Who's to blame for Burma's economic misery

Last week the International Monetary Fund (IMF) released a statement saying that Burma has a chance to become "the next economic frontier in Asia." But the IMF went on to note that the country can realize its potential only "if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world" to its advantage.

In a word, it's up to the government.

Contrary to what you might think from the headlines, it's not western sanctions that are causing Burma's economic woes. It's government policy. The Burmese government's Industry Minister, attending the World Economic Forum in Davos last week, admitted as much when he responded to a journalist who asked whether the country has done enough to get U.S. sanctions lifted: "We have a lot of things to reform and lots of things have to change: laws, regulations and institutions, not only in the political sector but also in the economic sectors. But sanctions are up to them."

In 2004, the well-known U.S. economist Jeffrey Sachs wrote that sanctions against Burma had "systematically weakened the economy by limiting trade, investment and foreign aid." It's an argument that many critics of sanctions have made.

The media love to use terms like "pariah," "isolated," and "closed" whenever they describe Burma and the effects of sanctions on the country.

If the term "pariah" denotes a country that utterly disregards international norms and behavior, and correspondingly meets with unrelenting censure from the international community, then that's a pretty good fit for Burma. But when the word is used in a way that's supposed to characterize the country's overall economic position (invariably in combination with words like "closed" and "isolated"), then it doesn't describe the situation at all.

According to the Economist Intelligence Unit, in 2010 Burma's exports and imports stood at $8.7 billion and $4.9 billion respectively. That's higher than the data for some of the comparable members of the Association of Southeast Asia Nations (ASEAN), such as Cambodia and Laos. Meanwhile, many experts caution that the official figures for Burma's exports fall far short of the real numbers because they don't cover the value of timber, gems, narcotics, rice, and other products smuggled to neighboring countries.

As far as foreign direct investment (FDI) is concerned, Burma reached a record high in 2010-11 of almost $20 billion. That's more than the figure in the same year for Southeast Asia's latest investment darling, Vietnam.

These facts suggest that Burma's exposure to trade and FDI is higher today than ever before, and even higher than that of some comparable ASEAN countries. In this light it becomes extremely hard to argue that sanctions have deprived Burma of FDI and trade, much less that Burma is "isolated" or "closed." (This also offers an eloquent commentary on how ineffective the sanctions regime has actually been.)

Of course, sanctions do have negative effects on the economy (for instance, job losses in garment industry after the 2003 sanctions imposed by the U.S.), and there are many spillovers to other sectors, ranging from education to the growth of civil society. But the government cannot use sanctions as an excuse for its mismanagement and kleptocratic corruption.

Given this extent of economic involvement with the outside world, Burma should boast a good growth rate and corresponding improvements in the lives of its citizens. But the socioeconomic indicators tell a different story. For instance, since 1988 Burma's GDP has grown at an annual average rate of 2.9 percent, the lowest in the Greater Mekong Subregion. The 2010 UNDP Human Development Index ranked Burma 132 out of 169 countries. The country is the lowest in Southeast Asia (Laos and Cambodia ranked 122 and 124 respectively). What's wrong with this picture?

The problems are twofold. First, the regime has tailored trade liberalization policy to benefit the natural resource extraction sector. The FDI that has come into the country has also focused on natural resource extraction and hydropower. Agriculture and manufacturing received a mere one percent of FDI because of the many problems that plague these sectors, including poor infrastructure, unfavorable exchange rates, electricity shortages, the lack of skilled workers, and so on and so forth. Since the natural resource extraction sector is capital intensive, most of the benefits go to those who own the capital. And that means the military conglomerates, which control almost all the capital in a society that is starved of private capital. As result, the distribution of income is highly uneven. The military takes the biggest share and most of the population never sees any benefit.

Second, the regime does not re-invest that revenue in education, health care, or necessary infrastructure. Instead, for example, it has plowed money into building the wasteful new capital Naypyidaw at a cost of about 1 to 2 percent of GDP, according to the IMF. By the government's own official statistics, it allocated 23.6 percent ($2 billion) of the 2011 budget to military spending, while the country spends a mere 1.3 percent on health ($110 million) and 4.13 percent ($349 million) on education. Some experts estimate that actual military spending amounts to as much as 60 percent of the overall budget. No wonder the country is mired in poverty.

The IMF's statement calls on the Burmese government to use revenues from natural resources "to build human capital and infrastructure." The Fund describes these as the "key priorities to alleviate poverty and reduce bottlenecks to industrialization."

Burma's third session of Parliament, which opened last Thursday in Naypyidaw, is now set to discuss the budget for the 2012/2013 fiscal year. This will be a litmus test for the new pseudo-civilian government. We will soon see whether it is willing to "redefine national spending priorities and bring fiscal transparency," as the IMF suggests, or whether, instead, everything stays the way it's been until now.

Paula Bronstein/Getty Images

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Mixed feelings on a Ugandan anniversary

For the last 26 years Ugandans have celebrated Jan. 26 as NRM Liberation Day. The celebration marks the day that the National Resistance Movement (NRM) seized power from an ineffective and corrupt army-led government. The coup marked the end to the long period of domestic instability that followed the disputed 1980 presidential elections.

The "bad days" of corruption and chaos under the old government were over. It was a new beginning for Ugandans. We were amazed when the new government lived simply and its ministers drove simple cars. They promised law and order, and we were ready to work with them. To be sure, violence and conflict continued around the country in places far from Kampala. Some twenty-two rebellions are recorded. So even when the world said that peace reigned in Uganda, it was a conditional peace. Those of us who lived in the "safe zones" carried on with our lives and only read about the armed conflict in the newspapers. We felt sorry for the affected areas.

Yes, war is a bad thing, we agreed, as we watched the grainy footage on Ugandan TV that showed the skulls in Luweero, the battleground of the war that brought the NRM to power. When First Lady Janet Museveni formed the Uganda Women's Effort to Save Orphans (UWESO) in response to the number of orphans in the region, we agreed it was a noble thing to do. We still remember the story of Robert Mugabi, the boy rescued from monkeys in Luweero. He returned to human life after years of abandonment. It took a while for him to adjust to human behavior and talk. It was as if we had discovered our own version of Tarzan.

Years later, the government is still trying to push the message that only it can protect the people from the old days of insecurity. To drive home the point, it tries to surround the 26 January celebrations with exaggerated fanfare and a sense of euphoria. (The photo above shows President Yoweri Museveni inspecting troops on the day of the anniversary.) I remember being in primary school and looking forward to the day when we would march proudly in our school uniforms. That pride is long gone.

The day has lost its luster. It is just another day off work. It is another opportunity to think of more creative ways of survival. Each year offers fresh reminders of the things that have gone astray. Each year is a reminder that we need something new. A leading TV channel posted a question on its Facebook page: "What are the greatest achievements that have been made under NRM leadership over the last 26 years and what remains to be done?" The comments people made in response highlighted corruption, power outages, restrictions of the freedom of expression, the removal of term limits, tribalism, the growing gap between rich and poor, and the impunity of the powerful from the law.