In 1988, Myanmar abandoned the socialist path which, with its nationalisation and Burmanisation of the economy, had brought the country close to economic ruin. Since then, private enterprise has been encouraged, a liberal investment code established and there has been increase of trade, tourism and foreign investments. The process of economic reform seems irreversible.

However, economic performance has been below expectations for a country which claims to have abandoned socialism in favour of market economics more than five years ago, so much so that some analysts doubt that Myanmar has really come out of its economic stagnation. Vietnam, which embarked on its doi moi (reform) programme only a couple of years earlier, has done much better. For instance, foreign investments committed to Myanmar in financial year 1992–93 amounted to US$900 million (provisional figure) while over US$4 billion were committed to Vietnam in 1993.

Most of the investments to Myanmar are in extractive sectors like mining, forestry and fisheries, or in tourismrelated projects like hotels. Foreign investors are reluctant to put their money into substantial fixed capital with longterm returns.

Vietnam's GDP has grown by an annual average rate of 4.4 per cent since 1986, compared with Myanmar's 0.5 per cent over the same period, and 4.8 per cent since 1988 compared with Myanmar's 1.5 per cent.

The explanation for this state of Myanmar's economic affairs lies not in the economics but in the politics of the country. Myanmar has not yet found a way out of the impasse it got itself into in 1988 when civilian opposition confronted the military regime resulting in violence, many deaths and the suspension of economic aid by the leading western powers and Japan.

The general elections in 1990 were supposed to resolve this impasse and produce a civilian government. But they did not because the pro-military political party, the National Unity Party, won only ten of the seats in the proposed 491-seat legislature while Aung San Suu Kyi's opposition National League for Democracy (NLD), espousing liberal democracy, won 392. It is not clear whether the military rulers had miscalculated or were forced by circumstances in 1988 to promise elections. Perhaps both.