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Devotees pray at Myanmar's holiest Buddhist site, the Shweddagon Pagoda in Rangoon.

Adam Dean for The Globe and Mail

The Rangoon Auto Salon is pulsing. Three dozen of Myanmar's rich and powerful have put their muscle cars and SUVs on display for the invitation-only event, held outside a nightclub where a bottle of foreign liquor costs more than the average monthly salary.

As night falls, the city's young and beautiful come to gawk at the automobiles and drink and dance in a parking lot lit by their headlights.

My invitation came from a slickly dressed, 27-year-old, Australian-educated Myanmarese who introduced himself as Neil at another nightclub two nights earlier. Throwing his arm around my shoulders and pouring me a large glass of Raspberry Absolut Vodka from the bottle on his reserved table at the edge of the dance floor, he promised that he could get me "anything I want."

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"Pick any girl here," he said. "I can give her to you." He had ecstasy too, at $5 a pill.

The auto show is fenced off and access is strictly controlled to keep the peering masses - most of whom get around either on bicycles or ancient Toyotas and Ladas held together by electric tape and hope - away from the gleaming Land Cruisers and Mercedes. Young women in tight, red bodysuits look somewhere between bored and angry as they lean on the vehicles for the benefit of the car aficionados' cameras.

Owning one of these vehicles is a declaration that you come from the tiny clique that is the sanctions-busting elite in the country formerly known as Burma - either rich enough to afford to get around the rules or powerful enough not to need to.

The street price of a new Land Cruiser with all the "transaction fees" paid (the costs of importing the vehicle, in violation of sanctions, and paying for it via accounts in other countries) is in the neighbourhood of $160,000, more than double the sticker price in Canada.

The utility of the sanctions that Canada, the United States, the European Union and Australia have imposed since 1988 is now coming into question. Myanmar is deeply mired in poverty, with its military rulers arguably just as entrenched now as they were 23 years ago.

Even the leader of the country's pro-democracy movement, Nobel Peace Prize laureate Aung San Suu Kyi, has in the past wondered aloud whether the trade and travel restrictions imposed to help her cause haven't done more harm than good - although she's standing by them for now, as she proved in an interview with me on Friday. (See sidebar.)

What is clear is that a clutch of generals, oligarchs and their children have become wildly rich.

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On the edge of Rangoon, a sprawling 18-hole golf course with two stucco-walled clubhouses and a matching private hospital sits cheek to jowl with a slum of homes made of thatched wood and corrugated tin. Walls have been erected to spare golfers the sight of the poverty next door.

About 400 kilometres to the north, Naypyidaw, the generals' new capital, is still under construction on previously deserted scrubland. The junta has never said how much it expected to spend building the city, now home to an estimated 900,000 people, though far fewer seem actually to live there.

The International Monetary Fund estimates that 1 to 2 per cent of the country's gross domestic product has been spent on Naypyidaw each year since construction began in 2005. In contrast, this country - gripped by high rates of malaria, HIV/AIDS and dengue fever - dedicates just 0.5 per cent to its battered and dysfunctional health-care system.

Such grim statistics are plentiful. Myanmar is ranked the second most-corrupt country in the world, better than only Somalia. Among Asian countries, only Afghanistan is poorer on a per-capita basis. Once the world's top exporter of rice, Myanmar is now fighting an annual battle to avoid food shortages. More than 10 per cent of children die before the age of 5.

The situation is worsened by what one aid worker recently called an informal "aid boycott" by Western countries, with Canada among the most reticent to give, despite Myanmar's multitude of humanitarian needs.

Remembering when sanctions were romantic - and effective

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It's startling to find myself here, questioning sanctions now, since as a teenager in the distant suburbs of Ottawa I was militant about the need to fight the military government in the country I knew as Burma.

Having fallen in love from afar (like many Westerners) with the beauty and nobility of Aung San Suu Kyi and her cause, I would curse the ignorance of anyone I saw drinking a can of Pepsi, which then had bottling operations in Myanmar.

Ahead of holiday weekends at the cottage, I would root through my friends' shopping carts, imploring them not to buy Pepsi, 7-Up, Frito-Lays, KFC or Taco Bell (brands then owned by PepsiCo). The Lady had called for a boycott, and I was her storm trooper in my local grocery store.

We were granted a small victory in 1997, when Pepsi withdrew from Myanmar. But 14 years later it's plain and painful to see that we accomplished nothing more. (Pepsi, for the record, is easy to find here now, though not so commonplace as Coca-Cola.)

Yet in Western capitals, and among Myanmar's large population of political exiles, it's as if there were nothing to debate. It's still vividly remembered that tough international sanctions, over a long time, helped to bring an end to apartheid in South Africa. To drop them now on Myanmar, as Ms. Suu Kyi and others say, would be to reward Senior General Than Shwe and his underlings for despicable behaviour.

The junta still refuses to honour the 1990 election victory by Ms. Suu Kyi and her National League for Democracy (NLD). The military crushed student demonstrations in 1988 and 1996, and proved its bloody-mindedness again as recently as 2007, when it resorted to force to quell the monk-led Saffron Revolution.

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"Without the sanctions, the people of Burma would still be miserable and the generals would be much happier. They'd be much richer and would have no accountability at all," says Soe Aung, a member of the Forum for Democracy in Burma, a Thailand-based exile organization.

But during my two-week trip in Myanmar, I have seen few signs that the generals and their coterie are feeling the pain.

If anything, the sanctions have created a class of super-affluent Myanmarese, nearly all of them affiliated with the junta, who made their fortunes through sanctions-busting.

For example, to get that Land Cruiser, the buyer must pay for an official import licence and other taxes before the sale takes place outside Myanmar - often paid for via accounts in Singapore - and a middle person drives the car over the border from Thailand and delivers it. All along the way, the junta, its cronies and their associates abroad take their cuts.

"No one who understands transaction costs would support sanctions," says Nay Win Maung, director of Myanmar Egress, an independent civil-society organization based in Rangoon. "Sanctions affect the grassroots. It's an empirical reality."

Unlike Myanmar, South Africa didn't have neighbours such as China, Thailand, Singapore and India, which have flouted the sanctions almost since the beginning.

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Late last month, the Association of Southeast Asian Nations (ASEAN) made its position even plainer, calling for sanctions to be lifted "to ensure that economic development in Myanmar can take place."

Thanks to these neighbours, Myanmar's elites aren't suffering. The shelves at CityMart, a high-end chain of supermarkets with locations around Rangoon, are stocked with French and Australian wines, Chinese snacks, L'Oréal makeup, Gillette razors and Alpo dog food.

But few ordinary Myanmarese have ever walked the store's air-conditioned aisles.

"Look at what's in the shops: If you have the money, it's there," says a Western businesswoman who asks not to be named. She says Western investment would actually improve the human-rights situation by introducing practices such as environmental-impact assessments and labour standards that firms from China and ASEAN aren't known for.

"You can talk about economic mismanagement if you want, but the foreign investment that is coming in employs people."

Right now, the country generates most of its cash by selling its abundant natural resources - gas, wood, gems and rice. But the money from resource exports never trickles down. No processing or manufacturing is done here, as nobody wants a "Made in Myanmar" label.

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This allows the government to blame the sanctions even as they enrich themselves. Every failure is laid at the feet of Ms. Suu Kyi, the NLD and the West.

"Oppose foreign nations interfering in internal affairs of the state," reads the daily bold-type instruction of the official New Light of Myanmar newspaper. "Crush all internal and external destructive elements as the common enemy."

If we sanction Myanmar, then why not China?

Since my days of teenaged pro-Burma righteousness, I have travelled inside more than a few nasty regimes.

There is no question that Myanmar's government is repressive, keeping more than 2,200 political prisoners even after Ms. Suu Kyi's release in November. The army has been accused of systematic rape and torture during its on-and-off wars against ethnic militias in the country's borderlands.

But ordinary citizens do not live their lives in fear and worship of a dictator, as North Koreans do. They get by however they can, usually left to their own devices so long as they do not go near politics or big business.

In that respect, Myanmar is most like China, albeit without the economic progress that has pulled hundreds of millions of Chinese out of poverty in recent years.

The Communist Party of China never repented for the bloodshed on Tiananmen Square in 1989, nor would it allow an organization like the NLD to exist.

China's own Nobel Peace Prize laureate, Liu Xiaobo, remains in jail while Ms. Suu Kyi, for the moment, walks free.

So why is the West so insistent on continuing to punish the junta even as it does trillions in trade with Beijing?

The handful of foreign-aid workers based inside Myanmar are among the most vociferous opponents of ongoing sanctions. They all have tales of trying to tackle the multiple crises facing this country, only to be hamstrung.

Most important is a general lack of aid money - roughly $5.50 a person reached Myanmar in 2010, a 10th of the aid that goes to Cambodia and Laos, two nearby countries with both higher per-capita incomes and authoritarian governments.

Then there are the impractical restrictions that, for example, demand international aid organizations have no contact with the local government.

"I see these policies having several negative impacts," contributing to high child malnutrition and maternal mortality, says Bishow Parajuli, Rangoon's humanitarian co-ordinator for the United Nations Development Program.

"The unfortunate part of this is we're linking everyone [in Myanmar]into one box. It's totally doing a disservice."

Mr. Parajuli was particularly critical of the Canadian government, which gave just $2.5-million in 2009 to humanitarian programs inside the country, or just five cents a person. In comparison, that year Canada poured $10.9-million into Cambodia (almost 75 cents a person).

Aid is focused instead on Burmese refugee communities in Thailand, where the Canadian International Development Agency spent $15.9-million over the past five years.

"Canada is not dogmatic or ideological about this," says the Canadian ambassador to Thailand, Ron Hoffman, who also has responsibilities for Myanmar. "If the needs are there, we believe we can help in a manner consistent with our sanctions policy,"

But many aid workers complain that Canada has chosen the cheap high ground.

"Except for the generous assistance after Cyclone Nargis [in 2008] the only things the Canadian government has done for Myanmar are granting Aung San Suu Kyi honorary citizenship and imposing the toughest sanctions in the world. Neither of which costs the taxpayers of Canada a single dime or does anything for the people of Myanmar," says Andrew Kirkwood, a Canadian who heads Save the Children Myanmar.

"If the Harper government is serious about trying to improve maternal and child health around the world," he adds, "Burma should be one of the first countries they send money to."

Signs of reform that point in contradictory directions

Myanmar is arguably becoming more open, even if not nearly fast enough for the NLD and its supporters around the world.

The junta rammed a new constitution through by referendum two years ago while much of the country was still digging out from the death and destruction wrought by Cyclone Nargis. It entrenches military power, but it also provides the country, for the first time since a coup d'état in 1962, with a nominally civilian head of state and a parliament.

Granted, the elections in November were laughable: Ms. Suu Kyi was barred from running and widely unpopular military-backed parties somehow won nearly 80 per cent of the seats.

The first week of Parliament in Naypyidaw disappointed anyone who expected immediate progress, as Thein Sein, the junta's former prime minister (and a recently retired general seen as a protégé of Gen. Than Shwe), was elected President in a vote no diplomats or media were invited to witness.

Most analysts believe the 78-year-old Gen. Than Shwe implemented the changes primarily not because of outside pressure but to protect himself and his cronies from persecution by military rivals if and when he retires as commander-in-chief.

Yet, whatever the motives, the few opposition representatives in the new Parliament are taking their new roles seriously, studying up on parliamentary procedure and planning to flood the session with motions and proposed new laws.

Gen. Than Shwe may still be the top authority in the new "democratic" Myanmar, but even his own edicts now must be formally debated before they become law.

"For 20 years, there was only the government, the United Nations and a few NGOs here. But now there is much more. There are political parties and 15 [federal and regional]parliaments. There are more people on the stage. Civil society is more independent," says Khin Zaw Win, a veteran pro-democracy activist who has spent 11 years in jail, including time in the notorious Insein Prison outside Rangoon.

"It's like someone took the board game and threw all the pieces in the air."

After the 1988 military crackdown and the stolen election of 1990, he supported sanctions. But two decades on, Mr. Khin Zaw Win now wonders whether more effort should be made to minimize the harm being done to ordinary citizens.

"Twenty years of sanctions have just driven Burma deeper into the embrace of China and cut Burmese off from the West. We don't have access to capital, technology or even things like scholarships or [academic]visits. More tourists should come. That's the thing we should start with - exchanges. … Let's start by lifting the tourism ban."

There are signs of that already happening, even without a signal from Washington or Ms. Suu Kyi. Myanmar received a record 295,000 tourists last year (most of them from Europe), a 30-per-cent rise over the previous year, and the record is expected to be broken again in 2011.

The bottom line? It's not over till the Lady says it's over

It was Ms. Suu Kyi's stolen election victory that inspired the original sanctions against Myanmar. In many ways only she can lift them. But the 65-year-old laureate, currently recovering from a recent bout of ill health, could surely do that with a single speech.

And in recent months she has quietly inched closer to doing that, although she will not do so explicitly or without a long list of caveats.

In an audio address to the World Economic Forum in Davos last month, Ms. Suu Kyi said her country had been "left behind" and added, "I would like to appeal to all those present ... to promote national reconciliation, genuine democratization, human development and economic growth in Burma," she said.

But she added that any potential investors needed to "put a premium on respect for the law."

Afterward, the NLD released the results of its own investigation into the effectiveness of sanctions, which came to the conclusion they were still justified and needed.

However, the party said it wanted to hold "discussions" with Canada, the U.S., the EU and Australia regarding "how and under what circumstances sanctions might be modified in the interests of democracy, human rights and a healthy economic environment."

Few expect Ms. Suu Kyi to back down all the way. Lifting sanctions outright would not only give away what little leverage she and her allies in the West have over the junta, it would also involve a massive mea culpa by a woman who is famously stubborn in her convictions.

But some of her allies see room for a subtler shift.

"The rich are losing millions of dollars - the poor are losing a dollar a day. But for these poor people, it's their lives," says Myo Yan Nang Thein, an NLD member, former political prisoner and leader of the 1996 protests.

"From a justice point of view, sanctions must remain. We must punish this government," he says.

"But we must punish them in the way that hurts the poor 0 per cent. Because 1 per cent is too huge for them to bear."

Mark MacKinnon is The Globe and Mail's correspondent based in China.

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