The changes underway in Burma are so dramatic that it is hard to assess the situation clearly.  Here is a quick attempt.

Some history

The UK granted Burma independence in 1948.  It became a parliamentary democracy, and was considered to be the South East Asia country with the brightest future.  Under British rule, it had been the wealthiest country in Southeast Asia, was the world's largest exporter of rice, produced 75 per cent of the world's teak, and had a highly literate population.

The military took over in 1958.  A military coup followed in 1962, whose government pursued an extreme policy of internal socialism and external isolationism.  A popular uprising in 1988 brought to power a new group of generals who wanted to abandon these policies.  They held an election in 1990 which was won by Aung San Suu Kyi's party (the National League for Democracy -- NLD).  She was placed under house arrest, the election results were disavowed, and the country's name was changed to Myanmar in 1989.

The US and most other Western countries imposed sanctions.  Most neighboring Asian countries pursued a policy of engagement, especially China which developed very close economic and political ties.  Burma was brought into ASEAN in 1997.

Elections were held on 7 November 2010, but the NLD refused to participate.  A nominally civilian president, Thein Sein, was appointed -- he is in fact a former general.  Surprisingly, he has had a wide-sweeping reform agenda, including the release of some political prisoners, preliminary peace agreements with some armed ethnic groups, anti-corruption campaign, exchange rate reform, opening up to foreign investment, a reduction in media censorship, and constitutional changes to allow registration of political parties and leaders from the opposition.  Aung San Suu Kyi was freed from house arrest on 13 November 2010.  Notwithstanding these impressive measures, economic reform has greatly lagged political reform.

The NLD then stood in by-elections in April this year, in which it won 43 of 45 seats, including one seat by Aung San Suu Kyi.  She has been permitted to travel to an international conference in Thailand and made a trip to Europe where she was finally able to personally accept her 1991 Nobel Peace Prize.

Western countries have responded very quickly with promises to lift sanctions.  US Secretary of State Hillary Clinton visited Burma in December 2011, and the US government has just nominated Derek Mitchell as American Ambassador.

Why the dramatic changes after all this time?

It seems clear that the Burmese regime has wanted to reassert some independence from China which has been virtually colonizing parts of the country through its investment and infrastructure projects, notably the Myitsone hydroelectric project which has recently been suspended.  Burmese public opinion had been reacting very adversely to the Chinese presence.

The ASEAN countries had been holding out an olive branch to Burma in terms of ASEAN presidency in 2014 and trade and investment relationships.  Consistent with their own experiences, they were pushing more for economic liberalization than political liberalization.

The US Obama administration also changed tack towards a pragmatic engagement path -- by offering the re-establishment of links, and re-newed access to World Bank and Asian Development Bank resources.  The US has been motivated to reduce Chinese influence in Burma, and is also concerned about its links with North Korea, which may be exporting advanced military technology to Burma.

And lastly, the generals may have been worried that their days were numbered.  Repressed populations the world over are becoming increasingly aware of prosperity in their neighboring countries.  Thus, a pre-emptive liberalization and opening up was the best way of saving their personal skins.

What is the state of the economy?

The Burmese economy is in an appalling state due to pervasive government controls, and inefficient economic policy.  Burma's GDP per capita in 2009 was only $399, barely more than $1 a day, which makes it the lowest of all countries in the Asia-Pacific, even lower than North Korea and Afghanistan (in purchasing power parity terms it is around $1000).  The government estimates that about 33 per cent of the population live in poverty.  Similarly, according to a multidimensional poverty index, 32 per cent of the population are estimated to be poor, with the most important deprivations being for nutrition, years of schooling, school attendance, and drinking water.  Rural poverty is three times that of urban poverty.

Another sign of Burma's backwardness is that about half its GDP still comes from the agricultural sector, the highest of all Asia-Pacific countries, and 70 per cent of the population is employed in agriculture (as development proceeds, countries usually see a relative decline in their agricultural sector in tandem with industrialization and the rise of their service sectors).  Consistent with this, Burma has a low rate of urbanization -- 34 per cent of its population live in urban areas (up from 25 per cent, twenty years ago).

Burma has managed an average annual economic growth of more than 10 per cent over the past decade, and more than 5 per cent in the past three years.  (These figures are, like most data concerning Burma, highly questionable, and most likely overstated.)  Over the past two decades, exports have grown strongly, rising from 5 to 35 per cent of GDP.

Burma's major trading partners are Thailand (30 per cent), China (29 per cent), Singapore (8 per cent), India (8 per cent), Korea (4 per cent), Japan (4 per cent), Malaysia (4 per cent) and Indonesia (2 per cent).  Burma's main exports are natural gas, wood products, pulses and bean, fish, rice, clothing, and jade and gems.  Foreign investment comes from China, Singapore, Korea, India and Thailand.

Burma's exploitation of resources -- especially natural gas, mining and timber -- has not benefited the population at large.  Wealth from these developments has been concentrated in the hands of an elite group of military leaders and business associates.  In fact, local populations have suffered through the environmental damage and human rights abuses associated with these developments.

One controversial project has been brought to international attention by the NGO Earth Rights International.  It claims that the France-based Total and US-based Chevron are currently partnered with the Burmese military regime in a remote corner of southern Burma on the Yadana Gas Project.  This large scale project transports natural gas from the Andaman Sea across Burma’s Tenasserim region to Thailand, where it generates electricity for the Bangkok metropolitan area.  From the project’s beginning, the Burmese Army has allegedly provided security for the companies and the pipeline and has committed widespread and systematic human rights abuses against local people.  Abuses include: extra-judicial killings, torture and other forms of ill-treatment; widespread and systematic forced labour; and violations of the rights to freedom of movement and property.

In addition, the Yadana Project has been a significant factor in keeping the Burmese military regime financially solvent.  Rather than contribute to Burma’s development, the project has generated $5 billion dollars in revenues for the Burmese government, thereby contributing to high-level corruption.  The revenue is not accounted for in Burma’s national budget and is allegedly stored in two offshore banks in Singapore.  The project also has adverse environmental impacts.

The country's rulers have also depended on the sale of precious stones, such as rubies, sapphires, pearls and jade, to fund their regime.  Rubies are the biggest earner, with 90 per cent of the world's rubies coming from Burma, whose red stones are prized for their purity and hue.  Thailand buys the majority of the country's gems.

What are the prospects for Burma?

There is much international excitement about the dramatic changes in Burma.  The international community is now rushing to provide support, and foreign investors are lining up to invest in the country's rich natural resources (arable land, forestry, minerals, natural gas, and freshwater and marine resources), and take advantage of its strategic location between India, China and South East Asia, and of its large population of about 60 million people.

We must however be careful about rushing to a very optimistic assessment.  There is a whole history of corruption and mismanagement to be undone, and it is unclear how much reform and change is actually taking place.  For example, the government has just reprimanded Aung San Suu Kyi for referring to her country as Burma, rather than Myanmar, and she was also scolded for comments at a conference in Thailand that international business men should avoid reckless optimism about Burma, and be aware of the pitfalls that her country still holds for investors.  And even the big surge in foreign investment is pushing up the exchange rate and adversely affecting traditional exports.

Burma has very poor infrastructure, very low levels of human capital (life expectancy is only in the mid-60s), and telephone and Internet penetration is extremely low.  In terms of economic freedom, the Heritage Foundation ranks Burma 173rd in the world, just ahead of the ghastly cases of Venezuala, Eritrea, Libya, Cuba, Zimbabwe and North Korea.  The Fund for Peace similarly ranks Burma among the world's very worst countries on its Failed States Index.  According to Transparency International, Burma is the third most corrupt country in the world, just ahead of North Korea and Somalia, and equal with Afghanistan.  In this context, in 2010-11, state assets -- especially real estate -- was transfered to military families under the guise of a privatization policy.

The country is an ethnic mosaic of Burman, Shan, Karen, Rakhine, Chinese, Indian, Mon and other groups.  They have never learned to live together, and the government has for a long time been guilty of some of the worst human rights abuses.  It has been referred to as the Yugoslavia of Southeast Asia.  In particular, there is the Rohingya ethnic group, which has lived in Burma for generations, but whose 800,000 members are not recognized as citizens, are virtually stateless, and suffer from great discrimination..

According to Amnesty International, despite the limited political and economic reforms, human rights violations and violations of international humanitarian law in ethnic minority areas increased over the past year.  Forced displacement reached its highest level in a decade, and reports of forced labour their highest level in several years. Authorities maintained restrictions on freedom of religion and belief, and perpetrators of human rights violations went unpunished. Despite releasing at least 313 political prisoners during the year, authorities continued to arrest such people, further violating their rights by subjecting them to ill-treatment and poor prison conditions.

According to the US State Department, Burma is a global hot spot for human trafficking:

"Burma is a source country for men, women, and children who are subjected to forced labor and for women and children subjected to sex trafficking in other countries. Many Burmese men, women, and children who migrate for work in Thailand, Malaysia, China, Bangladesh, India, and South Korea are subjected to conditions of forced labor or sex trafficking in these countries. Poor economic conditions within Burma have led to increased legal and illegal migration of Burmese men, women, and children throughout East Asia and to destinations in the Middle East, where they are subject to forced labor and sex trafficking. For example, men are subjected to forced labor in the fishing and construction industries abroad. ... The government is beginning to address the systemic political and economic factors that cause many Burmese to seek employment through both legal and illegal means in neighboring countries, where some become victims of trafficking.

Trafficking within Burma both by government officials and private actors continues to be a significant problem. Military personnel and insurgent militia engage in the unlawful conscription of child soldiers and they continue to be the leading perpetrators of forced labor inside the country, particularly in conflict-prone ethnic areas. Since the dissolution of a ceasefire with the Kachin Independence Army in June 2011, fighting has displaced an estimated 60,000 Kachin residents, who are highly vulnerable to forced labor and sex trafficking."

Burma has been described by Australian National University professor Desmond Ball as “the largest narcotic state in the world” when you combine the production of opium (it is the world’s second largest opium producer, after Afghanistan) with the production of methamphetamines, of which Myanmar is probably the largest in the world.  He claims that while the central government has been working on transforming cease-fires into permanent peace deals with the many ethnic insurgent armies throughout the country, Myanmar’s drug production has actually been increasing since many cease-fires were originally inked.  The drugs are mostly produced in the north and northeast, in regions controlled by ethnic armies, particularly the United Wa State Army — the dominant narcotrafficking organization in the region.

Ball argues that Myanmar military units are closely involved in the shipping of the drugs out of the country and into Thailand and Laos, where the army units help move the drugs past checkpoints and ensure security from raids by Thai forces and DEA units that work with them.  The trouble is, as the government has made cease-fire deals with the ethnic armies, it has actually allowed the ethnic groups more freedom to expand their operations and work with the military, without worrying that the government is going to take action against them.

Burma is exposed to a range of frequently occurring natural disasters.  Its coastal regions are exposed to cyclones, tropical storms, storm surges, and tsunamis. Rain-fall induced flooding is a recurring phenomenon across the country. The whole country is at risk from earth quakes, droughts, and fires, while the country's hilly regions are also exposed to land slide risks. Less frequent events include tornadoes, thunderstorms and heat waves. Historical data indicates that between 1996 and 2005, urban fires constituted about 70% of disaster events, followed by floods (11%); storms (10%) and others (9%) including earthquakes, tsunamis, and landslides.  More recent major disasters have included the 2004 tsunamis, the 2005 landslides in the mountainous region, and Cyclone Mala in 2006.

However, Cyclone Nargis was by far the most devastating natural disaster in the country's history, and has brought to fore the extreme vulnerability, in particular of the country's coastal regions, to such low-frequency but high impact natural hazards.  Cyclone Nargis struck Myanmar on 2nd and 3rd May 2008, sweeping through the Ayeyarwady delta region and some townships in Yangon Division including Yangon City with winds up to 200 km per hour. Almost 7.1 million people were affected. It had taken its toll of household and farm assets and certain human lives, with a total of (77,738) casualties, (55,917) still missing and (19,359) injured in the major rice and livestock farming and fishing communities, residing in the fertile delta region depending on agriculture as their main livelihood.

Concluding comments

One can only rejoice at the great changes now taking place in Burma.  For the long-suffering Burmese people, it is difficult to imagine their lives becoming worse.  But, it is similarly difficult to imagine a rapid path of economic development, such as that launched in Korea half a century ago, and in Vietnam a couple of decades ago.  Burma suffers from too many curses -- natural resources, ethnic divisions, entrenched organized crime, natural disasters, external partners who are clammering for influence, and a regime that may not really be serious about reform.

We can only hope that we are wrong.