Culture: Political Science: Misunderstood Myanmar:

 

Chapter V: The Milieu Exterieur

 

By Koh Kim Seng, Ph.D.

International Business Executive, Political Scientist

Singapore

 

Editor’s Note: This paper is one of a series of chapters excerpted from Dr. Koh’s book, ‘Misunderstood Myanmar: An Introspective Study of a Southeast Asian State in Transition’. With years of experience operating a business in Myanmar (Burma), Dr. Koh has first-hand knowledge and a deeply practical understanding of the economic and administrative opportunities and challenges currently existing in the country. This segment explains Myanmar’s internal affairs scenario. -JP

 

On the Other Side of the Free World

“Business environment in Burma is not as remote and isolated as the outside world may think” - anyone hearing this comment by a local Myanma entrepreneur easily gets the impression that truly, Myanmar is misunderstood.1  The “world” he is referring to, I could speculate initially, is composed of foreign investors wanting to put up their respective businesses in Myanmar but would rather think that the country is not conducive to business development.  This Myanma entrepreneur is no SLORC/SPDC apologist and he wrote this in his unpublished critical paper2 on Myanmar’s economic situation as an intern of Focus of the Global South, a progressive movement led by Right Livelihood awardee (also known as “the Alternative Nobel Prize”), Dr. Walden Bello.  He wrote this naming the Developed North / Western countries as the “outside world,” which once penetrated mainstream Myanmar and then pulled back, subsequently issuing sanctions against Myanmar.

 

Framed as an honest assessment so as not to be dismissed as placing things out of context, the critical paper went on to discuss the disadvantages of political meddling in local businesses and industries.  In any event, this sort of comment supports the argument that Myanmar is under intense disproportionate criticism and by way of these overarching doctrinal pretexts, the isolation of Myanmar in my assessment is two-fold - from the inside and out.  The latter, the one originating from the outside, is happening for one basic and simple reason, Myanmar is rightly or wrongly perceived as being the obverse side of the rest of the “Free World” coin. 

 

Lt. Gen. Kyaw Ba,3 in our conversations back in 2001, by which time sanctions were already in place, referred to Myanmar as a nation already developing, “progressing rather than retrogressing.”  The infrastructures are being put in place, the economy is gaining, “slowly but gaining.”  In 2006, ADB Asian Development Outlook4 noted the high export output of natural gas of Myanmar.  Likewise, in its own assessment and without delving much into details, the SPDC released a publication entitled “Chronicle of National Development Comparison Between Period Preceding 1988 and After”5 (or until 2005) stating among others, that in key areas such as agriculture and forestry, electric power, mining and mineral sectors, in urban and especially rural areas, health, and education the country has made tremendous progress.

 

Having visited Myanmar many times over a 20 year-span, I can attest to the physical changes that have taken place.  My view is that qualitatively the claims are correct though quantitatively it is difficult to verify.  Thus the allegation from the milieu exterieur that developments in Myanmar are “cosmetic” might present some problem in justification.  Myanmar has achieved remarkable growth and development, since 1988, despite the “distractions” like trade and other sanctions imposed on it by the United States.

 

On the Doctrine of Isolation

It is imperative at this point to trace the roots of this overarching doctrinal pretext on Myanmar, which is widely stated by some scholars as Myanmar having been caught in a “time warp.”  On this issue, another former minister who held a key position in the SLORC Ministry of Finance and Planning so generously offered his views to this discussion on Myanmar’s pitfalls and vicissitudes.  In honour of his well-acclaimed local as well as international position as a Myanma, I shall refer to him in this section as “U,” an honourific equivalent to an “uncle” of sorts.  U held the view that “the Government before the dawn of 1988 was watered down: agriculture and industry were dilapidated for various reasons including that of historical legacy; foreign debt commitments could not - in all honesty - be met in time; to stall debt servicing, Government was advised to apply for an LDC status; inflation was skyrocketing and the Consumer Price Index (“CPI”) was simply going through the roof.”  These factors when summed up, according to U, posed a danger of total “conflagration”6 (as I term it), a culminating event and a causative factor in Gen. Ne Win’s decision to call it a day, judiciously, and hand over power to a new team in the “broader interests” of the nation.

 

Practically, Senior Gen. Saw Maung, Gen. Ne Win’s successor, under the style of the SLORC, was preoccupied with endeavors “to pick up the pieces” - being the ratio for the banner aim, namely, “to restore law and order.”  This perforce included renovating the decrepit economy, and plumbing for a more modern and democratic governmental system.

 

According to U, with the advent of the SLORC Government, the politically authoritarian or autocratic regime and the long-held dirigisme of centrally planned and controlled economic system were converted to a free market economy.  The deeply ingrained system of practically the whole economy being run by the public sector was opened up to the private sector.  Simultaneously, foreign direct investments were invited with various incentives offered including that of tax holidays, repatriation of profits, and full ownership of companies by foreign investors with a guarantee that no nationalization of assets would be undertaken, the last of which, i.e., nationalization of assets, had been carried out previously under Newinism.

             

Economic restructuring in Myanmar necessarily took the form of provision of the necessary infrastructure as the first step such as the expansion of the road and rail systems, enhancement of communications and postal system, setting up of industrial zones or estates, establishment of private banks and allowing for the establishment of foreign bank representative offices, enhancing heavy and light industrial development, and tapping of natural resources such as oil and gas, forestry exploitation, development of the tourism, fisheries, gemstones industries, etc., through totally foreign owned operations and/or on a joint-venture basis, utilizing production co-sharing or build, operate and transfer (BOT) mechanisms.

 

Over time, economic activities, particularly trade, were found to be stifled by the problem of locals not being allowed to handle foreign currency.  This was overcome by introducing an intermediate step following in the footsteps of China, i.e., the Foreign Exchange Certificate (FEC) which ranks pari passu with the US dollar.  Meanwhile, on the social welfare front, the government oversaw the development of hospitals, clinics, and housing7, the promotion of primary and tertiary health care, and the expansion of educational facilities such as schools, universities, technical colleges, and so forth. 

 

Concomitant with the move to enhance the economic system promoting growth, employment and stability, the political structure was also reviewed in the direction of a democratic system with changes made to the social welfare infrastructure, in support.  It was at this point that  I ignited a discussion with U on the 1990 Multiparty Constituent Assembly General Election (MCAGE), reminding him that there was the perception that the world after 1988 was looking closely at developments in Myanmar and anticipating a switch from years of political autocracy and autarkic economy to one of democracy and laissez faire economics. 

 

U intimated to me in response that the SLORC Government in 1990, after the initial return of law and order and a partial renovation of the political and economic systems, decided to hold a MCAGE, and analyzed in retrospect that perhaps given more experience it would not have been done “post haste.”  Unfortunately, after some 26 years of cloistering, the exercise proved to be imprudent and premature.  He added: “The enormity of the problem at hand, in having to satisfy the many disenfranchised, disillusioned, disgruntled and dispossessed Myanmas at home and, more potently, the Myanma Diaspora acting together with the “milieu exterieur” in the far flung corners of the world, was grossly underestimated.”

 

In retrospect and introspect, U and my other key respondents were certainly aware that the SLORC Government was “overly ambitious and inexperienced,” in their words, and were not fully apprised of the complexities, implications and ground conditions to have attempted to meet local and international expectations of a change from a military-run autocracy practising autarky for in excess of a quarter of a century, to a change to a modern liberal democratic system with free market economy - all within a space of three years.  As a result, the very much criticized refusal to “hand-over” power to the NLD could very well be, according to U: “the ghost of this gross mistake and inexperience.”   “And, to compound the problem,” he added, “soon enough within the space of some eight years, economic sanctions led by the US were imposed on Myanmar.”

 

I then asked him this simple question: “What do you think led to the imposition of sanctions?”  I was taken aback somewhat by the quick retort of U: “For a quarter of a century, we were, to the outside world, ‘asleep,’ then there followed the big upheaval in 1988 and suddenly we hit the world headlines.”  According to him, it seems that foreign nations, particularly the First World ones, were seriously concerned with their existence, as Myanmar “woke up.”  I enquired about his thoughts on the direct implications of such international perceptions, and he replied that “Initially, the foreign powers took a wait-and-see attitude and were not ‘belligerent’ towards us.  However, within few years, we were brought into deep focus by our own ‘high-profile’ activities – exploitation of the energy, forestry, agricultural industries taken up by foreign multinationals, overly rapid development of the tourism industry culminating in the ‘Visit Myanmar Year’ (1996), trade expositions of international standard, and so forth.”  As his final thoughts on this matter, U noted: “Thus as we ‘woke up,’ our detractors also ‘woke up.’  Perhaps, thinking back, we should not have been too loud and of course there are many other geo-political considerations which are profounder, but in a nutshell, we invoked the antagonism unexpectedly, unconsciously and unwittingly.”

 

Notwithstanding the subsequent economic sanctions, over the period commencing 1988, the Government had already substantially reined in the tangential forces of the secessionists, insurgents and minorities by signing peace treaties, suppressing the narco-economy through a combination of attrition and alternative economic activities, by which time the Government became “accepted” internationally8.  

 

Until the most recent years, the main income of Myanmar still comes from oil and gas, rice, pulses (beans particularly), gemstones and forest products (mainly the teak export industry).  Seen in the light of the above, there can be little doubt that the Military Government is trying to play the “catch up” game with other ASEAN member states.  However, progress is thwarted by its own past traumatic experience, its lack of exposure to actual modern models of Third World development - not that some of the Generals are ignorant of modernization and development theories but that because of the traditional and cultural value of always deferring to seniors and elders, speaking up by specialist members and technocrats of the Government is frowned upon.  The result is that “technocrats” feel constrained and are unable to prevail.  U was of the view that, when added to this the long term impact of Myanmar’s overly anxious move under the state of “unpreparedness” to keep up with (more successful) neighbouring Joneses, the institution of a multiparty democratic system of government with real market economy would be a slow and lengthy one.  Despite the concept of democratic governance being already in place – the writing of the new Constitution alone took some ten years and more and if the Referendum to get the approval of the Constitution proves positive, the obvious and incessant interference of the milieu exterieur (including the Myanmar Diaspora) in Myanmar’s internal affairs continues to act as the “retardant” to the implementation of glasnost and perestroika for Myanmar.  “All those looking for change ought to be cognizant of this.  It is not that we are unwilling to move on,” U said, “but we must be cognizant of the negative forces at work.  The silver lining is that ASEAN, without being too pushy and without interfering with our internal affairs, is drawing us into the regionalisation exercise.”

 

In 2006, the Asian Development Bank (ADB) report, Asian Development Outlook, highlighted that over 30 percent of the total export value of Myanmar was represented by its export of natural gas to Thailand.  At the time of the report, the possibility of a Memorandum of Understanding (MOU) between Myanmar and China or India to export natural gas was still brewing until, recently, Myanmar and China officially inked an MOU to export 3.5 million tonnes of Liquefied Natural Gas.9  According to the Ministry of Information, [Myanmar] has continually produced abundant natural gas and [this] has contributed much towards earning Myanmar’s foreign exchange.10   In addition to oil and gas, Myanmar is likewise engaged in “extended cultivation of teak at the rate of 20,000 acres per year and efforts are being made for cultivation of 800,000 acres of teak in 40 years.11

 

U’s narrative of Myanmar’s trade and development was positive and optimistic.  But the sticking point, as always, was politics.  “As part of the overall plan to move into liberal democracy,” U went on to say, “in 1993 a National Convention to write a new Constitution attuned to other modern democratic governments was put in place.”  According to him all interested parties, including the National races and ethnic tribes, were invited to attend and to give their views against an agenda which had been formulated by the Government.  This broke down in 1995 when the NLD representatives decided to stage a walk out because of their disagreement with certain terms and conditions.  The National Convention therefore was called off and put on hold. The milieu exterieur, it seems, was at work through its (monetary) influence on local politics, to forcibly shape Myanmar’s emergence from isolation according to its terms.

 

On International Aid

According to U, the IMF/World Bank offer of aid and other Structural Adjustment Programmes (SAP) or Multilateral Agreement for Investments (MAI), complete with the conditions attached for meeting debt obligations and for development, “would only cause what has been termed ‘IMF riots’ in the Third World/LDCs/developing states.”  He added: “Myanmar is in no hurry to see any more ‘riots.’  Moreover, for us, in the area of international relations, in terms of realpolitik for the Third World, democracy is far less important than actual political stability and social order.”  It is quite clear from this and from all the talks I have had with my key respondents, that this is Myanmar’s main consideration.  Obiter dictum this appears to be in tandem with the more successful ASEAN states such as Singapore, and even the burgeoning China.

 

As the friendly discussion with my key respondents over the prudence or imprudence of accepting aid got a little “heated,” their response got a little “robust.”  I was surprised at how they readily cited examples in many African states, such as Angola and the Congo, where changes in external alliances and indulgence in democracy and human rights as conditions set by the IMF, led to the “IMF riots”.  Brother narrated how in the case of Egypt, when there was a change in foreign policy, in line with the requirements of the West, President Sadat refused to comply with IMF aid conditions set in 1977, pointing to the outbreak of violence on the streets in Cairo that caused the explosive violence later.  Additionally, citing the example of the massive financial aid granted to Mexico in 1982 by the US, Brother noted that this was meant to prop up the political establishment, which had been weakening, and to ensure that the communist insurgency, which had been growing in Central America and the Caribbean, would not “infect” Mexico, their neighbour. This according to U was “no altruistic move.”  The so-called great “Mexican Miracle,” in U’s view turned out to be a “farce.”  Cynically, Brother remarked, a real ‘globaloney’, with the suggestion that I read up on the subject!

 

To put it simply, it was clear from the discussion and communication with U and other retired government officials (who are key officials in the country’s economy and planning as well) that Myanmar was totally aware of the implications of receiving aid.  Their perception according to Brother is that “social chaos and probably the downfall of governments would ensue, if we are not careful or if we follow their prescription and accept aid according to their conditions, carte blanche.”

 

It is imperative at this point to again highlight the collective memory-induced “unpleasant and disastrous experience” of dealing with foreign powers, by the Junta and their consequent social mood of distrust.  It is in this light that one can understand that creating and maintaining foreign relations are not the easiest exercise for it to undertake and taking into account Brother’s comment that, “with foreign benefactor governments interfering with aid, aid control / condition and disbursements, the position becomes even worse for any country.”

 

When viewed in the light of this sort of feeling, and in the light of the possession of “strategic (natural) assets” such as in the oil and gas fields, which can be utilized as collateral for not only financial purposes but also for purposes of geopolitical, geo-strategic and econo-political bargaining chips12, besides ensuring that the current government stays in place, Brother’s view is, “why should money in the form of aid from the usual Bretton Woods organizations be traded for power, when one can have both by taking a slow and steady progress, instead of being rushed into it by the First World?”

 

Be that as it may, recalling Burnell, I interjected that it may be useful for Myanmar to get out of this “induced skepticism” about aid and assistance from the developed North or Western countries, and to see that with judicious and prudent appraisal, setting aside pride and with a little “horse trading,” that not all aid carries with it or implies the intent of encroachment of state sovereignty, state independence or indeed other political and/or exploitative aims13.  “If I may add,” I humbly suggested, “that from this point of view, history has shown [that] playing it right, in spite of restrictive and difficult conditions, Tanzania, under President Nyerere, in the 1960s accepted and received more aid from Britain than from any other country at the time.”

 

Despite this “humble” suggestion, it was apparent to me that to the Myanmar leaders, their take is that there are many other, perhaps, even better ways of raising the much needed finance, such as via private, international syndicated bank loans to meet current account deficits even though the US sanctions are a stumbling block.  But above all, their aim is to be independent by tapping Myanmar’s own abundant natural resources, some of which are very “strategic” these days.

 

Their “confidence” in their performance is such that indeed in all the government’s Build-Operate-Transfer (BOT) and Joint-Venture contracts, by 1991 unequivocal clauses specifying that non-nationalization of any investor organization assets is guaranteed.  Furthermore, if conditions better than that offered in current contracts are offered to other foreign direct investors in the future, the equivalent conditions would be accorded existing FDIers who might have signed up earlier.

 

Based on my experience, in Build-Operate-Transfer building contracts executed by my company and the government there was a condition in which there would be a “ground rent rate adjustment” of up to a maximum of five percent (5%) increase upon review every five years.  Upon my query and request for an equivalent “downgrade adjustment,” Vice Admiral Maung Maung Khin, Chairman of the Myanmar Investment Commission (concurrently Deputy Prime Minister) denied the request on the basis, according to him, that “Myanmar is moving forward and upward - not downward - so why should we all be talking of any negative equity or reduction of ground rent occurring?”

 

From this point of view, I recalled Burnell again on how Zambia’s experience was that in its assertion of sovereignty, nationalization of resource industries did not ensure sustained revenue increases or help the foreign exchange earnings.14  It appeared that I was not persuasive enough to draw the Group out for a “debate” or that there were other factors up their sleeves, which could not be revealed at the time. 

 

Nevertheless, what I found interesting in this line was a specific view put forward by Brother.  I had commented that the philosophy of inviting FDIs or Joint-Ventures in Myanmar was the most enlightening economic move in recent years and that it was pragmatic.  I even continued saying that the Government ought to intensify this because even “nationalists” or the “opposition” within the State cannot flaw the government.  Brother’s response was that, philosophically, he was conscious of the fact that in the search for gain, there is always a possibility of loss.  This being so, while he appreciated that “ending dependence would sometimes involve compromising the country’s independence, there is an optimal beyond which this extension becomes counter productive.  We will attempt to get used to the ways and agenda of capitalists and capitalism again first.”

 

Brother further asserted that the primary consideration is for the Government to attend to domestic socio-economic requirements, failing which this can and will, in his words, “translate into political upheavals.”  On the other hand, according to him, over dependence on foreign capital, technology and management can leave the state “vulnerable,” especially if the foreign element “does not satisfy domestic requirements.”  “Meaning what?” I interrupted, whereupon he responded, “Oh, creation of troublesome foreigners interfering locally to tame political problems!” This apart, his dilemma seems to be how to tread the fine line of not irritating foreign capital to the extent of becoming ostracized by foreign capital on the one hand, and on the other, of ensuring that the domestic requirements in terms of business, industries, social and other developments, particularly that of independence and sovereignty are not compromised.