Miles to go | The Economist

The new government unveils promising but vague economic plans, as the armed forces loom in the background

IN AN open-plan office in a nondescript building in central Yangon, women sort through piles of brown folders. Three men try, with little success, to fix a photocopier; others organise piles of kyat, Myanmar’s currency, by denomination. Myanma Economic Holdings Limited (MEHL), a conglomerate run by the armed forces, has many workers who do very little. Being owned by men with guns has long meant being shielded from competition.

That began to change in 2011 when Thein Sein, then the country’s president, ended the military conglomerates’ tax exemptions and their import monopolies on many goods. He welcomed foreign competitors to some of their businesses. But the army, which ruled from 1962 until March of this year, when the democratically elected National League for Democracy of Aung San Suu Kyi took office, retains vast business interests. And it controls three powerful ministries, as well as a quarter of the seats in parliament, meaning it can scupper Miss Suu Kyi’s planned economic reforms, should it choose to.

That Myanmar’s economy needs reform is beyond dispute. Though foreign investment is soaring and GDP is expected to grow by at least 8% this year and next, both are from a tiny base. Before the army seized power, Myanmar had been one of the world’s leading rice exporters and one of Asia’s wealthiest countries; today it is among the poorest. Last year GDP per person was just $1,204—less than a fifth the level of neighbouring Thailand—and tax revenue, as a share of GDP, was the lowest in the region. Most of the population is poor and rural: scant access to credit, energy, seeds and fertiliser keeps agricultural productivity low. Bad roads, inefficient ports and sporadic electricity impede industrial growth: the advantage afforded by a cheap, young workforce is frittered away if they sit idle during power cuts. Transporting goods to market costs a fortune.

On July 29th in Naypyidaw, the capital, Miss Suu Kyi presented her long-awaited plan to tackle these problems.

Though it pointed in the right direction—towards greater liberalisation and away from the planned economy—it was worryingly light on detail. What were described as “economic policies” were more like aspirations: more efficient public spending and taxation; better technical and vocational education; more transparent budgeting; less red tape and so on. There were vague promises about agriculture and infrastructure. Farmers will somehow get greater access to credit and more secure land tenure. Electricity generation, roads and ports will be prioritised.

The goals are laudable. But are they achievable? And when will the government get started? According to Sean Turnell, an Australian economist advising the new administration, so little economic information was handed over by its predecessor that its first four months have been spent tracking down basic facts about revenue, budgeting, the financial position of state-owned enterprises and so on.

After many years in exile fighting for democracy, Miss Suu Kyi has entered office with much goodwill, at home and abroad. But she is also burdened with high expectations, which are likely to go unfulfilled. Almost everything needs fixing, and she has shown a worrying tendency to centralise and micromanage. She still chairs her political party, while holding three positions in the new government. To build functioning financial institutions, she must learn to delegate, analysts say.

The rift over the loot

There are also worries about how the army will react once the government is ready to act. Outright resistance is unlikely: the democratic transition began in part because the army realised it was hopelessly ill-equipped to oversee a market economy. And at least some of its enterprises make money legitimately, and will make more as the country prospers. MEHL, for example, makes Myanmar Beer, the most popular brand, and Red Ruby, one of the most popular cigarettes. 

However, the army and its cronies have also grown rich from gem and jade mines—and vast tracts of land that many contend were illegally seized. The new government says it will neither extend mining licences nor offer new ones until the laws governing the sector are tightened (it appears keener on environmental and safety rules than its predecessors). It has begun to investigate what it estimates are hundreds of thousands of land grabs, totalling millions of acres. This limited remit—the government could have plumped, instead, for a full-blown investigation into land-ownership nationally—is seen by some as a signal to the army that it will be allowed to keep past gains, but should understand that from now on, things will change.

Whether that will be enough for it remains to be seen. For Miss Suu Kyi has pledged a “just balancing” between states and regions, with the aim of “national reconciliation”. This is an old demand of ethnic insurgents against the central government: Myanmar’s civil wars have been motivated not only by politics, but by control of resources. Dividing the spoils more equitably will be essential if the fighting is to end. But Miss Suu Kyi may find that the army is none too happy about a civilian government dictating terms over conflicts in which it has spilt blood for decades.

Source: Miles to go | The Economist

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