How to run a country like a business

Corporations have perhaps been the defining unit of human organisation of the last 100 years. Their real birth occurred in a single law passed in London that could be said to have spawned the modern age; the Limited Liability Act of 1855.

This act quickly spawned similar laws in the other leading or ‘emerging’ economies of the day; France and the United States. But the key to their success was removing accountability for the unit’s actions from individuals – the company, a made-up entity, would take legal rap rather than the person or people truly responsible for its actions.

And so in Burma, roughly a century and half after this ‘brainwave’, the raw face of political domination is being converted to wholly appreciate this notion; that instead of belligerently taking action and ignoring all comments and criticism, one simply diffuses such lines of ‘attack’ with a harmony-inducing quagmire of accountability.

Amongst this apparent, but seldom-mentioned, drive is the provision in Burma’s new election laws that will permit political parties to own companies. If the lessons of ‘advanced’ economies and their political structures were analysed one would have to be critical of their evidently polarising nature, even without such a gargantuan conflict of interests.

In the birthplaces of the provision for the ‘corporation’ – the US and the UK – recent examples demonstrate that even with fair, although oft-criticised, rules to prevent such conflicts of interests, policy is fairly easily corrupted by the synthesis between big business and government.

In the UK in the current epoch Tony Blair’s complicity or alliance with Europe’s largest arms manufacturer, BAE Systems, to sell an airforce traffic control system to Tanzania, a nation without an airforce, can be seen as exemplary. It’s a deal which then-UK development minister Claire Short said “stank” of corruption. Tony Blair pushed the deal through despite misgivings from his cabinet. It’s one example of BAE’s dalliance with corruption and the British state.

In the US, former vice president Dick Cheney’s position on the board of Halliburton had to be revoked when he took office, but that didn’t stop the Republican continuing to grease the axel of the famed ‘revolving door’ with provisions that would out-source much of the US military’s support services to Halliburton, awarding contracts with little, if any, competition.

So now let us picture a scenario where there is no revolving door; one does not need to leave the building.

The Union Solidarity and Development Association (USDA) in Burma for instance, described as a ‘mass movement’, is believed to be in line to receive state assets. Details are hard to come by but they have been given a government technical college in Insein township, Rangoon, according to political and economic analyst, Aung Thu Nyein.

The USDA seems to be epitomise the new face of Burmese politics and has so far registered the Union Solidarity and Development Party (USDP) for elections this year. A gambling man would not have to be able to read Than Shwe’s brain or look inside a ballot box to tip them for serious clout based on the upcoming polls. The new party will be headed by Burmese prime minister Thein Sein, despite a debilitating heart condition and deteriorating health.

The USDA are part-led by a military man named Htay Oo, who also presides over the agricultural ministry and is said to be “Western friendly” due to his ability to charm diplomats – he recently met with US envoy Kurt Campbell on his last visit to the country.

The USDA then appears the perfect apparel to fuse business, state and the military; a mass organisation, a business, a political party, and with a board of directors all drawn from the military. But where pluralism will come from is the big issue – no party will be able to compete without the financial backing that ownership of businesses will bring.

The newly privatised enterprises also beg other issues. Such assets were not always state-owned – many were nationalised under Burma’s ‘Path to Socialism’, a pock-marked path that led only to our current swamp, but nevertheless those assets once belonged to private individuals.

In the future they will belong to those business interests who were friendly to the military or who are the military; either way businessmen in Rangoon have suggested that the new owners will need protection from the military to keep such assets. Without the military, the hammer of the law may deem them illegitimate owners.

Along with the USDA or USDP, the other big winner and a murky conduit for power is the Union of Myanmar Economic Holding Company Limited (UMEHC). This, according to analysts, has won the largest share of privatised assets and is run by the military’s quartermaster general as a sort of ‘military company’, or a parastatal. They part-own the Myawaddy Bank as well as a multitude of other assets.

The UMEHC was founded in the early 1990s as part of the junta’s slow re-branding away from the Burmese Path to Socialism. Effectively it is a lookalike, a copy of the model of a company but very much in the general’s image.

This factor can be seen to dominate the autocratic path that Burma under the military generals has taken. All these facets are things that have been devised and utilised elsewhere with provisions; what the International Monetary Fund (IMF) would call “conditionalities”. The term is used in the context of privatisation to imply conditions on which the sale of assets is undertaken; entities must perform some minimal functions in the interests of stability and the nation.

In Burma conditions exist but are not written down; rather the lack of transparency means they exist in the sense of patronage. Essentially the largest shareholder, the one to answer too, will always be the generals – those who gave the managers the asset, those with guns.

The IMF notes that: “The establishment of new enterprises in transition countries could be more important in generating growth in output and employment” than supporting those assets that were previously in play within the economy in state hands. This notion will have serious ramifications in Burma, for while the IMF made this comment based on experiences in nations such as Ukraine, the polarisation of political and economic control was nowhere near that which exists in Burma. The Ukraine privatised following the collapse of one power block in order to reallocate.

A company answers to its shareholders, it seeks profits first and foremost, and profits are easier to gain without competition. The military will naturally then seek to limit competition, for it is a stakeholder in these newly ‘privatised’ institutions.

Actions like mergers, fast sales and cutting costs all push share value up because they are making easy money. So in the case of the extractive industries, a cost-cutting dam or mine undertaken by an Indian entity (often state-owned), for instance, would prove extremely attractive to all parties, from the crony-run construction companies in Burma to the junta board in charge and the foreign conglomerates, essentially because of the lack of conditions which hamper business.

As Wong Aung of the Shwe Gas Movement (SGM) told DVB: “The regime enables the projects to go ahead unhindered in the face of local opposition. Local communities do not have any platforms on which to voice their concerns about extractive projects. They have no recourse in the event of human rights and other abuses at the hands of the military, and there are no strong environmental protection laws that come to bear during the project implementation.”

The one ‘party’ who will miss out are the people, not just now but in generations to come. Companies solely acting to maximise profits are not sustainable, and this is demonstrated amply by the recent credit crunch; but in Burma, this will be a resource crunch.

Selling of assets will take place and the value or cash wealth of junta-friendly companies will grow until they oversell, the resources run out, the evaluation is proved to be phoney and investment rapidly disappears. Then, India or Thailand, Korea or China, will have no interest in Burma or its people. Will profit-interested private entities really tell their shareholders that they forewent profits voluntarily in order to offer Burma a sustainable economic future? Indeed, according to Wong Aung, “multinational companies have no incentives to engage in sustainable development practices”.

In the case of India it has been noted that Burma’s hydropower sector is extremely attractive, partly because years of strife in India has enabled a degree of accountability or at least a hesitancy. So as one unnamed Indian executive from Power Grid Corp of India Ltd (PGCIL) revealingly noted: “A transmission link for the evacuation of power is expected to be set up.”

The power will be evacuated, away from the flooding, away from the deportations and environmental destruction. ‘Power’ that is similarly evacuated to neighbours through the Shwe and Yadana gas pipelines is known as the “mineral curse”, and is most familiar in Africa.

With this, one does not need new enterprise of the sort that has transformed other Asian economies. One needs ‘free reign’ to extract commodities as cheaply as possible and avoid interference from regulation, progressive taxation and, at times, transparency, in order to maintain share price. In other words, this is absolute control. It has limited affect on the economy or wealth of the nation overall and is a synthesis between government and business.

Thus we that see not only that the people of Burma do not receive their just deserts from the minerals that lie beneath their feet, but that the polarisation of wealth that the extractive industries bring prevents a redistributive effect that ‘normal’ enterprise can bring; enterprise that relies on redistributive or essentially neutral governance. It is like the creation of the corporation – a logical formulation or vision of economy and society that attempts to define the masses, the ‘collateral’ stakeholders, out of nature’s endowments, out of the natural contract of economy.

Leave a reply