By Col R
Hariharan
Strategic
context of change
Myanmar is
in the throes of change since 2010 after the first-ever multi-party election
was held after two decades. President Thein Sein has surprised all the
stakeholders by the speed with which he is transforming the government
from an insensitive military dictatorship to a democratic rule of sorts,
despite the limitations imposed by the Constitution 2008. As a result Myanmar
has become the focus of international attention and even approval.
Geographically
located on the eastern borders of India, and on the South and Southeast of
China, Myanmar’s strategic value for two most populated nations of the world is
immense. This is further enhanced with the impending completion of two
infrastructure projects linking Myanmar with China and India. The China-funded
Kyakpu port project with road link and gas and oil pipelines to Yunnan in China
is likely to be completed in the next few months. This would provide China a
direct strategic access to the Indian Ocean by passing the choke point at
Malacca Strait. Apart from security implications, it would make Chinese exports
to the under exploited South Asian market more competitive, while helping the
development of Yunnan province.
Similarly
India’s Kaladan multi modal project providing easier road and river access for
India’s troubled Northeast to Sittwe port in Myanmar is expected to be
completed in May 2014. This link could act as a catalyst for the development of
Northeastern states of India as it would open a direct route for India’s trade
with Myanmar and the rest of ASEAN. In tandem with China’s direct access
through Kyakpu, Sino-Indian trade will have greater opportunities to flourish.
And we can expect China to enlarge its foot print further in South Asia.
China’s
increasing belligerence in East and South China seas has become a cause for
concern for Japan and its close ally the U.S. It threatens to destabilize
the U.S.’s dominance in East Asia and longstanding strategic equation with
Japan, South Korea and Philippines. China’s contentious territorial claims on
South China Sea have become louder. To contain this development, the U.S.
has been trying to enlarge its strategic periphery from Asia-Pacific to Indo-Pacific.
As a key geostrategic entity in this region, Myanmar is well on its way to
become a focus nation of the U.S., shedding its out caste status of earlier
years.
During the
last three decades, China had carefully cultivated Mynamar’s military junta by
providing vital economic and political help to soften the crippling effect of
international sanctions imposed upon the country after the military refused to
hand over power to the democratically elected civilian government in 1990.
China chose to ignore the struggle for restoration of democracy by the
National League for Democracy (NLD) under the leadership of Ms Aung San Suu
Kyi. Although India and ASEAN countries did not observe the sanctions and built
their own links with the military regime, it is Chinese influence that
predominates in Myanmar, particularly in the armed forces, infrastructure,
mining and trade and commerce.
The cosy
relationship China had built over the years in Myanmar is under threat now.
Sustained international pressures and support to Ms Suu Kyi’s campaign
spearheaded by the U.S. ultimately compelled the military regime to come out
with the 2008 Constitution which gives limited democracy to the people. China
had no option but to go along with the international community on the democratic
reforms in keeping with its growing international profile.
Ever since
the civilian government came to power and started taking up political, economic
and structural reforms process, the U.S. has started rebuilding its relations
with Myanmar. As a result the U.S. sanctions are progressively being lifted to
facilitate greater opportunities for U.S. business in Myanmar. President
Obama’s visit in November 2012 came perhaps as the final recognition of
President Thein's earnest effort in the democratic exercise. As increasing U.S.
presence in Myanmar is eating into the Chinese sphere of influence, it has
become a matter of concern to China. Chinese media had been lamenting the
failure of its policy makers to cultivate the democratic constituency in Myanmar.
Though
Chinese are trying to repair their relationship with leaders like Ms Suu Kyi,
in the amorphous state of politics in the country it will be quite some time
for results to emerge. However, China as a neighbour with enormous economic and
military power will continue to enjoy wide spread influence in Myanmar
for some time to come. However, China would always be on watching with extra
attention the U.S. initiatives in Myanmar in the context of regional security
and trading regimes. This would become even more important when Myanmar
assumes the chairmanship of ASEAN in 2014.
Unlike
China, India’s relationship had been more laid back. However, Myanmar's
historical cultural and religious experience and shared colonial history with
India makes Myanmar more comfortable in dealing with Indians. India’s presence
as a friendly and powerful neighbor enables Myanmar to somewhat balance China’s
overwhelming influence. This could become a potential game changer as and when
India-U.S. strategic relationship grows. Indian efforts to enlarge its
economic and strategic relationship are not on the same league as China.
However,
given the entrepreneurial spirit of Indians which is second only to the
Chinese, we can expect it to grow more rapidly in the coming years. Indian
leadership of all political hues is aware of the importance of Myanmar in
India’s overall strategic spectrum. And as democracy comes to stay in Myanmar
its equation with India is likely to make rapid progress.
Myanmar’s
ability of to sustain political and economic changes now underway has to be
viewed in this overall strategic context.
Political
changes
The country
owes much of its new found success to President Thein Sein’s prioritized and
action-oriented style of governance. Within two years of coming to power, he
has managed to overcome his negative image as a handpicked man of the military
junta and a former military officer. Clearly he has impressed not only the
people of Myanmar but also Ms Aung San Suu Kyi, who led the struggle against military
rule.
Though the
reform process still has a long way to go, President Thein appears to have
chosen his priorities right. In the last two years in office in the first stage
of the reform process, he took up political reforms to produce visible results.
Most of the political prisoners have been released, exiles have returned after
a number of irksome military-imposed restrictions were removed, and media is
freer than ever before.
Thein not
only freed Ms Aung San Suu Kyi from house arrest, but persuaded her to bring
the NLD back to national political mainstream despite her strong objections to
the 2008 Constitution. Electoral laws were amended to enable her and the NLD to
contest parliamentary by-elections; now under Ms Suu Kyi the NLD is taking an active
part in the parliament as the main opposition party.
In this
climate of growing political harmony, Ms Suu Kyi has reciprocated Thein's
positive approach. Even in some of the grey areas like ethnic reconciliation,
Ms Suu Kyi has chosen to help him than confronting him. Overall, there is a lot
of enthusiasm among the people, particularly the youth, who are trying to
understand democracy in action. Unless, the government performance matches
enthusiasm the danger of the country reverting to army rule and chaos is always
there.
The NLD is
staging a comeback after living for two decades in political wilderness. The
recently held NLD conclave has shown weaknesses in organisational structure and
leadership. The party needs to replace the aging leadership ruling the roost
and bring in fresh blood to impart dynamism. Historically the student power had
been the catalyst of change in Myanmar.
Though the
NLD has planned to bring in younger leadership it may not be an easy task as a
popular political party it can become a bandwagon for diverse vested interests.
This is the malady that had undermined Mynamar in the early days of
independence when political parties gained notoriety rather than fame for
schism, power struggle and factionalism.
Fortunately
for NLD, Ms Aung San Suu Kyi still remains the only charismatic national leader
with grass root popularity. However, she appears to be a little hesitant in
exercising her leadership clout as demonstrated in her reluctant approach to
some of the contentious problems like ethnic conflict and attacks on Rohingya
people. President Thein Sein appears to have cleverly used her as the cat’s paw
by making her to head the Latpadaung Inquiry Commission
after public outcry against a copper mine project destroying their environment.
Inevitably in the
process, she has courted some unpopularity with her
recommendation to go ahead with the project as planned by the government.
The Union Solidarity and Development Party
(USDP) now in power is backed by the military. Though this background could be
a baggage when it is pitted against the NLD in the elections, as a ruling party
it has the advantage of being able to dispense favours. Moreover, Thein
Sein’s reforms have the potential to improve the quality of life of the people,
and win their support to the USDP. Other political parties are yet to
establish themselves in the nascent political environment. However, ethnic
parties have established constituencies and their support could become useful
in jacking up strong coalitions. In this respect the NLD has a better history
while USDP as a party in power has a better opportunity to improve the equation
with ethnic communities.
So the
future of stability in democracy would depend upon the relative ability of Ms
Suu Kyi and President Thein to rally the support of smaller political entities.
While President Thein has the advantage of power, Ms Suu Kyi has a record of
achieving this during the two decades of her political struggle for democracy.
However, to achieve this in the present context, perhaps she needs to evolve a
proactive strategy to impart greater political dynamism in the NLD.
Potential
game changers
Myanmar’s ability to sustain economic and
political reforms as planned could be dislocated by two game changers – army
and ethnic insurgencies – which had been having antithetical relationship in
the history of the country.
Ethnic insurgencies plaguing the country
since independence provided a valid reason for army taking over power when
political instability troubled the government. The army seized power in 1962
when there was political chaos as a number of parties clamoured for power, and
Karen and Communist insurgencies threatened the existence of the nation.
According to Wikipedia the army has doubled its strength to 500,000 since 1988.
With progressive modernisation the army has become a powerful one in the
region. Such a powerful army with a constitutional role conferred on it to
intervene in the democratic system makes an incendiary combination. Any
dilution of its role can be carried out only through constitutional amendment.
With the political scene in a flux, it is probably too premature for any party
to even think about amending the constitution to curb military’s role. In any
case it will provoke immediate army reaction.
A second aspect is army’s unfettered
control over national security. Thus in any ethnic reconciliation process, the
army will be the final arbiter of peace and war. There are about 17 ethnic
insurgency groups in the country. They have a long history of fighting the army
to preserve their identity, areas of habitation while seeking autonomy. Of
these, 14 have signed ceasefire agreements with the government after it came to
power. However, the Kachin Independence Army (KIA) in the North bordering India
and China, the Shan, and Karen insurgent armies have been involved in sporadic
clashes with the army after they refused to accept the terms of the under the
2008 constitution. As per the constitution their armed cadres were required to
come under the Myanmar army. The insurgent groups have refused to surrender
their weapons in the absence of a political solution to their demands for autonomy
in terms of the Panglong Agreement signed at the time of independence. This may
not be forthcoming in the present unstable political environment.
As the
economy opens up, rich natural resources abundantly available in ethnic states
would add an economic rider to the issue as it happened in Kachin state
triggering conflict with KIA. Unless a permanent solution is found the
possibility of resurgence of insurgency will always loom in the horizon. Such a
conflict would definitely put the clock back on democratic reforms and provide
space for the military to step in to rule.
Economic and structural reforms
Ever since General Ne Win, the architect of
military dictatorship, introduced the Burmese way to socialism, the country’s
economy became a disaster. After the global economic liberalisation became a
fact of life, in 2008 the junta started carrying out economic and fiscal
reforms. This process picked up momentum after democratic reforms. The
government on coming to power in 2011 introduced two-stage reform process in
which structural and economic reforms to facilitate less bureaucratic and more
accountable process and bring stability to Kyat are important components.
The key economic indicators based on the last 5 years’ performance
compiled by the Asian Development Bank are given in the Table below:
Head
|
2008
|
2009
|
2010
|
2011
|
2012
|
GDP
in billion $
|
20.2
|
31.4
|
35.2
|
45.4
|
51.9
|
GDP
per capita $
|
351.0
|
537.3
|
595.7
|
759.1
|
856.8
|
GDP
growth %
Agriculture etc.
Industry
Services
|
5.5
8.0
21.8
12.9
|
3.6
3.4
3.0
4.2
|
5.1
4.7
5.0
5.8
|
5.3
4.4
6.3
6.1
|
5.5
4.4
6.5
6.3
|
Consumer
price (% change)
|
32.9
|
22.5
|
8.2
|
7.3
|
4.2
|
Overall
fiscal deficit % of GDP
|
(3.8)
|
(2.4)
|
(4.8)
|
(5.6)
|
(6.4)
|
Current
A/c balance % of GDP
|
0.6
|
(2.2)
|
(1.3)
|
(0.9)
|
(2.6)
|
External
debt as % of GDP
|
56.8
|
37.7
|
35.3
|
30.6
|
28.2
|
Evidently the government has achieved
success in managing inflation and in stabilising the monetary value of Kyat.
However, as the economy opens up managing them will become even more complex
and a lot of foresight and planning would be required from the government.
However, even with all the goodwill in the world, today doing
business in Myanmar is not easy. There are no foreign banks in Myanmar as their
operation is not codified. Nineteen foreign banks, including 5 Chinese and one
Indian entity have been permitted to open only representative offices. They
cannot do banking transactions. Any Myanmar citizen can open a dollar
account to deposit dollars but he cannot transact in dollars! And there is only
one Myanmar bank - with a single office in Yangon for channelizing foreign
currency transactions! So the foreign investor’s option as of now is limited to
bring in foreign currency without the facility to directly remit profits in the
currency and bank of his choice. At present the correspondent bankers facilitate
this by reciprocal arrangement with the authorized Myanmar bank.
However,
all these are set to change. With large number of American businesses visiting
Yangon, the U.S. is relaxing its strong financial curbs on transacting with
Myanmar. So it is a matter of time, structural frame work with legal oversights
would emerge in Myanmar.
The international community appears to be
favourably disposed towards the structured economic reforms process. In this
context Myanmar Govt. Letter of Intent to International Monetary Fund of Dec.,
28, 2012 is of interest. The government claims: “Myanmar ….after substantial
progress in the first stage of reforms, which aimed at achieving peace and
national unity.…has embarked on second stage reforms to comprehensively
modernize the economy and integrate it with the global economy,
including through regularization of financial relations with the international
community. We recognize that to successfully meet these challenges, lasting
macroeconomic stability is critical. Therefore, government has developed a
program of economic policies and institutional reforms for the period through
December 2013.”
However, according to both IMF and ADB,
Myanmar has limited capacity to handle macroeconomic management and establishing
and managing sound economic policies and structures. The government seems to be
aware of this. At present the IMF is helping it to overcome these limitations,
monitor and assess the progress.
Conclusion
During the
last two years of democratic experiment despite its military patronage, appears
to have progressed well in ushering political and economic reforms. This is
mainly due to the positive approach of President Thein as well as Ms Suu Kyi,
the opposition leader, to work together to progress. All the external powers
including China and the U.S., are vying for a piece of action in the country
now opening up for global business and they are unlikely to allow the nation to
revert to become the failed state it was. This augurs well for democratic and
economic reforms sorely needed to enhance the quality of life of the people.
The U.S.
has been suitably impressed and despite the economic recession U.S. business is
making a beeline to Myanmar. China which was the cock of the walk in Myanmar
during the days of military rule is worried over the U.S. political and
economic foray. India not to be left behind in this race for a share in the
economic pie, has unrolled its red carpet of aid - $ 500 million package – to
Myanmar.
Myanmar
could become the newest tiger to join the pack in ASEAN in the next decade if
the reforms progress smoothly. That still remains a big question mark because
the future of Myanmar is paved with landmines of political, economic and ethnic
relational uncertainties that could explode and halt the progress of reforms.
It will
depend upon how two historic game changers of Myanmar – the army and the freedom-minded ethnic entities – conduct themselves to keep the reform
process on track. As of now the future of Myanmar
depends upon Thein Sein’s ability to manage the army as much as the national
government.
Even if the
political and ethnic environments remain peaceful and army extends full
cooperation, it is too early to say the reforms would make an easy passage.
Army rule has created huge voids in public services, banking, civil society and
political institutions. A culture of cronyism and corruption permeates the
system. Myanmar simply lacks the capacity to bounce back unless capacity
building across the board is sustained during the next decade. As peoples’
expectations have been kindled now, sustaining change in this complex scene is
going to be a big leadership challenge not only for Thein but for other leaders
of the country.
[This
article formed the basis for Col Hariharan’s presentation “Political and
economic change in Myanmar” at the Federation of Indian Export Organisation
(FIEO) seminar “Doing Business with Myanmar” at Chennai on March 16, 2013.]
Courtesy: Chennai Centre for China Studies Paper No. 1116 dated 27 March 2013
http://www.c3sindia.org/eastasia/3486
http://www.c3sindia.org/eastasia/3486
No comments:
Post a Comment