Myanmar’s reform: For the people

By: Philippe Beco Charlie Lancaster - Posted on: May 30, 2012 | Current Affairs

With Myanmar stretching its capacity to usher in new reforms, Southeast Asia Globe sits down with four of the country’s key economic players to discuss their vision for the country

By Philippe Beco & Charlie Lancaster Photography by Sam Jam

When Aung San Suu Kyi cited exhaustion as the reason for suspending her campaign a week before Myanmar’s historic April by-election, some observers claimed it was another symptom of the ‘Burma burn-out’ syndrome. The recent explosion of reformist fervour may be stretching the country’s capacity and resources, but as Southeast Asia Globe’s April roundtable with four Myanmar delegates shows, the country is not short on enthusiasm.

Myanmar is burning the candle at both ends in its attempts to satisfy the demands of the domestic reformers and the international community. The delegates to last month’s Asean-European Union Business Summit in Phnom Penh joked that for the handful of government officials scurrying to draft reforms, weekends are a thing of the past.

“We had our arms and legs tied for many decades,” enthused a softly-spoken Winston Set Aung, senior economic advisor to President Thein Sein and director of research at the Asian Development Research Institute, “but we don’t want to hop anymore, we want to run.”

With some fearing the rush of regulatory reform may overwhelm the capacity of an archaic state system more familiar with crony capitalism than democratic nation building, Winston Set Aung said the country has no choice. Pointing to the International Monetary Fund’s April deadline to unify at least seven different rates of the kyat as an example of the challenges of sequencing and timing, he said the government needed to quickly initiate a law to meet the set date. “But then the international body started to say, ‘you have to slow down’, but we couldn’t do that. We don’t have time.”

Such haste has taken on an even greater political dimension since the landslide victory of the opposition National League for Democracy (NLD) party, which won 43 of 45 parliamentary seats in the April 1 by-elections. However, while the majority of Myanmar has welcomed reforms, some observers warn of mounting pressure on President Thein Sein, fearing a conservative backlash in the ruling party that may reverse key elements of reform, or at least close the window of opportunity the private sector is so eager to pry open.

“I am really anxious about returning to a situation where competition among the political parties is so intense that unity is destroyed,” political analyst Maung Wuntha told The Myanmar Times. “That led the country into chaos [in the past].”

Though Winston Set Aung, who has consulted on economic reform in several countries including Cambodia and Vietnam, insists the country’s stakeholders agree on the overall direction of reforms and only differ on mechanisms and timeframes.

“I understand from all my interactions with the government,” said Winston Set Aung, “that all those who used to be considered hard liners really understand that this is the way we have to go.”

Eager to be welcomed back into the international fold, the Myanmar delegation to the Asean-EU summit presented an impressive list of laws to be drafted or revised in preparation for parliamentary sessions. Areas of reform include: special economic zones; the financial sector (expected to provide more independence for the central bank); foreign exchange; imports and exports; and labour and consumer protection.

In a bid to meet, reward and position itself to benefit from Myanmar’s astonishing pace of reform, global governments have been fighting their own administrative procedures to lift sanctions, a move that will allow international companies access to one of the world’s youngest – yet wildly unknown – frontier markets.

With the lifting of sanctions, poised investors are one step closer to tapping into Myanmar’s promising market. Yet analysts warn against moving too quickly, fearing the hectic pace of reform could result in patchy policies and legislation riddled with ad hoc measures and loopholes.

“As such the legal framework and other requirements cannot be examined yet,” said Gordon Peters of Emerging Markets Consulting (EMC). “From a foreign investor point of view, I would urge caution until they are clarified.”

With Myanmar’s ‘work in progress’ status, Winston Set Aung admitted that the country still lacks an overall development model. Yet sitting between financial powerhouses India and China, and situated in the dynamic Southeast Asian economy, Myanmar is in a prime position to pick from the best the region has to offer and tailor a model to meet its specific economic needs. “We have been to many countries to study the policies that various countries have adopted,” said Winston Set Aung.

Given high expectations from the populace, the pressure for the Burmese Perestroika to deliver is astronomically intense. “We need to support the political reforms with an economic environment or risk a fall back,” said Thaung Tin, vice president of the information and communications technology sector of the Union of Myanmar Federation National Chambers of Commerce and Industry (UMFCCI). “If we cannot improve peoples’ lives through economic development, there is a danger that those left behind will get frustrated.”

Indeed, ‘the people’ was the bottom line for the four delegates, who repeatedly stressed the importance of bearing “the people” in mind when drafting laws, placing “the people” at the heart of all policies and ensuring “the people” benefit from the reforms. It’s not hard to see why. In a country riddled with corruption, ethnic-targeted violence and poverty, the nominally civilian, and increasingly self aware, government does not want to risk angering a population familiar with uprisings and hardened to brutal crackdowns; after all, sanctions can be reinstated.

Key to opening up the market to competition is breaking the military’s stranglehold on business. Enter small and medium enterprises (SMEs) – the backbone of the economy according to Win Aung, president of the UMFCCI, which represents 24,000 SMEs.

“We would like to provide them with access to finance and to market opportunities,” he said. “We also hope to attract value-added large companies that will provide these SMEs with opportunities to further develop by supplying the large groups. So we need good partners who have technologies and want to share them with us, as well as their markets.”

It is a long-awaited development the country’s second tier businessmen will welcome with open arms, as will the rising number of youth expected to enter the workforce in coming years. With 30% of Myanmar’s 55 million citizens under the age of 14, the quest to create adequate employment opportunities is no easy task. “We need to create jobs for this huge, hard working and quick learning labour force,” said Khine Khine Nwe, secretary general of the Myanmar Garment Manufacturers Association.

Decades of sanctions decimated the country’s once-flourishing garment industry. However, it is set to blossom again as Myanmar works to shift the focus from agriculture – 75% of the population live in rural areas – to labour-intensive industries. In the fiscal year 2010-2011, Myanmar exported $243m-worth of garments to Japan, up 30% from the previous year. “Now we want the quality of our workforce to be recognised by being given more exposure,” Khine Khine Nwe said.

“It makes sense to move from a primarily agriculture-based economy into other sectors because the agricultural sector has less value added than other sectors, but it takes both good policy and a good operating environment for the private sector to grow into new areas. Luckily, there are some great models of that in the region,” said Peters, warning that government relationships and informal fees will remain a hurdle for foreign investors, international aid organisations and development institutions in the short term.

For Myanmar to shed its failed state status and join the ranks of successful nations, many challenges lie ahead. Real progress hinges on the degree to which institutions in Myanmar, such as courts, administration and
legislative and executive government offices, can be turned into efficient and transparent organisations. Afterall, real reform requires deep structural changes, not superficial facelifts. Yet optimism and enthusiasm is proving to be an effective antidote to fears of a ‘Burma burnout’, with people such as Aung Win, Winston Set Aung, Khine Khine New and Thaung Tin guiding the country through this unprecedented wave of reform, determined not to let their country down.

“We would really like to see growth with discipline and proper economic principles,” said Aung Win. “We do not want to be a pop-up economy that cannot be sustained.”