Leaders from the Association of Southeast
Asian Nations (ASEAN) are meeting in Yangon, Myanmar this week to discuss
economics, trade and investment. But critics say the country has a long way to
go before it can truly meet the standards of this and other internatinoal
economic organizations.
Despite
a concerted effort from Myanmar’s post-dictatorship administration, recent
political developments and uneasiness with a lingering military elite may
hinder the nation's efforts to attract foreign capital to one of the world’s
last truly frontier markets.
“The
rich and powerful find it very easy to get whatever they want.; that’s fine for
today but leads to problems down the road,” said Lex Rieffel, Southeast Asia
expert and former U.S. Treasury economist.
More
recently, the country has been wooing foreign investment through banking
reforms and a push towards developing its vast stores of natural resources. But
large amounts of cash from abroad may do more harm than good if handled
incorrectly.
“If you
get the wrong kind of foreign investment in the wrong way at the wrong time, it
could be damaging,” Rieffel said. “The good investors aren’t always the ones
that pay the most money.”
Myanmar
emerged from a generation of dictatorship just four years ago, and has made
some positive steps.
“Myanmar
is leaving behind decades of isolation, fragility and conflict,” the World Bank
wrote in its 2012 profile of the nation noting the history of tight economic
nationalization and severed ties with the outside world that started after a
1962 military coup by General Ne Win. Even after he resigned in 1988, the
government’s violent suppression of political opposition incited strong Western
sanctions, which further isolated the economy.
But
President Thein Sein, elected in 2010, signaled a relatively new direction,
World Bank analysts wrote. Along with the release of Aung San Suu Kyi and other
high-profile political prisoners, he halted controversial development projects,
and made a few notable steps toward decentralizing the country’s economy and
opening the markets to foreign investment and the international community
through the World Bank, IMF and the Asian Development Bank.
The
World Bank projected its economy to grow 6.8 percent this year.
But
despite reforms, it’s not all rosy in Myanmar. The nation ranks 157th out of
177 countries on Transparency International’s Global Corruption Perceptions
Index. Last week, the leading opposition
party recently said it collected five million signatures on a petition to
reduce powers of unelected military parliament members, which seems to be an
ongoing trend.
“Economic
liberalisation can perpetuate the political and economic dynamics of the
resource curse,” wrote Stuart Larkin of the Institute of Southeast Asian
Studies, in a Financial Times op-ed on Wednesday.
“Foreign
direct investment can fall into resource enclaves while the elite benefit from
increased resource rents and their recycling into real estate and consumer
import booms. Under this dynamic, the elite’s power is enhanced, allowing them
to adapt and to exploit Myanmar’s nascent democracy,” he wrote.
In
recent years, most foreign direct investment in the country has been
concentrated in extractives, with oil, gas and hydropower taking the top spot,
followed by mining. But this resource wealth is also a major potential problem.
“How
the government receives, manages, or uses oil and gas revenues is not publicly
disclosed, the role that military enterprises play in revenue management and
use remains unaccountable, and a total lack of benefit sharing is prolonging Burma’s
resource curse,” wrote researchers from Arkan Oil Watch, a Myanmar-based
NGO, in a 2012 report on the issue.
Exports of natural gas is Myanmar’s single largest source of foreign income,
accounting for more than 40 percent of its total exports. It has been sending
gas to Thailand since the 1990s, and was ranked the largest gas exporter via
pipeline in the Asia-Pacific by BP in 2007.
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