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Politics & Economy: Myanmar Finally Headed in the Right Direction

No informed observer doubts that economic and political policies in Myanmar are turning ever so slowly toward growth and stability.

The Status Quo

 

The ship of state is yawing right and the helmsmen seem to know what they are doing. Yet the midcourse correction must be sustained and amplified by sound long-term decisions if the country is to avoid running aground again.

The move to democracy | Source: http://graphics8.nytimes.com

The country began to veer towards democracy after the popular uprising of 1988, when the unrest of the isolated people finally boiled over. At that time, General Ne Win’s socialist regime made tentative efforts to chart a different course. However, the country’s real turnaround began under the semi-enlightened regime of General Than Shwe.

Between 1992, when Than Shwe took over, and 2011 when he stepped aside, the country slowly transitioned from a Stalinist economic model toward a market-based one. The economic sanctions imposed by world powers were keyed to this political intransigence and were felt by everyday Burmese citizens. It took the government more than a decade to restore stability and internal security. Temporary ceasefires were signed with major armed ethnic groups; a new constitution was written and an election scheduled.

However, Than Shwe also made a living martyr of political activist Aung San Suu Kyi by keeping her under house arrest and repressing democratic supporters. The economic sanctions imposed by world powers were keyed to this political intransigence and were felt by everyday Burmese citizens. The ultimate fruit of the sanctions were displayed in the country’s first multi-party election in more than two decades.


A FRUITFUL ELECTION

The 2010 voting produced an entire new government, while reformist President Thein Sein really cranked the rudder in the right direction. Since then, the pace and scope of policy changes has been staggering: many repressive policies have ended. Hundreds of political prisoners have been released. Diaspora groups were invited to return and some press freedoms restored. The new government has pursued peaceful resolution of ethnic conflicts and taken steps to spur economic growth.


Thein Sein (left) and Aung San Suu Kyi (right) | Source: http://resources1.news.com.au/

Moving from confrontation to collaboration, Thein Sein also initiated talks with Suu Kyi. The two leaders reached an agreement to cooperate as much as possible for the greater good of Myanmar (Burma). Suu Kyi was allowed to legally integrate into Myanmar politics, and she took full advantage of it: Her National League for Democracy (NLD) captured nearly all the contested seats in the lower parliament.

It is as if Myanmar (Burma) awakened one morning to full sunshine after years of bitter overcast. The 2015 general election will test the governing authorities’ commitment to sunshine. The victors of the upcoming election will inherit relatively weak institutions and administrative capability, so the struggle will continue as Myanmar (Burma) progressively realizes economic prosperity.

Yet all of this change has led to the dropping of most sanctions, which will give the economy an immediate boost. Myanmar can expand its economy at 7% to 8% a year and become a middle income nation over the next 15 years. Official aid agencies and international non-government organizations are working again, and The World Bank and Asian Development Bank have opened their purses. The money will continue to flow into Myanmar (Burma) only as fast as political and economic reforms gain traction.

To ensure that reforms continue, the World Bank Group will technically guide the pseudo-democracy in areas of public financial management, regulatory reform, and private sector development. Asean Development Bank directors believe Myanmar (Burma) can expand its economy at 7% to 8% a year and become a middle income nation over the next 15 years “if it can surmount substantial development challenges by further implementing across-the-board reforms.”

That is a significant hedge in view of the volatility of Myanmar’s ancient and modern political history—and its uneven relationship with its giant neighbor to the north: China. In the 1930s, a scholar living in Burma, Professor J.S. Furnivall, was pessimistic about the future of this relationship:

“If, as it but too probable, the obstacles prove insurmountable [to constructing a unified society and economy] … after a period of anarchy more or less prolonged, our descendants may find Burma a province of China.”

The professor’s pessimism may be unwarranted, yet Myanmar (Burma) continues to struggle against China’s near-usurpation of Myanmar’s abundant natural resources.


IN THE BULL’S EYE

Myanmar’s valuable resources and strategic location have always made it a target.  In World War II, Myanmar (Burma) was a battleground. Today it is at the center of a global shift in focus toward the Asia Pacific Region. Regional disputes about off-shore areas of the Western Pacific have begun to boil. Strategic competition among regional and global super powers is heating up as well. And China covets a strategic outlet to the Indian Ocean, namely, Myanmar itself!


Myanmar's geopolitical significance | Source: http://www.solarnavigator.net

Furthermore, Myanmar (Burma) is geographically vulnerable to invasion. The Irrawaddy River valley runs down the center of the country, a strategic conduit for invaders. The Shan Plateau on the Thai border to the east is even less of a physical barrier. Defending the mountainous and plateau Ceasefire agreements have been reached with ten of eleven ethnic armed groups: a major first step. border areas are essential for national security.

Yet these regions are inhabited and controlled by diverse and autonomous ethnic groups. Bamar comprise about 60% of the country’s population and live in the country’s more developed core. It is the remaining 40%, comprising more than a hundred national races, which live in the hilly remote areas flowing with natural resources. This combination of national security concerns, as well as ethnic and geographical separation, is a major stumbling block to national unity.

Ceasefire agreements have been reached with ten of eleven ethnic armed groups: a major first step. On the geo-political front, Myanmar (Burma) is weaning itself from its reliance on China, as it tries to create equal space between itself and all foreign powers. A testament to its rapprochement with the West is an invitation to attend the annual Kobra Gold exercise, a major U.S. and Thai-led multinational military-to-military exercise. Japan has also become a supportive economic partner of Myanmar.


THE ECONOMIC AGENDA

The country’s immense wealth in the ground includes natural gas, gems, and an array of valuable minerals. Managing and exploiting these natural resources is essential to Myanmar’s future growth in gross domestic production. The country’s decision-makers also must carve out policies that will lift the economy’s huge agricultural segment.

Most of Myanmar’s current GDP is derived from agriculture, forestry, fisheries and livestock, but labor-intensive manufacturing has the best chance to jump-start Myanmar’s GDP growth. The manufacturing segment needs help though, as do the country’s infrastructure (roads, ports, telecom, and energy), and health and education systems.

Some big basic building blocks have been put in place. A progressive foreign investment law has begun to delineate the rights and responsibilities of investors and to provide appropriate investor safeguards. Labor laws, that keep peace in an industrial workplace environment, have also been implemented. The currency exchange rate has been changed to float with the market, Unlike China and Vietnam, Myanmar’s leaders are pressing ahead with political reform before enacting economic reform. thereby making the government more responsive to trade factors. If exports and tourism can markedly increase, global corporate interests are expected to get off their hands and invest in the country in a big way as they have in other Southeast Asian countries. 

Unlike China and Vietnam, Myanmar’s leaders are pressing ahead with political reform before enacting economic reform. This is difficult, but they have made a promising start. It frankly is hard to dismiss as inconsequential the widely shared feeling of forward momentum in Myanmar (Burma); political factions at home and abroad, banking interests, and private sector investors are all coming into alignment on economic priorities.

Still, the outstanding political reform agenda is daunting, and variable conditions could disrupt it. Twists and turns are inevitable. Yet, it appears likely that the current turnaround will continue and that smooth sailing is in Myanmar’s not-too-distant future.


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