Economists Say Political Stability Key to Growth

By Kyaw Hsu Mon 2 December 2014

RANGOON — Economists have pegged the health of Burma’s economy to the political environment in the lead up to next year’s general election, saying instability or a failure to see reforms through could hamper economic growth in the impoverished Southeast Asian nation.

Though the government has frequently touted economic reforms implemented over the last three years, some observers have said that Burma’s economy is underperforming. Much of the foreign direct investment hype that surrounded the country’s opening in 2011 has failed to translate into concrete deals as prospective investors adopt a wait-and-see approach.

Slated for late 2015, the general election and political developments ahead of the poll are expected to have outsized influence on the country’s economic fortunes.

Aung Ko Ko, an economist and writer, said that while no one could predict where the Burmese economy will be a year from now, a recently proposed six-party dialogue among Burma’s political heavyweights would help determine its trajectory. The talks, endorsed unanimously by Parliament last week, would focus on constitutional reform.

“The six-party meeting will have consequences for what will happen next year,” Aung Ko Ko said. “There are only two outcomes: The economy will downturn or upturn.

“It’s an important meeting for us,” he added. “After the meeting, if the result is good, economic development will increase significantly. If not—if the recent situation holds until the middle of next year—economic development will slow.”

The proposed roundtable would involve President Thein Sein, National League for Democracy (NLD) party chairwoman Aung San Suu Kyi, the speakers of both houses of Parliament, commander in chief Snr-Gen Min Aung Hlaing and a representative from an ethnic minority party. However, both the president and Min Aung Hlaing have dismissed the dialogue, with presidential spokesman Ye Htut calling the proposal “impractical.”

In addition to an ongoing and divisive debate on constitutional reform, a controversial education law and lingering conflict between the Burma Army and a handful of ethnic armed groups have brought protestors to the streets of cities nationwide in recent months, shows of dissent that would have been nearly unthinkable under the former military regime.

“Many people have been saying that the FDI is increasing in Burma, but I think that the true state of affairs will play out after the election,” Aung Ko Ko said.

“Only about US$9 billion in FDI has come into Burma under this government, so most foreign investors are still watching the political situation before investing here,” he said.

The Myanmar Investment Commission estimated earlier this year that FDI would hit US$4-5 billion in the 2014-15 budget year. By the end of September, Burma had already seen almost $4.09 billion in foreign investment.

The Myanmar Investment Commission expects FDI to reach $6 billion in the next budget year, though it has not yet announced an official target.

Maung Aung, a senior economist at the Ministry of Commerce, acknowledged that many potential investors were waiting to see how Burma’s political situation unfolds next year.

“If the political situation improves, economic development will accelerate,” he said.

“What I’m concerned about is if the country’s political situation is unstable next year, this will directly hit economic development,” he said, adding that security was of paramount concern to would-be investors.

“Practically speaking, [development of] special economic zones in Burma is ongoing. The Thilawa SEZ will be done after next year, as well as the Dawei SEZ, so after finishing these SEZs, more investors will come. Let’s see what happens beyond next year,” Maung Aung said, adding that consensus should drive governance in the coming year.

“Leaders should have mutual understanding. This is not the time to argue with each other. We need better economic policy,” he said.

Khin Maung Nyo, also an economist, echoed Aung Ko Ko’s sentiment, tying economic performance in the coming year to political stability.

After Thein Sein’s administration took office in March 2011, the president in a televised address said that his administration wanted to triple Burma’s economic growth by 2016. It has grown more than 7 percent over the last two years.

In January, Thein Sein said the government was aiming for economic expansion of 9.1 percent in 2014-15, the region’s most ambitious growth rate target, for a country that remains one of Asia’s poorest. According to International Monetary Fund estimates published in August 2013, based on Burmese government data, the country’s GDP was $55.3 billion for the 2012-13 fiscal year, and was expected to grow to $59.4 billion in 2013-14.

Additional reporting by The Irrawaddy’s Nobel Zaw.