in
19552 was roughly 12 percent below pre-World
War II. Burma's foreign trade, which pro-
vides between 60 and 70 percent of Burma's
central government revenues, was in calendar
1954 still only about two-thirds of the prewar
level. Rice production in 1955 was about 15
percent below the prewar average of 7.4 mil-
lion tons, and the export of 1.6 million tons of
rice was only half what it had been in prewar
years. Moreover, because exports of raw
materials such as timber and minerals have
not been restored, rice now accounts for near-
ly 80 percent of total export earnings com-
pared to a little above 40 percent before the
war.
37. Burma has a considerable potential for
increasing the living standards of its people.
Population density is low (less than one-
fourth that of India and only one-third
greater than that of the US), and population
is increasing at an annual rate of only one
percent. In lower Burma, the principal agri-
cultural area, the land under cultivation
could probably be doubled. Although known
Data series, unless otherwise specified, are based
on the Burmese fiscal year, 1 October-30 Sep-
tember.
7
reserves of minerals and petroleum were seri-
ously depleted in prewar years, geological
formations suggest the existence of undis-
covered subsoil deposits. Timber reserves are
large. Hydroelectric potential is consider-
able. The country has excellent natural har-
bors, extensive inland waterways, and a basic
rail and highway network.
38. However, Burma's ability to exploit its
potential is hampered by the primitive nature
of its economy, a lack of capital and particu-
larly a stringency in foreign exchange re-
sources, a lack of competent administrators
and trained technicians, and continued civil
disorder. Moreover, the bulk of the Burmese
people has by tradition and by temperament
been relatively uninterested in material prog-
ress.
39. Economic development program. In 1952
the government initiated an eight-year $1.6
billion development program. The over-all
goal of the program was to raise Burma's na-
tional product from about $780 million to
about $1,500 million in 1960 in constant
prices. However, the program goals would
raise per capita output only four percent
above prewar levels. Formulated with the
aid of American consultants, the program en-
visaged the development of a more balanced
agricultural economy reinforced by a modest
industrial sector.
40. Increased output was to be sought pri-
marily through investment in agriculture,
mining, and forestry, with supplementary in-
vestment in transport, communication, and
power facilities. Crude petroleum output
was to be only one-third of prewar production,
railways were to equal prewar levels, and pro-
duction in forestry, electric power, and crops
like cotton and peanuts were to exceed prewar
levels. The plan also called for fairly heavy
investment in health, housing, and education,
including technical training. However, the
various parts of the plan have never been
fully coordinated.
41. The government hoped that about a third
of the total planned investment would be
undertaken entirely by private enterprise.
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The government was to be responsible for the
remainder either alone or in partnership with
private enterprise. The government was
counting on its sizeable foreign exchange re-
serve and the earnings of government enter-
prises, particularly the rice monopoly, to pro-
vide its share of investment capital and to
finance necessary imports. Foreign exchange
requirements of the plan were estimated to
be about $575 million over the eight-year
period. The estimates of domestic capital
and foreign exchange resources available to
support the program were based primarily on
the assumption that international rice prices
would remain at about the 1951 level.
42. Burma's economic crisis. In 1953 the
price of rice declined sharply. As a result, the
value of Burma's rice exports fell from $214
million in 1953 to $169 million in 1954. More-
over, even though the volume of rice exports
increased slightly in the latter year, a surplus
of rice began to accumulate as Burmese pro-
duction rose. The volume of exports was
probably less than it might have been because
of the government's reluctance to adjust its
prices to the market.
43. As a result of the sharp decline in export
earnings and a rising level of imports, Burma
in 1954 suffered a balance of payments deficit
of about $87 million, the first since 1948.
Moreover, the steady growth of GNP was
drastically checked.
1951
1952
1953
1954
1955
GNP in
current prices
(US $ millions)
775
858
970
962
1,016 (estimated)
44. The Burmese government, apparently
hoping that the price trend would be reversed
or that substantial foreign capital could be
obtained, took no action until mid-1955 to
reduce nonessential imports or the rate of
domestic investment. Indeed, domestic in-
vestment continued to increase:
1952
1953
1954
1955
Investment as
percentage of GNP
18 percent
19 percent
22 percent
27 percent
8
To maintain this rate, the government re-
sorted to deficit financing, which created a
serious budgetary situation. Government
financial transactions for the first 11 months
of FY 1955 (exclusive of borrowing from the
banking system) showed a deficit of about
$65 million compared with a surplus of about
$29 million for the first 11 months of FY 1954.
Moreover, the government depleted its for-
eign exchange reserves, which fell from $272
million in June 1953 to the critically low level
of $76 million in July 1955.
45. During 1955 and early 1956 the Burmese
government took a series of actions to meet
the foreign exchange crisis. For immediate
relief it: (a) negotiated with India a $42
million-equivalent rupee credit, convertible
into sterling; (b) obtained from the Interna-
tional Monetary Fund a $15 million foreign
exchange credit; (c) concluded negotiations
with the US for $21 million in surplus agri-
cultural products under PL 480; and (d) re-
duced consumer goods imports. Burma is
negotiating with the IBRD for loans of
$21-24 million covering a series of projects,
and some of this assistance is likely to mate-
rialize this year. Burmese officials have also
approached the US for loans.
46. In addition, under the terms of the 1954
reparation agreement with Japan, Burma will
receive some $20 million worth of goods in
each of the next ten years. The Japanese
have also agreed to invest up to $50 million
in joint undertakings in which the Burmese
are to have a 60 percent interest. To improve
its internal finances the Burmese government
has, in the 1956 budget, reduced the invest-
ment item to about one-third below the 1955
level, and has raised excise taxes.
47. The Burmese government has given some
encouragement to domestic and foreign pri-
vate investment. Except in the sectors re-
served for public ownership, the government
will give a ten-year guarantee against nation-
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alization, equitable compensation in the event
of nationalization after the agreed period,
permission to remit current earnings and
repatriate investment, and other privileges.
With respect to foreign private investment,
the government appears to be interested pri-
marily in joint ventures on an operating
contract basis. Most significant instances of
private participation thus far are in joint
ventures for the exploitation of lead, silver,
zinc, and petroleum.
48. Burma has also taken action to increase
the quantity and quality of its agricultural
production and to develop new markets. It
has made plans to obtain Israeli and Soviet
agricultural advisors, and is seeking techni-
cal assistance from the International Bank.
Most importantly, the government took steps
to ease its rice surplus situation and its
foreign exchange shortage by the conclusion
of government-to-government barter agree-
ments. In addition to agreements with Yugo-
slavia, Israel, Indonesia, Japan, and India,
major deals were concluded with the Sino-
Soviet Bloc. However, Burma in March 1956
still had a surplus of some 600,000 tons of rice.
49. Economic relations with the Communist
Bloc. Beginning in November 1954, Burma
entered into a series of barter agreements with
Communist China, the USSR, East Gerpany,
Czechoslovakia, Poland, and Hungary. As a
result, Burmese exports to the Bloc, which
had previously averaged about one percent of
Burma's total trade, and most of which went
to Communist China:, rose during calendar
1955 to around $45 million, or almost 20
percent of total Burmese exports. If all
agreements with the Bloc which have been
concluded or are pending are fully imple-
mented, Burma's annual rate of exports to the
Bloc could reach a level of $70-90 million, or
equivalent to a quarter to one-third of
Burma's estimated 1956 exports.3
This projection includes a supplementary ar-
rangement with the USSR, signed in April 1956,
which raises Burmese rice exports to the USSR
from 150-300,000 tons to 400,000 tons for each of
the next four years, and a 3-year agreement with
Rumania, signed in February 1956, for around
20000 tons of rice annually.
9
50. These deals with the Bloc have substan-
tially boosted the immediate prospects for
the export of rice, but the total gain to Burma
is not yet clear. Some skepticism has been
voiced in Burma over the quality, price, and
delivery schedules of Bloc goods. Moreover,
since the Bloc countries offered capital equip-
ment and the services of technicians in re-
turn for the rice, the Burmese are having to
modify various programs to fit the types and
kinds of Bloc equipment available to them.
Concern is also felt regarding the re-export
of rice to Burma's traditional markets.
51. Burma's economic prospects. The volume
of production in all fields on which statistical
information is available has been climbing
steadily since 1950, and there are a number
of factors which favor continued economic
progress. These include a steady growth of
fixed capital formation, some recognition that
private enterprise or investment has a role
to play, employment of skilled foreign tech-
nical advisors, the gradual training of Bur-
mese technicians, increasing experience in
management, the Japanese reparations agree-
ments, and the financial assistance which is
available or probably will be forthcoming
from India, the United States, and the IBRD.
52. However, there are a number of obstacles
to continued economic progress: continued
insurgency in many parts of the country, and
the lack of experienced government officials,
capable managers for industrial enterprise,
and skilled workers. Finally, Burma's eco-
nomic progress will remain dependent on the
export of rice at a time when the world
market price for rice remains depressed.
Foreign Relations
53. In terms of basic values, Burma remains
oriented toward the free world and the West,
but a fear of provoking Communist China,
and residual anticolonial sentiment, have led
to the adoption of a foreign policy position in-
dependent of the major power blocs. Although
the AFPFL leadership is united on the basic
objectives of Burma's foreign policy, its direc-
tion and moralistic tone are often attributable
to Prime Minister U Nu. He has increasingly
sought an active role in world affairs, in the
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belief that Burma can act as a mediator be-
tween the great powers. His apparent will-
ingness to accept Sino-Soviet pledges at face
value while questioning the motives of the
Western powers frequently has led U Nu to
take positions favorable to the Bloc. Within
the past year, moreover, Burma's economic
difficulties have provided the basis for a sig-
nificant expansion in Bloc-Burmese relations.
54. Relations with the West. Because inde-
pendence was achieved without violence,
Burma's anticolonialism has lacked the viru-
lence exhibited in some former colonies. The
majority of Burmese prefer the democratic
system as developed in the West, and several
Burmese have publicly described the Soviet
system as a new form of imperialism. Bur-
mese-British relations, in particular, have
been cordial and the Burmese government
gives a respectful hearing to official British
opinions.
-55. All Burmese state scholars and virtually
all private students (except overseas Chinese)
going abroad for study still go to the US or
to other free nations. The great majority of
printed and visual information media are non-
Communist in nature. The government sanc-
tions the anti-Communist publishing program
of the Burma Translation Society, and several
of the lay Buddhist societies have anti-Com-
munist overtones. Some responsible officials
frequently reiterate a preference for Western
rather than Bloc economic and technical as-
sistance, were it possible to pay for it with
surplus rice and to avoid political commit-
ments.
56. Anticolonialist attitudes persist, nonethe-
less, and to a considerable degree the United
States has inherited Britain's former position
as the principal "imperialist" threat. While
no responsible Burmese suspects the US of
coveting Burmese territory, there has in the
past been considerable apprehension lest
Burma and other weak nations fall victim to
some new and perhaps unintended form of
economic imperialism. Moreover, US-Bur-
mese relations have been strained by the activ-
ities of the Chinese Nationalist irregulars, and
more recently by US sales of rice in Asian mar-
kets. The Burmese are critical of the US
10
position on such matters as trade controls,
Taiwan, and disarmament, and they feel that
US policy in general is too inflexible and too
narrowly centered on the military aspects of
the Communist threat. The Burmese also
fear that too close alignment with the US or
the West might provoke Communist China
or lead to involvement in war. These fears
and irritants account in large measure for
Burma's reluctance to undertake not only the
pledges required in US legislation but even im-
plied political commitments in return for the
receipt of economic and military assistance.
57. Despite these complications, the Burmese
recognize the need for good relations with the
US. Although Burma felt obliged to cancel
the US technical assistance program in 1953
when it brought the Chinese Nationalist
troops issue to the UN, the government re-
tained private US firms to fulfill some of the
projects. Under appropriate conditions, the
Burmese would probably like to obtain US
arms and economic and technical assistance.
58. Relations with non-Communist Asian
states. Since independence, Burmese-Indian
relations have been close, and Burma's inter-
national policy has been similar to that of
India. Burma's ties with other Asian neigh-
bors were slow to develop, but the increased
importance of these relations has been re-
flected in membership in the Arab-Asian
group in the UN, planning of the Bandung
Conference, and participation in the Colombo
Plan. In addition, Burma was the prime
mover in staging the Sixth World Buddhist
Council in Rangoon, and in organizing the
Asian Socialist Conference. Past relations
with Thailand and the Philippines have been
minimal, due to the feeling that these coun-
tries were tied too closely with the US, and,
in the case of Thailand, because of the long
history of conflict. Relations with Thailand
have improved greatly during the past year,
but Burma has no interest in following Thai-
land into such direct relationships with the
US as SEATO provides.
59. Despite the bitterness caused by wartime
occupation and destruction, Burmese-Japa-
nese relations have developed on an increas-
ingly friendly basis since the conclusion of a
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841.101111Wm 11
reparations agreement in September 1954.
The Burmese appear to welcome Japanese par-
ticipation in Burma's economic development.
60. Relations with the Bloc. Burma was the
first non-Communist nation to extend recog-
nition to the Peiping regime, acting from a
combination of: (a) fear of possible encroach-
ment by a powerful neighbor which histori-
cally had shown expansionist tendencies
whenever unified and strong; (b) vicarious
pride in the emergence of a strong Asian na-
tion; and (c) distaste for the Chinese Nation-
alist government. Since 1952, relations with
Communist China have grown steadily closer.
Burmese interest and admiration has been
aroused by the Chinese Communist economic
development program, and Burmese distaste
for the ruthlessness of Chinese methods is
tempered by an uneasy awe of Chinese mate-
rial accomplishments. A series of cultural,
religious, and athletic missions have been
exchanged, a major bilateral trade agreement
was signed in April 1954, and U Nu made an
official visit to Peiping in December 1954.
Burma favors the admission of Communist
China to the UN and during the past year has
publicly supported Peiping's claims to Taiwan.
61. As a result of U Nu's visit to Peiping, the
large Chinese Communist embassy staff in
Rangoon has been supplemented by a consu-
late at Lashio, which could further facilitate
Chinese contacts with Burmese Communists
as well as with Overseas Chinese. The re-
opening of the Burma road and agreements
on postal facilities and air transport will in-
crease direct contact and permit Chinese
flights into Burma. The 1955 renewal of the
trade agreement again permits Chinese Com-
munist purchases of commodities which, if
shipped, could create a barrier to US assist-
ance through conflicts with provisions of the
Battle Act.
62. Chinese governments have long claimed ?
at least through official maps ? considerable
territory the Burmese consider theirs, and the
agreement concluded during U Nu's visit to
Peiping in 1954 called for negotiations to set-
tle these boundary questions. If these nego-
tiations eventuate, Burma's stand on the
border issue may provide a test of Burmese
readiness to resist Chinese Communist en-
croachment.
63. Until the past year, Burmese-Soviet rela-
tions had not been close. Although the USSR
recognized Burma soon after independence,
the official line followed by most Communist
parties until 1951-1952 was that the Burmese
government was a surviving "tool of the im-
perialists." However, in July 1955 a barter
agreement was concluded in which the USSR
agreed to exchange industrial equipment for
surplus Burmese rice. Soon afterwards Bloc
leaders began to praise Burma for its inde-
pendent status and its posture of neutrality.
The growing rapprochement was highlighted
by an exchange of visits ? U Nu journeying
to Moscow in October and Khrushchev and
Bulganin touring Burma for nine days in De-
cember. In the joint communiques issued in
conjunction with these visits, Burma endorsed
many of the major themes in Soviet propa-
ganda, and agreements were made for Burma
to obtain. Soviet technical assistance, in addi-
tion to capital equipment, in exchange for its
rice.
II. PROBABLE DEVELOPMENTS
Internal Developments
64. The AFPFL will almost certainly win the
elections in the spring of 1956 with a large
majority because of its control of the election
machinery, the lack of an effective opposition,
and the general acceptance of AFPFL policies.
The new government will probably again be a
broad coalition, and U Nu will probably re-
main as Prime Minister because of his national
prestige and because he serves as a unifying
force in the AFPFL. It is possible that the
Socialists will feel themselves well enough
organized to form a government which did not
include U Nu. Such a development, however,
would probably not result in major changes in
Burma's domestic and foreign policies.
65. The BWPP may increase its representation
slightly in the parliament, but its over-all
position will probably not be greatly strength-
ened in the short run by the increase in
Burmese-Bloc relations. The organizational
strength of the BWPP would be improved if
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12
the BCP guerrilla cadres should obtain an
amnesty. The Communist insurgents are un-
likely to accept present terms for surrender,
but will continue to maneuver for a cease-fire
on terms that provide them some credit for
making peace and some provision for resum-
ing overt political activity.
66. Ethnic minority dissatisfaction with gov-
ernment policies will continue, but the gov-
ernment will probably be successful in
preventing secession. The strength of the in-
surgents will probably be further weakened,
but dissident and bandit activity will continue
to place a heavy burden on government
finances and to hamper economic develop-
ment.
67. During the next year or so Burma will
confront the same economic problems that
have impeded its progress for the last two
years. At the same time, it will probably have
larger resources at its disposal, chiefly from
deliveries under Sino-Soviet commitments and
assistance from non-Communist sources. Bal-
ance of payments and fiscal problems will
continue as long as the price of rice remains
depressed and the availability of other export
commodities does not materially increase.
Production from new projects will not begin
to save significant amounts of foreign ex-
change for at least the next two or three years.
To carry out even its recently curtailed devel-
opment program, Burma will have to be suc-
cessful in disposing of its increasing rice
production. Unless free world markets in-
crease substantially, Burma will remain sus-
ceptible to Bloc barter agreements. Burma
will probably receive sizeable amounts of aid
from the US and UN agencies, and may draw
upon a large credit from India and from Japa-
nese reparations. The government is unlikely
further to relax current restrictions on for-
eign private capital.
68. It is unlikely that economic conditions in
themselves will affect internal stability during
the next year or so. The increase in national
output is expected to continue at a sufficiently
high rate to permit a steady growth in per
capita consumption. Judging by the general
apathy of the population thus far towards
government economic policies, it is unlikely
that the state of the economy will become a
popular political issue.
Probable Trends in Burma's Orientation
69. Burma is now a major target of Bloc
efforts to extend its influence by political,
economic, and psychological means. During
the short run, the Bloc will probably attempt
only to reinforce Burma's tendency to adopt
positions similar to the Communists on cer-
tain international issues and to establish con-
ditions favorable to the increase of Commu-
nist influence within Burma. In the long
term, Bloc leaders may hope to reduce Burma
to a virtual captive of the Bloc through a
combination of economic pressures and united
front maneuvers, which could be reinforced
at any time by the application of military
threats along Burma's long frontier with
China.
70. During the next year or two Burma, de-
spite Bloc tactics, will almost certainly try
to continue to balance its economic and po-
litical relations between the West and the
Bloc. There will probably be no important
internal pressures for closer political align-
ment with the Bloc, and Burma will continue
to have a variety of economic ties with the
West and non-Communist Asian countries,
including the Japanese reparations agree-
ment, the US PL 480 program, the Colombo
Plan, and the sale of rice in traditional mar-
kets. On the other hand, Burma's economic
relations with the Bloc will probably increase,
and Bloc trade may account for 30 percent of
total Burmese trade. While trade of this
magnitude with the Bloc carries potential
dangers, the Burmese government will con-
tinue to have room to maneuver to avoid Bloc
political pressures for at least the next year.
71. However, in the longer run the situation
in Burma, combined with Bloc capabilities,
offers the Bloc important advantages in pur-
suit of its long-range objectives. Because of
its political organization, the Bloc can negoti-
ate economic agreements quickly. It offers
long term credits at low interest rates, and
can accept agricultural and other raw ma-
terials in payment for capital goods or as
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7111MIPirr" 13
service on credits. It is able to exploit
Burma's anticolonial sentiments and desire
to remain free of foreign entanglements by
offering economic arrangements on the basis
of "mutual self-help" with "no strings
attached." Burmese receptivity to Bloc offers
has been increased by the continuing decline
in the world market price for rice, the com-
plexities of economic negotiations with the
US, and the disposition of some Burmese
leaders to take Bloc assurances at face value
while remaining distrustful of Western in-
tentions.
72. If the Bloc exercises skill and restraint,
and if non-Communist markets for Burmese
rice do not expand, the situation favors a con-
siderable growth of Communist influence in
Burma. Economic commitments already
made will tend to increase Burmese-Bloc eco-
nomic intercourse. Accordingly, Burma is
likely to become dependent on the Bloc in
many instances for maintenance and repair,
supplies, and servicing. There will probably
be a relatively heavy influx of technicians and
experts accompanying this equipment, assist-
ing in agricultural development, and staffing
the new technical institute. To some extent
these people will encroach on the area in
which non-Bloc assistance is being or may be
offered.
73. In the resulting atmosphere of increased
goodwill towards the Bloc, the BWPP might
be strengthened by adding BCP cadres and
by luring additional independents and some
socialists into a new opposition group. The
appeal of Communism, and particularly the
attraction of Communist methods of building
an industrial economy, would probably in-
crease among students. Direct Communist
influence in the government would probably
be increased.
74. If the Bloc were able to convince the
Burmese that it should accept a large credit
in order to accelerate its economic develop-
ment, the Bloc's opportunity for exercising
influence in Burma would expand significant-
ly. Such credits in addition to the existent
level of trade with the Bloc would orient the
Burmese economy toward the Bloc on a long
term basis, and Western influence would be
sharply curtailed.
75. However, there are also obstacles to the
success of Bloc tactics in Burma. There is
no significant political pressure on the govern-
ment to drop its present pay-as-you-go policy
on development, and, unless it does so, Burma
is unlikely to increase greatly its present de-
gree of economic dependence on the Bloc.
Burmese economic ties with the West are
substantial; Burma's leaders have no desire
to become economic dependents of any bloc;
and Burma will prefer to export to the maxi-
mum extent possible to markets where it can
earn convertible currencies. Despite in-
creases in economic and cultural relations
with the Bloc, Burmese nationalism, Bud-
dhism, and memories of past Communist in-
trigues will tend to discourage the develop-
ment of a strong domestic Communist move-
ment.
76. The actual course of events in Burma will
also be influenced by a number of contingen-
cies, particularly Communist conduct and
Western courses of action. Communist pros-
pects would be adversely affected if Bloc
representatives appeared to meddle in domes-
tic Burmese affairs or if the Bloc moved too
soon to extract concessions. Kyaw Nyein and
important army leaders are believed to be con-
cerned that Burma is already too dependent
on the Bloc. Sharp increases in Bloc influ-
ence might lead them to pressure U Nu for a
change or even to remove him. Burmese
vigilance would also be increased by Chinese
Communist aid to dissident or Overseas Chi-
nese elements in Burma, or by excessive Chi-
nese claims during boundary negotiations.
Moreover, Burmese distrust of the Commu-
nists would also be stimulated by clear-cut
Communist aggression in Laos, and possibly
Vietnam or even Taiwan.
77. Communist prospects would also be af-
fected adversely if Bloc economic performance
falls seriously short of expectations, or if Bur-
mese economic relations with the non-Com-
munist countries expanded significantly. The
delivery schedules and quality of Bloc capital
4511Namme
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rfeZer' 14
goods may suffer in comparison with Western been disturbed by Communist China's sale
performance. Communist China has already of rice to Ceylon, and this concern would be
evidenced difficulty in providing more than intensified should the Bloc re-export increas-
nonessential consumer goods in return for ing amounts of Burmese rice to traditional
Burmese rice and rubber. The Burmese have Burmese markets.
146Nemeal
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Declassified and Approved For Release 2013/05/28: CIA-RDP79R01012A008000030001-1
Declassified and Approved For Release 2013/05/28: CIA-RDP79R01012A008000030001-1
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Declassified and Approved For Release 2013/05/28: CIA-RDP79R01012A008000030001-1