Daunting challenges amid the hope as Myanmar opens up

Asia New Zealand Foundation former executive director Dr Richard Grant travelled to Yangon in May 2012 as part of our inaugural track II (informal diplomacy) talks with Myanmar. As a first-time visitor, Dr Grant gives his perspective on the state of the country and the myriad challenges it faces as it looks to move beyond the shadow of military rule.

Yangon StationThe first thing that strikes you is the distance things have come since Myanmar’s new president took office in March 2011 – and how far things still have to go.

The second thing that strikes you is how daunting the challenges are. To a first-time visitor who knows Laos, Cambodia and Vietnam, Myanmar looks way behind. The challenges are on all sides: political, economic, human resources, infrastructure, knowledge of the outside world.

Internally, the word one frequently hears is “hope". Hope that the process is irreversible; hope that the government will deliver on its promises; hope that the outside world will support the reform process, and do so swiftly and consistently.

The Myanmar Government's priorities are fairly well articulated, both to the domestic audience and to the outside world – restoring peace; upholding the country' territorial integrity; bringing economic and social development.

Social and economic development are two gigantic tasks. This is a rich country, and could be another Vietnam easily if all goes right. But the last 60 years have seen Myanmar go from the richest country in Southeast Asia to the poorest. That seems to have been the driver of change – a realisation that Myanmar was dropping to the bottom in a region that is going to be at the centre of global growth for the foreseeable future.  

The years of isolation have cut into the fabric of a performing economy. Education needs massive investment. Because economic development is so low, children do not complete school, and are diverted into the subsistence labour market. Children might make it through primary school, but the dropout rate rises significantly from that point.

Universities are by and large a shadow. The military viewed them with utter suspicion, so people didn't go out of fear, or went and their studies were not of any great standard. The best graduates – and there are few of them – are taken by the military.  So the knowledge base is in the military, but it is also very limited.  The military are still in key positions in the administration but they have no technical knowledge in their fields.

And the military is also not used to consultation: giving orders is what it is about. 

Oxen being used to plough fields in Bagan, MyanmarThere are huge holes in the country’s data. We were told that about 65 percent of foreign trade is not documented. There has been no recent census, though one is on the horizon. Subsidies in the domestic economy distort the government's budget, such as it is. 

The floating of the kyat has been largely successful, but as foreign investment comes in, the risks of currency appreciation are very real, and that is not something that would help the poor. The floating rate will also mean that real returns on exports will be reflected in the daily economy, whereas in the past enormous rip-offs were possible for those who had exposure to the artificial exchange rates.

Much of the economy is still informal as well, particularly in the rural areas, so bringing this sector into the formal economy is going to take some time (decades, not months).

The legislative fabric is archaic. There are laws on the books from the colonial era. The new parliament is keen on passing legislation to change things, but they have no experience in either law-making or consultation. Bills get drafted and laws get passed without any discussion with the relevant sectors.

The population is still about 75% rural, and the rural economy is still the lifeblood of most peoples' lives.  Landholding, and the rule of law in the rural sector, is still very confused, if not arbitrary. The military is a large player in the economy.

Infrastructure demands are enormous. Even in the hotels in Yangon where the foreigners stay, brownouts – intentional cuts to reduce the electricity load – happen every day.  (The hotel I stayed in had several per day; and yet this is the hotel where the Korean president and India’s prime minister stayed as well.)  The Internet works, most of the time.  Mobile phones are everywhere, but are not compatible with the outside world. The transport network is like something from the 1940s.

And this is just Yangon. As one foreigner put it to me, Yangon and Naypyitaw are on different planets from the rest of the country.

On the political dynamics, my impression again is that there is hope. The by-elections were fair. Aung San Suu Kyi is inside the tent, and that means an enormous amount to many Burmese. The press is getting freer and more fearless. Association with foreigners is no longer a problem. While there still seems to be a bit of internal control, movement around the country for Burmese has freed up enormously. I was told, for instance, by one Burmese who regularly visited family in the north, that on the last few trips there had been no highway checkpoints.

Dr Richard Grant and other Track II delegates in front of the Shwedagon Pagoda  in YangonAs in similar cases in other parts of the world, the diaspora seems to be contributing, in cash and in kind. Remittances are assumed to be significant. There are large numbers of Burmese working in Thailand, India, Korea, and in other ASEAN countries - perhaps as many as two million.  Their remittances have been important, but until recently not easily transferable because of US sanctions hitting the financial sector.

The return of the highly skilled is desirable. That will increase tension in some ways, because they will command positions that the locals cannot do, but it seems to me that the advantages outweigh the short-term problem.

The outside world is seen as a real contributor to change. This ranges from the obvious desire to see international aid and technical assistance flow in, through to a more subtle view that having more international involvement helps make the risk of a return to the past more unlikely. 

Myanmar's international relations will be a challenge. It is wedged between India and China, and both have significant national interests in Myanmar and how it acts on the international stage.  ASEAN will be the main bulwark of defence for Myanmar. And, of course, Myanmar is chair of ASEAN in 2014.

A one-sentence summary: This country deserves its chance for change, and turning hope into certainty is devoutly to be wished for, but the uncertainties are daunting.

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Sajini Jesudason, from Wigram Capital Advisors, also took part in the Track II dialogues in Myanmar. She wrote this report on the country's economic issues and prospects:

The International Crisis Group has a good recent paper on Myanmar on its website:

First two images sourced under a Creative Commons Licence from Flickr users Stefan Munder and João Almeida.

Last updated: 16 Dec 2013