Reexamining Growth and Poverty in Myanmar

June 25, 2014

By David I. Steinberg

International data indicate that Myanmar’s current growth rate is about 7 percent, which by any measure should indicate progress and pride. Macroeconomic reforms have been extensive. The unrealistic legal exchange rate, which at one point was about 150 times below reality, has been consolidated and floated. An independent central bank is in the offing. A new investment law has been passed by an increasingly vociferous Parliament. Internal and foreign economic advisors are prevalent. Foreign aid has poured into the country, and foreign direct investment is expected to increase to up to $100 billion over the next two decades as a major driver of GDP growth. Myanmar received a “record-breaking” 2 million tourists in 2013. These are all exceedingly positive developments, and yet, they are far from painting the whole picture.

International data indicate that Myanmar’s current growth rate is about 7 percent, macroeconomic reforms have been extensive, and the unrealistic legal exchange rate, which at one point was about 150 times below reality, has been consolidated and floated. Photo/Geoffrey Hiller

Shortly after his inauguration on March 30, 2011, Myanmar President Thein Sein spent a full day in an unprecedented multi-day poverty conference that for the first time in half a century publicly aired the dismal state of the country’s economy for the average citizen. During his statements, the president pledged his commitment to poverty reduction to improve the lives of the people. If the focus of his administration was national unity, national sovereignty, and the autonomy of the military, as authorities have stated for about two decades, clearly the subtext now for the first time was on alleviating poverty.

Embarrassment over the depressed economy in Myanmar – a nation predicted early after independence to become the richest state in Southeast Asia, only to become in December 1987 one of the world’s “least developed nations,” – was so palpable that the government tried to keep secret its official decision to lobby to get lower interest rates on loans. And, although the country moved from an unmanageable socialist mode (albeit with Burmese characteristics) to one more market-oriented in 1988, and is attracting foreign investment, poverty remains dire. ADB estimates suggest that one quarter of the population in both Burman and ethnic minority areas remains below the poverty line. Per capita income is below both Laos and Bangladesh.

Growth in Myanmar has generally been a product of resource extraction and infrastructure investment, and is not yet reaching the average citizen. Yet a broad spectrum of reforms have been instituted that have begun to transform the social environment. Although calling Myanmar a “democracy” in the broadest sense may be premature, there is a growing distance between the state and the individual – a shift that is being widely applauded internally and internationally.

However, few of these critical changes have reached the rural sector, which accounts for 70 percent of Myanmar’s population and where poverty is endemic. Fifty years ago, landlessness was a marginal issue. Now it is said to encompass some 30 percent of the population, rural indebtedness is virtually ubiquitous, and state-sponsored, productive rural credit woefully inadequate. Because the state has, since independence, owned all land, rural farmland could not be used as collateral for lending, although this is now changing. Rural to urban migration has increased, but the push from the farms and the pull of urban living has not been mitigated with increasing urban employment. Protests, now legal, have occurred against land confiscation.

The problems are compounded in some minority areas that remain insecure and under military hold. In eastern Myanmar alone, half a million people are internal refugees. Land grabbing conducted by the military and the state and given to state entities or to businessmen close to the regime is endemic. Corruption undermines business transactions and legal decisions. Not only is rural credit an immediate problem, other official credit to businesses is as well. Entrepreneurial credit for small- and medium-sized businesses is inadequate. Concern is on the rise that new immigrants, including many Chinese who are living in Myanmar and have greater access to non-banking modes of credit, may come to dominate many of the urban retail and productive enterprises and buy up much of the farmland. This creates the possibility of a future middle class that may be predominantly Chinese – a potentially dangerous situation in a highly nationalistic environment.

Can foreign aid ameliorate these problems? Certain programs such as microcredit do help at the fringes, but not at the core. International NGOs and bilateral and multilateral organizations are aware of the issues and are designing programs to help in health, education, and agriculture. Unfortunately, the capacity of the state at all levels is inadequate, and how much the reformist commitments of the central government reach down into the bowels of the bureaucracy and the military are unclear. The humane and political needs of reducing rural poverty are evident, and the government is concerned. At the same time, the government and opposition are also increasingly focused on the looming 2015 national elections. No political party has yet formulated specific poverty-reduction programs beyond political platitudes.

Foreign assistance is critical to progress, but the magnitude, types, programs, and requirements placed on local governments at any level create obstacles to success. Yet this moment in Myanmar history is a unique opportunity to assist in progressive change that would help alleviate the burdens of poverty that such a large percentage of the population faces.

Guest contributor David I. Steinberg is Distinguished Professor of Asian Studies Emeritus at Georgetown University, and Visiting Scholar at SAIS, Johns Hopkins University, and author of 14 books and monographs. He can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

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