Sunday, October 5, 2014

Democratic Voice of Burma

Democratic Voice of Burma

Burma’s capital and labour market challenges

Posted: 04 Oct 2014 11:38 PM PDT

Just a little more than a generation ago, many countries in Asia, with the exception of Japan, were associated with endemic poverty, hardline ideological regimes, and state-controlled economies that barely met the needs of the people. The people power uprising in Burma, now Myanmar, in 1988 was quickly crushed by military regimes intolerant of political change as was the movement pushing for democracy which occurred in China's Tiananmen Square in 1989.

Fast forward to 2014, and, with apologies to Bob Dylan, it can definitely be concluded that The Times They Are A-Changin. Or perhaps more appropriately – The Times They Have A-Changed.

“Although the argument can be made that foreign investment creates efficiency in the market due to increased competition, the long-run result may simply be the monopolisation of the market by the foreign investor due to deep financial resources.”

One of the major reasons for this reversal of fortunes has been the opening of markets in this region and the associated massive flow of capital that followed. Financial consultants, business executive and central bankers have come a-calling preaching the gospel of the market economy with pockets full of money for foreign investment that may create business and employment opportunities or exploit a country's resources for the benefit of a few.

For a country like Burma the benefits and cost to these new developments are far from certain. Economics by nature is not a generous science. The best of all world scenarios are usually exceptions to the rule, with a number of trade-offs being the norm. Growth often is accompanied by the negative effect of income equality, inflation and environmental degradation. The adage that economic growth is an essential condition for economic development it is not necessarily sufficient. And there is no guarantee the opening of the market will improve human rights, though proponents at least give lip service to this goal.

Capital Markets

While Burma has become a population destination of choice for foreign investment, investors face both substantial opportunities and threats. Burma's challenge is to ensure the investment benefits the nation. The inflow of capital provides less developed countries with much needed funds for development that cannot be generated in the domestic market due to a lack of savings. Foreign investment, for example, serves to foster the creation of the infrastructure and industrial base deemed necessary for a market economy to develop. This capital can also fund local entrepreneurs willing to take the risk of starting business ventures. As growth begins, the allure of profits and the desire of firms and individuals to improve their economic standing provide the catalyst for even further investment. This puts the country on the development path and, theoretically, these benefits of the market should significantly contribute to economic growth and in the long-run spread to all sectors of the economy.

At the same time, however, forces are at work that may negate some of the investment benefits. Foreign investment, for example, may mainly drive out local producers. Although the argument can be made that foreign investment creates efficiency in the market due to increased competition, the long-run result may simply be the monopolisation of the market by the foreign investor due to deep financial resources. If most of the profits of the foreign investor are repatriated, the positive effects on the domestic market may be negligible and generate fear of exploitation of a country’s resources.

“Cheap labour – the comparative advantage of a nation –turns out to be its worst enemy.”

In addition, the foreign investments, which tend to flow to those areas with the highest expected rate of return, are often not necessarily the types of investment the population at large needs most. The construction of five-star hotels, office space and golf courses receive investment priority and tend to continue even if a glut occurs. Overseas development aid has too often placed emphasis on providing opportunities for companies associated with the aid-provider rather than the recipient with the end result harmful real estate speculative bubbles.

The phenomenon can be found particularly in Burma which has become the new darling of both donors and foreign investors despite significant human right violations against ethnic and religious minorities. Although criticism of this opening up has come from some sources, perhaps the best way of understanding the change in philosophy is to quote British economist Joan Robinson, who postulated that "The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all."

It is also somewhat easier for the leaders in Burma to allow such "exploitation" since much of the present wealth is concentrated in the hands of the ruling military, who despite their claims of promoting democracy and market economics, maintain firm control over the economy. Investors desiring to enter the market in Burma realise they have to deal with these people; the pursuit of profits is rarely hindered by moral concerns.

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International organisations such as the World Bank and the International Finance Corporation, for example, still subscribe to the belief that increasing profits of the private sector (and mainly the high income sector) will in the long run benefit the poor. This is just a version of the controversial and frequently discredited trickle-down economic policy of free-market economists. Yes, the benefits may trickle down, but often the amount is a drop of water to the poor for every bucket of water given to the rich. Yes, the luxury hotel will have to hire staff which one can argue benefits the lower income groups.

Granted, over the long run, the growth of the country’s economy may have positive effects for the nation as a whole, while the poor (mostly rural sector) may see marginal improvement in their standard of living. However, quite often their relative position declines as prices rise and environment degradation of these areas occurs due to an attitude of "develop at all costs".

Labour Markets

The opening of the Burmese economy will no doubt benefit the labour market. The market economy will provide the incentive for workers to improve their productive capacity in order to receive higher wages. Higher wages, or the ability to purchase more goods, should in turn foster business and job creation – a.k.a. economic growth. And observing the economy standing of most workers in newly developed economies makes it hard to dispute the advantages of the market economy.

However, in many less developed countries, Burma as a good example, the influx of foreign firms also serves to exploit the excess supply of unskilled workers. These firms, relying on the low-cost worker for labour-intensive production, have no incentive to teach these workers more than the rudimentary skills necessary to work on a crude production line. This translates into a long-run situation where the productive ability of the workers does not improve, thus placing the country in a low wage equilibrium trap. Cheap labour – the comparative advantage of a nation –turns out to be its worst enemy.

The benefits of opening the economy of Burma will depend on the extent to which market failures are recognized. Addressing the many issues that come up will take time and investors, international agencies, and the Burmese government must be cognisant of the often opposing factors which are unleashed. Politico-economic skills must be fully harnessed to avoid instability, disruption, and a return to the violent past. It would be naive in the extreme to assume that historically massive capital inflows and changing labour markets will not create a mixed bag of cost and benefits. The challenge of Burma is to create a framework which benefits the economy and society.

 
Dr. Dennis C. McCornac teaches economics at Loyola University Maryland USA specializing in economic development and the economies or East Asia.

Dr. Anne Cullen is an Associate Dean at the American University in the Emirates with a specialty in Asian Politics.

dcmccornac@loyola.edu, http://www.loyola.edu/sellinger

 The views expressed in this article are the authors' and do not reflect DVB editorial opinion.

‘Burma will become a responsible timber-trading country’

Posted: 04 Oct 2014 09:35 PM PDT

A workshop on exporting Burmese timber and other forest products to Western countries was held on 30 September at the Myanmar Timber Merchants Association office. The workshop was attended by timber merchant organisations from Britain, Denmark, USA, Australia and the Netherlands, as well as officials from Burma's Forestry Department and related NGOs.

During the workshop, a joint working group was created, in part to ensure that forest products are exported in accordance with local and international law.

DVB's Aye Nai interviewed Bar Bar Cho, joint secretary of the Myanmar Timber Merchants Association, about the workshop and how Burma's new logging export ban will affects industry.

Q: What was the outcome of the meeting between the EU delegation and the Myanmar Timber Merchants Association on 1 October?

A: Actually, we met with three groups on 1 October: the EU delegation; an American group called the International Wood Product Association (IWAP); and the Australian Timber Importers Federation. They all wanted to learn about Burma's forest product supply chain in a step-by-step manner. They also wanted to know about our standards and how our industry works. We all talked about how to cooperate in order to reach the higher standards of developing countries. We invited the foreign groups in order to establish a market for our products, learn how to enhance the value of our products, and give Burmese industry players a chance to express their ideas.

Q: What does the EU want to import? Do they want to invest in logging, timber or processed wood?

A: As you know, the export of logs has been prohibited. However, foreign buyers don't mind whether they import timber or processed wood. According to many countries' laws, imported forest products must be harvested in accordance with certain laws and standards. This is their main challenge, as they can only import forestry goods if there is a guarantee that the wood comes from forests that are "legal". If no such guarantee exists, foreign buyers are in danger of breaking the laws of their own countries. This is why the foreigners came to meet with us, as they don't want to break their own laws when importing Burmese forest products. It's not their intention to establish wood processing operations or make other investments in Burma."

Q: Do you expect that Burma’s timber or furniture businesses will benefit from the meeting?

A: For both furniture and wood, the main issue is whether the market is willing to accept the products. In some cases, even if there is market demand in a particular country there may be legal or political factors which limit our ability to trade with that country. Accordingly, our meeting was designed to find ways to implement responsible trade practices that would be acceptable to NGOs and foreign governments. We didn’t necessarily focus on the quality of the product itself.

Q: Could you say this meeting marks the initial opening of Burma's timber industry after the EU and US relaxed their human rights-related sanctions against Burma? 

A: Actually, the EU and US sanctions were lifted at different times. We have already been engaged with the EU for a period of time because the Europeans relaxed their sanctions earlier. But we've told the buyers that it's inconvenient if they all come separately, as we have to keep answering the same questions when the Americans come, the Australians come, etc. So we organized this event in order to talk with everyone together and make sure we're all on the same page. Many customers were invited to the meeting, and on our side we invited the relevant government departments.

Q: Could you talk about the outcome of the meeting and your hopes for the future of the industry?

A: I want people from other countries to remember this meeting and I want to see the industry develop. The participants said there should be a timeframe, so a proposal was put forward to form a working group or a task force. Since the participants agreed on this point we have formed a working group with representatives from the Myanmar Timber Merchant Association, NGOs and the government. The working group will be in touch with buyers and consider how our side should proceed and what the buyers can provide. We will also discuss what kind of technical support and capacity building they can give us, and the buyers will tell us more about these issues after returning home. The foreign attendees also told us to provide our time framework, and we agreed to work on this. Anyway, I think this meeting marks the beginning of Burma's history as a responsible timber-trading country.

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Will Burma’s Reforms Sideline Suu Kyi’s Political Influence?

Posted: 04 Oct 2014 07:56 PM PDT

Burma's military rulers have wised up since 1990. After Aung San Suu Kyi was elected in a landslide victory the military rulers quickly discovered that Democracy threatened control over their self-interests. They promptly placed Suu Kyi under house arrest and returned to their business as usual. Prior to Suu Kyi's release in 2010 Burma's dictatorship announced its new Constitution.

The recent “reforms” rolled out in 2012 by a former general, President Thein Sien, was touted as amazing progress by governments, institutions and people across the globe itching to get their hands on a piece of Burma's vast resources and access to its low wage manufacturing workforce.

In the early days of reforms even U.S. President Barack Obama took his entourage to Burma gleefully visiting Suu Kyi and President Thein Sein. Burma is slowly and chaotically adapting to the economic newness of, well, everything. Though due to a countless number of reasons, Burma has a long way to go before rising just slightly on the list of least developed nations. For example the Burmese military leaders' recent admission of using child soldiers led them to "pledge" an end to the practice in a few months time rather than immediately. Read – not really.

Since Suu Kyi and President Thein Sien made worldwide diplomatic tours, received awards and showers of praise, the world's exuberance over reforms has quieted. Burma's leaders had their promised time as the ASEAN Chair in exchange for reforms. They are now looking at the 2015 national elections with a sentimental eye on the past and one worried eye on the future.

With real estate values blown off the charts, pre-reform-like stifling of political critics, arrests of land rights activists and journalists now occur more frequently. According to the Assistance Association for Political Prisoners not all political prisoners have been released from prison as promised by President Thein Sein. Government rule is softly moving into a nebulous conditional domain described by key government officials and military leaders as a "Disciplined Democracy."

Pre-empting Suu Kyi's release, a new constitutional law was written by Burma's rulers to prohibit her from running for President. The massive crowds she raised at campaign events leading up to recent by-elections, they said, reminded them of the famous 1988 uprisings. More to the point, such large crowds supporting Aung San Suu Kyi scare the hell out of the military leaders. They have no way to counter the support for the one person in Burma capable of effectively opposing them for years on end simply by remaining in her own home.

If she is also prevented from campaigning outside her home district prior to the 2015 elections, Suu Kyi's affect on Burma's people will be severely limited.

If Suu Kyi obeys the prohibitive law, its legitimacy will be enforced. If she runs a national campaign, she will break the law created to prevent her from refreshing support for her and other NLD candidates. Either way, the government's response to Suu Kyi's actions will reinforce the "disciplined democracy" approach desired by Burma's current leaders.

Preventing Suu Kyi from campaigning for the NLD sets her on the margins of authority. Politically, she may as well be under house arrest. With Suu Kyi nudged out of the top political sphere, her influence on national and regional issues may equally vanish. As Suu Kyi ages and with no national leader remotely as popular in opposition to the military rulers, the NLD may be in danger of permanent collapse.

Suu Kyi, NLD followers and like-minded supporters recently made brisk progress, using basic principles of democratic freedom, by gathering millions of signatures to petition the government to amend the law barring her from the Presidency. The law disqualifies Suu Kyi because her adult children are not holders of Burmese passports.

Will Burma's current rulers listen to Burma's citizens? Or, will they listen to the Chinese investors, IMF, and other foreign investors currently planning to convert greater Rangoon and Mandalay into enormous enterprise zones?

Mainland South East Asia, with over 300 million people nestled between three of the world's most populous nations, India, China and Indonesia, is preparing for unprecedented change. Rangoon and Mandalay are merely puzzle pieces to mainland ASEAN's planned regional development. Overland trading by road and rail connecting India and China with Vietnam, Lao PDR, Cambodia, Thailand, Malaysia, Singapore and Burma are underway. Currently not one mainland ASEAN nation has a democratically elected government and only Burma possesses a formidable opposition leader.

Foreign leaders and dignitaries have no option but to deal with the current and retired military leaders in Napyidaw no matter how much they admire Aung San Suu Kyi. Recently, US Secretary of State John Kerry visited Burma's leaders to discuss the approaching national elections and to meet with gathering ASEAN leaders. Some observers unfairly rebuked Kerry for using a hotel owned by a military dictatorship crony, still sanctioned under US policy.

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None can visit Burma now, or could have in the past, without their cash going to the government and its cronies. One could optimistically argue that Kerry can sleep anywhere in Burma if he helps create an opening that allows Suu Kyi's candidacy for President.

More importantly than where Mr. Kerry slept, the United States is a consistent supporter of Suu Kyi and the Burmese people's quest for democracy. Mr. Kerry didn't fail to mention that, lest anyone forget it, now that Burma is awakening to the world beyond its borders. A more prophetic part of Kerry's trip was that he nearly missed a meeting with Suu Kyi at her home in Rangoon. An excellent question was quickly raised by Irrawaddy journalist Kyaw Zwa Moe in an article titled, "Has the United States Forgotten Suu Kyi?"

He noted: "In the past, when Suu Kyi said something, world leaders listened. Their policy reflected well on her words. But now, the situation is different. These days, Washington and other Western governments seem to need Thein Sein more, while Suu Kyi is becoming a mere symbol for the international community. Foreign diplomats aren't missing meetings with the Nobel Peace Prize laureate, but their meetings are more and more appearing as courtesy calls."

The reality is that while Suu Kyi remains the most influential opposition leader to the current government, she is not the leader of the government. Neither is Suu Kyi just a symbolic figure. Mr. Kerry's trip correctly reflected that.

In the past Suu Kyi's public approval to the lifting of US-led sanctions was all but a requirement. If Suu Kyi is unable to run for President in 2015 one must wonder if the politician Aung San Suu Kyi will remain equally relevant. With such high stakes looming for economic engagement with fast developing ASEAN nations it seems less likely she will.

A utopic vision for the future of a democratic Burma is nice but the realities on the ground reflect a startlingly complex story. Millions of Burmese people simply survive day to day. Sadly, there are no easy answers for the myriad troubling issues in Burma. If Aung San Suu Kyi does become President, expectations for her will be set incredibly beyond her reach.

If barred from a run at president, Suu Kyi's wildcard option is to boycott the elections. Doing so could lead to disastrous and violent civil unrest if mass protests occur. Burma's military leaders have historically proven they're very willing to massacre and imprison their own citizens. Yet, a boycott could prove meaningless without a government reaction or crackdown on mass demonstrations. To avoid a repeat of past violent reaction by Burma's military, at some point one must ask the question, is something, such as the current pace of reforms, better than nothing?

The time could be approaching for Aung San Suu Kyi to declare victory in that any kind of progress in Burma is forward progress. However, some leaders in Naypyidaw are unwisely regressing into pre-reform political rule while allowing economic development. This innate behavior by Burma's military, may unfortunately force mass demonstrations should Suu Kyi boycott the elections.

To that end, thousands of ex-political prisoners have no fear of recriminations for their political activism. It should be clear to Burma's current rulers that no one wants a repeat of the past. Is the military willing to allow more civilian governance by relaxing their grip on the throat of its citizens?

Until the current rulers stop imprisoning journalists, land rights activists and protestors while ignoring the near-genocidal treatment of the Royhinga people in Arakan State, as well as other ethnic people on the border regions of Burma, it's doubtful that Suu Kyi will just give in and consign her supporters to sweat shops and shopping malls. Burma needs solutions to solve issues of basic human rights, to end the misery and suffering of the poor, the uneducated, the hungry, the homeless, and to set free its child soldiers.

 

Daniel Opacki is an educator who occasionally writes about Burma. He is currently writing a collection of stories about Burma and can be reached through his blog Bamboodazed.com

 

The comments and opinions expressed in this article are the author's and do not reflect DVB editorial policy.
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