National Agenda : Myanmar Awakens to Kinder, Gentler Military : Regime loosens martial law and renews contacts with the outside world. But critics wonder if changes are cosmetic.

The coils of concertina wire, an ugly reminder of the brutality of military rule, have been quietly removed from the sidewalks surrounding the lakeside villa belonging to Aung San Suu Kyi, the democracy campaigner who has been held under house arrest since 1989.

Hundreds of political prisoners have been released. Martial law was lifted from Yangon and two other regions of the country last month, and an 11 p.m.-to-4 a.m. curfew was withdrawn for the first time since 1988.

But the darkened streets of this capital remain eerily deserted as a lifetime of suspicion keeps residents from testing their newfound freedom.

Bamboo scaffolding covers the decaying face of the Strand Hotel, a relic of the British Empire. The hotel is being refurbished in a joint venture with a foreign firm as part of the government’s ambitious plans for expanding tourism from the present handful of adversity-loving foreigners to 100,000 visitors a year.

After three decades as one of the world’s most isolated, repressive countries, liberalization and reform are the talk of Myanmar, the Southeast Asian nation formerly called Burma. But it remains a nation of many contradictions: Western diplomats and many Burmese alike say they can’t yet tell whether the moves are cosmetic or represent a genuine shift toward pragmatism by the ruling military government.

Like a tortoise tentatively poking its head out of its shell after a long hibernation, the ruling military junta has begun seeking international contact. In August, Myanmar rejoined the Nonaligned Movement after an absence of decades, hinted that it wants to become part of the Assn. of Southeast Asian Nations and even began inviting foreign journalists to visit again.

“The proof will be in our actions,” said U Aye, a wisecracking, American-educated diplomat who is director general of Myanmar’s Foreign Ministry. “We’re working toward a multi-party democracy with a free-market economy. There’s no going back to a centrally planned economy because the people don’t want it.”

Evidence of the need for reform abounds in Yangon, a crumbling museum piece of the British Raj formerly called Rangoon. The city’s fine old buildings--red brick and plaster Victorian edifices with cupolas, gargoyles and innumerable columns--are now blackened with mildew. The enormous, crackling telephones look like they are on loan from the Smithsonian. The few cars on the streets are mainly matchbox-sized Japanese models made locally to 1950s specifications.

There are few signs of the former grandeur of Burma, which a 1948 Stanford University study called Southeast Asia’s richest nation. It was a major oil and mineral producer and the world’s largest rice exporter. Every flight from Europe to Asia stopped off in Rangoon, and residents of Bangkok, Jakarta and Singapore lived in envy of Burma’s many charms.

British rule was replaced by an ineffective and increasingly chaotic government under the politician U Nu. He was overthrown in 1962 by Gen. Ne Win, an intensely xenophobic and superstitious military commander who cut Burma off from the outside world and wrecked its prosperous economy with a socialist system reminiscent of the brutal regime of Enver Hoxha in Albania.

In 1988, Ne Win officially retired after an explosion of street demonstrations demanding democracy, but the military returned to power in September that year after a chaotic summer in which more than 2,000 demonstrators, most of them students, were killed by soldiers. Thousands more fled to Thailand, where they continue to dwell in refugee camps along the border.

Most of the liberalizations have taken place since April, when Gen. Than Shwe took over as chairman of the ruling junta, which calls itself the State Law and Order Restoration Council, known popularly as SLORC. Than Shwe replaced hard-line Gen. Saw Maung, who was believed to have suffered a nervous breakdown after he started publicly babbling that he was the king of Burma.

Since Than Shwe took power, the government has released more than 500 mostly second-echelon political prisoners from jail. More than 900 remain behind bars and are being set free in small groups as the government is satisfied they no longer represent a threat to national security.

More significantly, SLORC under Than Shwe has announced a timetable for making a transition to civilian rule by 1996, including a constitutional convention in the next three to six months, followed by a referendum on a new constitution and new elections.

Some, like the human rights group Asia Watch, nevertheless are withholding their applause. “While some of the measures are welcome and may show the impact of international pressure, Asia Watch finds no reason to believe that the human rights situation has fundamentally changed,” it said in a September report.

Many foreign diplomats in Yangon now compare Myanmar with Indonesia in the 1960s and predict that the country will follow the example of a “guided democracy” in which the military’s wishes are always paramount.

The junta left no doubt about its intentions when it announced earlier this month that a new constitution would ensure “participation of the armed forces in the leading role of national politics of the state in the future.”

The May, 1990 elections, in which the National League for Democracy, headed by Aung San Suu Kyi, won an overwhelming majority, were a humiliating fiasco for the military. It has since gone about meticulously altering the results--at least 113 elected members of Parliament are in jail, have fled the country, have been disqualified or died.

“We feel SLORC doesn’t have the authority to hold a constitutional convention, because they were not elected,” said an opposition leader who was freed from prison in July. “They issue commands. They do not compromise.”

Suu Kyi remains a prisoner in her home on University Avenue, attended by a maid and reportedly doing a Jane Fonda workout daily to remain in shape.

Since April, her husband, a British-born Harvard professor named Michael Aris, and her two sons have made a total of four visits under a government decision to allow her “humanitarian visits” by family members.

Suu Kyi, who won the Nobel Peace Prize for her efforts on behalf of democracy in Myanmar, continues to command enormous respect in the country, in part because of her status as the daughter of independence hero Aung San but also as a symbol of defiance to the regime.

“This woman is beautiful, she is a mother to all Burmese,” said a schoolteacher who lost his job after the 1988 violence. “There can be no peace in Burma without her.”

While Western governments continue to express concerns about human rights in the country, however, it is the sad condition of the economy that is most troubling for most ordinary Burmese. The economy is also the main reason for the current reform campaign, Western diplomats say.

Some trade reforms have been introduced, but the government clings tenaciously to an outmoded exchange rate; officially traded at six kyats (pronounced chats) to the U.S. dollar, it takes more than 120 kyats to buy a dollar on the pervasive black market.

The exchange-rate problem has effectively dissuaded foreign businesses from investing here because they would receive only a fraction of their true investment. Foreign aid is also discouraged because governments are loath to pay official prices in a country where a taxi ride can cost $50 and a Coke is officially $10.

As a result, the government prints money to meet its budget deficits, fueling inflation of between 40% and 60% a year.

Government statistics put Myanmar’s per capita income at 1,225 kyats a year, which at the unofficial rate of exchange is only $10. Even at the official exchange rate, it’s just $200 a year--a figure that would still rank Myanmar as one of the world’s 10 poorest countries.

Luckily for the government, 80% of Burmese live in rural areas and are essentially divorced from a cash economy, bartering agricultural products for whatever goods they need.

Foreign aid from most Western countries, including the United States, European countries and Japan, was suspended after the 1988 massacres and has not been resumed.

Minoru Kiryu, a Japanese University professor who is an economic adviser to the Myanmar government, wrote recently: “If we see the present situation in Myanmar from the economic standpoint, we have to say Myanmar is on the brink of ruin.”