The fuel-price protests of August 2007

On 15 August 2007, the Myanmar authorities significantly increased the retail price of fuel by up to 500 per cent. The extent of the price increases, compounded by the fact that no advance warning was given, resulted in a significant shock to livelihoods. This in turn led to rare expressions of dissent and acts of civil disobedience on the part of the population. This section looks at Myanmar’s fuel policy, and explores the reasons why the regime felt confident in instituting such sharp, unannounced price increases. It also explores the evolving nature of political opposition in Myanmar, which can help shed some light on the reasons why the regime might have been taken by surprise by the public reaction to the price rises.

Myanmar fuel policy

Like a number of other developing countries, Myanmar has a tradition of heavily subsidising fuel prices. In 2004, before the current series of price increases, retail fuel prices in Myanmar were the cheapest in the region (and among the cheapest in the world), at US4 cents a litre for diesel and 4.4¢ for petrol. To give some idea of the extent of subsidisation implied by such prices, consider that this was less than one-sixth of the cost of unrefined crude oil on international markets at that time.[3] Such prices are all the more striking given that Myanmar has very limited domestic refining capacity and thus has to import refined fuel products.

In comparison, during the same period, retail fuel prices in Thailand (which also had small fuel subsidies) were 37¢ a litre for diesel and 54¢ a litre for petrol. Even in Indonesia, which at the time was heavily subsidising fuel, the prices were 18¢ a litre for diesel and 27¢ a litre for petrol (Metschies 2005).

The role of the black market

In 1980, Myanmar introduced a rationing system, with a limit of 60 gallons (273 litres) per vehicle per month. This immediately created a black market for fuel, with vehicle owners selling their excess to brokers, who sold it in turn to taxi drivers and others who exceeded their quotas, or in some cases smuggled it to neighbouring countries. By 2005, the black-market price had reached 67¢ a litre for diesel and 44¢ a litre for petrol. A number of private-sector bus lines began to convert their engines to run on cheaper compressed natural gas, with the encouragement of the authorities.

Given the large fiscal deficits Myanmar was running, it is hardly surprising that successive World Bank and International Monetary Fund (IMF) missions recommended that fuel and other subsidies be reduced and in due course eliminated. By 2005, with increasingly high world oil prices and a continued depreciation in the market value of the kyat against the dollar, the high level of fuel subsidies had become impossible for the Myanmar authorities to sustain.

The October 2005 price rises

On 20 October 2005, the government dramatically increased fuel prices. Diesel prices rose from 160 to 1500 kyat per imperial gallon (from 2.8 to 26¢ a litre) and petrol prices from 180 to 1500 kyat (from 3.2 to 26¢ a litre). This represented an increase of more than 900 per cent in the price of diesel, the main fuel used for the transport of goods to market and for the ubiquitous small electric generators.

The result was that private bus lines immediately quadrupled their fares, taxi charges doubled and the fares on state-run buses increased sixfold. The knock-on effects of increased fuel costs were reflected in the prices of basic commodities, which jumped 10 to 20 per cent within a week (probably in part as a result of stockpiling by consumers and speculation by traders). Prices then continued to rise gradually as the effects of higher fuel costs filtered through.

The Myanmar authorities made no attempt to prepare the ground for the increase in fuel prices and issued no public statements in advance. Public information was limited to small notices pasted on the pumps at official government outlets on the day before the price increases took effect. The contrast with expert recommendations on how such price rises should be implemented is obvious but nonetheless striking:

Fuel policies that are rational in the long run may meet emotional opposition when they are implemented at short notice…Therefore careful strategic planning is needed. The reaction of target groups must be considered and financial and economic arguments have to be prepared as part of public awareness campaigns in the mass media…Fuel price increases should never exceed 10 per cent of the pump price at any time in real terms. (Metschies 2005:82)

Such price increases were all the more bold given the events in Indonesia earlier that month. Barely three weeks before, in a move that had been voted through parliament and explained to the public in advance, Indonesia introduced a cap on government spending for fuel subsidies, causing retail fuel prices to rise by (a comparatively modest) 120 per cent. This sparked a wave of angry demonstrations across the country.

Given what had just happened in Indonesia (and the fact that fuel-price increases had been the spark for the 1998 riots that led to the overthrow of the Suharto regime), such sharp and essentially unannounced price increases suggested either a failure on the part of the Myanmar authorities to consider the implications of such a move, or an extreme level of confidence in their ability to control popular unrest. While the ad hoc and sometimes bizarre nature of economic decision making in Myanmar makes it possible to believe that the decision to raise fuel prices was taken without any thought being given to the socioeconomic impact, the security obsession of the regime makes it harder to contemplate that the security implications would not have been considered. This suggests that the regime was extremely confident in its ability to keep a lid on any unrest. Indeed, despite their immediate and significant impacts on transport costs and commodity prices, the 2005 fuel-price increases prompted no public reaction at all.

Why a different reaction this time?

On 15 August 2007, diesel prices were increased from 1500 to 3000 kyat per imperial gallon (from 25 to 51¢ a litre) and petrol prices from 1500 to 2500 kyat (from 25 to 42¢ a litre). In addition, prices for compressed natural gas, increasingly used by buses and taxis as well as for cooking, were increased by 500 per cent.

The absence of any public protest in October 2005 would have reinforced the regime’s belief that it was in firm control of the situation, and could explain why it felt confident about repeating the step, this time with no advance public information of any kind.[4] Although the impact of the price rises was very similar this time—an immediate, sharp increase in public transport costs and a (fairly small) spike in the price of some basic commodities—the public reaction was very different. In order to understand why, it is necessary to examine what has changed in the intervening two years. Two key factors can be identified.

The first factor is economic. Across Myanmar, impoverishment is increasing, with ever-larger proportions of the population unable to meet their basic needs. In the past several years, wages have failed to keep pace with high inflation. The huge increase in the price of fuel in October 2005 certainly contributed to this. On 1 April 2006, the government dramatically increased salaries for public-sector employees, by up to 1000 per cent. While this move—undoubtedly financed in part by the earlier reduction in fuel subsidies—reversed years of gradual erosion in the real value of government salaries, it was itself highly inflationary. The worst hit were the poorest segments of the population, such as day labourers, who did not benefit from the government salary hike and who were in a weak position to demand higher wages. This same group was the most seriously and quickly affected by the second round of fuel-price increases in August 2007, given that they lived in the poorer townships on the outskirts of Yangon and therefore had to travel relatively long distances to work,[5] and because, as daily wage earners, they spent a large proportion of their income on basic commodities (rice, cooking oil), which they often purchased daily.

The second factor is political. The house arrest of Daw Aung San Suu Kyi since 2003, and her inability to meet or even communicate with the National League for Democracy (NLD), has been a significant blow to the party. The NLD Central Executive Committee has become increasingly cautious and politically reactive (to the frustration of many rank-and-file party members), issuing statements but avoiding political mobilisation and action. This vacuum has been gradually filled by the emergence of two new kinds of political actor.

  • The ‘social activists’: individuals or small groups who, since 2006, have been airing grievances about high prices and the socioeconomic situation more generally, but who have deliberately avoided more political issues such as governance or the release of Daw Aung San Suu Kyi. They have staged public demonstrations, but until now the regime has been reluctant to crack down hard, perhaps fearful of sparking wider unrest.[6] One group of social activists formed the Myanmar Development Committee in early 2007.

  • The ’88 Generation Students Group: these former student activists were released from jail in late 2004. Initially careful to avoid rearrest, they maintained a relatively low profile and concentrated on re-establishing contacts and acquainting themselves with the current situation in the country (several had been in solitary confinement for more than 15 years). It was only in August 2006 that they formally established the ’88 Generation Students Group, and it was the subsequent arrest of several of its key leaders that prompted the network to embark on a series of protest campaigns, first for the release of the leaders (which was obtained in January 2007) and then on a range of social issues with the aim to ‘give people access to political actions’.[7]

The fuel-price increases in October 2005 came at a time when neither of these elements had fully emerged. By August 2007, however, both groups were mobilised and had been testing these issues, and so were well placed to quickly give public voice to popular discontent about the price increases.

On the Sunday after the price increases, several dozen people, including prominent ’88 Generation leaders, marched through downtown Yangon in protest. Two days later, as small sporadic protests continued, the ’88 Generation leaders and a number of other prominent activists were arrested. During the week, more than 100 people were taken into custody.[8] There were indications that these arrests were more than a temporary measure to take the steam out of the protests. First, the number and range of people arrested were indicative of a broader crackdown. Second, the security forces searched the residences of those who were arrested, seizing documents and computers, presumably to be used as evidence in building a legal case against them. (State media published detailed allegations against the ’88 Generation leaders the next day in an effort to justify the arrests.)

Despite the many arrests, including almost the entire leadership of the ’88 Generation Students Group,[9] demonstrations continued through the next week, which were reported heavily internationally. The reality on the ground was much less dramatic than the impression conveyed by the media; the demonstrations were rather small and did not appear to be particularly broad based (with bystanders generally sympathetic, but not participating actively). The government responded to these demonstrations not by deploying the riot police (Lone Htein) or the army, but with Swan Arr Shin—a militia comprising mainly hired civilians (some reportedly released convicts), apparently under the control of the regime’s mass organisation, the Union Solidarity and Development Association (USDA).

Although the demonstrations were very persistent, by the end of August it appeared that they were losing momentum. The protest leaders were unable to galvanise broader public participation behind their demonstrations and the authorities continued deploying civilian militias (the Swan Arr Shin) to quickly break up any gatherings of activists. What happened next was unexpected.

[3] At the end of 2004, subsidised retail rates for diesel and petrol in Myanmar were 160 and 180 kyat per imperial gallon, respectively. An imperial gallon is equivalent to 4.55 litres. At that time, the ‘market’ exchange rate was about 900 kyat to the US dollar. Crude oil was about $US43 a barrel (a barrel = 159 litres).

[4] In the wake of the fuel-price increases, the only explanation the authorities offered was on 26 August in some comments from the Myanmar ambassador in Manila—clearly more for international than domestic consumption. Ambassador Thaung Tun told The Associated Press on the sidelines of a regional ministers meeting in the Philippine capital that Myanmar could no longer afford to subsidise fuel so heavily because of the steep increases in oil prices worldwide (International Herald Tribune 2007).

[5] Indeed, after the most recent fuel-price hikes, there have been reports of workers either walking long distances to work (for up to three hours) rather than taking the bus or sleeping on the streets of Yangon at night because they cannot afford the bus fare home. The government quickly intervened to force a reduction in bus fares in Yangon, and UN data suggest that wages for day labourers have been rising.

[6] One such group started a demonstration near a market in downtown Yangon in February 2007 with shouts of ‘Long live Than Shwe!’, before calling for lower commodity prices and more reliable electricity supply.

[7] ’88 Generation leader Min Ko Naing in an interview with Irrawaddy magazine, 30 April 2007.

[8] A list of names of those arrested was quickly circulated by the Thai-based Assistance Association for Political Prisoners.

[9] The only prominent member to avoid arrest at the time was Htay Kywe, who went into hiding; he was eventually arrested on 12 October.