International Network for Economics and Conflict

Although the November 30 – December 2, 2011 visit of U.S. Secretary of State Hillary Clinton to Burma signaled a perceptible thawing of relations between both countries, meaningful impact and lasting societal change could only be achieved if developments in the political arena are mirrored in Burma’s economic sphere.  Since his election   in February 2011, Burmese President Thein Sein has taken steps to improve governance by pushing for more open elections and relaxing restrictions on political parties.  His administration released some 200 political prisoners on October 12, 2011 and championed legislation that allowed the National League for Democracy party led by Nobel laureate Aung San Suu Kyi to participate in upcoming elections.  These reforms have earned Thein Sein the moniker “Burma’s Gorbachev.”  The momentum created by these political reforms is unlikely to be sustained unless the immense potential of Burma’s private sector is unlocked, and non-junta entrepreneurs find the space to innovate and operate on a level playing field.

Secretary Clinton’s visit was both symbolic and strategic because it communicates U.S. commitment to support countries making demonstrable steps towards participatory and inclusive governance; consistent with U.S. foreign policy objectives in Burma.   Shortly after assuming office, Secretary Clinton lamented the inadequacy of a broad range of international interventions in Burma and announced a review of U.S. policy toward Burma which resulted in the “pragmatic engagement” strategy in September 2009.  This entailed direct engagement in senior-level dialogue with the regime to address U.S. concerns regarding democracy, human rights and non-proliferation, while maintaining existing sanctions.  The December 2011 visit sought to evaluate the content and sustainability of Burma’s unfolding reform agenda.  It must, however, be noted that Burma’s road to democratization is unlikely to be sustained or sustainable unless more attention is paid to addressing economic inequity and opportunity across the country.  A continuation of the political economy of the junta years (with generals in suits) would not inspire confidence.

It is worth noting that Burma has a history of unsustainable, fragmented or counterproductive reforms.  A number of political prisoners were released in 1992 when Gen Than Shwe took power.  This also occurred twice within the context of the country’s intelligence sector reforms in 2004 and 2005.  Currently, progress would require the release of all political prisoners and firm commitments to guard against their being re-arrested or intimidated.  The opening of political space would allow all shades of opinion to be openly expressed and debated without fear or favor.  Accomplishments in this area would be hollow if the average Burmese citizen faces significant barriers to full economic participation. Economic policy and economic institutions must promote entrepreneurship in order to unlock the potential of a growing private sector.  The stranglehold of the current political elites must be eased and economic policy must benefit all.  In the past, economic policy has been used to reinforce the dominance of the predatory elite and weaken the entrepreneurial groups that could threaten the status quo if they became too affluent.  Many view the tax amnesty of 1990 and the introduction of foreign exchange certificates in 1993 as examples of economic initiatives that were geared towards consolidating the position of administration officials or proxies.

Burma’s economy is both complex and fragmented.  There is an urgent need to delink the billion-dollar trade in illicit drugs from the rest of the economy.  Measures should also be taken to bridge the gap between the formal and non-formal parts of the economy. Programs should also be put in place to ensure that the financial gains from Burma’s petroleum sector (almost $2 billion this year) would effectively contribute to broad-based economic development, particularly in the rural areas.  Supporting and promoting economic openness could underpin and sustain political change by empowering groups that had been marginalized in the past, delivering tangible democratic gains and creating a viable constituency for peace.  The recent suspension of the $3.6 billion dollar Myitsone Dam on environmental grounds shows that the new Burmese administration is open to productive dialogue with civil society and private sector representatives.  These channels should be institutionalized in order to establish trust and promote collaboration between the political leaders and Burma’s growing private sector. 

Three important initiatives could support this process.  First, the United States should consider extending ‘pragmatic engagement’ to include the private sector.  Reforms should minimize barriers to entry and establish an equitable framework for private sector growth.  The overarching short-term objectives must be the creation of jobs and the promotion of equity, especially among groups that were either marginalized or disadvantaged.  Reducing the footprint of public sector officials (current or recently retired) in Burma’s private sector is also desirable.  Second, due consideration could be given to the development/articulation of a conflict-sensitive approach to private sector development in Burma.  This involves a careful analysis of existing linkages, as well as a determination of incentives/disincentives for enablers and spoilers.  Third, a forum should be created to sensitize and train both private sector actors and government officials.  Such a forum will help strengthen policy/program implementation, build capacity and prevent the escalation of conflict (particularly those related to Burma’s extractive sector).