By doing business with Burma, Asian countries help its brutal military regime stay in power—while the Burmese people remain trapped in a time warp of poverty, oppression and economic misrule.

Thaung Htun hasn't seen his homeland in 17 years. But the 49-year-old former doctor hasn't abandoned hope that one day democracy will come to Burma and it will be safe for him to return. In 1988, he participated in a student-led uprising against Burma's military regime and then fled to Thailand when the generals crushed the movement. Two years later, the generals purged the National League for Democracy (NLD), led by Nobel Peace Prize winner Aung San Suu Kyi, after it won a landslide victory in the 1990 elections, and Thaung Htun joined other fleeing democrats in a government-in-exile. Today, he remains cloistered among stacks of dusty papers in a one-room office across from the United Nations in New York City, wooing delegates to his cause. He and scores of other exiles and human-rights activists from Bangkok to London have received many a sympathetic ear. Last September, South Africa's Bishop Desmond Tutu and Vaclav Havel, former President of the Czech Republic, issued a call for the U.N. Security Council to press the generals toward political reform, warning that Burma "threatens the peace and stability of the region." U.S. Secretary of State Condoleezza Rice has labeled Burma an "outpost of tyranny," and Washington continues to impose sanctions that ban all imports from Burma and prohibit investment there by American companies. Critics as diverse as British Prime Minister Tony Blair and Hollywood star Susan Sarandon have implored tourists to boycott Burma, echoing Suu Kyi's insistence that any influx of foreign money helps legitimize—and enrich—the generals. The aim is to isolate and squeeze the junta until it cedes power to Suu Kyi or moves toward true democracy. After all his years of exile, Thaung Htun still hasn't given up. "I believe that I can go back to my country in my lifetime," he says. "History is on our side."

But foreigners such as Gong Nengzheng aren't on his side—and that's a key reason why Burma's military regime is still in power. While Thaung Htun tries desperately to keep overseas money out of Burma, Gong, the gung-ho mayor of the Chinese city of Ruili on the border with Burma, is striving to get more mainland money in. The Chinese government has turned the border area near Ruili into a special economic zone to boost trading ties between the two countries. More than $400 million in trade funnels through the Jiegao Border Trade Economic Zone each year. China exports household appliances, chemicals and medicines, and Burma ships back jade, seafood and timber. Jade bracelets and pendants cram glass cases in souvenir shops along the "China-Burma Friendship Street," which straddles the border. Residents on both sides pass between the two countries effortlessly, lugging sacks of clothing and wicker baskets of fruit back and forth to local markets. At one major crossing, marked only by a lone Chinese guard standing under a multicolored umbrella, dozens of army-green trucks file into Burma like a long line of soldier ants. Gong expects trade through Jiegao to triple to $1.2 billion by 2008. He has expanded a bridge over the Ruili River to handle the anticipated rush of rigs, and is constructing a towering ceremonial gate at the border to symbolize China's burgeoning relationship with Burma. Gong quips: "The countries are so close together, Burmese chickens lay their eggs in China."

Gong's enthusiasm for his Burmese neighbors is far from unique in China, which has become the military regime's most important partner. Officially, trade between the two countries more than doubled in five years to $1.1 billion in 2004, according to Chinese government statistics, and China has been a major provider of foreign investment and aid. But China isn't the only Asian country supporting the junta, despite its reputation for brutal repression. Many of Burma's neighbors are happy to do business there, attracted by its rich natural resources. Thailand's imports from Burma jumped 50% in the first 10 months of 2005 to nearly $1.5 billion, according to Thailand's central bank, and India is looking to make major investments there for the first time, particularly in the Burmese energy sector. In fact, no Asian nation has fully supported U.S. sanctions, not even democratic allies like South Korea. As a result, the junta's coffers are more stuffed than ever before. In 1988, Burma boasted only $89 million in hard-currency reserves, but by 2004, it held $685 million, according to the International Monetary Fund. All of this aid, trade and investment has enabled Burma's junta to shrug off 15 years of pressure from the international community aimed at bringing about democratic reform. The generals' "principal concern is to ensure their survival, and they have enough money to do that," says Robert Templer, Asia program director of the International Crisis Group in New York.

Indeed, the military regime appears as entrenched as ever. The junta, which has euphemistically named itself the State Peace and Development Council, is dominated by hard-liners led by its chairman General Than Shwe. He consolidated power in 2004 after purging Khin Nyunt, then Prime Minister and a more moderate voice in the government. The NLD is in disarray, and its members—like many opponents of the regime—are routinely killed, detained or forced into exile. Suu Kyi, 60, remains under house arrest, where she has spent 10 of the past 16 years; in December, the junta extended her detention for at least another six months. In 2003, the government announced what it calls a "Roadmap to Democracy," which would eventually lead to new elections, and it intermittently stages a convention to write a new constitution (the latest session began in December). But Suu Kyi and other key members of the opposition have either been excluded or have boycotted the convention, stripping the process of any credibility. Meanwhile, the junta is digging in—literally. The generals are building a new capital at Pyinmana, a town 400 km north of Rangoon, with a massive complex to house government ministries and the army's headquarters, complete with a network of fortified tunnels and bunkers. The generals, says David Steinberg, author of the book Burma: The State of Myanmar, "have the idea that they can go it alone forever."

The natural resources at their disposal have clearly made it easier for the generals to cling defiantly to power. Burma boasts sizable reserves of natural gas near three fast-growing, energy-hungry nations: China, India and Thailand. While most major oil companies are barred by sanctions from investing in Burma's energy sector, there has been no shortage of foreigners scrambling for a piece of the action. Two existing operations, one managed by France's Total and the other by Malaysian state oil company Petronas, provided Burma with about $1 billion in revenues in 2005, estimates one energy consulting firm. (Total and Petronas wouldn't comment on revenues provided to Burma's government, citing contractual agreements.) Much more is in the pipeline. In 2004, a consortium led by South Korea's Daewoo International and including Korea Gas, India's ONGC Videsh and the Gas Authority of India discovered new gas reserves larger than either of the existing fields. An investment of about $2 billion might be needed to develop the find. Another group of investors, including China National Offshore Oil Corp. (CNOOC), signed six contracts with the Burmese government in June to explore for more fields. India is also planning a $1 billion pipeline to ship natural gas from Burma. "The ability of sanctions to limit investment in energy is probably negligible," says Andrew Symon, an energy-industry specialist at the Institute of Southeast Asian Studies in Singapore.

Other Asian companies have invested in Burmese pearl farms, hotels, truck manufacturers and even pencil producers. Singaporean firms are among the most enthusiastic, putting nearly $1.6 billion into 72 projects in Burma. Cheap wages—possibly the lowest in Southeast Asia—have been a big draw in labor-intensive industries such as textiles. Business deals have involved some of Asia's most powerful people. Thailand's telecom giant Shin Corp., founded by Prime Minister Thaksin Shinawatra, has provided Burma's state phone company with access to Shin's satellites for international phone services and domestic TV broadcasts since 1998. In 2002, Shin expanded phone services to countryside villages and two years later, a Thai state bank granted a $97 million credit line to the Burmese phone company to help it purchase telecom equipment from Shin. Richard Jones, a spokesman for Shin, calls Burma "one of our oldest customers," and says the company's business there "is a way of helping many people in Burma communicate with the outside world for the very first time." The flow of money from around Asia is unlikely to slow. "We have no plans to restrict Japanese business activities in Burma," says Hideaki Mizukoshi, the director of the Asian and Oceanic Affairs Bureau in Japan's Ministry of Foreign Affairs. "Democracy is not the only standard in deciding our relationship with a country."

Executives and diplomats around the region bristle at the suggestion that they are sacrificing human rights for profits. "By engaging Myanmar, that doesn't mean we look at it as just business as usual, as an excuse to do business with them," says Sihasak Phuangketkaew, spokesman for Thailand's Foreign Ministry. "We do recognize there are problems and we want to see progress." Many officials and investors in Asia believe that business and trade have a greater chance than sanctions of fostering political reform by opening up the isolated country. Ruili's Gong argues that China's economic role "helps to push forward economic and political reform in Burma." This thinking led the Association of Southeast Asian Nations (ASEAN), the region's main political forum, to invite Burma to become a member in 1997. James Gulkin, chief executive of Bangkok-based fisheries company Siam Canadian, which does about 10% of its business in Burma, says the idea behind such engagement with the junta is to "kill them with kindness."

In reality, neither engagement nor isolation has converted the generals into upstanding citizens. In a report last February, the U.S. State Department declared that "the government's extremely poor human-rights record worsened" during 2004 with "numerous serious abuses," including forced labor, executions, and the torture and rape of prisoners and political opponents. Nearly 700,000 refugees are currently living in Thailand, Malaysia, Bangladesh and India, having escaped from Burma.

The junta is a hazard to more than just its own people. The U.S. government claims that Burma is the second-largest producer of illegal opium in the world (after Afghanistan), and that it's Asia's primary supplier of methamphetamines. The drug problem is so severe in the border areas around Ruili that, says mayor Gong, Chinese officials employ some 1,000 people to round up addicts and force them into rehabilitation "farms." Human trafficking of Burmese is rampant, with young women forced into prostitution in Thailand and elsewhere. Fueled by this booming trade in drugs and sex, Burma "may be the greatest contributor to new types of HIV in the world," according to a study by New York's Council on Foreign Relations. The report noted that all but one of the AIDS outbreaks in a massive area spanning from Kazakhstan to southern Vietnam can be traced back to Burma.

His name card reads "Min Thein Kha, Seer of Myanmar." Hundreds of Burmese arrive daily to seek advice at his sprawling Buddhist commune, an hour's drive from Rangoon. Min Thein Kha, a 67-year-old chain smoker, claims his powers can soothe quarrelsome households, lure back wayward husbands, and compel thieves to return stolen property. Best of all, he professes that he can alleviate poverty. "Most people come here with financial problems," he says. "These days those problems are very bad." How does he solve them? "I do some chanting and make miracle remedies."

Today, Min Thein Kha is unwell, and politely declines to predict his country's future. He doesn't need to. Burma's woes are obvious and it will require more than chanting to address them. While the junta has benefited from the economic support provided by its neighbors, it has done almost nothing for the welfare of Burma's roughly 50 million people. Per capita income is just $225, among the lowest in Asia, estimates the U.S. State Department. The future doesn't look any brighter. Though the junta claims that GDP in Burma's last fiscal year grew an astounding 12.6%—outpacing even China and India—economists consider such official statistics pure fiction. The Economist Intelligence Unit estimates that GDP shrank by 2.7% in 2004 and grew a mere 1.5% in 2005. The generals, though, live in luxury. Early in 2005, a police raid on the property of former Agriculture Minister Nyunt Tin, who was arrested on corruption charges, allegedly turned up a rich stash of gold, cash and jewelry.

A stroll across the Chinese border into northern Burma shows just how little the Burmese benefit from the trade between the two countries. While Gong's Ruili is a modern metropolis of wide streets, incessant construction and per capita income five times higher than the surrounding district, the Burmese town of Muse directly across the border is mostly a jumble of huts made of bamboo, thatch and tin sheets. City buses are so old that rain pours through the roofs. The main market, with stalls hawking almost entirely Chinese-made goods, is nearly empty. Packs of beggars hassle Chinese tour groups for spare coins. The only concrete houses are two-floor villas said to be owned by Chinese gem merchants. "The trade is not good for the Burmese people; it's good for the government," complains Aung Kyaw Zaw, a former antigovernment rebel living in China. "China sends so much to Burma, but the community gets poorer."

And more desperate. While the country was once so productive that it was known as the region's rice bowl, today one-third of Burmese children are chronically malnourished or physically stunted, according to World Food Programme chief James Morris, who toured the country last August. "The humanitarian issues are serious and getting worse," he warned the Burmese government. Unable to find work in their chosen fields, physics graduates drive taxis, and doctors hustle real estate. Prostitution is one of the few businesses that are obviously thriving. Downtown touts who pester Western tourists to change money or hire cars now offer additional services: "Massage? Lady?"

Many Burmese get into odd get-rich-quick schemes. Rangoon boasts an extensive network of underground lotteries, with one of the most popular based on the last two digits of Bangkok's main stock market index. A winning $1 bet can rake in $80—equal to four months' salary for an average government employee. The capital is littered with unfinished hotels and tower blocks, many abandoned after Asia's 1997 economic crash. At scenic Kandawgyi Lake, the tennis courts at an uninhabited apartment complex have been reclaimed by the jungle, while the enterprising caretaker supplements his meager income by raising bananas in the forecourt. The government apparently does little for the poor. The International Crisis Group says that in 2004 the junta spent a total of only $22,000 to help AIDS victims. Says a Burmese economist: "If you don't care about your people, then sanctions are not an issue."

The junta blames U.S. sanctions for the country's financial hardships. When the U.S. banned all imports from Burma in 2003, the country lost one of its biggest trading partners, which bought some $350 million in Burmese-made goods annually. Textile companies were hit especially hard, and the U.S. government estimates that 40,000 Burmese textile workers quickly lost their jobs. Burma's democracy movement insists that the populace stands behind sanctions, but it's hard to find much support among ordinary Burmese. "We want pressure from the international community, but we don't want sanctions," says a Rangoon-based Burmese journalist. "Our people are very, very poor."

However, the junta's own inept and unpredictable economic policies inflict far more damage than sanctions cause. For example, the prices of essential services suddenly surge when the government decides it needs cash. Last August, fees for water service rose eightfold after the government reduced subsidies; in September, the cost of a ride on Rangoon's antiquated buses jumped from 20 kyat to 50 kyat in a week. One measure of the country's economic dysfunctionality is that while the kyat's official exchange rate is about six to a dollar, the black market values the dollar at 1,160 kyat. When the generals want to halt the currency's decline, they detain illegal—but usually tolerated—money changers operating out of shops and markets. The banking sector still barely functions three years after it suffered a collapse in public confidence and a run on deposits due to feeble government oversight. All of this economic chaos keeps survival, not politics, uppermost in most Burmese minds. "We're not thinking about Aung San Suu Kyi or General Than Shwe," says one Burmese trader. "We're thinking about food, clothes and housing."

Back in his New York office, Thaung Htun sees a glimmer of hope. The junta, he believes, is causing Asia enough harm and embarrassment that the region's governments are coming to see a reformed Burma as a necessity. "There is a policy shift in the region," he says. "If Burma is a failed state, it will create problems for its neighbors."

Some of Burma's friends do seem to be turning against the generals, even within clubby ASEAN. Members usually don't publicly criticize the junta, citing a policy of avoiding interference in others' internal affairs. But late last year, that stance changed dramatically. At a December summit, ASEAN's leaders issued a formal call for Burma to "expedite" democratic reform and release political prisoners. Though her name wasn't used, ASEAN was clearly referring to Suu Kyi. The association discussed the "need [for Burma] to be more responsive to the wishes of the international community," said Malaysia's Foreign Minister, Syed Hamid Albar. The statements followed a tussle over ASEAN's 2006 chairmanship. Burma was scheduled to claim the post, but, faced with the prospect of a pariah state heading their organization, some ASEAN members, especially Singapore, pressed Burma to stand aside. Folding under the pressure, the junta decided to forgo the chairmanship because, an ASEAN statement said, it wants "to focus its attention on the ongoing national reconciliation and democratization process." The Bush Administration is also campaigning for the U.N. Security Council to take action on Burma, which led in December to the Council's first-ever briefing on the country.

Meanwhile, many foreign investors have also come to the conclusion that Burma's generals make miserable business partners. Citing everything from currency controls and irrational regulations to power shortages and bad roads, 40% of the South Korean textile firms that set up operations in the country have left in the past three years, and about a quarter of all Japanese companies have pulled out since the late 1990s. "The low cost of labor doesn't make up for the high cost of staying," says Koji Ida, a Burma expert at the Japan External Trade Organization in Tokyo. The ethical taint of any association with Burma has chased others away. Lingerie maker Triumph closed its factory in Burma in 2002 after a U.K. human-rights group launched a campaign under the slogan SUPPORT BREASTS, NOT DICTATORS with posters showing models wearing barbed-wire bras. American oil giant Unocal has received perhaps the worst bloody nose. In March last year, the company settled lawsuits by paying compensation to Burmese citizens who claimed they suffered abuses by Burma's military—including rape and forced labor—during the construction of a gas pipeline in which Unocal invested $340 million in 1993 (before sanctions were imposed). Unocal, recently acquired by Chevron, has never admitted to any crime, and Chevron says it's continuing to evaluate Unocal's assets but has yet to make any decision about the pipeline. Says Katie Redford, co-founder of EarthRights International, the Washington-based activist group that launched one of the suits: "Business is never going to be the same."

Burmese such as Ye Winn are hoping that's true. The 59-year-old trader set up shop in Ruili's Jiegao economic zone eight years ago to export Chinese-made engines into Burma. Early on, business was brisk, but sales have since fallen by 40%, and are still declining. His Burmese customers are becoming so poor, he says, that they can't even afford cheap Chinese goods anymore. The erratic Burmese government has slapped so many new restrictions on small traders like him that many have been forced to become smugglers, who slip motorcycle convoys laden with computer parts and Hollywood DVDs through the jungle between border posts. But Ye Winn says he's scared of getting into trouble, so he just sits in a sweltering storefront, smokes, and wonders what he can do to make money. "We are all hoping and waiting for the Burmese government to change," he says. "Without reform, things are only going to get worse." That's a fate that Burma's downtrodden people—and the rest of Asia—can ill afford.

Here's a Burmese joke. A man with toothache goes overseas to see a dentist. "Don't you have dentists back in Burma?" the dentist asks. "Of course," the man replies. "We're just not allowed to open our mouths."

This joke, retold in Emma Larkin's book Secret Histories, will elicit no smiles at the embattled Rangoon headquarters of the National League for Democracy (NLD). Its leader, the Nobel laureate Aung San Suu Kyi, has spent more than 10 years in detention since 1989. Her senior colleagues are too old to fight the "stressful, bruising campaign" against the junta, argues The Irrawaddy, a magazine based in Chiang Mai, Thailand, and written by Burmese exiles. The rank and file have been arrested, tortured and murdered. The party appears moribund.

But not Burma's people, who seem almost hardwired for survival. In small yet significant ways, ordinary Burmese show their spirit of resistance against the tyrannical regime that rules them. Take, for example, the local editors who constantly challenge draconian censorship rules to inform readers about vital issues, often in clever and oblique ways. For example, it is illegal to publish stories about chronic power shortages, or about Burma's ongoing brain drain. Instead, readers find pointed stories about the popularity of Chinese-made generators, or the impact of the brain drain in India. One editor I know departs for his regular appointment with government censors uttering the cheerful cry: "I'm off to the bulls___ department!"

Or consider the Rangoon social worker who, angered by state indifference to Burma's rampaging HIV/AIDS epidemic, is privately raising $7,000 for a home for 30 AIDS orphans. (Compare this sum to Burma's entire budget for combating HIV/AIDS in 2004: just $22,000.) The home will be constructed without revealing its function to health or social-welfare officials, for fear they will obstruct the project. Once it is up and running, the social worker explains, "we'll ask officials to recognize and help us—or to take the children away and treat them themselves, which they won't do." Even the paperboy at the traffic lights on Shwedagon Pagoda Road does his bit to fight back: he sidles up to offer foreigners some antique contraband—a pristine 1994 copy of TIME magazine with Suu Kyi on its cover.

Burma is often described as a "hermit nation," yet it is no North Korea. Radio and satellite TV have long brought news from abroad. And since its debut three years ago, the Internet is regularly accessed by thousands of people. In Rangoon, Internet cafés proliferate yet remain notably overcrowded with young Burmese researching foreign college courses or downloading PlayStation cheat codes. Even online dating has started. The junta controls the country's two Internet service providers, but enterprising Burmese use proxy servers to access and anonymously surf banned websites, as well as to safely send and receive international e-mails. Mobile phones—virtually unheard of five years ago—are now a fairly common sight in Rangoon, even though service is spotty. Many Burmese doubt whether the regime's intelligence apparatus—already scrambled by the purge of spy chief Khin Nyunt a year ago—has the manpower or expertise to scrutinize a gathering torrent of e-mails and phone calls.

Few Burmese believe ruling hard-liner General Than Shwe will even contemplate reform. "Elephants never retract their tusks," goes a local saying. Yet with the government's mass relocation to Pyinmana, the elephant seems to be vanishing—tusks and all. "They're behaving like a retreating army," notes a delighted Rangoon journalist. Burma watchers speculate that the junta wants to protect itself from a U.S. military invasion. More likely, the move is prompted by what Burma's generals know is a clearer and more present danger: their own people.

I have never met Nobel laureate and Burmese democracy leader Aung San Suu Kyi, but I hope one day I will. Suu Kyi's picture hangs prominently in my Capitol Hill office, reminding me daily of her plight—and her strength.

Courageous and tenacious, Suu Kyi is the symbol of the nonviolent struggle for freedom and justice in Burma. As head of the National League for Democracy (NLD), she and other Burmese patriots have dedicated their lives to reform in one of the world's most repressive countries, currently misruled by an illegitimate military regime calling itself the State Peace and Development Council (SPDC).

Burma today is synonymous with state-sponsored killings, torture and rape. The horrors committed by the SPDC against the people of Burma are known to the entire world—and are spilling over into neighboring countries. In India, Thailand, China and elsewhere, illicit drugs grown and manufactured in Burma wreak havoc. An unchecked HIV/AIDS pandemic follows drug routes emanating from Burma. As many as 700,000 refugees have crossed Burma's borders in recent years seeking safe haven from SPDC atrocities. And inside Burma, the growing phenomenon of internal displacement evidences a people who live in fear and are ruled by force. Burma's problems are Asia's problems, and Asia's problems are the world's.

As befits a superpower rooted in democratic traditions, America has imposed severe economic sanctions against the SPDC. They include banning imported goods from Burma, limiting investments there, forbidding arms sales, and restricting visas for members of the SPDC and junta-affiliated organs. The European Union takes a similar approach, albeit to a lesser degree.

Proponents of engagement with Burma, who wrongly believe the SPDC can be swayed to undertake political and economic reforms through dialogue alone, claim that the people hurt by sanctions are the very ones we are trying to help. But sanctions don't pull the trigger of a gun or indiscriminately rape ethnic-minority women and girls. Proponents of engagement say that sanctions don't work, and that they offer no incentives for Burmese generals to change their hard-line positions. They could not be more wrong. The efforts of Thailand and Japan over the years to reform Burma through engagement have yielded no results. Further, with the sacking and imprisonment of SPDC Prime Minister Khin Nyunt last year, Bangkok and Tokyo have lost their primary interlocutor in the Burmese government.

Sanctions worked in South Africa, and they will in Burma too. They strike at the junta's lifeblood, namely its monopoly on all investments and total dominance of Burma's licit and illicit economies. Sanctions are a tremendous loss of face for the SPDC, a scarlet letter, particularly in the international arena. More important, sanctions empower those in Burma on the front lines of this struggle. The fact that the legitimately elected leaders in Burma support sanctions should be enough for democratic nations to impose them.

Until recently, Burma was a low priority for most foreign governments. Now it is all the more important that democratic nations consistently challenge the SPDC's tyranny at every opportunity in the international arena. The SPDC's forfeiture of its chairmanship of the Association of Southeast Asian Nations (asean) in 2006 indicates not only that asean is finally embarrassed by its most odious member, but that the generals in Rangoon do indeed respond to outside pressure. We must keep this pressure up. The renewal of sanctions against the junta last summer by overwhelming votes in the U.S. Congress underscores Washington's commitment to democracy in Burma. And efforts by members of the U.N. Security Council to discuss Burma have already met with some success, giving the junta the scrutiny it has long deserved. Dialogue without pressure leads nowhere.

The cause of and solution to Burma's problems are political. Through sanctions and unwavering support for the forces of freedom in Burma, democratic nations must secure the immediate and unconditional release of Suu Kyi and all prisoners of conscience, the first necessary step toward a credible process of national reconciliation. The NLD and Burma's ethnic minorities must have a seat at the negotiating table, and the phony efforts by the SPDC to hold a sham constitutional convention must be roundly denounced. Only then will freedom come to Burma.

The triumph over evil in Burma will take time. But the Lady can count on my support for as long as it takes.