Can Aung San Suu Kyi Save Burma’s Economy?

It has been a heady few weeks in Burma, with one announcement after another that many feared they would never live to hear. The broad contours of the first civilian-led government for over fifty years are now clear. Htin Kyaw is the new president, although he is essentially a proxy for the widely beloved leader of the National League for Democracy (NLD), Aung San Suu Kyi, who was denied the top job by the provisions of the military-drafted 2008 constitution. Instead, a new position has been created for her, roughly equivalent to that of prime minister — and she will also be foreign minister. In other words, there’s no doubt as to who will really be running the government.

Suu Kyi’s top priority, she has said, will be to ramp up the peace process in order to end the civil conflicts that have ravaged the country since independence. Not far behind, however, will come the economy. In 1962, when the military seized power, Burma boasted one of the region’s strongest economies; today it is the second-poorest country in Asia. It was, above all, to reverse this dismal state of affairs that then-President Thein Sein launched his reform program in 2011. His efforts have yielded an impressive-looking average growth rate of 6.5 percent over the last years, but that was from a very low base. In fact, Burma’s economy, starved of investment for decades, is still in dire straits. GDP per head is at a very low $1,200 or so — a stark contrast with neighboring Thailand, where it’s about $6,000. About one-quarter of the population live in poverty; only about the same proportion have access to electricity; and the country has the worst road, rail, and port network in Southeast Asia.

Moving some of those statistics in the right direction will be a monumental task, as most Burmese are all too aware. Sensibly, the new NLD government is taking its cue from its predecessor, which concentrated efforts on rural development. For as the new minister of planning and finance, Kyaw Win, has argued, “seventy percent of the population live in rural areas. These people are poor, and do not have enough income. So they are our first priority.” But Kyaw Win says that his economic policy will also focus on reducing income equality and boosting tax revenues, thus providing the government with the money to spend on the new schools and roads that Burma desperately needs. There is a lot of aid and development money coming into the country at the moment, particularly from Japan, which is investing heavily in new Special Economic Zones. That will continue. But the government knows that unless it can boost its own tax take, currently a paltry 5 percent of GDP, it has little chance of achieving anything.

What are the chances of success? Certainly, the new economics team in the cabinet hardly inspires confidence. Almost immediately after the government announced the appointment of the unassuming Kyaw Win, it was revealed that he had received his master’s degree and a doctorate from a “university” based in Pakistan that was actually a group of websites providing fake diplomas. He seems to have been unaware of this all along, as he admitted to reporters. It seems clear that Kyaw Win was chosen not so much for his expertise as for his loyalty to the NLD, in which he has long been a member of the economic committee.

Meanwhile, the man put up to be minister of commerce, Than Myint, was found to have a degree from what the New York Times called an “unaccredited correspondence school.” There is no doubt that the NLD has received some high-caliber outside advice recently from the likes of Australian academic and longtime Burma-watcher Sean Turnell. But at the cabinet level, the economics team already has a lot of catching up to do.

More substantially, though, the new government’s economic priorities are likely to bring it into an early confrontation with the military, and it is this struggle between the new civilian administration and the old guard of the generals that will define Suu Kyi’s term in office. In addition to the finance ministry, two newly minted ministries covering agriculture and national resources promise to be sources of conflict. How much progress the NLD can make in these two areas will go a long way to determining the government’s overall economic progress, as these are also the areas where the military and their business cronies are well entrenched. As well as retaining several vital cabinet posts and a quarter of the seats in parliament, the military also retains extensive, if opaque, interests throughout the economy (mostly through two big holding companies).

Take agriculture. As the new minister notes, about 70 percent of Burma’s population still lives in what could be classified as rural areas, and about 54 percent people work on the land, predominantly in smallholdings. Yet the sector only produces about 40 percent of GDP. In purely economic terms, as the NLD acknowledges, it is very unproductive. Rice, the main produce, is particularly inefficient. Burma has the second-lowest yields in Asia; Bangladesh and Vietnam, with similar productivity potential in their Delta regions, have yields that are 60 percent and 114 percent higher respectively.

There are several explanations for this, but one important reason is that farmers won’t invest in their land because they have no security of tenure. Particularly over the past few years, there has been a frenzy of officially sanctioned land-grabbing, with military officials expropriating whatever and wherever they could. This was mainly for speculation; by one estimate, only one-quarter of this land is in productive use. So the issue of land rights, says Kyaw Win, will be a priority. The last government passed a law in 2012 that allows for the paper certification of land use rights, but this is too weak and has often been used merely to justify forced expropriations. More robust laws around land titling and even ownership need to be passed, and those who have been dispossessed will demand some compensation. The NLD knows this, but these actions will cut directly across the interests of the military, which has expropriated so much land for itself. Yet without security of tenure, the farmers won’t invest in the pumps, the irrigation canals, and fertilizers that can lift yields. As Debbie Aung Taylor, an expert on rural Burma, puts it: “Farmers here are entrepreneurial, but haven’t been given a chance.”

The mining sector, and resource extraction more generally, is an even more sensitive area. The former military regime enriched itself largely by plundering the country’s mineral resources, siphoning off the vast majority of the profit from jade mining in Kachin state, for example. Very little of it reached the official state coffers, and even less was returned to the people who mined the jade, or to those whose land it was taken from. Global Witness, an international non-profit specializing in corruption, has famously estimated that jade alone (much sought after by the Chinese for lucky charms) generated up to $31 billion in off-the-books sales just in 2014. To put that figure into perspective, Burma’s total official exports come to merely $11 billion.

Quite apart from the injustice, if these sorts of sums were run through the formal economy, the new government would actually have some money to work with. But making this happen will demand profound structural changes in how the mining companies operate. And this, too, is almost sure to bring the government into confrontation with the military’s cronies and their well-established conglomerates.

Some of these have already indicated that they are willing to change, and to work with the NLD; they might accept competition and liberalization. But many have not. A very few sectors, most successfully telecoms, have been quickly thrown open to competition, but most remain relatively restricted. As yet, it is unclear how strongly and how soon Suu Kyi wants to challenge the military’s interests. But whether Burma’s economy can recover from decades of misrule depends largely on how she answers that question.

In the photo, laborers ride a truck on the way to work on the outskirt of Rangoon on September 21, 2015.

Photo credit: YE AUNG THU/AFP/Getty Images