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A country on the cusp

I am an economist that first visited Burma in 1973. There were a number of working visits in the 1990’s for the UN and since Nargis for Proximity Designs an innovative social entrepreneurship company. My forty years of professional life has focused mainly on nations in Southeast Asia. I was fortunate to be able to talk with Aung Sang Suu Kyi when she visited Harvard recently, and was impressed by her clarity and eloquence.

Myanmar has had a very rough past half-century. It has been run by the military and that stewardship until recently can only be graded as poor. In a number of salient dimensions from electricity to health to governance to human rights to infrastructure to poverty, the record has been dismal. While there are (again) peace treaties with most ethnic groups, there is yet to be a real resolution of the relations of the states with the center. Indeed, even now, there is outright conflict in the Kachin state and close to 100,000 internally displaced people. The state of Myanmar has been held together by force: it is a state but not yet a nation where all the citizens want to be part of the whole. However, the question is not primarily about that dismal past but whether or how to take advantage of more recent events.

Before addressing the future, let us briefly discuss the past. Most people who pay attention know that much of the past data reflected more what the higher officials wanted to see than what was actually happening. The recent UN poverty surveys which reported a halving of severe poverty rates during a period of declining food production per capita and a rising share of food spending in total consumption is one glaring example, but there are many others. (Normally, when incomes fall, the share of food spending rises, so these facts suggest the fall in poverty is very unlikely.) In other words, it is not easy to know what has actually happened or even what the present situation is. This makes it more difficult to decide what reasonable future actions should be. We need to be careful.

It is also clear that there is now a tentative but real and promising political movement led by the president and some of his ministers, the speaker of the parliament and Aung Sang Suu Kyi and other opposition and reform figures. These people have singly or more often together partially opened up the press, moved the exchange rate to a more realistic level, reduced Myanmar’s isolation from the west and introduced something approaching a balance of power rather than a simple authoritarian system. The popular legitimacy and political astuteness of Aung Sang Suu Kyi and the courage and political intelligence of the reformers have created a potent mixture. Much of this progress is lost on the Kachin, who are resisting the military and unwanted hydroelectric investment. Violence in the Rakhine [Arakan] state also suggests that these changes are more of a work in progress than a neat package. Much remains to be done, on both the economic and political side.

The economy has very limited supplies of electricity and only a quarter of households have any access to grid power at all – among the lowest in Asia. Transport costs per tonne-mile are five to ten times the level in Thailand or China and the ports are antiquated and inadequate. Bank credit for “normal” private firms is extremely limited, almost to the point of being unavailable. Farmers often cannot get any credit or pay 10 percent a month or more for what is available. The exchange rate at around 800 kyat to the dollar has squeezed profitability of farms and many factories, lowering incomes and driving many young workers to other countries. There are probably four to six million citizens living abroad (the number is hard to estimate) and the workforce is only about 30 million. There is a close connection between economic and political power and still a lack of transparency about public finance, though things are slowly improving.

The cards that Myanmar is holding are not great but neither are they without possibilities. Countries as poor as Myanmar with ethnic strife and a lot of raw material revenues find it hard to transform their economies and their societies. There is so much benefit from getting control of the government and the mineral revenues associated with that control that political cooperation tends to be difficult. Yet what is needed to continue reforms is exactly a broad coalition of groups that include reformists in the government, the parliament, parties currently in opposition, ethnic groups and sympathetic business people. I do not know much about the military but believe that many officers would like to see a stronger, richer and more united nation and they would support steps that achieved those goals. So there is a critical need to work together, but the habits of the past and the self-interest created by raw material revenues push many influential people in the opposite direction.

[pullquote] “If the current opening does fail, then Myanmar will probably not get another chance for a generation.” [/pullquote]

There will be many who have lived outside of Myanmar for many years who mistrust the current changes and think they are only superficial and could be easily reversed. I can understand that point of view but think it is ultimately an unproductive one. If the current opening does fail, then Myanmar will probably not get another chance for a generation. Adding another quarter century of stagnation to the half century preceding it would make it ripe for a takeover by its neighbors. This is an opportunity to get on a much better path – an uncertain opportunity with no assurances that it will succeed. Those who want Myanmar to be a place where they want to raise their children and have a reasonable hope that their life would be better have a difficult choice but a clear one. It is time to support the current reformists, even if conditionally, rather than pretend that nothing fundamental has changed.

What needs to be done? Many things, but here are a few. First, there has to be a degree of autonomy for the states. The current situation with centrally appointed military governors is not acceptable for a real peace. The ethnic groups, the Kachin aside, have been subdued in a military sense but a healthy nation does not want half of its territory and a third of its people to think of itself as occupied lands. The states need to elect local legislatures and governors and have enough funds to make their limited self-government meaningful. The model is Indonesia, where decentralisation has unified the nation and not destroyed it. Revenues from raw materials will have to be split and that must be negotiated – with the state being able to veto developments they do not want. A real peace will allow military spending, now between a quarter and a half of government spending, to fall to more normal levels. Getting the states to function well will be hard and the UN could help as a midwife in the transition to real regional and representative government.

Two, there needs to be land legislation that protects small holders. It is unhealthy to have huge estates built on land taken from shifting cultivators or small farmers. Revisiting past seizures will be complicated and may require the use of foreign aid to compensate existing owners for past investments. However, if the large land owners simply took land without improving it (except around the borders of the property) they should not be paid for the unimproved land. It will take time to create non-farm jobs and political and economic stability will improve with land rights. Democracy will not take root without them.

Third, there will need to be competition in services like construction, banking, transport and telecoms. This is where “crony” businesses will try to create monopolies or limit access and that would slow growth and further concentrate incomes. The participation of Myanmar in the ASEAN free trade area will keep factories from exploiting monopoly power, as cheap imports will provide competition. Faster growth will reduce poverty if policies are fair and supportive of all groups.

Fourth, the movement towards a nation that is more representative of its people and governed by law rather than individuals must continue.  It is ironic that the progress of reform depends so much on a few crucial gifted individuals and there is a need to broaden understanding and support for reforms so that progress will not be so fragile. As Aung Sang Suu Kyi said at Harvard, people must learn that freedom and responsibility are two sides of the same coin. This will all take time and would benefit from outside help but not meddling.

This is a hasty and incomplete list – infrastructure, education, health care and financial development are also needed, and the billions a year in jade and gem sales should be in public view with adequate taxation. However, it is a start. It is time to jump in the pool, even though the water is still dirty.

– David Dapice is an associate professor of economics at Tufts University and economist of the Myanmar Program at Harvard’s Kennedy School. Papers by the Myanmar Program can be found here

Editor’s note: At the request of the author, Myanmar has been used in this article rather than Burma.


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