Burma's failed socialist policies face an overhaul. BOWING OUT IN BURMA

Burma's strongman Ne Win, admitting economic failure and ``tragic'' military repression of recent riots, has bowed out of power - at least officially. Even if he continues to rule from behind the scenes, as some Western diplomats in Bangkok suspect he will, Ne Win's hardline socialist policies most likely face an overhaul.

The real test for the former general, a hero of Burma's 1948 independence, is whether he can maintain the loyalty of the all-powerful military, the diplomats say.

After a series of brutally suppressed protests in Rangoon and elsewhere since March this year, the septuagenarian leader faced the prospect of the military refusing to shoot at protesters, the diplomats say. That's what happened in Thailand in 1973 and in the Philippines in 1986. Last week, martial law was declared in Ne Win's home town of Prome.

After 26 years at the pinnacle of power in a one-party state, Ne Win dropped a surprise Saturday at an emergency meeting of his Burma Socialist Programme Party (BSPP): He offered to resign as party chairman. (He had given up his only constitutionally authorized position as state president in 1981.)

Four other top party leaders also were said to be leaving their posts. The move still requires changing the party's constitution to allow for their exit.

``It's not clear when any leadership changes will take place,'' said an observer reached by phone in Rangoon, the Burmese capital.

``If there is a referendum and they decide to have a two-party system, then they will have an election for a new parliament and only then will the present leadership hand over power. This could take a long time.''

Ne Win, known as ``No. 1'' in this largely peasant nation of 38 million, has called for a referendum by September on whether Burma should have a multiparty system. And the party's secretary-general, Aye Ko, said the party should permit more private enterprise as well as allow private newspapers and magazines.

Such changes, in an isolated country unaccustomed to change for so long, show how steep has been the economic nosedive during the past year, creating public the discontent that has fueled a series of riots since March. Over 200 rioters may have been killed by security forces, according to Western estimates.

In his mea culpa offer to resign, Ne Win was unusually frank: ``The bloody events of March and June show the lack of trust in the government and the party that guides it,'' he was quoted as saying.

This is not the first time Ne Win has appeared to give up power.

In 1960, after being prime minister in a caretaker government for two years, he stepped aside to allow civilian political parties to rule. But in 1962, he came back as head of a revolutionary council after a bloodless coup to save the nation from, as he put it, ``impending disintregation'' - from secession movements among Burma's ethnic minorities.

From 1962 onward, Burma practiced a xenophobic and ruthless ``Burmese road to socialism,'' virtually shutting its door to the outside world.

Tall, blunt, simplistic, and short-tempered, Ne Win ruled largely by personal whim, although he set up the BSSP to implement his policies. Much of the middle class fled the country, and the military ran most aspects of the economy.

After the economy steadily declined during the 1960s, turning a naturally rich country into a poor nation, the party held its first congress in 1971, marking the first easing up of Ne Win's doctrinaire socialism.

Despite student riots in 1974, an assassination attempt in 1976 by a military officer, and a party purge in 1977, Ne Win's rule seemed secure.

He sacked any heir apparent who tried to jockey for power. The most common question in Burma became: ``After Ne Win, who?'' He himself once defined the problem about absolute military control: Having taken hold of a tiger's tail, how do you let go?

But during the early 1980s, low world prices for Burma's exports - mainly agricultural and forest products - showed up the weaknesses of Ne Win's policies. The black market had become almost as big as the legal economy. Last September, in an apparent attempt to choke black marketeers, about 60 percent of Burma's currency was demonetized, wiping out the savings of many people.

As per capita income dipped below $180 a year, Burma took the humiliating step of asking the United Nations to be classified as a ``least developed'' nation, hoping to ease its foreign debt burden.

The unexpected riots and resulting deaths proved too much for the regime. Ne Win told his party congress that this ``may be my last speech to you.''

Ne Win took ``indirect'' responsibility for the riots and sought to resign because of his age, which is presumed to be 78 years.