Zin Linn, Jun 01, 2012
President Thein Sein of Burma (Myanmar) delivered a speech on 11 May 2012 concerning his plan for national development in Burma, at a work coordination meeting in Naypyitaw. He claimed that the first stage of reform to fulfill nation-wide development was already established. At this stage, a visible change of foreign exchange rate unification was being made with assistance from international financial institutions the IMF, the World Bank and the ADB.
Burma began reforming its monetary system on 1 April 2012. Burma created a managed floating rate for its national currency, the Kyat, in order to unify the multiple exchange rates in time for the Southeast Asian games which it will host in 2013.
A new foreign investment law was passed that offers a straight five-year tax exemption, with an extension of three years if certain measures are met. The law also specifies terms of using land, legal structures and incentives for foreign companies. This law was enacted in order to gain foreign direct investment (FDI) which had been limited due to previous international economic sanctions.
International governments, crediting Burma for successfully holding by-elections on 1 April, have suspended most sanctions. Without appropriate laws the Thein Sein-led government has made floating the currency and a new foreign investment law priority for attracting more investment.
These two steps begin to address the difficulties of conducting business in Burma. But major problems still exist, including: no electronic banking system, no up-to-date Internet connectivity, no 24-hour electricity supply and no intellectual property rights.
It is crucial that both domestic and foreign companies are treated fairly under clearly defined rules to protect intellectual property rights. Without intellectual property rights the prospects of the country’s high-tech industry may disappear. The Government needs to create a level playing field for both domestic and foreign companies in all areas of the economy, including manufacturing and services.
Currently all economic transactions are controlled by the military, their cronies and drug-lords. The Burmese military set up two military-managed economic enterprises, the Union of Myanmar Economic Holding Limited (UMEHL) in 1990 and the Myanmar Economic Corporation (MEC) in 1993. Both privileged enterprises are still exploiting the country’s key economic sectors with no benefits flowing to the citizens of Burma.
In brief, the country’s important natural resources and heavy industries including import, export and service sectors are monopolized by the UMEHL, MEC and their cronies. There is no level playing field in the economy and business in Burma. It is an open secret that military-managed business firms and crony enterprises are corrupted in various ways including tax evasions. The nation’s precious natural resources have been exploited by such corrupt authorities and the vast majority of citizens have been living in dire poverty for decades.
Despite much talk about needed economic reforms, President Thein Sein has never spoken of the corruption and unprofessional conduct of UMEHL and MEC. The most important point that President Thein Sein has ignored is this existence of officially embedded corruption and how to take action on this corruption and tax evasions committed by the respective authorities.
The second stage of reform strategy, including general guidelines, is useful to perform as economic reform principles. President Thein Sein seeks financial aid and support from the international community and direct foreign investments as national development tasks require more finances, capital, technology and human resources than the State funds has.
The Central Committee, the work committee, state, and regional governments will be responsible for successfully using the international financial aid and support in poverty reduction and broad development tasks as determined by the regions and the states for region-wise and sector-wise development.
In this second stage of the national development plan, Thein Sein calls for private sector involvement. Associations, companies, public companies, cooperative societies and foundations are the main forces engaged in the development of socioeconomic status of the people. As many nations and corporations have offered to provide assistance and investment in Burma, the ministries and region/state governments should draw strategies and tactics based on national and regional development project priorities for ministry-wise and job-wise reforms covering such sectors as agriculture, industry, education, and health.
President Thein Sein claimed a planning commission was needed in order to effectively manage a region-wise plan, sector-wise plan, project-wise plan, township-wise plan, and village-wise plan. Accordingly, the purpose of the President’s “work coordination meeting” is to make way for foreign grants and aids so as to bring about the national and regional development tasks.
Thein Sein’s speech and plan are clearly a “Foreign Aid Effective Management Meeting” to seek foreign grants and aids. The benefits of this development project will be delivered to the majority of citizens are not clear.
The unification of the official with the managed exchange rate is a fundamental change. But a large part of the population remains desperately poor, without a social safety net to help them survive further policy-induce economic shocks.
The government is going to establish a “Central Executive Committee for Foreign Aids Management” and sub-management committees correspondingly under it to manage foreign grants and aids directly. To supervise financial assistance from the private donors to various civil societies, the government is going to form a “Socioeconomic Consultant Committee”.
All foreign aids and grants have to go through those state-controlled management committees under the mechanism of memorandum of understanding (MoU) and similar agreements. Community-based organizations (CBOs) and civil societies known as non-government organizations (NGOs) have to register in order to be under government management.
To obtain relevant foreign aids and grants, the respective state and region chief ministers have to take the leading role in making the process of related proposals by the end of this May. It is impossible to draft effective large development projects within a 3-week period.
The urgency of immediate project proposal-making seems to be driven the donors’ meeting that will be held end of May 2012 in which the government is going to take the “Driver’s Seat”.
The government’s intention is that the budgets for ‘Rural Development’, ‘Poverty Alleviation’, ‘Public Education’, ‘Public Health’, ‘Socio-economic Wellbeing and Natural Disaster Prevention’ will be disbursed by means of foreign grants and aids while most of national incomes will keep going into the defense budget.
The government plans to create national development through international financial assistance with no planning of national development via its export-incomes. Crucially the public sector (health, education, sanitation, clean water, electricity etc) has never benefited from the country’s natural gas export earnings, a whooping US$2.947 billion in the first 11 months of the fiscal year 2011-12, up about US$424.77 from US$2.522 billion in 2010-11.
Natural gas export earning stood at US$2.926 billion in 2009-10, up from US$2.384 in 2008-09, reported the Flower News Journal. It is vital that these natural gas export net earnings are transferred to the budget and used for social and infrastructure development, especially in ethnic minority regions.
The Thein Sein government also plans to spend foreign loans to implement some development programs which do not attract foreign development aid.
The Asian Development Bank is ready to offer Burma assistance, but financial aid can only resume when $490 million loan is repaid. The government ignores repayment of these old loans, instead it seeks new loans. This illustrates the difficulty of investing in Burma. There is no accountability or commitment to transparent commercial transactions. It is not only morally wrong to evade debts from international financial institutions, but commercially risky for investors.
According to the current budget the government will provide 7% and the private sector 93% of the GDP in the national development financial plan. The government’s share is miniscule. The per capita income is less than US$1,000. With such a small government contribution of GDP, per capita income will reach US$1,500 in the next 5 years. This makes only 1 ½ times ratio. President Thein Sein wants 3 times ratio to raise the per capita income. To acquire 3 times of ratio in per capita income, the government needs to receive 3 ½ times FDI, 20 times foreign grants, aids, and loans.
According to these figures, the President’s 11-May speech delivered at a work coordination meeting in Naypyitaw shows a definite target of gaining international financial assistance immediately.
Foreign aid given to Burma in comparison with regional countries was included in the appendix of his speech. Laos and Cambodia receive US$4 to 5 hundred millions and Vietnam enjoys US$2.4 to 3 billion financial assistance. Burma receives US$ 6 million in loans and US$18,000 for humanitarian assistance. In such a situation, it will be difficult to gain US$3,000 per capita income, possibly less than US$2,000.
If and when this government obtains foreign loans and economic assistance, will citizens receive US$3,000 per capita income if the defense budget remains well above 25 per cent of the national income.
International development aid and foreign investment in Burma will not address the severe poverty of citizens in Burma especially in the ethnic minority states and divisions who are barely surviving after decades of civil war. There are no land rights for farmers who continue to be arbitrarily removed from their land as government, local and international businesses increase their commercial ventures.
The vast profits from extraction of natural gas and oil have gone directly into the pockets of a few generals and their families. This national resource wealth does not even appear in the budget. The military still receives the major per cent of the national budget, much larger than for health, education, and welfare.
Burma tied with Afghanistan as the most corrupt nation in the world according to Transparency International’s latest report. With no official recognition of the well embedded official corrupt practices and networks in Burma, there can be no means to address the issue. The citizens of Burma are very poor, not because the country has no resources, but because the country’s leaders, including the new semi-elected government refuse to acknowledge the extent of corruption and wealth amassed by the military leaders and their cronies formed business associates.
The president speaks of improving the health and welfare of the citizens of Burma. His plan is to create a series of committees in order to manage the foreign wealth entering Burma. Projects for each state and division are to be submitted by the end of May. This makes a mockery of a true development process by the citizens and for the benefit of the citizens. It is most likely that as international development aid and foreign investment flows into Burma, the same military affiliated businesses and crony associates will be the biggest benefactors, not the citizens who are barely visible to the government.
Posts
No comments:
Post a Comment