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Contents under pressure

18 October 2011 By Wayne Arnold

Myanmar’s moves to relax military rule and reopen to the world are earning calls for an end to Western sanctions. It’s true sanctions never succeeded in dislodging the Asian nation’s ruling junta, but Myanmar may not be ready for openness. After 50 years of isolation, economic and financial institutions are stunted. Flinging the doors open to international trade and investment would be a disaster, and may spoil Myanmar’s chance of sustainable growth.

Encouraging moves like holding elections and freeing political prisoners, including opposition leader Aung San Suu Kyi, may be a genuine response to Myanmar’s deteriorating fortunes. Its 56 million people are among the world’s poorest, with a GDP-per-capita of only $1,400 and an average lifespan of 64 years. Yet the country is rich in natural resources like natural gas and timber, and offers an inexpensive labour force with a 92 percent literacy rate.

Those are being exploited a bit already, despite U.S. and European sanctions. China and Singapore have already been readily engaging with the junta. But foreign trade is just $243 per capita per year, and the profits are unlikely to be evenly shared. Myanmar’s corruption is on a par with Somalia and Afghanistan according to Transparency International. Even if trade and investment benefit the average citizen, they benefit the junta more.

But removing curbs would be likely to create a deluge. Unchecked foreign investment, especially lured by still-high commodity prices, would overwhelm the country’s ability to absorb it efficiently or equitably. Cambodia and Russia both learned how a sudden opening can worsen corruption and create destabilising price spikes, entrench the elite and hinder the emergence of a middle class. Resource-rich Mongolia is struggling with similar issues.

Myanmar has taken a positive step, inviting officials from the International Monetary Fund to help map out economic liberalisation. Next on the list should be the World Bank. Strengthening tax collection and the central bank are priorities. Besides, Myanmar’s rulers have dangled openness before, only to brutally yank it back. All the more reason the country’s re-entry into the global economy should be gradual.

 

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