Thursday, December 4, 2014

The ‘Putinization’ of Myanmar’s economy

Written by
Marnix Krouwel

For anyone wanting to gain an understanding of whether Myanmar’s economic reforms are real, the European Parliament Committee Meeting held in Brussels on November 6 provided some useful insights.

The conference was entitled, "Time to invest in Myanmar? What's at stake with the EU-Myanmar investment agreement?" and it offered praise and criticism of the reform process ushered in by President U Thein Sein.

The presentation that stood out, however, was an analysis by Dr Sean Turnell of Macquarie University in Sydney who stressed the shallowness of the reforms and warned of the determination of the elite to hold on to their spoils.

Dr Turnell, the author of Fiery Dragons: Banks, moneylenders and microfinance in Burma, sought to contrast the hopes of 2012 with the realities of 2014. He argued that after the first wave of reforms the world brimmed with expectation. “And then it stopped paying attention,” he said. “Burma’s economy was fixed, the country was open for business.”

Consensus about progress in the economic reform process was premature, said Dr Turnell. Despite growing investment and moves towards liberalisation, the economy is not yet fixed.

“Burma’s current reform program is superficial, narrow, incomplete and now largely coming to an end,” said Dr Turnell. “It is now that we confront the cause of Burma’s real economic problems, most of which stems from a government that exercises tight control over most parts of the country’s economy,” he said.

Dr Turnell argued that the crony firms that control large chunks of the economy are, naturally, doing all they can to resist change and protect the economic rents that they extract. “What is going on in the country is the Putinization, dare I say, of the economy.”

Allowing a limited number of foreign banks into Myanmar could be seen as a positive step, but the reality is that the licensing concessions granted to them are narrow. For example, they are not allowed to have a retail presence.
Dr Turnell added that an opportunity to fix Myanmar’s public accounts was also squandered.

“According to the IMF, privately, and if you dig into [their] accounts, you will see that 40 percent of the gas revenues still do not come into the public accounts. This is very serious of course. If you have a situation where 40 percent of the major source of government earnings are not coming onto the books properly, then that tells us a lot of other things are mucking around the edges.”

Dr Turnell also challenges claims that military spending has declined.

“What they have highlighted is military spending as a proportion of government spending,” he said. “But unfortunately that is just a technicality. Some of the revenues have been brought in at the new foreign exchange rate that has greatly inflated the size of the budget. If you look at absolute spending, it is up 11 percent. Health expenditure is down over the last two years by 3 percent.”

Farmers don’t have much to celebrate, either. They have few rights over the land they farm. Land grabbing is rife, said Dr Turnell, who thinks most of the rural population is marginally worse off than before the reform process began in 2011.
“Economic reforms have taken place; you can see it on the streets of Yangon. But they have scarcely touched the institutions that have long expropriated the country’s resources to distribute to the political, military and economic elite. Missing still are the institutions necessary for genuinely transformational economic growth.”