Aung San Suu Kyi-Economy

Aung San Suu Kyi

After decades of economic disasters carried out by the military in the name of socialism, Myanmar’s economy was handed over to Aung San Suu Kyi in ruins. Even though she has pushed forward general efforts for liberalisation and economic development, the National League for Democracy seems to be “unsure of its economic agenda”, and the measures put in place have been too abstract to reach significant improvements. Yes, there have been some advances, but there is a lot left to be done, especially in regards to illicit markets and those minority groups who are most overlooked by the government.
Moreover, as the country suffers western sanctions, enforced as a punishment for human rights abuses, Suu is forced to hide behind powerful and care-free allies like China’s Xi Jinping. Unfortunately, as Myanmar’s economy becomes more reliant on Chinese trade, it becomes harder to influence Suu’s actions towards the minorities.

Inherited Numbers

As the military took over Myanmar in 1962, it established the “Burmese Way to Socialism”, a totalitarian strategy towards isolationism and socialism. This ideology ravaged the country, and transformed it from one of the most prosperous nations in Southeast Asia, to one of the most impoverished ones. Decades later, as Thein Sein became president in 2011, he pushed forward several economic liberalisation reforms and anti-corruption efforts, and even though Suu came to power after several years of attempted liberalisation, the traces of the Burmese Way to Socialism remained highly visible, and thus, she “inherited high inflation, sizeable budget and current-account deficits, a volatile exchange rate, and institutions both ossified after decade of corruption, stagnation and top-down rule”.

When the National League for Democracy won the 2015 elections, Myanmar’s GDP per capita was the second lowest in Southeast Asia, lingering at $1204, only a fifth of that of Thailand’s. Its tax takes averaged 7.5% of its GDP in 2017, making it one of the lowest in the world, in comparison to 16% of GDP in Thailand and 14% in Cambodia.

Unfortunately, the taxes that were collected were not spent appropriately. From 2007-2010 only 1% of Myanmar’s GDP was spent on education -not even a third of regional average- which can be reflected in the 9 out of 10 students that give up on their education before finishing high school. Moreover, the military regime emphasized the importance of agriculture during its rule, and by the time Suu came to power, 70% of the economy was directly or indirectly related to agriculture. However, it became a trap for the Burmese citizens who were involved in the industry, as the main source of credit was the Myanmar Agricultural Development Bank, a state-owned enterprise that charged 10% of its loans per month, leaving farmers more indebted than before they entered the agreement.

On top of a disastrous internal economic structure, the military’s brutal rule had caused international condemnation in the form of embargoes and sanctions. Between 2003 and 2016, the United States and the OECD imposed targeted comprehensive sanctions against the regime, which caused asset freezes, trade embargoes and financial restrictions. Consequently, Myanmar had to rely on a handful of trade partners to stimulate its economy, causing 93% of its trade to be with its top 10 partners, with 65-67% of which taking place with China and Thailand alone.

And so, as The Lady stepped into power in 2015, not only did she have to coordinate a proper democratic transition for which she had fought her entire life, but she also had to ensure that her people stepped out of the poverty and penury that the Burmese Way to Socialism had left.

Unfortunately, the reforms she has pushed forward during her time in office have been a mere continuation of the status quo, a perfunctory “neoliberal approach to economic management.” Nonetheless, it is -once again- difficult to determine to what extent this uncommitted attitude is caused by the controlling shadow of the military reigning over the Burmese parliament, or by Suu’s leadership choice.

Changes after Suu

Months after the 2015 elections, Suu announced a 12-point plan intended to boost foreign investments and to aid small businesses. In 2018, her government unveiled 238 non-binding measures to improve the economy. And even though these (and other) announcements lacked the sufficient detail to understand how it would develop, Myanmar’s economy has shown some improvement since the beginning of her rule.

By issuing bonds to reduce the fiscal deficit instead of relying on the Central Bank, Burmese inflation was reduced from 10% in 2015 to 6.5% in 2017. Similarly, between 2016-2017, the economy grew 5.6% and overall poverty levels fell. The textile industry, an important sector to the Burmese economy, grew ten times its size between 2008-2018, and now constitutes 8% of Myanmar’s GDP. These improvements were mainly achieved through foreign (Chinese) investment, but also through other specific measures that Suu’s government pushed through.

For instance, in an effort to reduce the influence and power of the 31 State-Owned Enterprises (SOEs), Myanmar joined an Asian forum on how to best monitor them. These enterprises provided for half of the government’s revenue in 2018 (excluding foreign aid), and they collect 12% of all fiscal revenue. Consequently, Suu’s decision to become a member of this Asian forum has allowed restrictions on highly influential and detrimental economic actors. Similarly, the government has expelled its ex-finance minister, Kyaw Win, for corruption and for falsifying his PhD.

However, there are still a lot of possible improvements in the economy, especially in regards to its illegal sectors and their irregularities. For example, Myanmar produces 70% of the world’s jade, but this industry is controlled by the military and is constantly threatened by rebel groups. Consequently, ⅔ of the market is illegal, making it extremely dangerous for the workers due to landslides and other possible threats. Similarly, the illicit drugs market constitutes between 1-2% of the country’s GDP, as Myanmar has become the second-largest source of opium and heroin.

Moreover, this industry has also become a national issue, as an estimated 30% of the population uses heroin or meth, and as it has become a source of income for most rebel groups. While the population suffers the dangerous effects of a largely informal and illicit economy, Suu’s pressure mounts to push forward economic reforms that will include even the most isolated groups.

Suu’s efforts have truly resulted in a general improvement of the Burmese economy and have slowly eradicated the remnants of the military regime. Unfortunately, there is a substantial amount of work left for her to do, especially as she faces the economic consequences of the COVID-19 pandemic.

Foreign Trade

One of the toughest measures that the military regime imposed on Myanmar on behalf of the Burmese Way to Socialism, was economic isolation. During the 60s, they limited foreign trade to a minimum, and it wasn’t until the late 20th century, when trade with China and Thailand was legalized, that the military junta decided to slightly open up to the world in order to stimulate its dying economy. Currently, Myanmar’s biggest export is natural gas, and it is followed by pulses, teak and minerals. It mostly imports machinery and equipment, as well as general consumer goods. Because of the strong sanctions imposed by the United States and Europe, especially after the Rohingya genocide, the country is forced to carry out most of its trade with southeast Asian countries, most notably China.

From day one, Xi Jinping has made a great effort to build a strong relationship with Suu. He was the first leader to send a representative to pay respects for Suu’s victory in the 2015 elections, and he has invited her to Beijing numerous times to “praise her efforts” alluding to their paukphaw (blood affinity). Xi has also secured its economic relationship with Myanmar through the Belt and Road Initiative (BRI). In 2018, talks of this agreement commenced, and in early 2020 the two countries signed 33 bilateral agreements which included rail and deep-sea port projects. As part of the BRI, the two states agreed on the China-Myanmar Economic Corridor, which is meant to connect the Yunnan province to Mandalay by road, rails, and gas and oil pipelines. Similarly, it is meant to push forward the massive urban development project known as the Yangon City Project. 

Suu’s government has clearly seen China as a lifeboat for their sinking economy, which is being drowned in Western sanctions and embargoes. Nonetheless, the BRI has proven to be part of a very aggressive Chinese agenda, and its investment decisions seem to be driven by Xi’s geopolitical needs rather than genuine hope for development. It seems that the rise of China next door can easily overwhelm the Burmese through deceitful agreements. Economically isolating Myanmar through sanctions as a Western means to punish severe human rights abuses leaves the country unprotected against the influence of a country that has proven to disregard the importance of human rights. As the former president advisor Thant Myint-U pointed out; “China should loom large in anyone’s analysis of Burma’s future.”