The first sign of
the protests now escalating in Myanmar occurred in
a rare display of public outrage over economic
conditions in February. A small group calling
itself the Myanmar Development Committee called on
the military rulers to address consumer prices,
health care, education, and the poor electricity
infrastructure.
Normally unseen in
Myanmar, the protest was broken up in 30 minutes.
Likely in response to the protests, the ruling
military junta appointed Brigadier-General Than
Han of the Myanmar
police to handle civil unrest
in Yangon.
On August 15, the government
made significant cuts to national fuel subsidies,
which had an immediate effect of increasing the
price of diesel fuel by a reported 100%, causing a
fivefold increase in the price of compressed
natural gas, and placing additional inflationary
pressure on an economy already facing estimated
inflation levels of 17.7% in 2005 and 21.4% in
2006.
Similarly to the event in February,
people took to the streets in a rare display of
public anger. The current demonstrations have
drawn a significant number of Buddhist monks into
the streets and have led to national curfews.
Violence broke out on Wednesday, as security
forces and protesters clashed, with government
reports of at least one civilian killed and three
injured.
The end of fuel subsidies was
likely part of a larger package of reforms that
the junta has been planning, among other things,
to reduce the pressure of global fuel prices in a
country that is dependent on diesel imports for
its entire economy. Myanmar has an insignificant
domestic refinery capacity and a chronic need for
foreign currency. The latest Indian proposal
intended to regain access to the Shwe gas fields
has reportedly included diesel-fuel exports, while
a deal with Petronas of Malaysia is seeking
similar arrangements.
The International
Monetary Fund and World Bank made recommendations
along the lines of the subsidy cut as part of a
larger package of reforms as recently as last year
- critically citing the trend toward
extraordinarily high budget deficits carried by
the ruling junta. The construction of a new
administrative capital, Naypyidaw, and the
proposed construction of an information-technology
(IT) capital, Yadanabon, along with significant
pay raises for civil servants and the military
have placed serious pressure on government
reserves. The government typically addresses such
deficits by printing more money, producing the
significant inflationary pressures seen today.
The involvement of private interests
should not be overlooked. Leading junta-linked
businessman Tay Za and his Htoo Trading holding
company may be set to profit from the
privatization of the national fuel-distribution
system. For the move to be successful, however,
the thriving black market in fuel would need to be
eradicated, thus the necessary removal of fuel
subsidies and the subsequent rise in prices
throughout the country.
While interplay
between junta leaders and private businessmen has
been cited before as a causal factor in often
erratic economic-policy changes, the international
pattern of subsidy reduction in the face of rising
global oil prices on the surface suggests that
this was not the underlying motive. However, it
would be fairly typical for the junta to select
reforms beneficial to its business partners rather
than to the national interest.
No
value-added exports The junta has
successfully melded Myanmar's economy into one
that is dependent and focused on the export of
resources. Arguably, it appears that the junta has
little economic-planning experience, and its
priorities lie in the promotion of military power.
However, it has produced a situation in which
little value is added to any natural resources,
whether it be copper, timber or energy, producing
an economy dependent on imports and exposed to the
volatility of global resource prices.
It
has managed resource rents and foreign investment
poorly; planned hydroelectric projects will likely
be forced to export electricity because of the
inability of domestic infrastructure to handle the
increased load. Similarly, the IT project of
Yadanabon, likely a response to a similar project
in Malaysia, is a typical kind of economic oddity
that the junta often embarks on with little
thought to planning. Communication infrastructure
within the country is archaic and will arguably
not support the proposed project.
Likewise, the jatropha plantations
currently being planted across the country,
another junta project, will likely not result in
any significant economic gain. Jatropha requires
significant infrastructure to be converted into
bio-diesel, which likely means it will be exported
in its raw form to neighboring countries while the
land under plantation could arguably be better
utilized to feed the local population. Regardless,
the aging diesel engines that are in use
throughout Myanmar will not be able to burn the
resulting fuel stock effectively, even if the
domestic infrastructure were available.
One
of the factors that may exacerbate the already
dire situation is the state of Myanmar's banking
sector. The junta has recently announced a
restriction on withdrawals from banks, raising
echoes of the banking crisis of 2003. These
restrictions are typical for unstable times, but
because of the shaky status of the private banks
especially, it is likely to cause even further
economic hardship for the population.
Monks may represent the spiritual drive of
the current protests, but it is the general
populace, which has been successfully cowed by the
junta into an attitude of self-preservation, that
will ultimately have to be mobilized to demand
change. The military has made a supreme effort to
remove itself from contact with the population:
barracks and bases are situated away from towns,
and the new capital is a study in strategic
withdrawal to the hinterland.
Decades of
military involvement in running the economy,
over-dependence on resource exports, and a high
rate of official corruption mean economic
improvements will not come easily to Myanmar -
even with political change. It is the populace
that has the most to lose from rampant inflation
and evaporating savings, but it faces an
incredibly resilient, sometimes violent and
increasingly isolated military that has kept a
stranglehold on power since 1962.
The last
major uprising in Myanmar occurred in 1988. The
underlying cause of that revolt was economic and
resulted in violent repression by the military.
The outcome of the current protest, many fear,
could be similar.
Published with
permission of thePower and Interest News
Report, an analysis-based
publication that seeks to provide insight into
various conflicts, regions and points of interest
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