United Nations unit says the country is
vulnerable to corruption, commodity prices
The
economic prospects of Myanmar, formerly Burma, could be undermined by volatile
commodity prices, according to the United Nations, which says that reliance on
the now-lucrative oil and gas sectors could hinder fiscal modernization.
Western
companies appear eager to tap into Myanmar’s natural resources as US and EU
sanctions are relaxed or suspended in the wake of a succession of recent
reforms such as the freeing of political prisoners and the holding of free and
fair by-elections on April 1.
But
although the United Nations Economic and Social Commission for Asia-Pacific
predicts 6.2 percent economic growth for Myanmar in 2012, the region remains
vulnerable to fluctuating prices of commodities such as oil and the ongoing
debt crisis in Europe.
Demand
for primary resources from large “emerging” economies such as China and India
has pushed oil and gas prices upwards. This means extra revenues for the
Burmese government and, given the recent ending of the country’s dual exchange
rate system, possibly a more transparent disclosure of the nation’s energy
earnings.
But in
an April research note on Myanmar’s economy, the US-based Carnegie Endowment
for International Peace warned that “it is critical that these net earnings are
transferred to the budget and used for social and infrastructure development,
especially in regions with ethnic minorities.”
Otherwise,
Myanmar could fall victim to the so-called “resource curse” with “commodity
boom countries falling back in terms of overall modernization and diversification
of their economies,” according to ESCAP.
To
counter this, Myanmar needs a stronger non-resource sector and “investments in
education, health, rural development and infrastructure,” says ESCAP. Around 75
percent of the Burmese population does not have access to electricity, despite
the country’s huge oil, gas and hydropower resources.
Other
prospective threats to Myanmar’s economy include increased inflation on the
back of an investment surge, and an increase of speculative capital flowing in and
out of the country. Inflation in Myanmar could hit 6.2 percent (the same as the
projected growth rate) during 2012, warns UN-ESCAP, hitting the millions of
Burmese who live on US $1-2 a day.
Nonetheless,
the lifting of sanctions and apparent emergence of a more business-friendly
administration represents “a tremendous opportunity for Myanmar,” said Noeleen
Heyzer, United Nations Under-Secretary General and Executive Secretary of
UN-ESCAP.
However,
she cautioned that Myanmar’s re-emergence into the global economy is at a very
early stage and that concerns regarding nepotism and cronyism remain. “There
needs to be support for new small and medium enterprises so that growth is not
driven by monopolies and families,” she said, speaking at the launch the 2012
Economic and Social Survey of Asia and the Pacific in Bangkok on Thursday.
Despite
a 26 percent increase in tourist numbers and the drafting of a new foreign
investment law, Myanmar’s economy “still suffers from restrictive measures,
such as licensing, which pose barriers to manufacturing and agriculture.”
The
recent relaxation of some US sanctions and the one-year suspension of EU
restrictions will also free-up donor countries to expand aid programs in
Myanmar. “There will be an inflow of development aid but I predict that private
sector investment will be a driver of growth,” cautioned Noeleen Heyzer.
Rapid
aid inflows have a poor track record in Asia, according to the Asia Foundation.
“When international assistance scales up rapidly in a place unaccustomed and
unprepared for large-scale aid, problems are likely to follow,” it said in a
note published on Wednesday titled How Can International Assistance to Myanmar
Avoid Mistakes of the Past?
“In
post-tsunami Aceh and Sri Lanka, and post-transition Timor-Leste, large-scale
aid often created perverse incentives that led to poor program quality and
wasted resources.”
In
Burma’s case, political and economic transition could be undermined if donors
neglect the country’s ethnic minority borderlands, where on-off fighting has
taken place in some regions since the late 1940s.
While
the longest-standing ethnic militia, the Karen National Union, has signed a
ceasefire with the Naypyidaw administration, fighting continues in Burma’s far
north between government troops and the Kachin Independence Organisation.
Kachin
NGOs complain that donors and aid agencies are neglecting the more than 70,000
civilians left homeless by the fighting, and the Asia Foundation writes that
“neglecting the remote conflict areas could lead to a renewed cycle of armed
resistance and military suppression, putting the whole transition at risk.”
Simon
Roughneen
The
Irrawaddy
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