A Post Not from the Field: Burma Economy and Sustainable Development Paper

Many thanks to Erin Quinn for sharing this brilliant paper.  Please email me at ad7625b@student.american.edu if you would like a copy

The Burmese Economy and its Impact on Sustainable Development

 

Outline

1.       Introduction

2.       Data Limitations

3.       Sustainable Development

4.       Trade

a.       Trade Sanctions

b.      ASEAN Membership

c.       Major Trading Partners

d.      The Invisible Cash Cow: Opium Sales

e.      Looking to Forward: The Removal of Sanctions

f.        Impact of Trade on Sustainable development

5.       Investment

a.       Investment Sanctions

b.      ASEAN Investment

c.       Major Investors in Burma

d.      Looking Forward: A New Burmese Investment Law

e.      Impact of Investment on Sustainable Development

6.       Debt

a.       Impact of Debt on Sustainable Development

7.       Policy Recommendations

8.       Conclusions

 

 

“We have to acknowledge that over half a century since we gained independence, it has not been lack of resources but rather misconceived ideas and flawed policies that have been our undoing.”

-          U Myint, Burmese Senior Economic Advisor

 

Introduction

The story of Burma’s development has been one of recurring hope, and subsequent disappointment. In the early 1960s Burma was on the path to becoming an Asian leader. A United Nations agency declared Burma the “most likely to become fully industrialised’ before its neighbours.”[1] Fifty years later, Burma stands as of the least developed countries in the world. An estimated 32 percent of its people live below the poverty line.[2] Burma ranks 149 out of 187 on the human development index, trailing far behind the Asian average.[3] In 2012, Burma received a Freedom House index score of 6.5, with 7 being the least politically free a nation can be.[4] Life for the majority of Burmese people today is difficult and uncertain. For the past five decades, Burma has been ruled by military regimes. Only in the past few years has the government transitioned to a nominally civilian government. Changes are underway right now—political, social, and economic—and once more, many are hopeful that a new freer, fairer, more equitable and harmonious Burma will emerge. Part of Burma’s success or failure will rest on how sustainably it develops. If Burma chooses a path that nurtures the environment, respects the rights of humans, and makes sound economic policies in the short- and long-term, it could again rise to be the Asian giant once predicted. If, instead, Burma continues down a path of unsustainable development, the prospects for life improving for the average Burmese citizen are low.

This paper examines that way that Burma has engaged with the global economy from 1988 to the current day. In particular, it focuses on the effect that Burma’s economic policies has on sustainable development. After discussing data limitations—of which, unfortunately, there are many—I move onto an examination of the definition of sustainable development. Split into three broad categories—human, environmental, and economic wellbeing—I give sample indicators for what sort of data can be used to assess sustainable development.

Following this, I delve into an exploration of Burma’s interaction with the global economy. I begin with the largest section, trade. I give a brief history of Burma’s trade policies, including sanctions against Burma from other countries. I explore Burma’s involvement with ASEAN, and its major regional trading partners. The discussion then diverts to Burma’s hidden trade—opium and amphetamine sales. The section ends by analyzing the effect that Burma’s trade policies have had on sustainable development, and looks forward to potential lifting of sanctions by Western Countries.

The second main section analyzes Burma’s investment policies. As with trade, investment in Burma is shaped by Western sanctions banning many forms of investment. I move on to a discussion of Burma’s investment from ASEAN, followed by an analysis of investment by China and Thailand—Burma’s two largest investors. The investment section wraps up with a discussion of sustainable development as it relates to investment, and introduce a new investment law being debated in Burma’s parliament.

The third section is quite brief and focuses on Burma’s debt. Burma has traditionally been very secretive of its public debt data. I present the most recent data on the amount of Burmese debt to certain creditors, and briefly discuss whether or not the current level of debt is sustainable.

In the final section of this paper I present policy recommendations for Burma as it moves forward. Change is on the horizon in Burma, and with careful planning and smart policies Burma may well change its course. By focusing on policies that ensure sustainable development, Burma has the opportunity to lift its people out of poverty and become a real player on the world stage.  

Data Limitations

Before delving into discussions about Burma’s engagement with the global economy, it is necessary to acknowledge data limitations. For the past five decades, Burma has been ruled by military regimes not keen on transparency. The government has had a monopoly on many key industries, and reports data when and how it pleases. To complicate matters further, until April 2012, the official currency rate was pegged 6 kyat to $1USD, while the real exchange rate was closer to 800 kyat to $1 USD. The discrepancy between the “official” exchange rate and the “real” exchange rate underestimated state revenue, and allowed officials to hide revenues they wanted to, or divert funds easily to different projects.[5]  

Data collected by United Nations (UN) agencies and by multilateral organizations like the International Monetary Fund (IMF) and the World Bank are often missing for Burma. When present, they are likely slightly inaccurate. People and companies in Burma engage in a vast amount of trade on the black market, often times in unofficial cross-border sales. Burma also gets huge amounts of revenue from sale of narcotics. Both types of these transactions are outside of the purview of official data.[6]

Sustainable Development

Historically development has been defined by economic indicators like GDP. It was assumed that if a country was experiencing economic growth, it was on the path to progress. As Cairns wrote over a decade ago, “economic growth is [seen as] the cure for all of society's problems, such as poverty, overpopulation, environmental degradation, and the increasing gap between rich and poor.”[7] Within the development community, there has been a movement to encompass more than just economic indicators. Pioneered by the first UN Human Development Report in 1990, the field has started to look at more non-income related indicators of human well-being. Beyond the human aspect, environmentalists have increasingly asserted the importance of policies that protect and maintain global natural resources.

In 1983 the UN created the Bruntland Commission to unite countries in the goal of sustainable development. In their landmark 1987 report, the Commission defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”[8]. The two fundamental ideas expressed in this definition are first, meeting the needs—essential needs, not desires—for every person in the world, and secondly, on meeting these needs in ways which do not endanger future populations. Building on this concept, Repetto defines sustainable development as:

…a development strategy that manages all assets, natural resources, and human resources, as well as financial and physical assets for increasing long-term wealth and well-being. Sustainable development, as a goal rejects policies and practices that support current living standards by depleting the productive base, including natural resources, and that leaves future generations with poorer prospects and greater risks than our own.[9]

From these definitions emerge three separate but interrelated components that together comprise sustainable development: human, economic, and environmental wellbeing. Truly sustainable development will ensure that progress is made in ways that help raise the standard of living for humans, while increasing economic growth and opportunities, in ways that are not detrimental to the environment or society. Below is a discussion of specific indicators I will use in analyzing how Burma’s economic policies affect its prospects for sustainable development.

                The first area of sustainable development is concerned with humans. As the UN Human Development Report for 2010 states, “Human development is the expansion of people’s freedoms to live long, healthy and creative lives; to advance other goals they have reason to value; and to engage actively in shaping development equitably and sustainably on a shared planet.”[10] Examples of indicators used to assess human development—taken from the inputs of the Human Development Index—include:

·         Provision of basic needs

·         Access to affordable, quality healthcare

·         Access to quality education for all

·         Gender equality

·         Protection of political and civil freedoms

·         Protection and respect for human rights

·         Good governance

While this is not an exhaustive list of indicators, it encompasses the main ideas consistent within the idea of sustainable human development.

                The second subset of sustainable development concerns economic indicators. As previously discussed, historically only measures of economic growth were used to assess economic wellbeing. Years later, we now know that higher GNP does not equate with increased levels of wellbeing across an entire country. As the Sustainable Society Index 2010 report states, “Economic wellbeing is not a goal in itself. It is integrated as a condition to achieve human and environmental wellbeing. It can be considered as a safeguard to wellbeing.”[11] With this in mind, examples of indicators used for assessing economic sustainability, culled mainly from the Sustainable Society Index, include:

·         Gross domestic product

·         Unemployment rate

·         Material consumption rates

·         Public debt

·         Income distribution

These indicators measure the growth of economies, but focus on growth for all. High unemployment rates, or disparate income distribution in a country with a high GDP, would indicate that while overall numbers show positive growth, clearly all inhabitants of the country are not benefiting from growth. Using all of these indicators together will ensure that if GDP is increasing, the benefits spread to the entire population.

                The last facet of sustainable development pertains to environmental sustainability. Often economic growth comes at the expense of the environment. Developing sustainably means that the “natural capital stock should not decrease over time.”[12] In this definition, natural capital stock can refer to anything from clean air, to fish populations, to forests. Examples of indicators used to evaluate environmental sustainability are taken predominantly from SSI and include:

·         Air quality (humans and nature)

·         Water quality

·         Greenhouse gas emissions

·         Forest area/ deforestation

·         Biodiversity

·         Energy consumption

·                  Renewable energy use
As a country rich in natural resources, Burma must focus on environmental sustainability as it continues to grow and expand. Natural resources can generate huge amounts of revenue, but if extracted in unsustainable ways, countries can deplete some of their biggest assets.

                Looking at development through a sustainability lens forces one to look holistically at the impacts governmental policies have on people, the domestic economy, and the environment.

In that sense, the concept of sustainable development is universal across countries. However, the indicators I discuss in the body of this paper in relation to trade, investment, and debt are the ones of most importance to Burma. Problems like massive income inequality and human rights abuses are particularly prevalent in Burma, and addressing these issues will be instrumental to ensure a promising future for Burma. The following discussion will analyze the way that Burma’s trade, investment and debt policies affect the human, environmental, and economic sustainability of the country.

Trade

                Until July of 1988, Burma under General Ne Win and the ruling military regime had a completely closed economy. The Burmese Way to Socialism outlined the government’s economic policies: they involved central planning and Soviet-style nationalization of all industries. In response to these detrimental policies, there were successful mass protests in 1987 and 1988, calling for Ne Win’s resignation. Unfortunately, in the end the Burmese people ousted one dictator and ushered in an even harsher regime— the State Law and Order Restoration Council (SLORC).[13]

                Under SLORC and General Saw Maung, Burma began to implement a package of economic reforms that included opening the economy and letting in foreign investment. From 1985-2003 Burmese exports increased 6.8 times, imports grew 5.5 times, and GDP increased 1.8 times over. Trade volume per capita increased from $25 to $106.[14] Despite these increases in trade, Burma still trails behind all of the other ASEAN member states in trade volume per capita. While the 1990s were a period of increased global engagement, Burma still trades less than its regional counterparts. One of the main reasons Burma has failed to increase its trading with the rest of the globe is because of trade sanctions in place by many Western nations. The following section outlines the trade sanctions against Burma, their effects on the Burmese economy, and the potential lifting of sanctions.

 

Trade Sanctions

                It is impossible to talk about Burma’s current engagement with the global economy without first discussing trade sanctions imposed on it by some of the world’s economic powerhouses. The economic sanctions placed on Burma by many western countries are in fact, purely rooted in politics. SLORC had a history of brutally repressing political speech and freedoms—from a harsh crushing of non-violent, pro-democracy demonstrations in 1988,[15] to refusing to honor election results from 1990. The regime has been accused of “grave violations of basic human rights including forced labor, the use of child soldiers, forced relocation, summary executions, torture and the rape of women and girls, particularly of members of ethnic minorities.”[16] In 1997 SLORC reorganized and renamed themselves to be the State Peace and Development Council (SPDC). Reorganization brought little change to the ruling military junta, though. The world watched as Burmese citizens continued to be oppressed and abused by their own government.[17]

                Spurred by these human rights abuses, many Western governments imposed trade sanctions on Burma. The United States government has issued a variety of economic sanctions, starting in 1997. The first trade sanctions were enacted by the US in 2003, and banned any Burmese imports to the United States. US exports were allowed to be sold in Burma, with the exception of financial services. In 2008 under the Junta Anti-Democratic Efforts (JADE) Act, import restrictions were tightened to include jades and rubies that originated in Burma, even if they were sold by a non-Burmese, third-party. [18]

In addition to the US, Australia, Canada, the EU, and other European nations have enacted economic sanctions on Burma. Australia has “a longstanding ban on defence exports to Burma.”[19] After a government crackdown on peaceful protests in 2007, Australia implemented additional bans “targeted against members of the Burmese regime and their associates and supporters.”[20] The European Union has implemented trade sanctions against specific people (namely, members of the SPDC), companies, and industries since 2006. The export or sale of any defense equipment, or equipment that could be used for internal repression is banned. Any equipment used in the logging, precious or semi-precious stone mining, and energy/mineral mining is prohibited from being exported from the EU to Burma. Additionally, any byproducts from those three industries are banned from import from Burma to the EU.[21]  Other European countries not in the EU, such as Norway and Switzerland, have similar laws restricting trade with Burma. Canada has by far the strictest regulations on trade with Burma. It has enacted several rounds of sanctions since 1988, and currently has a ban on all exports and imports to and from Burma, except for humanitarian goods.[22]

                The impact of trade sanctions on Burma has been substantial. It has cut off Burma from some of the world’s largest markets. According to a report from the US State Department, sanctions have cost Burma over 60,000 jobs just in the textile industry.[23] After the implementation of the 2003 sanctions, per capita income in Burma fell from $300 in 2003 to $225 in 2004.[24] Trade sanctions are meant to penalize the military regime, however, in practice, they end up hurting the Burmese people just as much, if not moreso, than the ruling party. Sanctions were intended to put pressure on the Burmese government to stop human rights abuses, and begin on a path to true democracy. For the first decade of the 21^st Century, sanction-imposing countries watched as their economic threats remained unanswered. As a 2007 United Kingdom report states

The sanctions on Burma send a signal of disapproval, and show that the UK and the EU are determined to apply pressure for change, but there has been no significant move towards greater democracy or increased respect for human rights. While the UK and the EU desire democratic change in Burma, they do not have any expectation that their current economic sanctions combined with those of other countries, most notably the US, will bring about that change.[25]

The trade sanctions, then, for many years were seen as ineffective in changing Burma’s internal policies towards political speech and human rights. Burmese leaders were told that should they begin to improve their record on human rights, Western economies would open up, once more, to the Burmese imports and exports. Until last year, this remained a pipe dream for many diplomats and human rights advocates. The future of trade sanctions is uncertain: it is possible and probable that many will be removed in the coming months. (A discussion of this comes later in the trade section). However, it remains that Burma’s trade relations for the past decade has been largely shaped by trade sanctions. The following section will outline Burma’s major trading partners and industries in the recent years. It will begin with a discussion of Burma’s involvement with ASEAN.

 

ASEAN Membership
                With Western sanctions in place and Burma’s market options quickly closing up, the nation looked to increase engagement with other partners. Burma, already a member of the World Trade Organization since 1995, officially joined the Association of Southeast Asian Nations (ASEAN) in 1997, and is a full member state. It has been widely noted that Burma’s interactions with ASEAN have been somewhat uncomfortable. Given the Western sanctions on Burma, many of the other ASEAN nations have been delicate in framing their interactions with Burma, for fear of repercussions from Western nations. ASEAN members and Western allies like Thailand justified their involvement with Burma under the principle of “constructive engagement.” In the years after Burma joined ASEAN, political tensions continued to grow, as ASEAN member states tried to balance their stance of non-interference with Western demands for reform in Burma. The most pointed example of this came in 2005, when Burma was supposed to have its turn at the ASEAN Chairmanship. The US and EU threatened to boycott any ASEAN meetings with a Burmese chair. ASEAN member states upheld the right for Burma to hold the chairmanship, but voiced concerns about the effect of a Burmese chair on the international legitimacy of ASEAN as an organization. In the end, Burma forfeited their right to the chair, ostensibly to focus on domestic issues.[26] Burma is poised to take the chairmanship in 2014, and most experts agree they will not relinquish this opportunity.[27]

                Politics aside, being a member of ASEAN has certain implications for Burma’s trade and investment. The discussion of ASEAN Investment rules and agreements will be discussed later in the investment section of this paper. In 1992 the six existing ASEAN member states signed the ASEAN Free Trade Area (AFTA) agreement and enacted a Common Effective Preferential Treatment (CEPT) scheme in regards to tariffs. The objective of these measures is to, “achieve free flow of goods in ASEAN as one of the principal means to establish a single market and production base for the deeper economic integration of the region towards the realisation of the AEC by 2015.”[28] When Burma joined ASEAN in 1997, it also signed the AFTA, but was given a delayed schedule for tariff reductions.[29] Burma conducts the second most intra-ASEAN trade of any of the member states with half of all trade coming from other ASEAN nations.[30] Below is a more in-depth look at Burma’s bilateral trade with other countries, both ASEAN and non-ASEAN.

Trading Partners: A Regional Affair

This section will discuss Burma’s interactions with its main bilateral trading partners. As mentioned in the data limitations section, official figures on Burma’s trade likely understate the amount of trade that is actually taking place. Official trade figures do not account for black market trade, arms imports, or trade in illicit drugs.[31] That being said, examining the current official figures will still glean important information on Burma’s interactions with global trading partners.

During the 1990s after years of trade liberalization, Burma’s trade deficit began to grow. In 1997, partially because of the Asian Economic Crisis, the deficit reached a record $1.8 billion. This led the government to adopt an “export first then import” policy. Importers could only purchase goods from abroad against export earnings. The policy was effective in balancing the trade deficit, but had some unintended consequences. Given that Burmese exports were not allowed into many Western markets, this had a huge effect on the amount that could be imported to the country. As intended, the “export first then import” policy dissuaded companies from importing goods such as luxury items, but it also meant many Burmese companies were unable to purchase necessary machinery for their factories. In this period, increased production of natural gas and development of the garment industry also helped balance the trade deficit by increasing Burma’s exports. During the mid-2000s, there was a gradual loosening of the import restrictions, but there was still an emphasis on keeping the trade deficit under control.[32]

Given the economic sanctions placed on Burma by many large, Western countries, Burma’s most important trading partners are regional. Over three quarters of Burma’s exports are sent to three regional partners—Thailand (46.6 percent), China (16.0 percent), and India (13.1).[33] Similarly, China (38.7 percent), Thailand (23.1 percent), and Singapore (12.9) account for 74.7 percent of all imports into Burma.[34]

The main export send to China is timber, primarily logged from Northern Burma and transported over the Chinese border.[35] The state-owned Myanmar Timber Enterprise (MTE) has had a monopoly on the teak industry for decades.[36] Exports to Thailand are mainly natural gas: over 92 percent of the revenue from exports to Thailand from Burma fall under the category of mineral oils, fuels, and distillation products.[37] The publicly owned PTT Exploration and Production Public Company (PTTEP) in Thailand funded the construction of a pipeline that runs natural gas from Burma into Thailand.[38] Money from the sale of natural gas to Thailand accounts for the single greatest source of foreign exchange for Burma.[39] The main export to India is edible vegetables, which accounted for over $445 million in revenue in 2010. India also imports a substantial amount of timber, much like China, transported over the northern border between Burma and India.[40]

Table 1 Burma's Exports 2010
Category	Amount in thousands USD
Mineral fuels, oils, distillation products, etc	$2,639,972
Edible vegetables and certain roots and tubers	$717,206
Wood and articles of wood, wood charcoal	$697,112
Articles of apparel, accessories, not knit or crochet	$523,663
Fish, crustaceans, molluscs, aquatic invertebrates	$294,165
Total	$6,042,702
Source: ITC 2010

Much like Burma’s exports, imports for the country come from three main regional players—primarily from China, Thailand, and Singapore. The vast majority of these go to supply technology and power for the manufacturing sector. China and Singapore supplied Burma with just under $900 million in machinery in 2010. Additionally, Burma imported over $840 million in non-crude petroleum from Thailand and Singapore alone. Another almost $500 million of electrical equipment was imported from China and Singapore.[41] Burma’s main trading partners supply it with necessary technology that keeps their domestic manufacturing industries alive.

Tables 1 and 2 show the top five categories of exports and imports for Burma in 2010. As the data show, Burma exports primarily raw materials and commodities, and imports manufactured goods. While arguably the bulk of Burma’s trade is South-South, they are still, by definition, entrenched in the colonial division of labor.[42] The garment industry—the fourth largest export group—is the only industry in the top five that does not export pure raw materials. Still, it is a long way away from the technology-intensive, manufactured goods coming from its regional neighbors. On the import side, Burma clearly spends the majority of its money on manufactured goods and on high-technology goods needed for their own domestic industries.[43] Burma’s position as an exporter of raw materials leaves it vulnerable to exploitation of other countries, and has serious implications for its sustainable development. The effect of Burma’s trade patterns on sustainable development will be discussed at the end of the trade section. Before we turn to a discussion of development, though, we must first look at one of the most burgeoning industries in Burma: the illicit drug industry.

Table 2. Burma's Imports 2010
Category	Amount in thousands USD
Machinery, nuclear reactors, boilers, etc	$1,313,679
Mineral fuels, oils, distillation products, etc	$1,083,898
Vehicles other than railway, tramway	$720,813
Electrical, electronic equipment	$701,798
Iron and steel	$509,949
Total	$8,982,252
Source: ITC 2010

The Invisible Cash Cow: Opium Sales

There is one area where IMF, World Bank, and UN official trade data is silent: the sale of illicit drugs. Burma, part of the infamous Golden Triangle of drug trade, has historically been one of the largest producers of opium in the world. Today it is second only to Afghanistan in the amount of opium it sells. Burma is the world’s leading producer of methamphetamines, or yaa baa (literally “crazy medicine”) as it is called in Southeast Asia (Wyler 2008). Most of the drug production is based in the northern Shan State.

Historically, most farms in Shan State have grown Burmese tea, even after losing much of its male labor to conscription during the civil war in 1962. It was in 1991, after signing a ceasefire, that  opium production in Shan State increased dramatically. After the civil war had ended, the military regime allowed pro-militia groups and other cease-fire groups to grow opium, in exchange for quelling rebel insurrections. Additionally, small farmers turned to opium production as a means of survival. By 1988, because of gross mismanagement of the economy and skyrocketing inflation rates, growing tea was no longer profitable: opium, however, was.

Beginning in the late 1990s, the Burmese government, in cooperation with the UN and other international organizations, has reportedly tried to eradicate the growth, trafficking, and use of opium and methamphetamines. The United Nations Office on Drugs and Crime reported in 2010 that despite recent slight increases in opium cultivation, Burma’s opium production since the late 1990s has reduced dramatically (UNODC 2010). This UN data (seen in Figure 1) is highly contested by many familiar with the region. Shan Herald Agency News has quoted insiders saying that the original opium counts taken by the US government in the 1990s were grossly inflated, and thus the “drop” never happened. The Palaung Women’s Organization (PWO)—an NGO of ethnic Palaungs, originally from Shan State—has published multiple reports in the past decade refuting UNODC findings. PWO has conducted their own field research, and found that UN data has grossly overestimated the amount of opium fields that have been destroyed by recent Myanmar government efforts. They report that often the UN relies on faulty Burmese police records supplied by the government. The police often demand bribes of the local opium farmers; if they are not paid, the police will destroy the crops. Often, the Burmese government eradicates fields only if they are on main roads or are highly visible: they pay only lip service to the goal of destroying opium fields and dismantling the opium industry (PWO 2010; PWO 2011).

Des Ball, an expert at the Australian National University Strategic and Defence Studies Centre, refutes the UN findings as well. He estimates Burma’s drug trade at $700 million to $1 billion per year (Thornton 2012). A report published by the US Congressional Research Service puts the total revenue generated by drug sales at $1 to $2 billion per year (Wyler 2008). While exact numbers are impossible to calculate, even the more conservative estimates concede that over 40 percent of Burma’s foreign exchange comes from the sale of illicit drugs (Thornton 2012). Much of the opium is trafficked through China—which shares a border with Shan State—and the bulk of methamphetamines through Southern Burma and into Thailand (ibid). Once out of Burma, it finds its way onto the world market and is found all over the world, including the United States.  

The drug industry in Burma is booming. Opium cultivation has a major impact on not only government revenue generation and exports, but also in providing livelihoods for many Burmese in Shan State. The enormous amount of foreign exchange it generates and the disastrous effects it has on the people of Burma make it one of the most pressing issues Burma faces as it attempts to develop sustainably.

 

Looking Forward: The Removal of Trade Sanctions

                Western economic sanctions against Burma have played a large role in shaping the trade patterns of Burma today. As recently as this week, sanctions against Burma have been removed, due in large part to efforts made by the government under President Thein Sein since fall of 2011. On April 1, 2012 the world watched the freest and fairest elections in Burma for over two decades. The opposition party National League for Democracy won 42 out of 45 parliamentary seats, including one for opposition leader and national hero Aung San Suu Kyi.[44] Weeks later, on April 23 the European Union voted to suspend all sanctions on Burma, with the exception of arms sales. The United States has already begun a targeted lifting of sanctions.[45] In mid-April Australia began lifting sanctions on over 200 members of the regime, including the president. Their ban on defense exports remains in place, much like the US/EU policies.[46]

                With Western markets now within Burma’s reach, trade patterns may shift drastically. The US, EU and Australia are some of the largest markets in the world, ripe with millions of consumers looking for ever-cheaper products. At this point the lifting or weakening of most non arms-related sanctions seems inevitable. How the Burmese government handles these changing economic conditions could have an enormous impact on their ability to develop sustainably.  

 

Impacts of Trade Policies on Sustainable Development

The impacts of Burma’s trade policies—and policies from foreign nations about Burmese trade—have had a variety of effects on their sustainable development. The extractive processes of mining and gas drilling, along with deforestation from the timber industry, and massive damming for hydroelectric power generation has had a detrimental effect on the environment. The shift from tea production to opium production in Shan state has robbed many families of a steady livelihood, and severely decreased the health and standard of living for many Burmese people. Trade sanctions imposed on Burma by Western nations have precluded small and medium sized businesses to flourish, and in doing so, forced the majority of Burmese people to live below the poverty line. Indeed, it seems the only positive outcome from Burma’s trade policies is the relative lack of consumption by most Burmese citizens: a nation full of impoverished people does not consume and overconsume goods like many rich nations do.

As previously discussed, the majority of Burma’s exports are commodities, in particular, ones derived from mining, drilling, or deforesting. Burma is rich in natural gas, minerals, and timber, but it is quickly depleting its country of the very resources that could HOIST its economy for decades to come. Trade policies made in regard to natural gas, mining, and hydroelectric power industries are inextricably linked to investment, and thus, the human and environmental impacts of these industries will be discussed in the investment section of this paper. The timber industry, by comparison, does not receive foreign investment, and thus will be discussed here.

The timber industry in Burma has been very lucrative for the past few decades. While it has generated huge revenues for the government, the percentage of total land covered by forest has decreased from 56 percent in 1990 to 50.2 percent in 2005. If no reforms are in place, the projected percentage of forest coverage area will fall to 40 percent by 2020.[47] It is clear to see that this is not a sustainable path for Burma. Heavy deforestation has also caused soil degradation, particularly in the drier zones of central Burma. For costal people, deforestation of mangroves has taken away food sources and an important part of their livelihoods.[48] Since the state has a monopoly on the timber industry, all of the money generated from sales of timber go to fill the coffers of the government, while the people are left with fewer and fewer resources. It is essential to put in policies regarding timber extraction, to ensure that forests continue to flourish while also providing a source of revenue for Burma.

Trade sanctions enacted by Western nations against Burmese goods have also hurt Burma—but not necessarily in the expected way. The sanctions were meant to penalize the government, but in the end, they have a worse effect on the people. As Jeffery Sachs explains

[The sanctions] have systematically weakened the [Burmese] economy by limiting trade, investment and foreign aid. Yet weakening a country's economy does not necessarily weaken a regime relative to its political opposition. Often, the impasse is merely deepened. Civil society and the political opposition suffer from brain drain, a squeeze on financial resources and reduced contacts with the outside world, while the regime is able to blame foreign meddling for policy mistakes. Hardliners on both sides, meanwhile, gain the upper hand over moderates, blocking changes that might otherwise be encouraged.[49]

The impact of sanctions, then, weakens both the opposition and the ruling party. The National League for Democracy has fewer tools at their disposal, and cannot oppose the government as easily anymore. This has a negative effect on political freedoms—one of the measures of sustainable development.

By penalizing the government, Western nations also penalized the Burmese people. Many economists believe that if sanctions were lifted, the poor would be some of the first to benefit. Alamgir’s analysis of Burmese trading policies finds that “concentration of commercial influence in conjunction with Western trade sanctions has curtailed the potential spread of an independent trading class.”[50] Thus, sanctions have actually worked to keep the cycle of poverty going, and have prevented a strong middle class from forming. Intergenerational poverty as experience by the Burmese people has detrimental effects for both economic and human development.

By far the most overtly destructive trade in Burma is narcotics. The transformation of northern Shan state from a tea cultivating state to an opium farming state has had disastrous effects on the area. In Shan state over 80 percent of youth are addicted to opium (SYBC 2012).[51] Reports released by the PWO put the percentage of Palaung adult men (over age fifteen) addicted to opium at 91 percent.[52] With the overwhelming majority of men addicted to opium, women have been forced to take over the role of primary breadwinner, in addition to their housework. Often children are no longer able to attend school, because the family cannot afford it. Women are also subject to increased levels of domestic abuse from their husbands.[53] As a typical Palaung women explained,

Every time I was pregnant I had to work every day right up until the day I gave birth. I have 9 children already and I am now 8 months pregnant. For every one of my children I had to go work again 7 days after I gave birth. If I didn’t do this, we would not have food to eat. Once, 3 months after I’d given birth, my husband beat me for asking him to look after his children. Another time I had to go washing but after I came back from the washing he hadn’t taken care of the children and had gone to smoke instead. I complained about this and he beat me.[54]

Opium cultivation has had a devastating effect on Burma. The problem continues to grow, as the number of addicted youth and males rises. The damaging impact of opium cultivation touches almost every facet of human and economic development. It destroys lives and livelihoods, and weakens the country’s economy by damaging its productive labor force. Unless and until the government has the political will to stop opium cultivation–instead of receiving bribes from poor opium farmers—this problem will continue to spiral out of control.

It will be a long road to reshaping Burma’s trade policies to help foster sustainable development, but not an impossible one. With a strong commitment to sustainable development and smart trading policies, Burma can ensure their trade with the globe does not continue to compromise domestic wellbeing. Policy recommendations at the end of this paper will address steps Burma can take to develop more sustainable trading policies.

Investment

Much like Burma’s trade relations, foreign investment in Burma has a complex history, fraught with international tensions. Many of the trends seen in Burma’s trade—Western sanctions, importance of regional partnerships—are also seen in Burma’s investment policies and investment patterns. In 1988 when SLORC came to power and began the process of economic liberalization, they rewrote Burma’s investment laws.[55] In November 1988, Burma passed the Myanmar Foreign Investment Law (FIL), which, among other things, allowed 100 percent ownership by foreigners. In 1994 the Myanmar Investment Commission (MIC) was created “to vet proposed investment plans by examining their financial soundness, their economic and financial validity, and their technical aptitude.”[56] From 1988-1996 a geographically diverse group of investors poured money into Burma. During this time period, the United Kingdom was actually the largest investor in Burma.[57] In 1997, though, Western nations began imposing investment sanctions on Burma, changing the course of FDI in Burma for years to come.

Investment Sanctions

                Western nations, beginning with the United States, imposed investment sanctions on Burma for the same reason they imposed trade sanctions: Burma’s flagrant human rights abuses. As previously discussed in the trade section, after a series of events showed the Western world Burma’s disregard for democracy and human rights, the West imposed economic sanctions in hopes of creating positive political change. In 1997 the US banned any further investment in Burmese companies. Firms that were already in place in Burma could remain in business, but no new investment was allowed.[58]  In the mid-2000s the EU and Canada implemented very similar laws, banning any sort of further investment in Burma.[59] Sanctions from the West have forced Burma to look for regional partners to invest in their industries. As then next section will discuss, Burma’s neighbors have proven to be very eager to invest, and have established a large presence in Burma’s industries.

 

ASEAN Investment

Burma receives a large portion of their FDI from neighboring countries. No group is more important in Burmese investment than ASEAN. In 1998, all ASEAN Member states signed the ASEAN Investment Area (AIA). This agreement aims to “make ASEAN a competitive, conducive and liberal investment area,” and break down barriers to investment in ASEAN nations.[60] Among the AIA’s provisions, all companies in ASEAN member states are granted national treatment, various obstacles to investments are eliminated, and the investment processes is streamlined.[61]  As a result of these favorable investment policies, in 2010 38.1 percent of FDI inflows to Burma were intra-ASEAN.[62] The majority of this intra-ASEAN investment comes from Thailand, a major trade and investment partner with Burma. The following section will discuss Burma’s major investing countries, including Thailand, and some of the important bilateral investment treaties (BITs) Burma has with other nations.

 

Major Investors in Burma

                As previously mentioned, ASEAN plays a large role in Burma’s investment. The remaining 60 percent of FDI flowing into Burma comes from other regional partners, namely China and India. Burma has signed or is in the process of negotiating 6 bilateral trade agreements (BITs), 7 double taxation treaties (DTTs), and 13 International Investment Agreements (IIAs). This increase in investment policy agreements follows the global trend.[63]

                In the last few years, China—which has a BIT with Burma since 2001—has overtaken Thailand as Burma’s main investor. Given the intense secrecy with which investment data is harbored within the government, exact figures are unavailable, but estimates by third-party organizations for 2011 put Chinese investment at over $14 billion.[64] The bulk of this investment goes to fund hydroelectric dams, mining, and gas pipelines. Earlier this year a government official from the Burmese Chamber of Commerce summarized Chinese investment in Burma, citing “Jade and timber extractions in Kachin State. Oil and gas in Rakhine State and mining in other states. [China] invested in hydro-electricity power projects in many parts of the country. Presently, 34.5 of the country's total foreign investments are from China [out of more than 30 countries that are investing].”[65] A brief description of Chinese investment in these three major areas follows below.

·         Hydroelectric Dams   Chinese companies made international news this year after repeated calls by environmental groups and civil society groups called for the stop to the construction on the Myistone Dam. Chinese Power Investment signed a contract in 2007 to build seven hydroelectric dams across the country, the Mysitone being the largest. Efforts to stop the $3.6 billion Myistone dam were successful, but construction on the other six dams continue.[66] A 2008 report by Earth Rights International states that some 45 Chinese companies have been involved in over 63 hydropower projects in Burma, with the majority of power generated going back to China.[67]

·         Gas Pipelines   Massive construction on a Burma-China pipeline has taken place due to heavy investment from China, along with South Korea and Hong Kong. Three separate projects supply natural gas and crude oil (originating in the Middle East) through pipelines that run from Southern Arakan state across the entire country, through Shan State, and into Western China.[68] The combined cost of the three projects will total close to $3.5 billion.[69]

·         Mining   China has been investing in mining in northern Burma for year. Due to the remote locations of mining, and small-scale mining efforts, data on exact investment amounts is hard to come by. A 2008 Earth Rights International Report found 10 Chinese multinational corporations that implemented 6 mining projects in the previous 5 years.[70] In 2010 the Burmese government signed the largest mining contract to date, an $800 million dollar nickel mining contract with Chinese firm China Nonferrous Metal Mining (Group) Company (CNMC) in conjunction with the Taiyuan Iron and Steel (Group) Company.[71]

Chinese investment in Burma has continued to skyrocket in the past few years. China has access to vital natural resources by way of Burma, and Burma receives much-appreciated FDI in return. It remains to be seen if this extractive relationship will continue in the future, or if Burma will soon become more protective of its natural resources.

                Historically, Burma’s neighbor to the southeast, Thailand, has been one of Burma’s main investors. From 2005-2007 Thailand invested over $6 billion in Burma, with the next highest investor country (China) investing a mere $281 million.[72] However, in the past five years while Thailand has steadily increased their investment in Burma, investments by other Asian nations have grown exponentially. While China recently nabbed the number one spot as Burma’s top investor, Thai investments in Burma continue to be incredibly important. Thai investments in Burma last year hovered around $9 billion, the overwhelming majority of which is spent in the energy sector. The state-owned PTTEP operates the Zawtika gas project in the Gulf of Mottama, and partners with other foreign firms in offshore gas projects located in Yetagun and Yadana.[73] Over the course of five years, PTTEP has invested over 600 billion Bhat ($19.35 billion)[74] in the Zawtika project. PTTEP continues to sign agreements with the Myanmar Oil and Gas Enterprise (MOGE) and expand their access to new gas fields. With agreements signed in 2011, natural gas production and export to Thailand is expected to increase 8 percent in 2012.[75] Given their history of economic relations and close geographic proximity, it is likely that Thailand will continue to be a major investor in Burma. If political reforms continue on their current path, is it conceivable that other non-energy sector Thai industries will also be enticed to invest in Burma, too.  

 

Looking Forward: A New Burmese Investment Law

                With political reforms already underway in Burma, government officials are eager to instate economic reforms, as well. The current investment law is the original law passed by SLORC in 1988. A new law has been introduced into the Burmese parliament, and is currently being debated. It allows firms to be 100 percent foreign-owned, and protects firms against nationalization—two provisions already in the current investment law. Additionally, it would create new tax incentives for foreign investors and would allow foreign firms to lease land for business purposes. Two major labor provisions are included in the proposed law. The first mandates that all unskilled workers come from Burma. The second requires that an increasing percentage of skilled workers come from Burma, beginning with 25 after five years, increasing to 75 percent after fifteen years.[76]

While the law has not been passed yet, it is probable that the law as is, or with some small changes, will be passed in parliament soon. Government officials are eager to attract foreign investment, particularly from Western nations who were previously not allowed to invest in Burma.[77] Controlling investment will be a tall order for President Thein Sein and his government. A discussion of my policy recommendations regarding investment can be found in the last section of this paper.

 

 

Impact of Investment on Sustainable Development

                The main industries in which Burma receives FDI are all extractive industries. Drilling, mining, and building dams all have vast implications for the environment. There can be damage done to the land while extracting minerals and gas; harmful chemicals may be used in the production and extraction of these resources; and lastly, LARGE topographical changes take place during these processes.  In addition to the environmental consequences of these industries, though, in Burma human rights abuses go hand in hand with large-scale mining, drilling, and damming projects.  The following discussion centers around the impacts these major Burmese industries have on the country’s prospects for sustainable development.

Pipelines

                Major pipelines have been laid to channel natural gas from Burma to Thailand and China. In addition, pipelines are under construction that would allow crude oil from the Middle East to pass through Burma and into neighboring nations. Constructing the pipelines involved clearing of large areas of land, resulting in mass deforestation and subsequent endangerment many local animal populations. Oftentimes the chemicals used in drilling can leak into nearby land, and contaminate local water sources.[78] The process of gas exploration creates drilling muds, which, “contain volatile organic compounds, polycyclic aromatic hydro carbons, arsenic, barium, lead corrosive irons, naturally occurring radioactive materials (NORM) such as radium 226, and other hazardous substances.”[79]  These, too, can reach the water supply and ocean bed, and kill marine life. There is no such thing as hazard-free drilling: the environmental impacts from pipeline construction and operation are immediate and real.

Unocal and Total have been involved in the construction and operation of the Yadana and Yetagun natural gas pipelines since the 1990s. Burmese military forces provide security around the pipeline area. Earth Rights International (ERI), an international NGO, has published over ten reports documenting repeated human rights abuses committed by members of the Burmese military around the pipeline sites.[80] As ERI states in a submission to the United Nations,

From 1992 until the present, thousands of villagers in Burma have been forced to work under brutal conditions in support of these pipelines and related infrastructure, lost their homes due to forced relocation, or were raped, tortured or killed by soldiers hired by the corporations as security for the pipelines.[81]

 

It truly cannot be overstated what a devastating impact these projects have had on the lives of Burmese people. The disregard for human rights and the denial of both the government and transnational corporations involved is shocking and disheartening. The construction of such revenue-generating projects should not come at the expense of human development, but rather, should enhance it. Until the government acknowledges there are flagrant human rights violations and employs a strategy to fix the problem, foreign investment in natural gas will remain a massive impediment to Burma’s sustainable development.

Besides environmental degradation and human rights abuses, there is the issue of energy sustainability. There is a growing domestic need for energy, yet the government continues to export more and more gas out of the country in order to increase export revenues.[82] Of all of the natural gas produced in 2009, only 28 percent of it stayed in Burma.[83] Finally, gas is a finite resource. Burma has a proven recoverable reserve of 510 billion cubic meters of gas. In 2009 Burma produced over 12 billion cubic meters for export and domestic use.[84] Depleting their natural gas reserves at that rate, Burma has less than a 43 year supply of natural gas. Burma must do something to curb the rate at which they export and use natural gas, to avoid WASTING a precious resource for export, and becoming an energy importer themselves.

Mining

Mining is known around the world for being a dirty industry. It involves destroying land, and using harsh chemicals to extract wanted minerals. The Chinese mines in Burma are no different. The newest and largest $800 million nickel mine in northern Burma has many inherent risks. One of the main problems is the “post-mining remediation, particularly the lack of tailings management where the waste from the manufacturing process is safely disposed of. ‘This means there will be toxic downstream contamination for generations to come.’”[85] Contamination from mining damages ecosystems, and can be very dangerous for people living in and around the mining area. The toxic chemicals used in mining can create dead zones, where no food will grow, threatening local food security.[86]

There have been numerous reports that Burmese workers at the mines are not well cared for. Often the foreign mining companies care only about their bottom line, not about the rights and health of local employees. As a man in Shan State describes,

People from China came and built a new factory at [xxx] mine but they were only concerned with the factory operations and did not care about workers’ health or the environment. Even when workers and people became very sick from the poisonous smoke, the Chinese businessmen and the Burmese government did not say anything. When people began to die because of the black smoke, they did not say or do anything. They do not care about us.[87]

Workers are forced to work in hazardous conditions, and in many cases, have no course of action to take in order to voice their concerns or complaints. Women who work in the mines are also exposed to harmful chemicals, as well as their children, who often accompany their mothers to work.[88] For the economic benefit that Burma receives from its mining, it pays a large price in human and environmental development—one many Burmese people would argue, is just not worth the extra revenue.  

Hydroelectric Dams

Investment in hydroelectric dams—primarily from China—has accounted for billions of dollars poured into Burma in the past few years. While the promotion of renewable energy sources like hydroelectricity should be commended, unfortunately, the way the dams are planned and executed has had a negative impact on Burmese sustainable development. Building dams displaces local populations, disrupts ecosystems and natural fluvial patterns, and leads to social upheaval and human rights abuses.

The building of hydroelectric dams necessarily changes the topography of land. It diverts water from one source to another, and results in a floodplain. In doing so, it disrupts the ecosystems downstream from the dam. In the case of the seven dams slated to be built on the Irrawaddy Delta, 84 percent of the water in the Irrawaddy River will be affected and diverted by the dams. The floodplains will flood forests upstream that are home to an incredibly biodiverse group of organisms, threatening to kill many plants and animals.[89]

The floodplains not only disturb ecosystems, but villages, too. Displacement of towns and villagers is a major issue. In the constructions of dams on the Mekong River, land was actually taken from Burmese citizens by the government. Not only did they have to relocate, they did not receive compensation for the land stolen from them.[90] The Irrawaddy Delta dams displaced a total of 15,000 people from over 60 different villages. Many were forced into relocation camps, with little indication of where they would be moved next.[91] Being uprooted from a village affects every aspect of human development. Villagers may not be able to find new jobs, threatening food and health security for the family. Education for children is interrupted, sometimes for months and years at a time. Displacing thousands upon thousands of people to build a dam from which the people will never benefit is not compatible with the idea of sustainable development.

Moreover, many of the places where dams are being built are in ethnic territories. Ethnic minorities feel disenfranchised by the placement of dams, and feel their way of life is being unfairly threatened. In some cases, they are so angered that there has been massive social upheaval. During the course of construction for the Shweli dam in Shan and Kachin states, battles between the Kachin Independence Army and the Burmese military broke out. This led to increased military presence in the area, which only worsened ethnic minority/ Burmese relations.[92] Nowhere in the definition of sustainable development is there an allowance for civil war and human bloodshed. The impact of dam construction on human development in Burma has been overwhelmingly negative. If Burma is to remain on the path to sustainable development, they will need to reconsider how they negotiate and manage large-scale projects like hydroelectric dams.

 

Debt

Burma’s debt situation has only been made public in the last few months. The most recent data available through any multilateral organization were 2009 figures from the Asian Development Bank (ADB). The ADB reported Burma’s external debt at $8.19 billion.[93] In February of 2012, in a rare demonstration of transparency, Finance Minister Hla Tun reported that Burma had owed over $11 billion to creditors worldwide. According to Tun, $8.4 billion of Burma’s debt accumulated under General Ne Win, during his rule from 1962-1988.[94] Japan is Burma’s largest creditor, with loans totaling $6.4 billion. Other loans originating during that time period came from the World Bank, the ADB, and West Germany. After the military’s brutal crushing of the 1988 pro-democracy demonstrations, many Western nations stopped loaning money to Burma. In the post-1988 era, China has been Burma’s largest creditor, loaning them $2.13 billion.

After publicly announcing their debt, Burmese officials set out to negotiate with creditors to have some of their loans forgiven. In mid-April Japan announced that, “In order to support Myanmar's efforts for reforms in various areas towards its democratization, national reconciliation and sustainable development” they would forgive $3.72 billion (60 percent) of Burma’s debt.[95] Additionally, Japan has decided to reinstate development aid to the country to help build infrastructure. Burma is likely to enter into negotiations with other creditors in the future to try and come to a similar debt forgiveness agreement. With many countries on the international stage taking a more favorable and optimistic view of the situation in Burma, Burmese officials may be successful in negotiating away large parts of their debt.

Impact of Debt on Sustainable Development

Given the relative lack of detail about Burma’s real debt, it is hard to analyze its impact on sustainable development beyond a superficial level. To begin the analysis, I use the World Bank ratio of debt to exports. With the $11 billion figure announced in February, this puts Burma’s debt ratio at 182 percent. After Japan’s loan forgiveness, though, the debt ratio decreases to 121 percent. Given these figures, Burma’s debt seems to be at a sustainable level.[96] If other countries follow Japan’s lead in reinstating development aid, however, Burma will need to be cautious about the level of debt it accrues. There is no doubt that Burma needs large public sector investment in infrastructure, health, and education, however, financial officials need to ensure they are not accepting unsustainable amounts of aid from outside sources.

Policy Recommendations

Burma is at a crossroads in its history. For the first time in five decades, it shows signs of truly embracing democracy. Trade sanctions that have stunted economic growth since the end of the 1990s are quickly loosening, and countries and companies across the globe are eager to engage with Burma. With careful planning and a true commitment to growth and sustainable development for all, Burma could become one of the biggest success stories in Southeast Asia. The following recommendations assume that Western trade sanctions continue to be lifted, and that a new investment law much like the one currently in parliament passes.  

Political

Burma’s emergence onto the world stage in the past year has been largely attributable to their demonstration of a true commitment to democracy and reform. Reestablishing political and economic ties with many Western nations is a great opportunity for development—an opportunity that likely comes only once. The government must ensure it stays steadfastly on the path to democracy and development that serves all—not just the ruling party. It needs to show a commitment to upholding human rights, and engaging positively and productively with ethnic minority groups. Any misstep at this point would severely damage Burma’s reputation and potential relationships with new global partners.

Trade

Burma is still entrenched in the colonial division of labor, exporting primary commodities and importing manufactured goods. It should strive to diversify exports, produce more labor-intensive exports, and become more self-sufficient in all industries. Specific recommendations include:

·         Diversify primary commodity exports. The heavy reliance on natural gas and timber exports as sources of foreign exchange leaves Burma vulnerable to economic instability should anything happen to these industries. The government should encourage companies to export an array of primary commodities—particularly as new Western markets open up to Burmese exports.  

·         Set limits on natural resource extraction and strictly enforce them. The heavy reliance on natural gas, timber exports, and mining as sources of foreign exchange is unsustainable. At current consumption rates, extracting those resources is doing heavy damage to the environment, and endangering the future availability of reserves. With the help of economic and environmental experts, the Burmese government should set extraction limits on all mining, drilling, and deforesting industries. Strict monitoring and enforcement is key for this policy to be effective.      

·         Export higher value added goods; begin with timber. Burma is rich in natural resources, but loses out on a host of potential revenue by exporting products in their rawest states. Burma transports timber as raw logs, and receives bottom dollar for them. It does this, in spite of that fact that there is insufficient paper and paper board to meet domestic demand.[97] The government should invest in developing the timber industry to produce higher value added products—both in order to meet domestic demand, and increase the revenue generated from timber-related exports.  

·         Invest in the textile industry to make it globally competitive. The textile industry is Burma’s main non-commodity export sector. Before the 2003 sanctions were instituted, the industry had shown growth and promise. The Burmese government should put in place incentives (e.g. tax breaks) for textile firms to increase production and should aid firms in expanding into new markets.

·         Take steps to revive the Burmese tea industry. Opium cultivation in northern Burma threatens to reverse all the progress the country is trying to make. Farmers in Shan state used to pride themselves on producing high-quality teas. Reviving the tea industry and making it a viable option for farmers while cracking down on opium cultivation is essential to the healthy, sustainable development of Burma. The Burmese government should create a commodity board for tea. First and foremost, the commodity board will stabilize prices internally. More importantly, the Tea Commodity Board should seek to establish an international commodity agreement (ICA) with consumer nations.[98] While current regional trading partners are all relatively high producers of tea, recently opened Western markets would be a solid option for Burmese tea exports.

Investment

With the removal of Western investment sanctions, hosts of new transnational corporations are looking to invest in Burma. While opening the door wide to new investment can be tempting, Burma must take steps to ensure that inflows of foreign capital are stable, and that foreign investment benefits the people of Burma.

·         Institute capital controls on new investment. In order to control the threat of inflation and the risk of capital flight, Burma needs to institute stringent capital controls on international private capital inflows, much like Malaysia implemented in the 1990s.[99] Though they may be unpopular with some foreign investor countries, protecting Burma from inflation, capital flight, and other risks associated with investment is critically important.   

o   To safeguard against capital flight, put in place a trip-wire, speed bump mechanism that trips when the ratio of total foreign private investment to gross domestic capital formation exceeds a governmentally-predetermined percentage.[100]   

o   Institute a one-year, non-interest bearing reserve requirement for all foreign firms.

·         Require environmental impact assessments (EIA) before the adoption of any major project. Make EIA reports available to the public. Countless reports by Earth Rights International and other NGOs have reported that EIAs are not carried out before the start of major projects.[101] Without first conducting EIAs, the Burmese government is literally signing contracts blindly, and hoping the environmental effects are manageable. The government should require EIAs before any new dam, pipeline, or mining project can begin. Copies of the EIA need to be available publicly, particularly to people in the affected project zones.

·         Reserve a portion of all energy derivatives for local Burmese. Many of the investment projects taking place in Burma send fuel and hydroelectric power exclusively into neighboring nations. Unsurprisingly, the Burmese people feel as if they pay and enormous environmental price for these projects, without reaping the benefits. The government should enact policies that require any hydroelectric, gas, or oil projects to send a portion of the energy (or the equivalent in energy credits) back to the local community to power homes and businesses.   

·         Enhance communication of business development and construction plans with local communities. Many Burmese people—particularly those living in the ethnic regions—reported knowing nothing about major mining, damming, or drilling projects before construction began. Before starting any major project, the government should consult with local communities, and hear any concerns they have about the investment project. If a project is approved, the community members need to know exactly what the project entails, how it will affect them, and how they will be compensated for any lost land.

 

 

Debt

Burma’s current level of debt is within the realm of sustainability. However, there are tactics they can employ to lessen their debt burden, or use debt repayments more productively. While Burma’s debt ratio right now is sustainable, the country needs to be careful to take loans judiciously in the future to remain on a sustainable path.

·         Negotiate with creditors to lessen the debt burden. The government should try to engage with other creditor nations as it did Japan, to try and get some of their debt forgiven. If other creditors are unwilling to forgive debt outright, the Burmese government should try to agree to a debt swap for development or debt swap for nature agreement.[102]

·         Be mindful of debt ratio as new development aid is offered.  With Western nations and other economic superpowers lifting sanctions and reengaging with Burma, the opportunity for development aid is high. Burma desperately needs to invest in its public sector, but it needs to do so with a targeted, cost-effective approach. Burma should take development aid eagerly, but frugally, and invest it wisely.

*    *   *    *   *   *

Burma is at a crossroads in its history. The decisions the government makes in the coming months and years will decide whether Burma’s people are relegated to decades more of poverty and oppression, or freedom and prosperity. Adopting policies that lead to sustainable development will make or break Burma’s future. With the recent opening of Western markets to Burma, there are countless new opportunities for trade and investment. By managing foreign engagement well, and crafting smart, equitable policies, Burma can ensure their future is much brighter than their past.    

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[1] Robinson 2012

[2] CIA 2012

[3] Human Development Report 2010

[4] Freedom House 2012

[5] Frangos and Barta 2012

[6] Alamgir 2008

[7] Cairns 1997

[8] World Commission on the Environment and Development 1987

[9] Repetto 1986 

[10] Human Development Report 2010

[11] Van de Kerk and Manuel 2010

[12] Peace, Barbier, and Markand 1990

[13] International Trade Union Confederation (ITUC) 2009

[14] Kudo and Mieno 2007

[15] On August 8, 1988 Burma saw one of the largest non-violent protests in their nation’s history, led in large part by Buddhist monks and students. Demonstrators were brutally repressed by the military regime, and thousands were killed. The West came to call this demonstration the Saffron Revolution. For more on the Saffron Revolution and other pro-democracy protests, see Chapter 5 of this book.

[16] Ewing-Chow 2007

[17] Ewing-Chow 2007.

[18] US Department of the Treasury, Office of Foreign Assets Control 2008

[19] Australian Government 2011

[20] Ibid

[21] European Union 2010

[22] Government of Canada 2012

[23] US Department of State 2004

[24] US Department of State 2005

[25] House of Lords 2007

[26] McCarthy 2008

[27] “ASEAN leaders approve chairmanship bid” 2011

[28] ASEAN 2009

[29] ASEAN 2007

[30] ASEAN 2010

[31] Alamgir 2008

[32] Kudo and Mieno 2007

[33] All data in this section is from 2010, the most current export/ import data for Burma available through UN Comtrade’s official figures.

[34] International Trade Center 2012

[35] Ibid

[36] Kudo and Mieno 2007

[37] International Trade Center 2012

[38] PTTEP 2012

[39] Human Rights Watch 2012

[40] International Trade Center 2010

[41] Ibid

[42] Petras 1981

[43] International Trade Center 2010

[44] International Crisis Group 2012

[45] BBC 2012a

[46] Parry 2012

[47] Htun 2009

[48] Ibid

[49] Qtd. in Ewing-Chow 2007

[50] Alamgir 2008

[51] SYBC 2012

[52] Palaung Women’s Organization 2011

[53] Palaung Women’s Organization 2008

[54] Palaung Women’s Organization 2006

[55] Khine 2008

[56] Kudo and Mieno 2007

[57] Khine 2008

[58] US Department of the Treasury, Office of Foreign Assets Control 2008

[59] Government of Canada 2012; European Union 2010

[60] ASEAN 2012a

[61] Ibid

[62] ASEAN 2012b

[63] UNCTAD 2011

[64] Mizzima News 2012

[65] Qtd. in Mizzima News 2012

[66] Fuller 2011; Myers and Mydans 2012

[67] Earth Rights International 2008

[68] Earth Rights International 2011

[69] Reuters 2010

[70] Earth Rights International 2008

[71] Allchin 2010

[72] Khine 2008

[73] Kyaw 2012

[74] $1 USD = Bhat 31 (average of currency exchange rate over five year period)

[75] MCOT 2012

[76] International Crisis Group 2012

[77] Robinson 2012

[78] Shwe Gas Movement 2012

[79] Ibid

[80] Earth Rights International 2005

[81] Ibid

[82] Shwe Gas Movement 2012

[83] International Energy Agency 2012

[84] Francisco 2011

[85] Wade 2011

[86] Earth Rights International 2005

[87] Ibid

[88] Ibid

[89] Burma Rivers Network 2012

[90] Earth Rights International 2009

[91] Burma Rivers Network 2012

[92] Ta’ang Student Youth Organization 2011

[93] Asian Development Bank 2012

[94] BBC 2012b

[95] Takenaka 2012

[96] Using the WB formula, a debt ratio under 200-250 percent is considered to be sustainable.

[97] Htun 2009

[98] Coote 1996

[99] Grabel 2003

[100] Ibid

[101] Earth Rights International 2012

[102] Ruiz 2007