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    Southeast Asia
     Dec 13, '13

Dearth of ideas in Myanmar transition
By David Baulk

On paper, few countries have had as good a year as Myanmar. It has seen the lifting of economic sanctions, the write-off of a substantial portion of the country's debts, strong levels of gross domestic product (GDP) growth, the winning the Association of Southeast Asia Nations' (ASEAN) chairmanship, the hosting of the World Economic Forum on East Asia, and praise from almost every government, donor and economic institution in the world.

This progress report is surprising considering that 2013 also brought evidence of the government's role in stoking religious hatred across the country, the number of internally displaced people resulting from civil conflict and land grabbing burgeoned, and the country continued to languish towards the bottom of

almost every global economic and social index.

The wheels of Myanmar's transition are in motion; progress is being made, but obstacles remain before the reform process realizes its potential. Few people have contested this narrative of progress - in a sense, the impossibility of being able to contest this is what makes it such an effective rhetorical device.

But there has been little debate as to whether the existing social and economic infrastructure - and the proposals to strengthen it - can actually deliver over the long term. Moreover, the slew of policymakers paying lip service to the need for responsible investment and progress on human rights issues has sidelined the most egregious elephant in the room: is the policy mix of the reform strategy the most effective for realizing President Thein Sein's stated goal of inclusive growth and poverty reduction?

The opening of foreign exchange markets, the consolidation of the country's multiple exchange rates, and attempts to make parliamentary business more transparent are all welcome steps away from the isolationism for which Myanmar had become infamous under direct military rule. Yet the risk of focusing on notable successes is that doing so can easily distort the lived reality of the majority of Myanmar's people.

The excitement generated by these reforms has allowed the international community's focus to narrow, to the neglect of the men, women and children who continue to live in misery under the country's military-backed, quasi-civilian government. Noting that "obstacles remain" has largely been taken as an appropriate level of caution when discussing Myanmar's purported transition.

Self evidently, this is more platitude than profundity. Drawing people on exactly what these "obstacles" are - and what they are precluding the achievement of - is more illuminating. Clearly, some of the biggest relate to the implementation of the strategy of economic and social reform upon which the country is embarking - not forgetting the ongoing prevalence of ethnic conflict, displacement, arbitrary imprisonment, forced labor, and gender violence which prevail in different parts of the country.

A more candid assessment might note that the remaining "obstacles" will take many years of discussion, institutional reform, education, and social rebalancing to address; that is, if the genuine aim of reforms is the amelioration of the lives of Myanmar's impoverished majority. In the meantime, the wholesale liberalization of Myanmar's economy proceeds and the benefits are not clearly trickling down.

Selectivity and irresponsibility
As international bodies from the World Bank to the European Union have noted, the most obvious concern is the absence of institutional capacity and infrastructure to effectively proceed on such a wide-ranging reform process at such breakneck speed. The international community has pointed to the activity of parliament as evidence that progress in this regard has been substantial. But the passage of a bill and the institution of a modus operandi are two very different things.

For example, uprooting a culture of corruption that permeates so many levels of the country's social fabric will take far longer than the passage of an Anti-Corruption Bill - though, tellingly, this took over a year. Decades-long under-investment in education helped to institutionalize corruption as a last resort to achieving economic advancement in the absence of human capital. Sedulously combating this culture is just one of the dozens of objectives Myanmar's over-stretched central government has elucidated in its Framework of Economic and Social Reforms (FESR).

While the policy mix articulated in the FESR has its strengths on paper, expecting a civil service, government machinery, and business community to rapidly overhaul the informal rules and regulations institutionalized over decades of military rule, is at best optimistic. To attempt to achieve this on a timescale under which even the most well-resourced nation would struggle, however, is irresponsible. It is irresponsible because it can only be seen to be achieved through the selective use of evidence of genuine change.

This selectivity helps to advance arguments aimed at realizing a specific model of economic growth, by making irreversible changes to the country's economic and social fabric. The international community has thus far chosen to view the reform process through the prism of Naypyidaw, using the number of legislative bills passed and committees created in the new capital as evidence of both de jure and de facto change.

If corruption is nominally being tackled, if parliament is operating in a more transparent manner, and if certain political prisoners are being freed, should the country's progress not be recognized?

The simplicity of this argument is what makes it so compelling; it gives license to absolve interested observers of the responsibility to investigate the spurious nature of what is being argued - a particularly difficult task in Myanmar. In advancing this thesis, space is created for the implementation of a paradigm of growth anchored in the notion that wealth creation is the necessary precursor to social development, against which voices of dissent struggle to be heard.

The international community's recognition of Myanmar's reform process has largely materialized in the form of increased investment - the estimated foreign direct investment compounded annual growth rate over the past three years is 316% - and the signing of bilateral trade deals, greatly increasing the scope for those at the military-connected vanguard of Myanmar's business community to generate big profits. Western countries have also lifted or suspended the economic sanctions they imposed against the previous military junta.

All of these elements are to a greater or lesser extent necessary for an economy embarking on a transition as sizeable as that of Myanmar. Neither the increased marketization of an economy, nor the engagement of the wider regional and global business communities by themselves represent a threat to a more prosperous future for the people of Myanmar.

What should be cause for concern, however, is that the development paradigm of which these elements are central pillars is still the only game in town - despite the prevailing issues faced by many of the countries at similarly low levels of development in which it has been applied.

Whilst not denying certain successes of neighboring countries like Vietnam and Cambodia brought about by their commitment to export-oriented trade liberalization, the praise lauded upon both countries has tended to take the form of headline indicators, such as GDP growth and foreign exchange generated. A critical observer might point to the more deleterious aspects of these policies - such as the lack of backward linkages and domestic employment created by Cambodia's export processing zones, or the increasing levels of income inequality in Vietnam - as evidence of how allying with a specific paradigm of economic growth has created unforeseen social issues which their respective governments have struggled to address.

In the case of Myanmar, the policy advice given by international financial institutions, governments and the business community is - to varying degrees - committed to this same paradigm, one that Naypyidaw has embraced seemingly without question. That blind embrace, however, raises two main issues.

Firstly, the ongoing shrinking of space in which governments can operate if they want to be engaged with global markets. Secondly, the absence of fresh ideas to address the needs of some of the world's most economically and socially impoverished peoples.

Forging new paths
Much has been made of Myanmar being Asia's "last frontier" - an opportunity for a brand of capitalist development to take root, bringing with it a swathe of market opportunities for both domestic and foreign entrepreneurs. The country's natural resource reserves, geostrategic location, and abundant cheap labor all point to the potential for the right policy mix to generate healthy GDP growth in Myanmar - the starting point for the strategy espoused in the FESR.

Once the building blocks for Myanmar's new market-based economy are in place, the government can set about enforcing the rule of law more effectively, and - as elucidated in the World Bank's latest 'Doing Business' report - cultivate a more enabling environment for business. Addressing issues of social development will be far easier with the revenues generated by this process, so the market liberalization theory goes.

However, the modus operandi of both Myanmar's parliament and its private sector evince the need for macroeconomic policy and social policy to work in concert; the latter cannot be an addendum of the former. For this to happen, an economic strategy that diverges from the paradigm that has for so long kept many less-developed countries "path dependent", to use economists' parlance, must be sought.

The case for investing in employment creation which builds both the productive capacities of the workforce and nascent domestic markets in the process is currently not being made - doubtless due to the prevailing weaknesses in public sector and civil service capacities outlined above. This makes questioning whether the current reform strategy is most conducive to Myanmar's long-term development all the more important.

Slowing the pace of reforms, and taking the time required to address certain systemic issues - for example, the independence of the judiciary, constitutional reform, and lack of capacity at every level of central and local government - is vital for creating a state which functions for the people rather than itself. Demanding that Myanmar's public sector generates employment, provides healthcare and education, and improves revenue performance by instituting an equitable taxation system is ambitious but absolutely necessary, if only to provide an alternative to wholesale liberalization to generate industrial growth.

Industrialization has already resulted in deepening financial inequalities, and is sure to exacerbate problems of rural-urban migration as eking out livelihoods from agriculture becomes even more difficult. In light of this, the argument that the government's primary focus should be removing "red tape" in the realm of business should be rigorously scrutinized.

There can be no denying that the role of the state in business must undergo systemic change; for too long it has approached the private sector as a means of extending its own networks of patronage. But arguing - as international financial institutions, the international business community, and Naypyidaw are - for the roll-back of regulatory mechanisms as an objective willfully ignores those elements of Myanmar's political economy that imperil the growth of a well-functioning labor market.

The absence of a minimum wage law, and Naypyidaw's unwillingness to ratify International Labor Organization conventions to institute basic labor rights, are pertinent. Generating employment in a manner that brings opportunities for the majority of the country's workforce will be vital to bring about a period of sustained economic growth, as will allowing that workforce the currently circumscribed right to register dissent.

The creation of hundreds of thousands of jobs which replicate the inhuman conditions currently prevailing in Yangon's industrial zones might expand GDP growth and increase foreign exchange but will do little to ameliorate the lives of the actual factory workers.

Bodies such as the United Nations Conference on Trade and Development (UNCTAD) have long argued that if the world's least-developed countries are serious about achieving the development promised by institutions such as the International Monetary Fund, the World Bank and Asian Development Bank, it is vital to understand the role of central government as a catalyst to private sector development, rather than solely an instrument to create a "business friendly" environment.

As argued in UNCTAD's 2013 Least Developed Countries report, there is a strong case to be made for governments to invest in activities in non-tradable sectors (such as infrastructure, education, housing, healthcare, and public administration) as a means of not only generating employment, but also building the productive capacities of an economy. An improved performance in tables such as the Human Development Index, the stimulation of domestic markets, and better economic and social circumstances for the country's majority could thus result.

There is no paradigmatic optimum strategy for Myanmar to pursue in its quest for development. As noted by Princeton University economist Dani Rodrik, to understand the latencies and opportunities that exist in a given political economy is a process of discovery. Unearthing what will most effectively bring about meaningful and lasting social and economic change in Myanmar begins with demanding a more nuanced approach to the process of "emergence" - one that recognizes the time that systemic change must take, and one that does not blindly defer to a paradigm that has failed to deliver on its own promises of liberalization-led development elsewhere.

David Baulk is a graduate of Development Studies from the University of London's School of Oriental and African Studies. He currently works in Tamil Nadu, India, as a researcher on women's rights and caste discrimination.

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