Myanmar: making reforms count

Julian Palma, a SAIS master’s student, reports from Tuesday’s discussion at Brookings:

After half a century of dictatorship and self-imposed isolation, Myanmar is rapidly emerging from a pariah state. Over the last two years, the government has made great progress in political and economic reforms: from releasing political prisoners to the unification of the exchange rate and the possible establishment of a central bank. The concerns ahead, however, lie on will Myanmar sustain the momentum of such reform and transformation.

Panelists

Priscilla Clapp, Former U.S. Mission Chief to Myanmar—U.S. State Department

Lex Rieffel, Nonresident Senior Fellow—The Brookings Institution

Anoop Singh, Director of the Asia and Pacific Department—IMF

Frances Zwenig, President—US-ASEAN Business Council Institute, Inc.

Moderator:  Vikram Nehru, senior associate in the Asia Program and Bakrie Chair in Southeast Asian Studies at the Carnegie Endowment for International Peace

Priscilla Clap:  institutions

Clap began the discussion by stating that one of the biggest challenges in the country today is institutionalization.  She argued that during the 50-year military rule little was done to develop institutions. The officials behind the reform agenda today are therefore unaware of what kind of institutions they need in order to develop a sustainable democracy. In order to bridge that gap, the international community must play an essential role in institutional building but “they [Burmese] need to do it themselves.”

Although rapid advancements have already been made, sustainable results will only be visible within the next two to three generations. Rule of law is particularly important: “they do not have a system that delivers justice and fairness.” While laws exist, institutions are weak. Clap is currently working on two projects with the US Institute of Peace (USIP) to meet the challenges.

Anoop Singh:  transparency

Anoop Singh was very optimistic with how the reforms are being supported across the spectrum in Myanmar. The biggest concern at the macro level is making the economic transition from a “segmented, informal parallel market” into a unified economy. The objective is to reduce the scale of “off-budget activities.” The establishment of a central bank with a framework that is open and transparent is imminent.

Frances Zwenig: investment climate

Zwenig commented on Myanmar’s investment climate and U.S.-Myanmar relations. It is not clear what the investment regime will look like.  The lack of training and capacity building is unquestionably a concern for investors. Although the U.S. has approved four major banks in Myanmar with which to conduct transactions, two are run by ‘cronies’. The recent resignation of the Minister of Telecommunications has raised eyebrows and has left the industry in further chaos. Myanmar’s big success so far has been healthcare. American presence in-country has helped set up NGOs that advocate effectively for maternal and child health.

Lex Rieffel:  money, regional factors and military reform

Foreign aid

An assessment of foreign assistance entitled “Too Much Too Soon” will be released next Wednesday (March 6) detailing the implications of aid in Myanmar. While great strides have been made on the government side to manage and guide donor aid, Rieffel pointed out that this is a sensitive topic because “donors bring an awful lot of chaos.”

Regional relations

The three critical regional are China, India and Japan.

Myanmar has long aligned itself with China, whose rise is generating nervousness. Some in Myanmar fear China is taking advantage of Myanmar’s wealth of natural resources, so the country is looking for other partners to help build its nascent economy. Rieffel referred to suspension of construction of the Myitsone dam in Myanmar. This Chinese project was of great commercial interest to Beijing, but President Sein said he responded to the “will of the people”.

While India aims to become Myanmar’s ally, it is unlikely to happen, partly for geographic reasons and partly because of distrust of the Indian minority. Japan recently announced cancellation of $3 billion in debt, making it Myanmar’s closest friend today.

Military reform

Military reform is important.  Twenty per cent of the national budget (2013-2014) will be allocated to the military, despite public concern.  There is also concern about the resources that former military heads are claiming.

Conclusion

The moderator remarked in conclusion that there are important cultural impediments to development. In Myanmar, authority is concentrated in individuals, not institutions. The shift to institutions will be one of the most difficult challenges.