Two Grim Burma Studies

Two detailed studies of Burma's economic health paint a grim picture on the eve of promised parliamentary elections later this year.

The first, by a US Congress-funded think tank called the United States Institute of Peace, says the country is suffering from "misguided economic policies" which have "deprived the economy of the basic foundations for sustainable improvements." Most of the data published by the military regime is unreliable or simply a fiction, the study says. The other, from Australia, warns that Burma's economy is being pillaged by the military regime and its business cronies and is "unbalanced, unstable and largely without the institutions and attributes necessary to achieve transformational growth."

Policy making in Burma is "not just ill-conducive to sustained economic growth, but is actively destructive of Burma's prospects," says the Australian report, "Dissecting the Data: Burma's Macroeconomy at the Cusp of the 2010 Elections." The document was compiled by long-time Burma watcher and economist Sean Turnell of Macquarie University in Sydney.

Turnell said there is evidence that per capita GDP in Burma, already one of the lowest in the world, is actually declining. His report finds that basic elements necessary for economic health and development remain missing in Burma—including lack of protection for private property, lack of business freedom, dysfunctional infrastructure and irrational and inconsistent policy making.

The US study—"The Economy of Burma on the Eve of the 2010 Elections" —was written by Lex Rieffel, who has worked with the US Agency for International Development for 30 years. It makes equally depressing reading, even as it offers a few glimmers of hope.

"Burma's official gross domestic product (GDP) figures for the past 10 years put the average rate of GDP growth well above China's, which cannot be true," Rieffel wrote. "Even the range of estimates of Burma's population—between 48 million and 58 million—is unusually broad because the last census meeting international standards was carried out in the 1930s."

Insurgencies by ethnic minorities since independence and sanctions imposed by the US and other Western countries since 1990 are not the main reasons for the poor performance of Burma's economy, the study said. "Instead, misguided economic policies, compounded by extraordinary neglect of the education and health sectors, have deprived the economy of the basic foundations for sustainable improvements in living standards."

Both Rieffel and Turnell are sharply critical of the involvement of Burma's military and its crony business friends in all corners of commerce.

"The country's financial sector is dysfunctional. The private sector has insufficient credit to grow because the central bank provides so much credit to the central government. The banking system is dominated by state-owned banks that lend primarily to relatives and cronies of regime leaders as well as state-owned enterprises," Rieffel wrote.

"To support an estimated 400,000 personnel, almost 30 percent of the national budget is allocated to the country's armed forces, which substantially understates the resources devoted to the military because it does not include large amounts of money generated by a vast array of legal and illegal businesses."

Export earnings from Burma's growing energy sector will double in the next five years, Rieffel suggests, largely because of the gas and oil transit pipelines now being built through the country into China. This could mean annual earnings from gas, oil and other energy of more than US$6 billion, he says. That calculation is based on energy exports, mostly gas, accounting for at least 45 percent of the earnings declared for 2008.

However, international human rights groups have said most of the income from energy sales is stolen by regime leaders and squirreled away in foreign banks.

Rieffel praises The Association for Southeast Asian Nations for trying to make Burma a more responsible member of the 10-country economic club, while noting that the Burmese government "has been the most obstructionist member" as Asean seeks to become a more inclusive community by 2015.

"If the next [Burma] government takes steps to promote stability through a more inclusive political process, it would be especially important for Western democracies and multilateral agencies to lift the existing constraints on aid," Reiffel said.

Western democracies are more likely to improve outcomes if they follow the lead of the Asian countries that are directly affected by the problems in Burma instead of trying to persuade them to buy into a Western-flavored strategy."

Turnell's study paints a grimmer picture of a Mafia-like regime even as it talks about national reconciliation sells off state assets and enterprises— almost 300 to date—to cronies and one another on the pretext of a privatization program.

"The 2010, elections notwithstanding, meaningful economic reform in Burma is, regrettably, neither in progress, nor in prospect," said Turnell who also produces the Burma Economic Watch news bulletin.

This originally appeared in The Irrawaddy, with which Asia Sentinel has a content-sharing agreement.