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After decades of economic and political stagnation, the past year has offered
the first hints of a better future for the long suffering people of
Burma/Myanmar. Elections held in November 2010, the formation of a new
‘civilian’ government made up of ex-military officers, and some announced
reforms of media censorship and political restrictions, have all contributed to
an environment of hope.
Beyond Hyperbolic Headlines
This sense of optimism was further strengthened by the decision of the Obama
administration to send Hilary Clinton to Myanmar earlier in December, the first
visit by a US Secretary of State since John Foster Dulles in 1955. Clinton’s
visit brought a high level of international attention to Myanmar, much of which
highlighted the economic potential of this resource rich land at the new
crossroads of Asia, surrounded by economic behemoths China and India, and
regional powerhouse Thailand.
However, what this sometimes breathless coverage generally failed to do was to
begin with a clear-eyed analysis of the current economic and business
environment. To establish an understanding of the profound challenges of
transitioning a stagnant, centrally controlled economy with a poor underlying
infrastructure, a weak education system and an underdeveloped civil society, one
must look back before looking forward.
Ominous Past; Challenging Future
Once the region’s strongest economy, Myanmar is now home to one of its weakest.
Badly shaken by civil strife throughout the 1950s, the country has suffered
under military rule since 1962. With political control as the exclusive goal of
the regime since then, education has been systematically de-funded, economic
opportunities doled out based on political exigencies, and widespread poverty
has been pursued as policy, to discourage the population from developing and
organizing politically. Given the priorities of the dictators (political
survival), they can view this policy path as a success.
Using a broader set of criteria for analysis, the military’s management of
Myanmar’s economy has been a terrible failure. The country scores a ‘Low’ in the
UN’s Human Development Index, scoring below regional neighbours Laos, Cambodia
and Bangladesh. Transparency International’s 2011 Corruption Index ranks Myanmar
third worst in the world. The Heritage Foundation/Wall Street Journal 2011 Index
of Economic Freedom puts Myanmar in the 6th lowest spot worldwide, trailing
countries like Chad and Democratic Republic of Congo, and scoring a zero in the
‘investment freedom’ category.
In recent years, China has provided extensive diplomatic and political support
for the regime, and has received commercial advantages in return. But Chinese
investors, in rather typical fashion, have proven to be arrogant and
insensitive, and have generated deep resentment amongst the Burmese populace.
This is a major concern, as anti-Chinese riots have taken place in Burma in the
past and could reoccur, which could irreparably harm the crucial relationship
between neighbours. It is this concern that has driven the Myanmar government to
reach out to India and to the West, as they try to establish a more balanced
relationship with their dominant Chinese neighbours.
Precarious Economic Prospects
Despite the significant and widely reported suspension of China’s massive
Myitsone Dam project, the economic relationship between Myanmar and China will
remain paramount for many years to come, with a wide variety of massive
infrastructure projects continuing apace, as long as seething Burmese anger
towards Chinese is kept under control. This is a critical issue that bears a
close watch, and will have a profound effect on the country’s economic future.
In the wake of Clinton’s visit, Western resource extraction companies appear to
be warming up to the opportunities they perceive in Myanmar. But US economic
sanctions in particular (including a ban on new investment) are unlikely to be
dropped any time soon. US sanctions enjoy broad, bipartisan support in the US
Congress, where scepticism of the Burmese military, and their recently retired
‘civilian’ colleagues, runs deep, based on years of empty promises and false
dawns.
Yet an important Western investment in Myanmar exists, though it elicited an
astonishing lack of coverage in recent Western media reports focused on, well,
Western investments in Myanmar. Total of France and Chevron of the US (along
with Thailand’s state-owned PTT), are partners with the military-controlled
Myanmar Oil and Gas Enterprise in the Yadana pipeline project, which transports
Burmese natural gas to Thailand for electricity generation. This partnership
generates billions of dollars in revenue for the Burmese, but what happens to
those revenues provides a cautionary tale for anyone thinking that foreign
investment will soon play a role in lifting Myanmar’s population out of poverty.
According to the IMF, the Myanmar government has been booking the revenues from
the Yadana partnership into the national budget using the old, ‘official’
exchange rate of about 6 Burmese kyat to the dollar, rather than at the ‘real’
rate of nearly 800 kyat to the dollar. This means that more than 99 percent of
these revenues (around $6 billion) simply disappear, reportedly into the private
foreign bank accounts of Burmese generals in Singapore, Dubai and elsewhere. In
sum, a precious Burmese natural resource is exported abroad, with the benefits
shared between foreign oil companies and a small number of high ranking military
men. Some see this as corporate pillaging, a war crime, with enormous potential
liabilities. Certainly, it deserves close scrutiny, and provides a poor model
for any investor looking for a long-term, sustainable opportunity in the
country.
If neither Asian nor Western investments are, under current circumstances,
providing significant benefits to Myanmar’s people, is there any hope that
foreign investment can provide opportunities for real development? Or will such
investments continue to be short-sighted resource grabs, with foreigners,
powerful generals and a small group of their cronies robbing Myanmar of its
legacy of forestry and fishery resources, its oil and gas and hydro-electric
resources, and its gems and minerals?
The modest opening of political space is an important step in the right
direction, as is the reduction in Myanmar’s comprehensive media restrictions.
But more difficult issues lie ahead. These include:
Relations with Ethnic Minority Groups: Myanmar’s population is nearly 40 percent
non-Burmese, and many of the country’s resources are found in the areas
traditionally controlled by these groups. The Burmese military has always looked
at the ‘ethnic problem’ as a military challenge, and has brutally suppressed the
ethnic populations for decades. But this is fundamentally a political problem.
Unless and until the military and ex-military leadership shows an understanding
that relations with ethnic minority groups will be solved through political
means, Myanmar will not be stable, and will not be a place for long-term
investment.
Release of Political Prisoners and Development of an Inclusive Political
Culture: The government has released some prisoners, but most of the talented
and dedicated leaders of opposition movements remain jailed. Until they are
released, and are given opportunities to participate both politically and
economically, the society will continue to be dominated by generals,
ex-generals, cronies and drug lords, with monopoly control of sectors of the
economy being doled out as political favours.
Constitutional Reform: The constitution under which the recent elections and
reforms have taken place is fundamentally flawed. This means that such changes
can be easily and instantly reversed. Without a commitment to developing rule of
law, transparency and basic accountability, mistrust will persist, and will
undermine the good ideas and efforts that we’ve seen in recent months.
Given the deep hole into which the military has dug the country, much needs to
done before people declare this ‘new era’ a success. ‘Optimism over Myanmar’ has
been a very rare commodity for decades, and for this reason, it is cherished.
But until objective standards for economic, social and political freedom begin
to be met, a sober analyst must look beyond the dramatic pronouncements to the
underlying conditions as they really are, not as we wish them to be.
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