BY: RAHUL ROKKAM, SENIOR CONTRIBUTOR
Myanmar is a new country. After 53 years of military junta rule, the National League for Democracy (NLD), Myanmar’s main opposition party, galvanized extraordinary support and claimed sweeping majorities in both houses of parliament in late 2015 elections. Praising the widespread democratic reform, international leaders including President Obama have lifted sanctions and now Myanmar is seeing its GDP increase annually by almost 9%, surpassing the teetering economic giant China. Can Myanmar serve as a paragon for developing countries to escape the third world?
Burma’s Political History
After more than a century of British rule, Burma proclaimed independence in 1948, shortly after nationalist leader and “leading architect of independence” Aung San was assassinated. But ethnic strife ensued at the inception of the new country—ethnic Burmans constituted two-thirds of the native population, while the remaining one-third comprised of Rakhine, Mon, Shan, Karen, and almost 100 other ethnic groups. The position of Myanmar is a key factor in the decades of strife; it lies directly east of the heavily Muslim population of Bangladesh and majority Hindu India and Nepal, south of China, and west of the multitude of religions in Southeast Asia – Theravada Buddhism, Confucianism, Taoism, and Christianity just to name a few. Representative democracy barely held this smorgasbord of ethnic groups together.
A military coup, led by General U Ne Win, occurred in 1962 and overthrew the existing political system of representative democracy. His reign ushered in a 26 year era of military dominated politics, as Ne Win’s ruling council was almost completely taken from the armed forces. In 1974 a new constitution was created, placing emphasis on an isolationist policy and socialist agenda similar to that of China’s state industrialism under Mao Zedong. Ne Win later nationalized Burma’s major corporations, and the nation’s finances soon crumbled, leading to a black market economy, where an unprecedented amount of unsanctioned trading occurred. The economic deterioration led to widespread graft and food shortages, galvanizing thousands of students to protest the squalor. In April 1988 the army opened fire on the protestors, killing around three thousand people. As result, Ne Win resigned as chairman of his political party, however, ironically an even more oppressive and draconian military junta gained power in late 1988. In response to the junta’s strict admonishment of protests and jailing of political rivals, the United States imposed thorough sanctions. In 1989, the junta changed the country’s name from Burma to Myanmar, citing its increased inclusivity of Burma’s ethnic groups.
Aung San Suu Kyi, daughter of Aung San, became leader of the NLD during the 1988 protests, and was subsequently put in jail and under house arrest for a total of 15 years until she was released in 2010. Even though she was in jail, she received the Nobel Peace Prize in 1991, and catapulted the NLD to win 392 out of 485 parliamentary seats in 1990 elections, signaling hope for change from the junta rule. However, the junta did not acknowledge the results, imprisoned more NLD leaders, sent protestors into exile, and enacted even more repressive policies. This all changed during the late 2015 elections when the NLD won majority rule in both houses of parliament, but more importantly, when the junta of President Thein Sein acknowledged the results with enthusiasm and agreed to a peaceful transition for power. Unfortunately, since Myanmar’s constitution does not allow for a President with a foreign spouse, Aung San Suu Kyi could not finish her meteoric rise to power. Instead, Htin Kyaw has been installed as Myanmar’s new President, effective April 2016. But Suu Kyi has gained several cabinet positions and remains leader of the NLD—with no doubt Kyaw will act as her proxy.
Myanmar’s economy has been flourishing ever since President Thein Sein announced plans in 2012 to scale back the government’s role in sectors such as energy, finance, telecommunications, and health care. Later that year, parliament passed a foreign investment law, rendering it no longer necessary for foreign individuals to have a local partner to start a business, as well as allowing them to lease, but not own, property. Furthermore, the law articulates that citizens of Myanmar must make up 25% of a foreign firm’s workforce. In 2012, the Asian Development Bank, which is dedicated to reducing poverty in Asia through loans, grants, economic research, re-established formal relations with Myanmar, financing infrastructure projects throughout the country. But most significantly in December 2014 Myanmar set up its first stock exchange, the Yangon Stock Exchange, opening up an inconceivable amount of investment from citizens to finance the dried up coffers of the private sector.
As a result of these broad economic reforms, the net inflow of foreign direct investment (FDI) increased from $900 million in 2010 to $2.3 billion in 2013, according to the World Bank. FDI later exploded to $8 billion in March 2015, a near exponential increase since 2009 FDI levels. This exponential increase in FDI is leading to international recognition. The United States, Australia, Japan, and European Union (EU) have all reduced the severity of their sanctions, and multinational companies, notably Ford, MasterCard, and Unilever, have begun to show interest in increasing investment in the country. Coca-Cola CEO Muhtar Kent has pledged $200 million in investment over 5 years and stated “It’s a great moment in history, just like it used to be when we opened up our business in east and central Europe in the former Soviet Union right after the fall of the Berlin wall.” In tandem, the World Bank has designated a $245 million credit line to the burgeoning nation, the first lending to the country in twenty-five years.
The Keys for a Successful Economy
The McKinsey Global Institute finds that Myanmar could quadruple the size of its economy, potentially skyrocketing GDP from $45 billion in 2010 to more than $200 billion in 2030—adding over ten million nonagricultural jobs in the process. But to do so, McKinsey explains that Myanmar must “accelerate the rate of annual labor-productivity growth, to 7 percent, from 2.7 percent.” How does a country nearly triple its labor productivity growth? McKinsey cites four fundamental areas that would lay such a necessary foundation:
- Harnessing digital technology. A government sponsored implementation of internet and communications technologies, or ICTs, would serve as a boon for economic growth. The International Development Research Centre (IDRC) finds in a report published in July 2014 that gaining access to ICTs is associated with a 2.5% improvement in a household’s poverty status, as well as a 7.5% increase in labor incomes over a two-year period. This is because internet availability leads to better communication, allowing individuals to network and optimize their job search and optimize their use of disposable income. More importantly, it allows people to learn without an established system of infrastructure—empowering them to succeed without the hindrance of a lack of transportation and proper financing.
- Supporting a structural shift towards manufacturing. While the trend in other Southeast Asian nations has been to shift towards manufacturing, Myanmar is observing the opposite. As of 2012, agriculture comprised a massive 37% share of the national GDP. Manufacturing would offer several advantages: an increase in FDI, as multinational corporations would seek profit, more jobs to satisfy rapid urbanization and a unemployment rate of 37% (2012), and a well-rounded export base as Myanmar seeks to not only open, but dominate, regional trade.
- Preparing for urbanization. As the population of Myanmar’s cities is likely to double around 2030, it needs to make sure the necessary infrastructure and governance networks are able to shift rapidly. The jobs, infrastructure, and governmental policies in the coming decades need to be tailored to the current trends of urbanization, to most effectively optimize the working class and open up educational opportunities.
- Connecting to the world. Myanmar must not follow the decades of isolationist policies of the past. Rather, it should be open to international relations. It is clear that many world powers are willing to help in any way they can, but it is not sure if Myanmar is willing to accept that help. Rebuilding international relations is crucial to gain investors, the sum of such investment must reach $650 billion to acquire autonomy and significantly boost its Human Development Index (HDI).
Once Myanmar embarks upon these reforms, it will begin to contribute even more significantly to the economic pivot to Asia already occurring. Let’s see what happens under the new government.