INTERNATIONAL CRISIS GROUP - NEW REPORT Myanmar: The Politics of Economic Reform

Jakarta/Brussels, 27 July 2012: Political transition and economic reconstruction are deeply entwined in Myanmar, and the government, the country’s elites and the international community must embrace both for the dramatic reforms underway to succeed. 

Myanmar: The Politics of Economic Reform, the latest report from the International Crisis Group, examines the benefits and challenges of the ambitious program of economic change set in motion by President Thein Sein and his administration. In an effort to create a rapidly growing economy and catch up to its neighbours, the government wants to do away with the restrictions and privileges of the old economic order, which benefited the military, party elite and crony businessmen. 

“If the reforms are done well, many across the country stand to benefit, but those who profited most from the old regime’s restrictions and privileges will lose access to windfall profits and guaranteed monopolies”, says Jim Della-Giacoma, Crisis Group’s South East Asia Project Director. “The crony businessmen, military and party machine will still do well but will need to play by new rules, meet domestic and foreign competition and even pay taxes”. 

Although economic reform will bring significant changes, especially for key pillars of the old regime, there have been few efforts to disrupt the project. Previously privileged businesses understand the advantage of joining a growing and competitive global economy. Instead of pushing back, elites – still hugely advantaged – are attempting to distance themselves from a history of official privilege and participate fully in the new economy. In addition, the recent resignation of Vice President Tin Aung Myint Oo, often regarded as an obstacle to economic restructuring, may aid the reform project. 

President Thein Sein still faces many challenges, however. The government’s limited experience and technical capacity hinder the speed and effectiveness with which sweeping new policies can be implemented. This deficit may be particularly telling when policies require swift adjustment.

Economic reform cannot be achieved without the promise of political stability. Similarly, governance transition cannot be successful without the guarantee of economic growth and equity, including quick-impact measures that produce a tangible effect on the lives of the bulk of the citizenry, such as improved access to electricity, land law reform, better public transport, cheaper telecommunications and lower informal fees of the kind that block access to health and education services. 

With the success of political and economic reforms inextricably linked and the potential benefits in the country’s transformation great, Myanmar’s government, military, business elites and ordinary people alike should welcome and work to adopt them. But international community support remains vital as well, including continuation of the process of removing sanctions imposed against the old regime. It would be highly counterproductive, for example, were the U.S. to retain its ban on imports, as a Senate committee recommended this month. 

“In order for the economic reform process to be successful, the political transition must go smoothly as well”, says Paul Quinn-Judge, Crisis Group’s Acting Asia Program Director. “But there also needs to be the assurance of economic stability to help the government successfully move on from its authoritarian past. Both are crucial for Myanmar’s advancement”.