Myanmar - reflections on 'a rich country with poor people'

As Myanmar under the new administration of President Thein Sein embraces change with the institutionalisation of political reforms, almost inevitably the issue of economic reforms will come to the fore. As the West and the international financial institutions such as the International Monetary Fund and World Bank prepare to make their return to this long-ostracised country with their retinue of economic 'experts', there is a risk that Myanmar will be exposed to the same nefarious set of neoliberal policies that devastated Eastern and Central Europe after the fall of their communist regimes. Gabriele Kohler argues that, in lieu of these failed policies, Myanmar could take the lead in creating a 'democratic developmental welfare state'.

AFTER decades of isolation imposed by major developed countries out of concern for the country's human rights violations, Myanmar is emerging as a new darling of the West, judging by the accelerating succession of visits by senior officials and gurus - among them the US Secretary of State, the UK Foreign Secretary, the Development Commissioner of the European Union (EU), and high-level government officials from many countries. The World Bank and International Monetary Fund (IMF) are being urged to resume work there, and the EU is offering a new _150 million assistance package to accompany the country's economic and social reforms - these are steps which had been impossible until now, due to the international sanctions policy. And new groups of investors are waiting to enter the country as soon as possible.

This sudden enthusiasm, after years of ostracising the country and depriving it of any bilateral or multilateral development cooperation save of a humanitarian nature, is a response to - much welcome - changes introduced by a government that came into power in 2011 in an orchestrated election process. Recent reforms include the release of political prisoners, the re-constitution of the Myanmar human rights commission, the weakening of censorship and an opening of Internet access, the adoption of a law allowing trade unions and the right to strike, the suspension of an environmentally damaging hydropower project with China, peace negotiations with ethnic minority groups, and other significant steps. The dissident leader Aung San Suu Kyi, who until 2010 had been under house arrest almost continuously since she was denied the election victory she had achieved in 1990 and who accordingly had refused any interaction with the oppressive government, has adapted her political stance since mid-2011, meeting with President Thein Sein first quietly and then publicly, and in November announced that she and her party would be standing in the April 2012 by-elections.

One hopes that the about-face of Western powers is borne out of a genuine commitment to supporting peace and democratic reforms. But one fears that in reality the change of position is driven as much or more by the sudden awareness that China in particular, but also Thailand, Singapore and India, have been ruthlessly benefiting from the abundant natural resources of Myanmar - natural gas, hydropower potential, gemstones, real estate for industrial production zones or tourism - and the country's geostrategic position with access to the Indian Ocean, while businesses in the US and Europe were missing out on very lucrative deals and investment opportunities.

Political and economic reform are intermeshed, and past decades have shown time and again that the important movement to ensure civil liberties, democracy and most fundamentally the guarantee of human rights is  very often confused and conflated with measures to introduce neoliberal capitalism and prise open a country to the economic interests of individual and multinational investors. This was the case in Eastern and Central Europe after the collapse of the Soviet Union; 20 years later, the populations in most of these countries are still reeling from the adverse effects of privatisation - which benefited insiders and created new oligopolies - and of deregulation - which dismantled core public services in health, education and infrastructure, cancelled crucial social transfers such as pension commitments, and in general hollowed out and destroyed government functions so vital to the delivery or regulation of public goods and to efficient and transparent public administration. These measures were sold to the then emerging democracies as the only available remedy to address statist oppression, corruption, cronyism and inefficiency - instead of reforming the state, introducing accountability, and preserving and enhancing public goods and services.

Policy space to innovate 

There is a risk that Myanmar will be exposed to the same set of nefarious policy ideas, especially now that many of the welfare states in Europe have themselves embarked on a brutal course of fiscal austerity, with massive public sector cutbacks and a freezing of wages and social transfers.

However, a country as endowed with valuable resources as Myanmar has the means to use its policy space to innovate, and to create a democratic developmental welfare state. As U Myint, a leading Burmese economist and head of the country's new economic advisory board, has put it: Myanmar is a rich country with poor people. It has the fiscal resources to upgrade socio-economic policy and macroeconomic policy around objectives of social justice and economic development. It could introduce proactive labour policies to create decent work in the public sector - health, education, social services, civil administration - to build infrastructure in the rural areas, deliver electricity and upgrade public transport; to finance and lead extension and innovation in the rural economy; and to create centres of research and development excellence. All these areas have been seriously neglected for decades, displaced by investment into the military, into oppressive wars against ethnic minorities, into the police state apparatus, and most recently into industrial parks which concentrate resources rather than spreading employment and technology across the country.

Myanmar could consider an enlightened form of government-led 'industrial strategy', building on some of the East and South Asian policy paths, defining and costing out its economic development options. Such an approach would, for example, selectively promote sectors and areas for domestic and international entrepreneurship and investment while demanding that they ensure employment, decent work, learning and innovation transfers. The recent introduction of labour standards would fit in constructively with such a strategy, if the population, now subsisting on one of the lowest per capita incomes in South-East Asia, could benefit from decent employment and work conditions, and enjoy wages and salaries commensurate with the country's overall economic wealth.

Myanmar also has the means, if it so decides, to universalise social protection. This is necessary from a social justice point of view and because currently, only 1% of the population is covered by social security. Social security benefits for the government sector have recently been increased, and a few groups receive poverty- or emergency-related income transfers, but there is no systematic health insurance or income poverty response.

One interesting idea in this connection that is currently capturing the imagination of global development policy discourse is the United Nations' social protection floors initiative, which is a concept that proposes a guaranteed basic income plus guaranteed access to high-quality, inclusive social services. A reforming Myanmar could explore such a 'floor' specific to its citizens' interests.

A combination of the decent work and social protection agendas with an industrial strategy could help address the country's dire poverty and income inequality and stark urban-rural disparities, and perhaps also address the pervasive and even violent forms of social exclusion based on ethnicity in the country's mountainous regions. The three agendas could be a tool for social inclusion, as well as facilitate environmentally sustainable production and a move away from the lucrative but pernicious narcotics cultivation. In short, Myanmar could take the lead in creating a democratic developmental welfare state, with its citizens emerging from poverty and political oppression - and thereby also inspire many other countries.  

Gabriele Kohler is a development economist and visiting fellow at the Institute of Development Studies in Sussex, UK. The above is an updated version (February 2012) of an article published (with references) on the IDEAs (International Development Economics Associates) website (networkideas.org, 6 January 2012).

*Third World Resurgence No. 257/258, January/February 2012, pp 50-51