By Emily Feng.
Once ruled by an autocratic military junta and largely isolated from the rest of the world, Burma, also known as Myanmar, has plunged into a massive economic and social transition that will determine how the post-autocratic country’s nascent economic and political systems will develop in the coming years.
Several friends of mine decided to spend their Chinese Lunar New Year last week in the third and most reclusive country of the Golden Triangle. They aren’t the only ones there, either. Burma’s rich resources and beautiful cultural heritage have lent themselves to the rapid development of a nascent, but flourishing tourist industry. In 2010 the number of foreign tourists was just shy of 300,000. That number has grown exponentially. In 2013 alone, more than 2 million flooded through Yangon International Airport, and projections for 2014 hover around 3 million foreign tourists.
Throughout the week, I received Instagrams of gorgeous, sunset-lit rivers, regal women dressed in richly embroidered fabrics, and golden pagodas. The Burma of these pictures seemed tranquil and exotic. Nowhere could I find traces of the rapid-fire privatization of Burma’s state properties or the frantic scramble for to establish lucrative footholds in a developing market. Also hidden from view is the ethnic and religious tension that have Buddhists and Rohingya Muslims in deadly opposition to one another.
Burma faces enormous opportunity for growth, but that that opportunity is double-edged; mess up now, and it risks baking in systemic inequalities and inefficiencies in the new economy, government, and society that is emerging.
The country’s path to economic growth is riddled with obstacles cannot be underFaulty electricity, rampant corruption, and capricious political headwinds continue to impede economic activity, Burma’s GDP made up a measly .2% of GDP in Asia in 2013. Likewise, GDP growth and per capita income growth lagged behind its fast-growing Asian neighbors. What little growth Burma did experience in the last few decades were the result of increases in population rather than increases in productivity. Low-tech agriculture still employs about 70% of the population.
Nevertheless, a new study by McKinsey & Co.’s shows that with the right amount of investment in the sectors like manufacturing, energy, tourism, and telecommunications, Burma’s economy could quadruple in size by 2030, lifting 18 million people out of poverty.
Tourism is booming relative to the past. With sanctions now lifted, European and American companies are flocking to capture a share of the emerging consumer market in Burma. Companies like Unilever, Coca Cola, General Electric, and Visa have all signed contracts with Burma companies. Capital is flowing in from non-commercial sources as well; the World Bank announced a $2 billion program to improve access to healthcare, energy, and improve agriculture. Many of these investors are working with the flexibility of a blank slate. For example, Burma has virtually no telecommunications network, and contracts to build one from the ground up (promising a substantial future market share) will be highly lucrative.
Though not as glamorous a market, the market for healthcare products and medicines is predicted to boom. That’s because healthcare under the previous military junta, in power since a 1988 coup, languished from lack of public spending and low incomes. To reverse this trend, in March 2012, Burma’s reformist president Thein Sein announced an effort to provide universal healthcare. As foreign investment pours in and incomes rise, the 75% of residents who currently lack access to quality healthcare will contribute to massive growth in demand for healthcare. “growth rates of 15-20% are well within reason for the pharma sector as long as the country’s economy continues to grow,” wrote blogger Benjamin Schobert, a healthcare specialist on Asia.
However, whether Burma’s politicians and policymakers can actually deliver the growth investors have been salivating over is another issue.
Little, if any attention, has been paid to the massive privatization of Burma’s state assets, on a scale unseen since the dissolution of the Soviet Union. The USSR’s “fire sale” of state-owned claims to oil, natural gas, and mining spawned an entire generation of superrich “oligarchs” who to this day exert undue influence in Russian politics.
In a similar fashion, Burma’s state assets are being auctioned. Among the economic reforms announced by President Sein is the privatization of 90% of state assets like land rights and airports. Much of the assets are being sold to parties connected with the military. Because Burma does not have a rigorous taxation system, the sales of these once-public, now-private assets are resulting in massive profits for individuals but little public revenue. Burma’s government also stipulates that any foreign investor must partner with a list of approved government companies to do business, further politicizing the rush to secure a slice of the pie.
Particularly worrisome is the industries attracting the largest share of investment are the extractive industries: timber, natural gas, and mineral mining. These resources are effectively non-renewable, yet Myanmar has been selling off the rights at a frightening pace to both domestic and foreign companies. Short-sighted profit motives risk depleting Myanmar’s natural assets and environmental degradation. We have already seen the smoggy externalities of economic growth in China.
Extractive industries and FDI in resources benefits government that are the sellers, but they do little to create jobs, raise income, and diversify an economy. Instead, industries prevalent in developed countries like manufacturing, tourism, and other service industries have a harder time getting off the ground in Myanmar because of poor infrastructure, a volatile business environment, and disadvantageous foreign investment laws. Omitted from the conversation is how to develop Myanmar’s human resources. 32% of its population still lives in poverty, and its worker productivity is among the lowest among the world due to lack of education, healthcare, and other social services. The mad rush for Myanmar’s resources is benefiting a few while leaving the country’s people behind.
And then there’s just simply the problem of size. Transforming a nation with virtually no industry, service sector, consumer base, and education or healthcare system is, to say the least, a daunting task. Even with money pouring in from other countries and foreign institutions, where does one even begin to start tackling the myriad of problems facing Myanmar’s new bureaucrats? When the international spotlight moves past Myanmar and the generosity ends, it will have an even larger problem on its hands. And to be honest, Myanmar’s history of graft can make anyone feel a little queasy; vast projects are the perfect chance for a little financial wizardry to go unnoticed.
Finally, and most immediately concerning are the ethnic tensions that threaten to render asunder the national fabric. Myanmar has a history of ethnic conflict between its Buddhist and Rohingya Muslims, who comprise about 5% of the population, and violence flared up again in the summer of 2012. Aung San Suu Kyi, chairperson of the opposition National League for Democracy and longtime activist, has taken a cautious, noncommittal stance so as not to cause further rifts in a still-fragile democracy. However, a country that cannot resolve fundamental conflicts of ethnic and national identity in the public sphere without resorting to violence may not be ready for democracy either.
Of course, it’s always easier to be the cynic. That doesn’t mean there aren’t promising signs that Myanmar’s glasnost could go well. Myanmar had relatively free and fair by-elections in 2012, with Aung Saan Suu Kyi’s NLD gaining 43 of the 45 parliamentary seats contested. Tourism is booming. And despite deep reservations, the fact of the matter is that foreign investment is accelerating. Yet opportunity is fickle: succeed and savor the triumph, or fail and construct inequalities in the very institutions being developed. It’s an onerous task, and one that places much power in the hands of Myanmar’s leaders, rather than its people.