Business as Usual
covering burma and southeast asia
Thursday, May 30, 2024


Business as Usual



Real economic change in post-election Burma is about as likely as a herd of white elephants, say experts

Burma’s current military rulers will continue to run the economy for their own benefit even after the country comes under a more civilian form of government following this year’s election in November.

A child plays while his parents take a nap beside their roadside vegetable stall in Rangoon.
That’s the conclusion of a number of economists and financial policy experts who have been monitoring Burma in the lead up to the election. They foresee little real change that would benefit ordinary people.

Although the current financial year will show improvements, these will be “driven mainly by investment in projects in the energy and petroleum industries, particularly by Chinese firms,” concludes the latest assessment of Burma by the Economist Intelligence Unit (EIU).

“Excluding these sectors, however, the domestic economy will remain sluggish,” according to the EIU report. “The government’s revenue base remains small, and it will continue to spend heavily on large projects that benefit the military regime.”

The EIU report, published in August, reaches similar conclusions to other economists and researchers who have been analyzing Burma in the months leading up to the election.

A recent study by the United States Institute for Peace (USIP), a Washington-based think tank funded by the US Congress, said that natural gas exports to Thailand continue to be the main source of income for Burma’s economy, yet “the junta has devised ingenious mechanisms to siphon these funds but has spent relatively little on improving the quality of life for most Burmese.”

“Using a system of multiple exchange rates, the junta deprives the government coffers of hundreds of millions of dollars each year,” said the USIP report. “Unsurprisingly, the resultant large fiscal deficits have been financed by printing money, which has led to persistently high inflation.”

The most somber assessment of all, by Australian economist Sean Turnell, suggests that in spite of growing gas exports, the standard of living in Burma is actually declining.

“Increasing net exports account for just over half of average GDP over the last five years,” said Turnell, an economics professor at Macquarie University in Sydney.

“Remove net exports from the equation and the domestic economy has been growing at a rate that falls short of that of population growth, implying that per capita GDP in Burma has been declining in recent years,” said Turnell. “At around US $435 per capita, GDP in Burma ranks amongst the lowest in the world and by some margin the lowest in Southeast Asia.”

Revenue from gas exports has peaked for the short term and will not expand further until 2013, when gas from the Shwe offshore field in the Bay of Bengal is expected to begin flowing to China.

With agriculture still accounting for nearly half of the country’s GDP, it was ripe for development using revenue from the gas, but the junta has starved the sector of funding, analysts agree.

“Burma has the potential to be Asia’s premier rice bowl once again, but only if rice production is modernized, marketing is liberalized, land tenure issues are resolved and agricultural credit constraints are eased,” said the USIP study, written by Raymond Gilpin, a USIP associate vice president, and Lex Rieffel of the Brookings Institution, also based in Washington.

Instead, rural financial arrangements “are in greater disarray than is the financial sector more broadly,” said Turnell in his report, “Burma’s Macro-economy at the Cusp of the 2010 Elections.”

“Formal credit is almost impossible to obtain by all but the largest and most connected cultivators, and usually only the subsidiaries of prominent conglomerates, meaning that small-scale moneylenders are the sole recourse of most.

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