Myanmar could be a development success story, or a disaster. Aung San Suu Kyi, newly inaugurated into the country’s parliament, warned on June 1 that optimism in its prospects should be balanced by “healthy skepticism”. But 50 years in isolation at least mean Myanmar has a chance to learn from its neighbours’ mistakes. From corruption to currency, it can get right what other Asian nations got so wrong.
The first issue will be how to handle new inflows of capital. Asia’s trade flows with the West are flagging, which means Myanmar can’t count on bottomless export demand to fund development. But there is still roughly $19 trillion in global pension funds scouring for returns, and Myanmar occupies a strategic position between China and India. It won’t want for investment.
Copying Japan and China may be the wrong path. They channeled capital on preferential terms to commercial elites who built industry and infrastructure. But the cost has been pollution, income disparities and corruption. While that would be an easy route to growth of 10 percent or more, Myanmar can aim for a more measured pace from the outset.
Myanmar rubs elbows with Afghanistan near the bottom of Transparency International’s corruption perceptions index. It needs an effective judiciary that can enforce the rule of law and that is paid well enough not to depend on bribes, unlike Indonesia’s. Property rights need to be clarified to stop land grabs and avoid a Philippine-style peasantry with no assets.
Opening up vital infrastructure and services to foreign capital, which China is only starting to do now thirty years into its opening-up, is a must. Myanmar needs everything from power plants to vocational schools. Pension funds share long-term horizons. Cellular networks and the Internet can extend modern finance to a broader segment of Myanmar’s population.
There will be many difficult decisions. Without many competitive advantages, Myanmar may need to protect some budding domestic industries from foreign competition. Then there’s the currency: tethering it to the U.S. dollar may bring stability, but a free floating currency would better absorb the impact of trade and investment flows that have proved so destabilizing to Thailand and South Korea. If Myanmar learns from example, good and bad, it can weather the storm.