In the third of my reports on Myanmar, I focus on the army’s enduring grip on the economy
Yangon may not be wealthy, but it is rich in sounds. Partly this is because motorbikes, swarms of which are petering around everywhere else in the country, are nowhere to be seen in Myanmar's largest city (they were outlawed after a facetious biker played a prank on a military general in 2003). From market traders to endemic birds, that makes daily life remarkably audible.
But these days it's a different sort of tweet that's adding a chord to Burma’s soundtrack. As mobile phones become ubiquitous in Yangon, so do the beeps and booms they are able to produce. From Facebook pokes to YouTube clips, signs of Myanmar's leap into the digital age are echoing along the city’s streets.
Some see this as evidence that Burma’s transition to civilian rule is already producing strong economic dividends. The country, which saw its first freely elected government in 50 years take office last month, grew 8.3 percent in 2015. Nearly $4.4 billion of foreign investment was approved in 2014, up from $32.9 million in 2011. The IMF forecasts GDP per capita to reach $1,977 in 2020 – 98 percent more than when political reforms started six years ago.
Will the bounty be shared? That remains unclear. If Burmese generals look like good losers, it may be because they’re trading political control for greater economic power: the army’s top brass owns 45 percent of Myanmar’s land and 55 percent of its companies, a Yangon-based economist estimates (he declined to be named). Much of the remainder belongs to military-connected tycoons, some of whom continue to be targeted by US sanctions.
In theory, the liberalisation of sectors such as telecoms and banking should allow the country to diversify away from construction and extractive industries, thus spreading the spoils. Under Burmese law, however, would-be foreign investors aren’t welcome unless they team up with at least two local partners willing to match their commitment. Given the sums involved, eligible parties belong to a restricted club.
Many sectors also remain sheltered from entrants thanks to heavily restricted credit. Myanmar’s central bank requires corporate borrowers to provide 100 percent of a loan in collateral, which only a handful of land and business magnates can do. Other competition-distorting quirks abound: a law reserving telecom licences to operators active in at least two other countries conveniently rules out most Thai companies, who represent a greater menace to state-owned MPT because they already cover borderlands.
Endowed with a young and cheap workforce, a 2,000km coastline and ample agricultural land, Myanmar has huge potential. But its export options will remain narrow as long as smaller companies starve liquidity and farmers can’t get cheap loans to buy productive crops. That’s ominous: booming imports pushed the trade deficit to $5.3 billion last year; the currency dropped, leading inflation to peak at 16 percent. Rice prices rose 21 percent, hurting the poor disproportionately.
Foreign investors and development agencies are right to be excited about Myanmar’s opening. But they should insist on greater liberalisation and transparency. Motorbikes or not, the country's modernisation drive will peter out fast if its economy remains on a leash.