MYANMAR: The Reform Process – on a bumpy road

SAAG-16-July-2012

By C. S. Kuppuswamy 

“In the first year or power, the national government has been speedily working on political reforms and national reconciliation.  From this year on wards, we are working on a second wave of reforms which will focus on the development of the country and the public” – President Thein Sein in a nationwide televised speech on 19 June 2012.

“Myanmar must first set its public finances in order, open up its economy to international trade, lift restrictions on investment, and manage its natural resources carefully to ensure socially and environmentally sustainable development. If it holds steady to these reforms, Myanmar has enormous potential for sustained rapid growth.”—Vikram Nehru, Carnegie Endowment. 

Introduction

On taking over as President in March 2011, Thein Sein in his inaugural address, revealed his plans for introduction of wide ranging democratic reforms for overall development of the country.  Since then he has been assiduously implementing his plan despite the challenges faced by his administration from various quarters. 

In an address to the nation on 01 March 2012, on completion of one year in office, he reviewed the progress and promised to introduce more reforms to bring in genuine democracy in the country. 

International Crisis Group in its Update Briefing titled “Reform in Myanmar: One year on” dated 11 April 2012, has given an exhaustive account of the reforms introduced, the challenges ahead and the role and reactions of the various agencies. 

The focus of the second wave of reforms to be introduced is on financial and economic changes and development of the country and the public.  Privatisation of some key sectors, a new investment law, rule of law and safety of the public are all part of this second wave of reforms. 

The Reform process

The major reforms introduced so far and those in the pipeline are:  

  • The Political Parties Registration Law was amended to facilitate the main opposition party, the National League for Democracy (NLD) to register as a political party and enter the main stream politics.  Certain provisions such as restrictions on imprisoned persons being members of political parties were removed.

  • In a slew of amnesties in the last year and a half, the bulk of the political prisoners have been released.

  • Legislation according the citizens the right to “assemble peacefully without arms and holding processions” has been passed.  While this will facilitate people for holding public meetings and processions there are a number of restrictions which will be taken advantage of by the law enforcing authorities to deny permission for such gatherings.

  • Legislation permitting trade unions and labour organisations to resort to strikes and form trade unions was introduced.

  • A National Human Rights Commission has been established.

  • Restrictions on media were relaxed.  Access to over 30,000 blocked internet sites was made available. Censorship over the print media has been liberalised and plans for setting up a press council in the near future was announced.  The local media is being allowed to take pictures inside the parliament and cover the debates and proceedings of the parliament.

  • An Ethnic Affairs and Peace Committee was formed in August 2011 with Khin Aung Myint, a upper house MP, as the Chairman.

  • The Myanmar currency had a dual exchange rate (one official and the other a black market rate) which was the source for major corruption. The Central Bank has managed to float the currency with effect from 1 April 2012 at the rate of 818 kyat to the dollar.

  • Myanmar Central Bank has allowed 11 local private banks to operate foreign currency accounts from 16 July 2012—a step towards an international finance system which will help easy flow of FDI. Customers can open accounts with different currencies such as the US $, Euro, Singapore $, FEC etc.,

  • A new investment law has been drafted allowing foreigners 100% ownership of companies and to set up joint ventures with at least 35% foreign capital.  Some tax concessions and permission to lease land from State and private citizens are also proposed in the draft.

  • Legislation for establishment of a special Economic Zone has also been drafted and is expected to be submitted to the parliament.

  • Myanmar has started the process of liberalising its communications networks to provide mobile and internet access to masses.  The posts and telecommunications in a joint venture with an internet provider is embarking on a reform plan to provide telecommunication services at an international standard and at a cheap price.

Challenges and Hurdles in the Reform Process

There is a resistance to the reform process from within by some hardliners though the military as an institution is believed to be supportive.  The president has repeatedly denied the presence of any hardliners in all his public speeches. Consequent to the acknowledgement of the resignation of Vice President Tin Aung Mint Oo (reportedly a hardliner) in early July 2012, media reports indicate a possible cabinet reshuffle through which the other hardliners will be eased out or pushed to positions of less importance.  This will definitely help President Thein to carry on more aggressively with his reform agenda. However the appointment of Myint Swe (also reported to be a hardliner), a former general close to Than Shwe, to replace Tin Aung Myint Oo as Vice-President goes against the general trend. 

At the first meeting of the Union level Peace Committee on 03 July 2012 President Thein Sein himself admitted that ending “the conflict with the ethnic armed groups is the key foundation to peace building in the country”.  Despite the ceasefire agreements entered into with about 10 ethnic armed groups, the fighting continues in Kachin controlled areas and minor attacks and skirmishes in other ethnic areas (Shan, Karenni, Karen).  Media reports indicate that local commanders of the army are ignoring the orders from the top and that the Government is also trying to weaken the groups to get into a better bargaining position.  As some major national projects are partly in the areas controlled by ethnics this will have wide ramifications particularly on the economic reforms. 

Many western analysis have been quick to point out that lack of institutional and technical capacity as another major impediment in the on-going reform process.  Lack of trained and skilled personnel at the middle level and at the working level is certainly adding to the woes.   This deficiency will be felt more in the economic reforms now underway.  The financial institutions, the trading agencies, the foreign exchange procedures the chambers of commerce have all not been geared to this sudden rush of investments from abroad.  These will get sorted out in due course as the country gains more experience and expertise. 

The president admitted that developing nations do not possess a sufficient government budget to meet development goals alone.  Hence there is an urgent requirement for the economic sanctions by US and other nations to be waived.  Aung San Suu Kyi told the press and the visiting dignitaries that the “democratisation process is not irreversible”.  She has also cautioned the western nations against “reckless optimism” and to exercise “healthy sceptism” of the whole reform process.  This has irked the regime and has caused a set back in that the western nations are still hesitant and are only suspending the sanctions and that too in a graduated manner.  Suu kyi should have welcomed the whole reform process unequivocally however tentative or incremental the reforms may be. 

The recent communal clashes in Rakhine State have also put the country in bad light.  Has it affected the reform process.  It is too early to say.  The Rakhine problem is an age old one, but it has erupted at a very awkward moment.  The imposition of emergency in the state and the consequent actions of the military in the area are under watch. 

News analysis

According to Reuters since President Thein Sein assumed office in March 2011, 26 new laws have been passed and more or less the same number of laws are waiting for approval by the attorney general.  The reforms and the necessary laws originate at the level of a select group of 20 people consisting of Cabinet ministers and private economists called the “President’s Business Advisory Group” which meets periodically on the directions of President Thein Sein. 

As Craig Steffensen, the ADB’s Chief on Myanmar and Thailand puts it– “They really aim to reform just about anything and everything at this stage.  There is so much on their plate right now and so few people involved in evaluating all of this that I think they’re getting to the point where they are overwhelmed.” 

The reaction of the internal community has been positive and most of the countries have eased or suspended the economic sanctions and have started interacting by sending their trade delegations.  The US has confirmed the appointment of Derek Mitchell as its ambassador and he has already arrived in Myanmar.  The US has further relaxed the sanctions on 12 July 2012 by allowing US companies to “responsibly do business in Burma”. US Secretary of State, Hillary Clinton met President Thein Sein at a business forum in SIEM REAP (Cambodia) on 13 July 2012 and introduced him to top American business leaders.  The UN has lauded the reform process underway in Myanmar. 

Some of the analysts are of the view that the relations between the two leaders that matter (President Thein Sein and Aung San Suu Kyi) are getting strained after Suu Kyi’s visit to Thailand for the World Economic Forum, which President Thein Sein was also supposed to attend till he cancelled it.  Her speeches, at the Forum and in her subsequent tour of Europe have also portrayed the country’s administration in bad light despite reiterating her confidence in President Thein Sein to go ahead with the reforms. 

Ko Ko Thett in his commentary (Mizzima News – 06 June 2012) attributes three main reasons for the lack of real development consequent to the reforms – a) the officials remain prepossessed with the appearance of development rather than actual development b) discordance between ministries and c) institutionalised red tape and incompetency.  He adds that “Reforms may be fast-paced, but the country’s institutions are not keeping up; the lack of rule of law and corruption continues to block Myanmar’s road to progress”. 

Despite the avowed support of the military to the reform process, the fact there are frequent violations of the Cease Fire Agreements (with the ethnic armed groups) from the army side does not augur well for the reform process either.  After several rounds of talks the KIO has rejected the offer of the Government to hold the next round at Bhamo (the Irrawaddy – 09 July 2012) because of the renewed  army offensives in the area of Laiza, the HQ of the KIO.  Hence, there are differences between the government and the army on the peace process and eventual national reconciliation.
The general complaint is that the common man is yet to feel the real impact of the reforms as political reforms have taken precedence over the economic reforms.  This will take time and it is difficult to imagine economic reforms keeping pace with political reforms within such a short time when the nation has just opened up.  To be critical is easy, but one should understand the ground realities.  There is no appreciable improvement in his well being, employment opportunities or in his social upliftment. Education and health sectors have not been paid much attention in these reforms.  The Chief Economic Advisor to the President has called for the reopening of the Rangoon University. An effective and progressive educational system is essential for economic and social development.   

Myanmar is being advised by various agencies on the economic reforms such as the International Monetary Fund, the World Bank and the Asian Development Bank.  Their advice is more often at variance and the Myanmar government is in a quandary to decide on a definite course of action.  The IMF consultation report reproduced in Mizzima news (08 May 2012) cited a number of “ key obstacles that must be put in line with international standards, such as the deposit-to-deposit ratio, onerous collateral requirements, administratively set interest rates, and segment banking activities.  These controls and the exchanges restrictions lead to a large unregulated shadow financial system”.  As usual the IMF is in a hurry. 

Sean Turnell, a leading economist following the developments in Myanmar, writes “Economic reform lags even further behind the political variety.  Myanmar lacks sound property rights, the rule of law, much basic infrastructure and other critical foundations of a market economy”.  He also adds that the absorption of the bulk of the government spending by the military is the cause of Myanmar’s economic instability. 

There is a frenetic rush for introduction of reforms.  The reason attributed by the Industry Minister Soe Thein for this hectic pace is that unless the “people will feel the dividends of democracy” they may dub the present government as good or as bad as the erstwhile military government.  Rush for political reforms is understandable as economic reforms will need more time and infrastructural support. 

—–

http://www.southasiaanalysis.org/papers52/paper5119.html

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