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C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000861 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS; 
PACOM FOR FPA 
TREASURY FOR OASIA:SCHUN 
 
E.O. 12958: DECL: 09/11/2017 
TAGS: EFIN ECON PGOV IMF BM
SUBJECT: IMF PERSPECTIVES ON GOB ECONOMIC DECISIONMAKING 
 
REF: A. RANGOON 859 
 
     ¶B. RANGOON 838 
     ¶C. RANGOON 749 
 
RANGOON 00000861  001.2 OF 003 
 
 
Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 
 
¶1.  (C) Summary.  The IMF team, during its Article IV 
consultations August 22-September 24, observed that all 
economic decisions, including the August 15 fuel price hike, 
are made at the top, with some input from the Ministries. 
The GOB ministries are highly compartmentalized, and economic 
recommendations follow suit.  Directors often fail to request 
the advice of the technocrats before making recommendations 
to the Ministers, and Ministers do not consult with other 
Ministers before taking their recommendations to the Senior 
Generals.  The IMF also learned that some economic proposals 
are made by an advisory committee appointed by the Prime 
Minister.  Decisions on monetary policy are not made by the 
Central Bank, but rather by top level officials.  The IMF, 
finding that many working-level officials lack technical 
capacity, plans to provide technical assistance to government 
officials to help future decision making processes.  End 
Summary. 
 
A Working Level View 
-------------------- 
 
¶2.  (C) During the August 22-September 4 IMF Article IV 
consultations, the IMF/World Bank team traveled to Nai Pyi 
Taw to meet with the Burmese Minister of Finance, the Central 
Bank Governor, and working level officials from the 
Ministries of Finance, Agriculture, Oil and Gas, and Planning 
and Development, among others (Reftel A).  Prior to their 
departure to Nai Pyi Taw, the IMF team asked foreign embassy 
officials to explain how economic decisions are made now that 
Prime Minister Soe Win, who showed an interest in economic 
issues, is no longer in Burma.  The Malaysian Ambassador 
commented that he doubted any of the senior generals had any 
interest in economic affairs since the Prime Minister's 
departure.  Economic decisions, he opined, are made by Than 
Shwe alone, even when Soe Win was around.  Econoff explained 
that the top brass keeps trained economists on staff, not to 
formulate a coherent economic program, but rather to 
legitimize the government's unsound economic policies. 
Because the generals dismiss their economic recommendations, 
many trained economists refuse to assist the GOB.  Indian DCM 
Manoj Bharti confirmed that all economic decisions are made 
at the top, with little input from those who actually 
understand economics. 
 
¶3.  (C) Leslie Teo, IMF Deputy Division Chief for 
Asia/Pacific, told foreign mission officials on September 4 
that that the Ministries in Nai Pyi Taw were even more 
compartmentalized than last year.  Ministry offices are 
insulated and government officials are cut off from other 
officials.  The situation makes coordination in policy making 
virtually impossible. 
 
¶4.  (C) While in Nai Pyi Taw, working level bureaucrats 
explained to the IMF the various hierarchical ways that the 
government makes economic decisions.  More often than not, 
senior generals make decisions with no input from the 
Ministries.  Instead they just demand the Ministries 
implement the policies.  One technocrat cited the recent fuel 
price hike (Reftel C) as a clear example.  The IMF also 
learned that at times, the top generals ask the Ministries 
for advice on issues.  In those instances, Ministers will ask 
directors for recommendations on issues.  On those rare 
occasions when their advice is requested, directors 
habitually fail to consult working-level officials, who often 
have some knowledge, before proposing solutions to the 
 
RANGOON 00000861  002.2 OF 003 
 
 
Minister.  Ministers rarely consult with other Ministers 
before proposing ideas to the Senior Generals.  The IMF also 
gleaned that some economic recommendations are made by an 
advisory committee appointed by the Prime Minister.  Those 
recommendations get forwarded to the senior level for any 
decision. 
 
¶5.  (C)  Teo noted that the IMF primarily met with 
working-level officials in Nai Pyi Taw, although the team 
also saw the Minister of Finance and the Central Bank 
governor.  One IMF team member told Econoff that the Minister 
of Finance was "not impressive and did not grasp many of the 
IMF's recommendations."  Unlike last year, the team did not 
meet with the Prime Minister, who is dying in Singapore, nor 
were they granted a meeting with the Acting Prime Minister 
Thein Sein.  After meeting with the working-level officials 
and assessing their capabilities, Teo opined that one reason 
why decisions are made without technocrats' input may be 
because many of them lack technical skills and competence. 
 
Central Bank Worsens the Problem 
-------------------------------- 
 
¶6. (C)  Ake Lonnberg, IMF Senior Financial Sector Expert, 
told us that the Central Bank, which lacks operation 
autonomy, also faces a crisis in decision making.  The 
Central Bank is not accountable for monetary policy, and the 
IMF doubts whether there is any monetary policy at all. 
According to the Central Bank law, the Central Bank is 
responsible for maintaining internal monetary stability 
(i.e., controlling inflation) and maintaining external 
monetary stability by assuring a stable exchange rate. 
Lonnberg pointed out that the multiple exchange rate system 
provides no stability and inflation is more than 30 percent, 
showing the Central Bank's poor performance.  Another 
problem, he asserted, is that the Central Bank, on the orders 
from the senior generals, finances the budget deficit by 
printing money, thereby fueling inflation. 
 
Is Technical Assistance Valuable? 
--------------------------------- 
 
¶7.  (C) While the new Central Bank governor and vice governor 
showed an interest in monetary policy, they, like other 
government economic officials, lack the technical skills to 
do their jobs.  In every meeting, officials requested IMF 
support, prompting the IMF to propose that it will provide 
technical assistance to government officials in the hope that 
it will improve future decision-making.  Teo asked foreign 
missions whether this technical assistance would be valuable. 
 The Malaysian economic officer noted that Malaysia provides 
technical assistance, offering government officials 
scholarships to visit Malaysia to learn how that government 
functions.  A Singaporean official noted that, in conjunction 
with ASEAN, the Embassy maintains a training center in 
Rangoon, bringing in speakers to train the Burmese government 
in the areas of trade negotiations, public speaking, and 
information technology.  Both the Malaysian and Singaporean 
officials noted that they receive positive feedback on their 
programs, but are unable to judge their effectiveness.  The 
Indian DCM commented that IMF assistance would help develop 
the Burmese civil service and provide them opportunities for 
open discussions.  Businessmen, however, warned that the 
current Senior General listened to no one, so doubted the 
technical skills could be applied as long as he alone made 
all the decisions. 
 
Comment 
------- 
 
¶8.  (C) The generals' economic power cannot be separated from 
 
RANGOON 00000861  003.2 OF 003 
 
 
their political power.  Over the last forty-five years, the 
regime has built an elaborate system of patronage where the 
generals and their military-owned enterprises dominate every 
profitable natural resource industry and profit-making 
enterprise.  True economic reform would require the 
dismantlement of this elaborate structure, threatening their 
powerbase.  That is why the civil servants have no authority 
to make economic decisions or enact IMF recommended changes. 
But the lack of economic skills at the working level is 
worrisome, as these same technocrats will likely be called 
upon to make economic policy in a political transition. 
Technical assistance from the IMF and other organizations 
would help prepare these officials for the day when the 
Senior General no longer controls the economy, and expose 
them to modern concepts of transparency and accountability, 
as well as sources of advice.  So the question becomes 
whether it is better to begin preparing for a transition, or 
waiting until after the transition begins but risking 
economic turmoil until a new generation of technocrats can be 
trained. 
VILLAROSA