To
speed political reforms in Burma, the West can’t end sanctions soon enough
The US is to ease its economic sanctions against
Burma, the UK has announced a suspension, and other EU countries are likely to
follow suit soon. But all are still an inadequate response to the opportunities
for real change at all levels opening up in that long afflicted country.
If the western nations truly believed that sanctions
were intended to help the Burmese people, rather than simply show displeasure
at the generals’ brutality, they would move swiftly to provide momentum for the
changes now underway. They must take President Thein Sein’s commitment to
reform at face value if only because the alternative is not his replacement by
democracy icon Aung San Suu Kyi but by old-guard military men and their
civilian party supporters.
Popular expectations for improvements in peoples’
livelihood are running high, as though the spirit of Aung San Su Kyi could
deliver material benefits in the way it has helped deliver a degree of liberty
and democracy. Disappointment could lead to reaction by conservative forces in
the military and among the elites who have prospered under Burma’s crony
capitalism.
In their own interests as well as those of the
nation’s 60 million people, countries that imposed sanctions owe it to the
Burmese to get to the forefront of efforts to raise Myanmar’s social and economic
conditions after half a century of decline. This issue is more important than
using sanctions to extract more political gains for Aung San Suu Kyi.
Years of economic sanctions backing Aung San Suu
Kyi’s fight for democracy may, to some at least, seem justified by recent steps
under President Thein Sein to a more open society with rational economic
policies. But years of sanctions have made the economic situation far worse.
They also promoted a tiny, military-linked moneyed class profiting from those
sectors which were largely immune from sanctions – extractive industries like
the oil and gas, gems, drugs, timber and cross-border deals of all kinds with
China and Thailand.
Meanwhile the activities that benefited significant
numbers of people – garment and other labor-intensive export industries,
tourism and agriculture suffered most. The nations whose policies damaged those
sectors must now get their priorities straight and focus on immediate steps to
revive those industries.
There is far to go before sanctions cease to matter.
The US has lifted some, but the complex US mix of executive orders and laws
promise a long process for the rest. The actual impact of those said to be
lifted has yet to be clarified – an important issue given that US financial
sanctions have global impact, continuing, for example, to inhibit the use of
mundane items such as credit cards. UK sanctions are merely being suspended as
though Myanmar must be treated as if “on probation” and expected to live up to
much higher standards of liberty than applied to China, Vietnam and dozens of
other countries. Yet Burma has begun steps to rationalize its economic system
and badly needs help to sustain the process.
Following International Monetary Fund advice, Burma
now has an exchange rate that reflects actual supply and demand in place of
various artificially manipulated rates which delivered benefits to a select
few. It is planning to reduce and rationalize the array of import controls and
export taxes that inhibit or distort trade. It is aiming to rebuild a mainly
private banking system to generate savings and provide credit. But sanctions
remain an impediment to transactions with the outside world, let alone the
entry of western bank capital and expertise into the system.
Potential investors are flocking to Burma to look
for opportunities, especially in natural resources. But what the nation first
needs is a better commercial infrastructure which can only come when sanctions
are gone. Next it needs more physical infrastructure, power in particular,
without which, no industry can grow. The World Bank and Asian Development Bank
are eager to help – but their hands remain tied by US sanctions.
Burma needs the garment and other labor-intensive
industries that can provide the cities with jobs. Manufacturers and logistics
companies from Hong Kong have visited and like the prospects: Wages are low,
there is basic literacy and ready access to other Asian centers. But so long as
trade sanctions remain in place, opportunities are minimal. If Vietnam and
Cambodia could be given privileged access to the EU market for various
labor-intensive industries, why not Burma?
Much is written about Burma’s oil and gas potential.
Exports are rising, and western groups are looking to compete with Chinese, Indian
and Southeast Asian companies to explore and develop new fields. But the
reality is that Burma’s hydrocarbon export prospects appear big because its
domestic power supply is so small.
Not only is there very little manufacturing
industry, but electrification has yet to reach most rural areas. Only about 20
percent of the population of 60 million has access to electricity – Rangoon’s
power supply is so unreliable that downtown streets other than in the smartest
residential districts are thick with the fumes of roadside generators.
Gas will be useful, but the revival of the economy
must be based, as it was in Vietnam, on revival of agricultural exports and
low-wage manufactures. The potential is there. The will also appears to be
there. However, implementation is a huge problem. Technical expertise is in
short supply; educational standards, once the highest in the region, have
fallen drastically over the years of isolation; and the bureaucracy is a master
at creating rules from which only its officials benefit.
Corruption runs deep, and there is no over-arching
power like the Communist Party in China and Vietnam. So delivering change could
be doubly difficult. The situation cries out for a massive program of
educational support which English-speaking countries are particularly
well-positioned to deliver given the British colonial legacy. The scope for
foreign direct investment will be limited initially by the economy’s small size
and the competition in manufacturing from neighbors China and Vietnam.
Investors will also have to be willing to do
joint-venture deals with existing local conglomerates, of which about a dozen
are identifiable. They have prospered mainly because of their connections, but
are mostly run by opportunists who can probably adapt to change and an end to
monopolies. Such conglomerates also need capital as they seek to expand from
simply being big fish in a small pond to being seen as on equal terms with
similar groups in Malaysia, Thailand and elsewhere.
The bottom line for these business people, as for
most others in Burma, is that in their hearts they want their country to become
normal again, not to be a pariah or laughing-stock. For that, they need the
country to be open to all, but particularly with the West, which long shunned
them while China and to a lesser degree other Asian countries, developed links.
Indeed, if Burma’s nationalism was once driven by
opposition to foreigners – British colonialism and Indian, Chinese and other
foreign traders – nationalists now look to reviving links with the West, India
and elsewhere as counterbalance to the power of China’s money and the dominance
of Thai and Chinese trade. The West would do well to stop preaching and start helping.
Philip Bowring
Asia Sentinel
Business & Investment Opportunities
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