The Straits Times – Taking quicker steps forward

By Hans W. Vriens | 20 May 2013

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THE world has been astonished by the political and economic changes in Myanmar since President Thein Sein came to power just over two years ago.

A small group of reform-minded ministers (all former senior military officers) started peace negotiations with many of the ethnic minorities that control the border areas, abolished censorship, lifted restrictions on political parties and brought Ms Aung San Suu Kyi in from the cold.

Calling her the opposition leader has become a misnomer. She fully supports the reform policies of President Thein Sein and of the Speaker of the Lower House and chairman of the governing party, Mr Shwe Mann. She has repeatedly been seen working closely together with the latter in the recent months and weeks. She also praised Mr Shwe Mann repeatedly during a wide-ranging discussion at her lakeside villa recently.

Real leaders of the opposition are supposed to criticise the government and argue they will do better if they win the next election. Ms Suu Kyi has in fact concluded a coalition with the reformers by standing for and becoming a Member of Parliament and supporting their policies. She and the reformers need each other to succeed. They will fail or succeed together. The possible reward for her will be the presidency, assuming she wins the elections in 2015.

To stand for the presidency, however, she first needs to convince the reformers and the military (which has a potentially blocking minority in Parliament) that she can be trusted. In fact, one of the lead reformers, Minister Aung Min, declared recently on his trip to New York that the government intends to allow the Lady (as she is often referred to in Myanmar) to stand for the presidency. This will require a change in the Constitution that bars Myanmar citizens whose children have foreign passports. Both her sons have British nationality.

No more isolation

THE reformers and Ms Suu Kyi are in a hurry. Myanmar is the poorest country in South-east Asia, the outcome of a political system that long ago demolished the institutional foundations of a market economy, and then ossified into an extractive and dysfunctional state. General Ne Win closed the borders and nationalised the economy in 1962. Decades later, strongman Than Shwe ended the disastrous “Burmese road to socialism” and started wide-ranging privatisations. After 1988, the political crackdown against Ms Suu Kyi and her National League for Democracy led to widespread international sanctions that ensured continued isolation. “As result we have been living in a cave for 50 years,” said a presidential adviser recently.

The rate at which the reformers have put Myanmar on a new economic course is astonishing. Within two years the government moved from paranoid secrecy (it didn’t even publish a budget) to attempts at the greatest possible transparency. Minister U Soe Thane, a fluent English-speaking former commander of the navy, who oversees the economic reforms, says Myanmar is determined to join the Extractive Industry Transparency Initiative (EITI) as soon as possible. EITI membership will pave the way for much greater transparency on how the Myanmar government spends its fast increasing income from offshore gas fields. Two more of these fields are coming on stream this year and 19 deep sea blocks are being tendered in a transparent way. Oil and gas are also being transported to China through almost completed twin pipelines from the coast to Kunming. Two years ago it would have been considered a joke to suggest that Myanmar could join the EITI.

Foreign investors welcome

A TRANSPARENT tender process and the lifting of economic sanctions have also convinced leading telecommunications firms like Vodafone, China Mobile, Telenor, SingTel and Axiata to bid for two licences to build and operate the two nationwide telecom networks to be awarded to international firms. The winners will have to get their network up and running within two years.

This timeframe is clearly dictated by the 2015 parliamentary elections. Cheap mobile telephone services are viewed as vote winners in a country where, until recently, a SIM card would set you back US$2,000 (S$2,520) – a price very few could afford. Myanmar used to have fewer cellphones per capita than North Korea.

This multibillion-dollar foreign investment in the telecom sector will give Myanmar a more modern network than Thailand. It will allow possible winners like Vodafone and payment companies like Visa to roll out their mobile banking and remittance services. This will transform an economy that lacks anything even resembling a modern banking sector.

After the banking crisis of 2003, the generals decided it was safer to rely on a cash-based economy. Formal credit is therefore virtually unknown. Dismantling all the often bizarre rules made for an autarkic economy will be equally daunting. In the past, for example, an “export first” policy prevented importers from doing business if they had not earned hard currency through exports.

I believe that ministers and presidential advisers have shown courage and pragmatism with their willingness to embrace the world. They appear anxious to understand how the world economy has changed in the last 50 years. They also want to adopt international best practices. Many reformers are enthusiastic about the prospect of big European companies investing in the country. “We know that the Europeans have the highest standards. We have been very impressed by the corporate social responsibility projects and the training provided by Total (one of the world’s major oil and gas groups),” one of the presidential advisers noted when comparing the behaviour of Chinese firms.

Chinese ways rejected

MYANMAR decided on its dramatic break with the past after realising that its economy was failing after a long period of over-reliance on big Chinese investments in the hydropower, and the oil and gas sectors.

In Shan state, with its fertile land bordering Yunnan province, it is easy to spot Chinese farmers. They have leased land to grow highly priced watermelons that will be sold in China, and are the only farmers who can afford tractors. Their aggressive use of pesticides makes them far from popular. “We can’t use the land for three years after they have left,” complains a farmer in the state.

Although initially high on the government’s agenda, reforms in agriculture have barely started. “A first step is that we will no longer instruct farmers what crops to grow,” says an agricultural adviser to the President. The small group of reformers hasn’t had time to focus on this sector on which 70 per cent of the population depends. “Many of the villages have no roads and no electricity.”

Ms Suu Kyi is concerned: “We are now in the third year of the reform era. Many people haven’t seen any tangible benefits. Our focus should be on jobs. We have to create many more jobs.” But she is not in favour of investments in garment factories. “We don’t have to follow the Chinese model of sweatshops.” She prefers Myanmar to develop into a centre for organic farming.

It is impressive to see how open-minded the reformers are, how eager they are to succeed, and how broad-based their support is. At the same time, however, they face the daunting task of completely overhauling the disastrous policies of the last 50 years. Let’s be realistic. Nobody can expect Myanmar to become another Norway overnight.