Aid, Foreign

   (Official Development Assistance).

   After Burma became independent in 1948, it accepted aid from both Western and socialist nations, reflecting its policy of nonaligned neutrality. This included P.L. 480 grants from the United States; Japanese war reparations (which were not strictly aid, but constituted the largest early source of development assistance, a total of US$250 million between 1955 and 1965 and an additional US$140 million in "quasi-reparations" that were paid out until the early 1970s); assistance from the People's Republic of China and India; and loans and grants from Russia (the Soviet Union) and its Eastern European allies, including such projects as construction of Rangoon (Yangon) Institute of Technology and the Inya Lake Hotel. Aid flows were affected by political developments: In 1953, the government of U Nu terminated an aid agreement with the United States because of the Central Intelligence Agency's involvement with Kuomintang (Guomindang) forces in Shan State; in 1967, Beijing halted aid following Anti-Chinese Riots.

   After Ne Win established the Revolutionary Council in 1962, aid was drastically reduced, with the important exception of Japanese war reparations and United Nations programs. However, the failure of socialist self-reliance to promote economic development led to a change in the regime's attitude toward foreign aid in the 1970s, at a time when it was promoting limited economic reform. In 1976, a donors' consortium, the Burma Aid Group, was established, consisting of Japan, the World Bank, the Asian Development Bank, West Germany, France, Great Britain, the United States, and others. Allocations from major donor countries increased greatly in the late 1970s, with Japan and West Germany the largest and second-largest bilateral (nation-to-nation) donors, respectively. Their assistance was mostly in the form of concessional loans denominated in yen and deutschmarks. Washington provided support for the Ne Win regime's drug-eradication program, selling Burma helicopters to be used to interdict cross-border drug trafficking. Total bilateral and multilateral aid allocations grew from US$22.9 million in 1970 to US$450.6 in 1988. But foreign debt piled up, reaching US$4.5-5 billion in the late 1980s; the government, unable to meet debt service obligations, sought and received Least Developed Country status from the United Nations in 1987.

   In the wake of 1988's Democracy Summer, major donors halted flows of aid to protest human rights violations, and these sanctions remained in place through the early 21st century, due in part to the refusal of the State Law and Order Restoration Council/State Peace and Development Council to recognize the results of the General Election of May 27, 1990. After establishing formal diplomatic ties with the new military regime in February 1989, however, Japan resumed some aid projects and offered the SLORC debt relief grants.

   Western nations have given grants for humanitarian purposes, and China has emerged as an increasingly important aid donor. But in contrast to the 1976-1988 period, when the Ne Win regime became heavily dependent on official development assistance to fund internal investment, the post-1988 military regime's principal source of hard currency has been the sale of natural resources to neighboring countries and inflows of foreign private investment.

   See also Economy and Economic Policy, Burma Socialist Programme Party Era; Economy and Economic Policy, State Law and Order Restoration Council / State Peace and Development Council Era