24 April 2008

Sham Referendum Offers Little Hope to Burma’s Economy, April 24, 2008

(Fundamental economic reform requires profound political change)

By Derek Repp
Staff Writer

Washington -- Prominent academics agree that it will be impossible for Burma to make the fundamental economic policy shifts necessary to improve the lives of its people without profound political transformation. 

Many also agree the constitutional referendum scheduled for May is unlikely to lead to the type of change necessary.

State Department spokesman Sean McCormack, in a statement in early February, referred to Burma's "pervasive climate of fear, in which virtually the entire opposition, including Aung San Suu Kyi, is under detention …."  No referendum held under these conditions can be free, fair and credible, he said.  (See “United States Denounces Burmese Constitution Referendum as Sham.”)

Considering such circumstances, economic experts are finding it hard to imagine Burma's leaders will offer any change from the destructive economic policies of the past several decades.

Sean Turnell, associate professor of economics at Macquarie University in Sydney, Australia, and author of Burma’s Economy: Current Situation and Prospects for Reform, described present-day Burma as an "un-developing country.”

The economic mismanagement of the last four-and-a-half decades, he said, have turned what was one of the richest countries in Southeast Asia at the dawn of the 20th century into the poorest in the 21st century.  Although it is notoriously difficult to get accurate economic data out of Burma, Turnell estimates that current per capita GDP is around $290 and is growing by a mere $1 per year.

Turnell explains that Burma’s ruling military apparatus has for decades claimed a dominant share of the country’s income.  One way that the rulers do this, he said, is by putting the profits made from oil and gas into reserve accounts rather than back into the real economy, allowing the funds to be siphoned off according to the whims of the rulers.

A prominent American academic commenting on background on Turnell's work said, “Burma’s economy is more properly one that is neofeudal or 'warlord,' rather than centrally planned.  The regional military commanders control trade, prices, taxes, and effectively ownership.”  The scholar, who did not wish to be identified, continued: “This limits opportunity, efficiency, productive investment, and competition.”

MACRO-ECONOMIC MISMANAGEMENT

The arbitrary and undemocratic rule by the military establishment in Burma allows it to make decisions that seem to be in the sole interest of self-preservation. 

For example, like many dictatorships, a disproportionately large amount of money is spent on the military.  Burma's armed forces are the largest in all of Southeast Asia in terms of personnel, and it is the only country in the region whose defense budget is larger than that of its health and education budgets combined.

This explains why UNICEF has listed Burma’s health system as the “second worst in the world,” and why illiteracy in rural areas has doubled since Burma's days as a British colony.  Only one-quarter of all children in Burma complete primary education, and secondary education is reserved for the relatively “well-off,” according to Turnell.

Foreign investment in Burma has come to a grinding halt outside of a few industries, like gas and oil.  “Lack of legitimacy and the chance of a shift in the ruling coalition makes any investment hostage to unstable, elite coalitions,” which severely limits the type of investment, the scholar said.

The American academic mentioned some other problems often associated with authoritarianism:

• Rampant corruption leaves few resources for productive investment.

• Lack of feedback on government officials makes for a very inefficient civil service.

• Tendency towards crony capitalism and monopoly raises prices while reducing competitiveness.

• The ruling junta's lack of legitimacy makes tough but necessary economic decisions difficult because the people have little faith in the leadership.

Although dictatorships do not have a monopoly on economic mismanagement, Turnell holds that among them it is a nearly universal trait.  For this reason, he said, “real and effective reform of Burma’s economy requires profound political transformation.”

Only with a new government, ideally a democratically elected government with a popular mandate, does Turnell believe that Burma can carry out much-needed reforms. 

In his paper, Turnell lists the short- to medium-term reforms that would be required to stabilize Burma's macro-economy and lay the foundations for future growth in the event of sudden political change.

These reforms include reducing the size of the state apparatus, liberalizing financial and agricultural markets, introducing basic freedoms, providing effective property rights and reopening the country to trade.

“With a genuinely reforming government in place that is accountable, reasonable, predictable in its policy making, and protective of the rights of the individual under impersonal law," Turnell says, "Burma’s future need not be bleak.”