Sean Turnell: 'The US is angry'

A massive shift in the character of Burma’s economy is currently underway, with the government in recent months selling off swathes of state-owned industry to private businessowners. Some observers have said that this is an attempt to liberalise the struggling economy, while others claim that it is sowing the seeds of  a post-election ruling oligarchy.

Burma economics expert, Sean Turnell, from Australia’s Macquarie University, tells DVB however that the reasons are manifold, but all point towards a feeling that government ministers and cronies are uneasy about their place in a post-election Burma.

Industry continues to be privatised in Burma at an alarming rate. What do you think are the reasons behind this?

I think it’s a couple of things: first, I think it’s about divvying up assets – everyone knows that the regime will come back after the elections, but individual members within the regime will be less certain of their position and their family’s economic position so they’ll want to grab some sort of economic future and grabb what they can, while they can. Neither government members nor businesspeople close to the junta are certain of how they individually will fare [after the elections].

There are other reports we’re getting that the regime is short of cash at the moment – probably a short-term thing with the channelling of funds to the [pro-junta organisation] USDA and other parties – but also given that the regime keeps its gas money offshore, the domestic fiscal position is still pretty bad, regardless of the need for various election bribes. A third thing is that there is some pretence that this is part of a liberal economic reform, although we can see from the nature of it that there’s no liberalisation or any deep-seated reforms in the industry; it’s just a conversion of state monopolies into private ones.

Do you share concerns that a murky oligarchy is being formed?

Yes, absolutely. Also, however badly they mismanage the economy, members of the regime and people connected to it have been pretty clever in ensuring that they’re OK. A casual glance around the world at other regimes suggests that if you’re going to try and get hold of economic power, now [around the elections] is the time to do it, rather than a time when potential populists could emerge – why couldn’t there emerge a Burmese version of [former Thai prime minister] Thaksin Sinawatra, divvying up all the assets for the people? I’ve also heard that the privatisation was about taking liquidity from the private sector; that some people in the private sector didn’t want these assets and were just taking money out of the private sector in this election period and empowering the elites.

Given the transformation of the economy and massive overseas investments, is it time for the West to reconsider sanctions?

Well I think it’s time to toughen them up, but just the financial sanctions. With the substantial money the junta is making from gas, it’s either now wasting it or it’s keeping it in offshore accounts where various people can access it. So the financial sanctions are quite important, and I’d like to see the US and other countries if anything increase their financial sanctions, not just as a way of pressuring the regime and trying to change their incentives, but as a way of just tracking the funds. The US should appoint someone to coordinate other governments and so on so that we just get a better idea of where the money is going and putting pressure on some of the financial jurisdictions that we know the money is sitting in. So I think the investments do give the regime a bit more room to manoeuvre and fob off the West but also it lifts the opportunities of the West to ramp up the financial side of sanctions.

What is the mood like in the US having achieved little from engaging with the junta?

When I was there in September last year and all the talk was of a change in US policy that would probably entail some lessening of sanctions in exchange for concessions from the regime. This time, very different, a great deal of anger, on Capitol Hill especially, and a real feeling of having been rebuffed; that the hand had been extended and they were getting nothing. If anything, they felt that the regime had gone out of its way to make the situation that little bit more uncomfortable, such as the arrest of Nyi Nyi Aung and in particular the change in the electoral laws. The US saw Suu Kyi’s expulsion as unnecessary – going that extra distance was seen as excessive. And in that context the whole question of leveraging up financial sanctions is really on the table and that was the dominant conversation I had while I was over there.

Are you surprised that so much foreign investment is going into Burma, given the instability of the market?

I don’t doubt for a second that there will be a lot of money lost, but I never cease to be amazed at China’s appetite for energy, and this has been demonstrated time and again that they will pay over the odds for anything – it’s quite extraordinary. There’s also this desire to tie-up resources for the longer term – with China it’s more or less a constant story of giving themselves strategic options.

How do you feel the China-ASEAN free trade agreement will affect Burma?

I would only echo fears that it could scupper Burma’s development, but unless things dramatically change, the horse has bolted on that one. Burma’s consumer industries are so dominated by Chinese goods that there really is no private sector in Burma of any significance and Burmese state-owned industries are totally out-classed by Chinese imports. So really Burma doesn’t need this trade agreement. I think the biggest barrier to the flow of goods in Burma is internal: the various checkpoints along the border and extraction of informal taxes and fines are the biggest barrier.

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