Burma's economy: Does sanctions hinder development?

by Mungpi
02 October 2008

New Delhi (Mizzima)- Poverty and the slow-pace of economic development in Burma, which was once known as the 'Rice Bowl' of Southeast Asia, is not the result of the current economic sanctions imposed by western nations but because of the ruling junta's mismanagement and inept economic decision making, said an economic expert.

Sean Turnell, Associate Professor and member of the Burma Economic Watch, at the Economics Department of Macquarie University in Sydney said he disagrees with the Burmese Foreign Minister's statement that sanctions have hindered economic development in Burma.

Nyan Win, in his address to the UN General Assembly in New York on Monday, called for an end to what he described as 'immoral sanctions' against his country, saying sanctions hamper economic development and harm the people.

Nyan Win, in his speech, said sanctions are "unwarranted," and "They are not only unfair but immoral. They are counter-productive and deprive countries of their right to development."

But Sean, a long time observer of Burmese economy, said Burma's economy is hardest hit by the junta's mismanagement and its self-imposed isolation.

"Burma's poverty is not a result of sanctions, but 45 years of extraordinarily inept economic decision making by Burma's military regimes," Sean said in an email to Mizzima.

He added that the regime has self-imposed sanctions by creating an economic environment that makes international investment, in true productive industry, utterly impossible.

The United States and the European Union have recently stepped up sanctions against Burma's military government for its suppression of pro-democracy groups and its refusal to improve the situation of human rights including the release of political prisoners.

However, the Burmese Foreign Minister, in his speech said, for Burma to be able to implement economic development, it needs "unfettered access" to markets, modern technology and investment, which according to him has been deprived to Burma due to the imposition of sanctions.

"The sooner the unjust sanctions are revoked and the barriers removed, the sooner will the country be in a position to become the rice bowl of the region and a reliable source of energy," he added.

Economic development without sanctions?

Aung Naing Oo, a Burmese analyst based in Thailand, said while lifting economic sanctions cannot improve Burma's economy over-night, it will, however, allow space for development in the long-run.

According to him, Burma, which has been isolated for nearly half a century and suffered nearly two decades of economic sanctions, a 'command economy' is prevailing, whereby the ruling generals dictate the economy and provide opportunities only to their cronies.

He said, therefore, lifting sanctions and allowing free flow of direct foreign investments, in the long run, would help open up new space for development as well as create new political space.

He added that economic sanctions, which the opposition group led by Daw Aung San Suu Kyi have called for and was imposed by the US and EU, does not encourage political reconciliation in Burma.

The Burmese junta is annoyed with the west because of the sanctions but are even more so on the opposition led by Daw Aung San Suu Kyi for urging the west to impose sanctions, he said.

"[T]here has been a sore relationship between the junta and the opposition. So, international sanctions are an obstacle to reconciliation," Aung Naing Oo said.

However, he said, unless the junta drops its 'Command Economy', cronyism, and corruption, lifting sanctions will not help in developing the economy.

But Nyo Ohn Myint, the foreign affairs in-charge of the National League for Democracy – Liberated Area (NLD-LA), said sanctions have its causes and effects, but the deteriorating economic situation in Burma is mainly caused by the junta's corruption, nepotism and cronyism.

Nyo Ohn Myint, who closely monitors Burmese economy, said western sanctions does not put on hold the possibility of foreign investment, which mostly are from neighbouring countries including members of the Association of Southeast Asian Nations (ASEAN).

But he said, Burma failed to attract foreign investors due to the lack of political stability, and transparency, which investors see as an unhealthy atmosphere for business deals.

"Despite the sanctions, we see that Burma's bilateral trade with neighbouring countries like India and China are increasing," Nyo Ohn Myint said.

Even with sanctions imposed by US and EU, there are several companies still operating in Burma, Nyo Ohn Myint said, but he added that the junta's failure to demonstrate stability and mismanagement of the economy has slowed down Burma's economic development.

According to Sean, sanctions by any means are "not a full solution" they are, however, useful in an array of strategies.

"Often overlooked is that sanctions can be an avenue, through their progressive lifting, for sponsoring genuine reforms," he added.

Despite the sanctions Burma has several opportunities to implement economic development, Sean said, adding that Burma can still "bring about wholesale reform - especially in the areas of property rights and rational decision-making."

But under the current circumstance corporates and companies are "hardly going to invest in a place where expropriation is a real possibility, where poverty is such that a viable market is barely achievable, and where corruption imposes such high a 'tax' on genuine activity," Sean said.