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#3580, 27 February 2012
Myanmar and the West: Economics of Politics
Medha Chaturvedi
Research Officer, IPCS
email: medha@ipcs.org

After decades of isolation, Myanmar is again on the international radar. A series of high-level interactions with Western dignitaries including the US Secretary of State and the British Foreign Minister are indicative of this. While democracy in Myanmar is still in an embryonic stage, the international community seems to have opened its arms to the government of Myanmar. With the US indicating a withdrawal of economic sanctions against Myanmar in the near future, the biggest questions that come to mind are: Why now, and what next?

Why now?
Myanmar’s efforts at democracy are now gaining legitimacy internationally, primarily because of Western economic interests. Myanmar is a resource-rich country and the West’s loss since the sanctions has been China, Thailand and India’s gain. Since the 1990s the Western world’s economic engagement with Myanmar has been limited to humanitarian aid. Despite Myanmar’s abundant natural resources and resulting economic and investment opportunities, economic sanctions meant the West could not take advantage of it.  Now, with a democratically elected civilian government led by President U Thein Sein having assumed office, the international community is rushing to this potential goldmine of investment opportunities.

Post the global financial meltdown, financial bailouts, fiscal austerity measures and freezing salaries have become an accepted norm for the Western world, especially EU countries. With declining employment rates and increasing national debts, Myanmar could come as a blessing in disguise in terms of investment opportunities. Myanmar is endowed with natural resources, but lacks the technology to capitalize and process this strength. The West is now indicating its willingness to provide Myanmar with the technical know-how in return for cooperation.

In recent months, Myanmar has gone for many reforms including in the banking sector, liberalization of economic and financial activities, the operation of trade unions, eased media and censorship laws, reconstitution of the National Human Rights Commission and greater internet access. These reforms indicate an inclusive approach in the path to progress. These developments can also be seen as confidence-building measures which increase the country’s legitimacy on the international front. Personal banking is coming up in a big way in Myanmar and as a result, many international banks are already setting up branches.

Access to the Bay of Bengal is another important aspect of this renewed interest. If the Chinese infrastructure projects continue to grow at their current pace in Myanmar, China gaining a viable corridor to the Bay of Bengal and the Indian Ocean and bypassing the Malacca Straits is a very plausible scenario which is worrisome for the rest of the world. Myanmar is however is showing subtle signs of moving away from the preponderant Chinese influence. The suspension of (the Chinese-funded and built) dam on Myitsone River is indicative of this as is Myanmar’s willingness to also cooperate with countries other than China.  

The West’s poster girl for Myanmar’s pro-democracy movement for over two decades, Daw Aung Saan Suu Kyi, has also been a factor for this change in the attitude of the international community. Post her release from an extended house arrest sentence in January 2011, and after President Sein’s talks with her, the constitution was amended to allow her to contest the upcoming by-elections. This gesture by the Myanmarese government has gone a long way in addressing the West’s concerns. President Sein seems to have understood that Suu Kyi is the key to court Western investments and has therefore undertaken every measure to accommodate the pro-democracy leader. The gradual release of political prisoners also served this end.

What next?
Myanmar’s efforts at improving its image internationally are gaining ground with many regional groupings and organizations granting it legitimacy and acceptance. Its election to the ASEAN chair for 2014 has brought a promise for greater engagement with member countries and the US. The GMS initiative also held its summit in Myanmar in December 2011 which contributed to expanding its trade relations with member countries. This is evident with the upward swing in Myanmar’s overall economic situation with its currency, the Kyat, becoming 25 per cent stronger due to capital inflows since the beginning of 2010. The possibility of President Sein’s government reaching peace agreements with the ethnic armed groups has also generated a fair amount of confidence in international investors towards securing and safeguarding investments.  

Myanmar’s head of the newly inducted economic advisory board, U Myint, recently said, “Myanmar is a rich country with poor people.” So far, neither the West nor Myanmar has gained anything fruitful from not engaging. In fact, the West’s treatment has only pushed Myanmar closer to China over the last two decades. This has been problematic given China’s rise being viewed as a menacing phenomenon. Now, with Myanmar opening up to economic liberalization and privatization, Western attempts can be viewed as a form of neo-liberalism. While there is no denying that politics and economics in the contemporary sense are inseparable, the long-term ramifications of this shift are profound.

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