An Opportunity in Myanmar

As a country endowed with valuable resources, Myanmar is ripe for social and economic innovation.

January 9, 2012

CREDIT: Jolie (CC).

After decades of isolation imposed by major OECD countries out of concern over human rights violations, Myanmar has emerged as a new darling of the West. There has been an accelerating succession of visits by senior officials including the U.S. Secretary of State, the UK Foreign Secretary, and high-level government officials from France, Norway, and other countries. The UN Secretary-General may pay a visit, and the World Bank is being urged to resume work there, which had not been possible due to the international sanctions policy. New groups of investors are waiting to enter the country as soon as possible.

This sudden enthusiasm, after years of ostracizing the country and depriving it of development cooperation beyond humanitarian relief, is a much welcome response to changes introduced by the government that came into power in 2011 in an orchestrated election process. Recent reforms include the release of some political prisoners, the reconstitution of the Myanmar human rights commission, the weakening of censorship and an opening of internet access, the adoption of a law allowing trade unions and the right to strike, the suspension of an environmentally damaging hydropower project with China, and other steps.

The dissident leader Aung San Suu Kyi, who until 2010 had been under house arrest almost continuously since being denied election victory in 1990 and who accordingly refused any interaction with the oppressive government, has adapted her political stance since mid-2011, meeting with President Thein Sein first quietly and then publicly. In November she announced that her party would be willing to stand in the 2012 by-elections.

One hopes that the about-face of Western powers is a genuine commitment to supporting peace and democratic reforms. But one fears that in reality the change of position is driven as much by the awareness that China, Thailand, Singapore, and India have been benefiting from the abundant natural resources of Myanmar—natural gas, hydropower potential, gemstones, real estate for industrial production zones or tourism, and the country's geostrategic position with access to the Indian Ocean—while businesses in the United States and Europe were missing out on very lucrative deals and investment opportunities.

Political and economic reforms are intermeshed, and past decades have shown time and again that the important movement to ensure civil liberties, democracy, and human rights is very often confused and conflated with measures to introduce neoliberal capitalism and prize open a country for the economic interests of individual and multinational investors.

Such was the case in Eastern and Central Europe after the collapse of the Soviet Union: 20 years later, the populations in most of those countries are still reeling from the adverse effects of privatization—which benefited insiders and created new oligopolies—and of deregulation—which dismantled core public services in health, education, and infrastructure; canceled crucial social transfers such as pension commitments; and in general hollowed out and destroyed government functions that were vital to the delivery or regulation of public goods and to efficient and transparent public administration.

These measures were sold to the then-emerging democracies as the only available remedy to address statist oppression, corruption, cronyism, and inefficiency—instead of reforming the state, introducing accountability, and preserving and enhancing public goods and services.

There is a risk that Myanmar will be exposed to the same set of nefarious policy ideas, especially now that many of the welfare states in Europe have themselves embarked on a brutal course of fiscal austerity with massive public sector cutbacks and a freezing of wages and social transfers.

Yet as a country endowed with valuable resources, Myanmar has the means to use its policy space to innovate. As leading Burmese economist U Myint, head of the country's new economic advisory board, has put it: Myanmar is a rich country with poor people. It has the fiscal resources to upgrade socioeconomic policy and macroeconomic policy around objectives of social justice and economic development. It could introduce proactive labor policies to create decent work in the public sector; to build infrastructure in the rural areas and upgrade public transport; to finance and lead extension and innovation in the rural economy; and to create centers of research and development excellence.

All of these areas have been seriously neglected for decades—displaced by investment in the military, oppressive wars against ethnic minorities, the police state apparatus, and most recently industrial parks which concentrate resources rather than spread employment and technology across the country.

Myanmar could consider an enlightened form of government-led "industrial strategy," building on some of the East and South Asian policy paths, defining and costing out its economic development options. Such an approach would, for example, selectively promote sectors and areas for domestic and international entrepreneurship and investment while demanding that they ensure employment, decent work, learning, and innovation transfers.

The recent introduction of labor standards would fit in constructively with such a strategy, if the population, now subsisting on one of the lowest per capita incomes in Southeast Asia, could benefit from decent employment and work conditions, and enjoy wages and salaries commensurate with the country's overall economic wealth.

Myanmar also has the means, if it so decides, to universalize social protection. This is necessary from a social justice point of view—currently, only 1 percent of the population is covered by social security. Social security benefits for the government sector have recently been increased, and a few groups receive poverty- or emergency-related income transfers, but there is no systematic health insurance or income poverty response.

One interesting idea that is currently capturing the imagination of global development policy discourse is the UN's social protection floors initiative, which is a concept that proposes a guaranteed basic income plus guaranteed access to high-quality, inclusive social services. Myanmar could explore a "floor" specific to its citizens' interests.

The combination of a decent work and social protection agenda with an industrial strategy could help address Myanmar's dire poverty, income inequality, and stark urban-rural disparities. It may also address the pervasive and violent forms of ethnic social exclusion in the country's mountainous regions, and the lucrative but pernicious narcotics trade. Taken together these three agendas could be a tool for social inclusion, facilitating environmentally sustainable production.

In short: Myanmar has the opportunity to create a democratic developmental welfare state, with its citizens emerging from poverty and political oppression, thereby inspiring many other countries.