By Stephen Brookes in Rangoon
For Newsweek  

They marched into the Yangon stadium with military precision -- armies of dancing children in brilliantly-colored costumes, marching bands in tight formation, troupes of glittering dancers waving flags through the morning air. As a team of parachutists dropped from the sky with a banner proclaiming the official opening of Visit Myanmar Year, more than 4,000 young women rose from their seats holding colored cards that read, in huge letters across the stadium, "Enjoy Your Stay in Myanmar."


                                                                                                           Stephen BrookesThere was only one problem -- out of the tens of thousands of people watching the November 18 spectacle, only a tiny fraction were tourists. And to one foreign diplomat in the crowd, that said a lot about Myanmar's military government.  "This was a display they put on for the domestic audience," he said. "They want to impress the outside world, but their message is aimed primarily at their own people."

That may be key to understanding where Myanmar, also known as Burma, is headed. The authoritarian State Law and Order Restoration Council that took power in 1988 is opening up to the world , but has been unable to win the hearts and minds of the people it governs.

No matter how hard it tries -- with giant billboards proclaiming its virtues, vicious attacks against "destructionists" in the press and self-promoting extravaganzas like the one for Visit Myanmar Year -- it remains widely unpopular. "They keep ordering us to like them," says Maung Zaw, 26, an office worker in Yangon. "But I don't know many people who do."

That uneasy tension between rulers and ruled is unlikely to end soon. If elections were held tomorrow, few doubt that they would be won in a landslide by the opposition National League for Democracy and its charismatic leader, Aung San Suu Kyi.

That's what happened in 1990, when the NLD won some 80 percent of the vote in the country's first election since 1960. When it tallied the results, the ruling SLORC took its loss badly. Not only did it ignore the results, it threw most of the NLD leadership into jail; Suu Kyi, who had been placed under house arrest in 1989, was kept there for six years.   

With the opposition squelched, the SLORC started on an aggressive program to modernize the country. It ended the isolationist "Burmese Way to Socialism" of the previous three decades, put the country on the fast track to a market economy and launched a range of diplomatic overtures to the outside world. It also started drawing up a new constitution for what it says will be a multi-party democratic system.

But few in Myanmar believe the SLORC's claim that it is only a transitional government. "They're ensuring a role for the military in any future government," says one diplomat in Yangon. "It doesn't sound like they have immediate plans to go back to the barracks."

Nevertheless, even its detractors admit that the regime has been a dramatic improvement over the previous military government. The SLORC has quelled most of the country's ethnic insurgent groups, and economic growth has been surging at over seven percent a year.

That's created hundreds of thousands of new jobs and a tangible sense of progress, as Yangon's skyline lurches upward with new hotels, office buildings and apartment blocks. Once-scarce consumer goods are everywhere now, and the streets are jammed with cars.

"Forty years ago, everyone thought this country would be the center of South East Asia -- it had the location, the natural resources, the legal framework, everything," says Pat James, an American business consultant in Yangon. "All that was stifled during the socialist regime, but now it's coming back to life -- and the momentum is incredible."

Having spotted Myanmar as Asia's next hot market, investors and traders are racing in with dollars in their hands -- US$4 billion so far, according to government figures -- building everything from amusement parks to a US$1.2 billion gas pipeline project.

But major roadblocks remain. A vast and inflexible bureaucracy makes business difficult, corruption is pervasive and roads, power facilities and communications are primitive, when they exist at all. Inflation has been running at an unruly 20 percent, and hard currency reserves are so low that imports of many non-essential goods have been banned since last July.

"We get a lot of businessmen coming in to look around," said the representative of one large Japanese bank in Yangon. "But when they see the problems, only a few decide to stay."

The government's most difficult hurdle, however, may be political. Dogged by charges of human rights abuses, including the widespread use of forced labor, the SLORC is under international pressure to open talks with the opposition. But it has responded by clamping down on the NLD and accusing its members of being stooges of foreign "neo-colonialists", and political tensions have risen steadily over the past year -- exploding into violence on November 9, when a mob apparently organized by the government attacked Suu Kyi's motorcade.

The result has been an angry war of wills, in which neither side trusts the other --  nor seems to be able to defeat, outflank, ignore or engage the other, either.

Suu Kyi has the popularity that eludes the SLORC, while the military holds the power that Suu Kyi needs if she intends to be more than just a figurehead. Is a compromise possible?

Observers in Yangon doubt it, noting that the SLORC is militarily and economically stronger now than it has ever been, and has no need to back down. The NLD, meanwhile, has become too weak to force SLORC to the bargaining table, and Suu Kyi's only real political card is her call for international sanctions. But that card may not be enough to win the game.

"This country was totally shut off from the world for 26 years, and they know they can always do it again and survive," says one Asian businessman in Yangon. "If they think that they need to clamp down on the NLD or arrest Aung San Suu Kyi, then they will -- no matter what the outside world thinks."

In fact, many in Yangon believe that, no matter how popular Suu Kyi may remain, time is on the military's side. Investment is picking up, prosperity is spreading, and while few people love the SLORC, most appear to be willing to live with it as long as the economy continues to improve.

"The biggest danger the SLORC faces right now is itself," says one Myanmar businessman and former political prisoner. "It has started modernizing the country, and things are changing fast. The question now is -- can the SLORC keep up with its own changes?"