A legacy of mismanagement: the state of Burma's economy

by Mungpi
Friday, 03 July 2009 21:05

Chiang Mai (Mizzima) – With decades of economic mismanagement under military rule, and presently exacerbated by the global economic crisis, Burma’s economy is facing serious threats to the extent that some experts are predicting an impending food shortage in parts of the country. Meanwhile, the generals who have ruled the country since 1988 say Burma’s economy continues to grow annually.

To analyze Burma’s economic crisis, its causes and possible solutions, Mizzima's Assistant Editor, Mungpi, caught up with Sean Turnell, an Associate Professor in the Economics Department of Macquarie University in Sydney, Australia. He is a member of Burma Economic Watch, which has for years produced research papers on Burma’s economy, as well as author of a recent in-depth publication on the history of Burma's financial institutions.


Mizzima: Sean, can you briefly explain to us the premise of what your book says about Burma and its financial evolution?
Sean Turnell: My book, Fiery Dragons: Banks, Moneylenders and Microfinance in Burma, is the history of Burma's financial system, its banks, moneylenders and in particular microfinance, which is an area of some hope. It covers the last couple hundred years and is, in some ways, a history of Burma's economy.

Mizzima: Burma’s military leaders have said that in the past decade Burma’s GDP has consistently grown by double digits. Do you think Burma’s economy is really growing as fast as the generals' claim? How much do the GDP figures provided by the generals reflect true economic growth?
Sean Turnell: I think those numbers are wildly inappropriate. Burma's economy has not been growing at anything like ten percent a year because if it had Burma would now be quite a wealthy country. Clearly it hasn't been growing at that level at all. We think it's probably been growing at one-third of that over the last ten years.

Mizzima: Could you tell us at what rate you think Burma's GDP is currently growing?

Sean Turnell: Well, we think at the moment it's about zero, but in the past probably three to four percent. It is very much driven by revenue from natural gas. Other areas of the economy are in a very bad way, so they're not bringing in much growth at all. But the gas numbers have definitely pushed the numbers positive, but not anything like the ten percent claimed by the regime.

Mizzima: To what degree would you attribute the current estimated zero growth to the global economic crisis?

Sean Turnell: While it's partly the aftereffects of Cyclone Nargis last year, but it is probably overwhelmingly at the moment because of the global financial crisis and the way it's pushed gas prices, as well as the volume of gas exported to Thailand, down. Thailand's been slowing as well.

Mizzima: Prime Minister Thein Sein has said Burma has sufficient employment to see the Burmese population through the global economic crisis, suggesting that Burma’s economy is surviving the global recession. How much do you think Burma’s economy is impacted by the global economic downturn?

Sean Turnell: Burma is not at all avoiding the latest financial crisis and it's impacting the country in a couple of ways. First of all the gas earnings I mentioned earlier are way down compared to last year, but also in other ways. As we know, a lot of Burmese people live outside Burma and send money home in the form of remittances. All of those numbers are likely to be way down as Burmese people lose jobs overseas and as their incomes fall. Also, Burma produces commodities – beans, pulses, rice – for export. The prices of those are going to be down as well. And finally or course, Burma attracts a small amount of foreign investment and that foreign investment is likely to be down too. If we look at the totality of all that plus the regime's mismanagement of the economy, which is the one constant feature, then I think we can say that growth is way down this year.

Mizzima: As we know, the generals are earning billions of dollars annually from the sale of gas and oil. But with the fall in oil prices, how much do you think the generals' income will be impacted? Do you have any sort of statistics that may give us a rough idea?

Sean Turnell: The current fall in gas and oil prices and energy prices in general will have a big impact on the generals' wallets. It might not have such a big impact on the Burmese economy itself because the generals don't allow that money to come onshore. So, the people who are most affected by that part are actually the generals themselves. And the impact for them will be quite significant. If you look at gas prices at the moment, they're nearly down by one-half from where they were at their peak in 2007. Plus the volumes that are being exported to Thailand are down a little bit as well. So, the reduction in revenue earned from gas, which goes primarily to the generals, will be down by quite a bit.

Mizzima: Can you give us some idea as to the how much the generals are making from the sale of gas? And how much they might be losing from the falling price of oil?

Sean Turnell: At the peak, in 2007, the generals earned about 3.5 billion dollars from the sale of gas. We think that will be down to around the two billion number. So, you can see it's quite a significant reduction. But equally, the amount of money they are still taking in is quite significant too.

Mizzima: With Cyclone Nargis devastating Burma’s main rice production region of the Irrawaddy Delta, some economists have predicted that Burma’s economy, or at least the agricultural and rice production sector, will be badly damaged to the extent that it could potentially cause food insecurity. Sean, how much do you think Nargis has or will impact Burma’s economy?

Sean Turnell: Nargis will have a big impact, and in particular in the area of the delta itself. A lot of people are in a terrible position down there. It's interesting though, because I think with the broader food shortage issue it's less to do with Nargis and more to do with some of the institutional failures more broadly, and in particular the failure to provide rural credit and the failure to provide a lot of the infrastructure that farmers need. So, to some extent I think the broader food shortage problem is much more a long-term problem than it is about Nargis, but certainly Nargis would have had a massive impact on the Irrawaddy Delta itself.

Mizzima: Do you have an idea as to how much the government is actually spending, of its own money, to help the regions devastated by Nargis recover?

Sean Turnell: It's actually very little effort that is being expended by the Burmese regime on post-Nargis reconstruction. In fact, it seems they're very much leaving that up to the international community, the international donors and so on. Again, the exact numbers are difficult to estimate, but we get a feeling that it is somewhat less than 100 million (U.S. dollars), so it's less that a-third what the international community has spent in post-Nargis reconstruction. So, the regime is spending very little on that and leaving it up to the international community. This is another way the regime could be using gas earnings in a more productive way than they are at the moment.