Can Reform Come to Myanmar?

Clinton's visit is historic. But without economic reform, political change will never occur.

The Obama administration has taken an important step in its efforts to foster political change in Burma: Yesterday Hillary Clinton became the first secretary of state to visit the country in half a century. The initial announcement of Clinton’s visit came just hours before famed opposition leader Aung San Suu Kyi announced that her political party would formally reenter the political system and that she herself would run for parliament. The twin announcements were celebrated by many as signs that genuine political reform, however limited, is underway.

But political reform will not be sustainable in Burma without addressing the country's serious economic troubles. Burma's economy is in dire straits, and many of its people live under conditions of crushing poverty. Economic reform is essential both to further political reforms and to help ensure they are durable.

The Obama administration has focused on political change—particularly the important goals of releasing political prisoners and ending human-rights abuses in ethnic areas. But it has done little in the way of offering concrete support for addressing the country's enormous economic woes. Getting Burma on a path to economic change should be part of a larger reform agenda advanced by Secretary Clinton.

Burma has suffered from five decades of government mismanagement. Failed experiments with socialism by way of crony capitalism have left the country devoid of the institutions necessary for economic growth. The country's public finances are in disarray and its export sector a disaster. Private enterprise is capital starved and underdeveloped. Problems are most dismaying in rural areas, where an estimated 36 percent of the population lives below the poverty line. As one Burma analyst noted, poverty is quickly becoming the greatest threat to human rights.

To change course, Burma will ultimately need to implement a comprehensive set of reforms, which include overhauling its banking system, establishing a reliable regime of property rights, and making significant investments in health, education, agriculture and infrastructure. That obviously will not be done overnight, but a very modest beginning can have important political as well as economic consequences

There is much the United States, ASEAN and our other friends can do to help.

To start, Secretary Clinton can commit to providing assistance to the country’s farmers through microfinance and agricultural-loan programs. Agriculture accounts for over half of the country's employment and well over 50 percent of GDP, yet rural cultivators largely scrape by at subsistence levels because they cannot afford productivity-enhancing inputs such as fertilizers and seeds. Expanding access to rural credit could go a long way towards developing the rural economy.

Assistance for education and health are also badly needed and can have some relatively quick results. The country's education and healthcare systems have been in ruin for decades. Just 50 percent of students finish primary school, and the once-impressive higher-education system has been decimated. High rates of malaria, tuberculosis and HIV/AIDS could be further attacked via international health NGOs.

Making small investments in Myanmar's rural economy and providing support for health and education allows the United States to deliver direct relief to the people of Burma and demonstrate America's commitment to the country's social and economic development. It is essential for the nongovernmental community and particularly Suu Kyi’s National League for Democracy party to be a part of this approach.

Of course, the true engine for development—economic growth—cannot be achieved through aid alone. It will require institutional reform and responsible international trade and investment. This, in turn, will require the United States and the international community in time to reconsider their sanctions policies towards Burma.

A carrot-and-stick approach to sanctions is required politically. In the short term, the United States could lift restrictions that limit the ability of international financial institutions like the International Monetary Fund and World Bank to offer technical assistance (not loans) in Burma. Following decades of isolation, Burma lacks indigenous technocrats and will require outside help to carry out the sweeping reforms necessary to get its economic house in order.

U.S. leaders have made clear that a full removal of sanctions, including an end to trade embargoes and investment bans, will be gradual and contingent on genuine progress on political and economic reforms. Burma's authorities should be expected to advance a credible plan for fixing its economy, including improving transparency measures and raising state spending on social services.

The speed with which reforms have taken place in Burma in recent months has been surprising. But many believe the administration is moving too fast, that Burma’s authorities have not done enough to merit a reconsideration of U.S policy towards the country. This is a question the administration needs to face in a difficult political environment. But significant political reform is hard to sustain under the weight of grinding poverty and economic dysfunction. Providing in the short-term some modest, clearly focused, concrete economic assistance is more likely to further both political and economic progress. It is worth the risk.

Pages