The Need for a Growth Coalition in Burma

Irrawaddy Online, Saturday, February 2, 2008

The Need for a Growth Coalition in Burma

By MIN ZIN

When Indonesian dictator Suharto died last Sunday, Burmese-language short-wave radio stations and other Burmese media based abroad gave the news extensive coverage and offered comparative analyses. They attempted to draw similarities and contrasts between Suharto and Burma’s late tyrant Ne Win, and between the different directions the two countries have taken in their development.

Many experts noted that although Suharto was a vicious dictator, he raised the Indonesian economy to “Asian Tiger” status in the 1980s. Ne Win and his successors, on the other hand, have turned Burma into a failed state. All lamented Burma’s slide into its current condition of economic deprivation.

In fact, Burma introduced economic reforms after the military staged a coup in 1988. According to reports, cumulative foreign investment in the period from 1988 through early 1997 reached $6.1 billion. Some optimists even said that investors seeking the next “tiger” economy should set their sights on Burma.

However, despite the country’s opening of its economy to foreign investors, overall economic progress remained slow. Economist David Dapice attributed this to the government’s reluctance to undertake comprehensive reforms, choosing instead to implement reforms in a “half-hearted way”.

Then the 1997 Asian financial crisis struck. At first, Rangoon was unconcerned, as the country was not directly impacted by the plummeting value of a number of key Asian currencies. But when investors from other Asian countries began to shift away from high-risk ventures and started reneging on their investment promises in order to limit their losses in the crisis, Burma also got hit hard. The military regime made matters worse by failing to come up with sound economic policies in response to the crisis. The unreal economic boom went bust.

In fact, the junta has neither the capacity nor the political will to carry out far-reaching economic reforms, because they are afraid that any such move would threaten the interests of military elites, forcing them to turn their economic playground into a level playing field. They worry that allowing technocratic participation, much less public involvement, in the policymaking process would weaken their grip on power and deprive them of the prerogatives they currently enjoy. “Technocrats and experts such as economists and respected bureaucrats need to be viewed as important human resources and [their role should be] enhanced in Myanmar (Burma),” said Khin Maung Nyo, a well-known economist and writer in Burma. “They serve to help formulate economic policies, and the availability of policy choices makes it easy for government to implement reforms to build a modern, developed nation,” the economist added.
However, military involvement in political and economic affairs has from the outset been much deeper in Burma than in Indonesia and other countries in the region, where technocrats have long played a key role in formulating economic policies and guiding subsequent growth.

Broadly speaking, the junta has failed to form a growth coalition involving the military, opposition elites, ethnic ceasefire groups, technocrats, business groups, and the bureaucracy—all of whom need to work together to shape meaningful economic reforms.

In fact, several Burmese economists abroad and inside Burma have attempted to persuade the generals to secure such broad domestic support for economic reforms. In early 2007, a well-known economist inside Burma approached late Prime Minister Gen Soe Win to set up a consultative forum. Although Soe Win was said to have supported the idea, the junta’s supremo, Snr-Gen Than Shwe, shot it down.

Business sources note that other reform plans have stalled or been aborted because of Than Shwe’s preoccupation with ensuring his own survival.

“Than Shwe calls the shots on everything,” said Sein Htay, an economist in exile. “No one dares to initiate major reforms unless Than Shwe gives the final order.”

Since 2005, dozens of business people and economists have reportedly been consulted for their input into the drafting of a Special Economic Zone (SEZ) Law, which will designate six main commercial cities as free-trade zones, with the aim of bringing more foreign investment into the country to revitalize its crippled economy. The much-anticipated and hyped SEZ Law, which was supposed to be enacted in 2007, has yet to come into effect, as Than Shwe continues to drag his heels.

“Than Shwe is afraid of the emergence of the Thilawa SEZ in Rangoon,” said a businessman in Rangoon. “He does not even want to bring limited liberalization to a limited zone. He is too concerned with security issues, especially after the September protests.”

Several economists suggest that the state urgently needs to readjust its role in economic policy formulation and implementation. They say that if the state reduced its over-dominant role and allowed the private sector to play a greater part in the economy, the authoritarian regime would be able to undertake economic reforms.

“Centralization must be relaxed,” said Maw Than, a former vice chancellor of Institute of Economics in Rangoon. “A pro-business attitude should be nurtured and broader consultation should be sought after. Advice must be given serious consideration for the benefit of society.”

However, the strongman who leads the ruling junta with an iron fist cares little about what the experts have to say. The military mindset of the regime means that its decision-making process is strictly top-down. Under the leadership of Than Shwe, the Burmese economy will continue going to dogs.

http://www.irrawaddy.org/article.php?art_id=10128