Making It In Mandalay

Sen. John McCain is nothing if not forgiving. While a POW in the Vietnam War he was tortured by Hanoi; now he's leading the effort to fully restore U.S. relations with his former captors. But even McCain balks at being nice to the generals who run neighboring Burma. "These are very bad people," says McCain, who met with Lt. Gen. Khin Nyunt, a key junta leader, on a fact-finding tour of Southeast Asia in April. The general harangued McCain for an hour, then played a videotape showing villagers being beheaded by "communists" wielding machetes. It was Khin Nyunt's blunt way of telling McCain that the regime will not budge on human-rights issues, or release Aung San Suu Kyi, the Burmese dissident kept under house arrest for nearly six years. The regime says that Suu Kyi, a Nobel Peace Prize winner, is merely a front for communist subversives.

Seven years after bloodily crushing a democracy movement, Burma's military junta believes it has beaten the rap-and is thumbing its nose at U.S. economic sanctions. The reason? This long-isolated country, source of most of the heroin flowing into the United States, has become the latest darling of investors in the world's fastest-growing region: East Asia.

McCain, who says he got out of Burma "as fast as I could," is not happy. Nor are human-rights and shareholder activists. They promise to turn Burma, which now calls itself Myanmar, into the South Africa of the '90s, badgering multinationals into boycotting the junta.

It may not work this time. Though most official aid to Burma has been cut off, foreign companies are rushing in. As recently as a year ago, the regime (called the State Law and Order Bestoration Council, or SLORC) showed signs of softening its tough line on human rights. U.S. Bep. Bill Richardson, who met with Suu Kyi in 1994 and successfully pressured SLOBC to negotiate with her, says the generais have grown cocky since foreign money started pouring in. "They said, 'Screw you. We don't need you. If you drop your investments we'll get them from someone else'," Pdehardson said after leaving Bangoon last month.

With its low labor-costs and plentiful natural resources, Burma attracts blue-chip firms. Most are from Japan, Singapore and other Asian nations. But U.S. multinationals such as PepsiCo and Unocal also have jumped in. For decades, nestled like some dystopian Shangri-La between China, India and Thailand, Burma wasted its promise with a policy of economic self-reliance similar to that of North Korea. But since 1992, Burma has followed the single-minded pursuit of economic success seen in other Southeast Asian countries. Foreign direct investment in Burma has mushroomed by more than 10 times since 1992, to $2.6 billion last year. The show-case project is a $1 billion gas pipehne being built by Unocal and its French partner, Total, which will bring in $400 million annually.

All this promises to strengthen the junta. So much of the foreign-investment money is channeled through SLORC that human-rights activists say even the old argument about "constructive engagement" --that economic development promotes political reform-doesn't quite work in Burma. McCain plans to introduce a resolution condemning Suu Kyi's incarceration. Sen. Mitch McConnell, a Kentucky Republican, is drafting a bill that would ban U.S. investment in Burma. "It's estimated that 70 percent of the heroin coming into the U.S. comes from Burma," he says. U.S. drug authorities say the junta's role in that traffic, however, is unclear.

In the surest sign that Burma has become a fashionable target, Hollywood has joined the attack. This summer Columbia Pictures will release "Beyond Rangoon," directed by John Boorman. The film is a powerful re-creation of SLORC's 1988 crackdown, when hundreds, possibly thousands, of students were gunned down. This pressure has started to pay off. Some high-visibility companies like clothesmakers Liz Claiborne and Eddie Bauer have withdrawn from Burma. But --as MeCain, MeConnell and Richardson admit--unilateral U.S. sanctions won't work, and little consensus exists for an international boycott. A Unoeal spokesman insists economic engagement can only help, that the gas pipeline "provides significant benefits to the people of Burma." One thing is certain: the generals will decide which people get them.