Junta fails to respond to global financial crisis

by Moe Thu
Monday, 03 August 2009 13:25

Mizzima News - Myanmar’s military leadership is yet to become fully aware of the consequences of the current global financial meltdown, and thus has been unable to position the country to respond properly to the crisis, which has hit the poorest of the developing world like Burma.

Unlike regional neighbours such as Thailand and Malaysia, which have been making significant economic progress over a few decades, Burma is falling behind and probably falling apart as well, as it has not moved.

And the military leadership continues to pursue a concept that the over-50-million-poplulated country is immune to the global crisis.

The ruling generals think the country is in an isolation ward, which does not deal much with the outside world – especially the United States, the origin of the financial disease.

With their reasoning, the country’s economy is underdeveloped, referring to such things as no stock market, no multinational companies working, the fact that its banking sector is in a kindergarten stage, and another that the country need not worry about reserve currency as it does not have much. Official statistics show that Burma has reserve currencies valued at US$ 4.7 billion as of 2008.

The military leadership’s reasoning is good. A low level economy like Burma is staying on the ground floor unit of a multi-storied building, so it does not get hurt when falling out of a window. It can be much more painful, when staying on the 10th floor and falling out. It could be better if and when staying in the basement where there is no window to fall out. Indeed, the junta has put the country into the basement -- below the bottom of a community structure.

What has the junta done to keep out of the financial disease? The generals apply “administrative measures” such as closure of border trade, cancel licenses for imports and exports, and rounding up foreign exchange dealers.

To prove its immunity, the military government refers to official statistics. Due to the financial crisis, many of its neighbours suffer negative GDP growth rates, while the ruling elite continue to claim that the country is growing at a high rate. That’s the leadership’s own no-problem assumption.

No problem? There is a lot of it. The isolated, underdeveloped economy could not set up an isolation ward in this increasingly globalised world. That’s because of its underground or informal or non-official economy, being linked to the outside world.

For instance, the country imports Japanese made vehicles across the border.

Meanwhile, the illustrated basement is the last place upon and around which other buildings are tumbling down, when the world is in a crisis like a catastrophic earthquake.

Suppose trying to seal the border. In the mountainous land with forests and rough terrain, it requires resources, including thousands of special forces and hundreds of guard outposts. They must be provided with sufficient funds and equipment to close the border. However, no one guarantees they are honest in performing their duties.

Also look at the sea border, to patrol the coast costs ten times more than the value of goods kept out or in.

For official statistics, it deals with the formal or official economy. It is possible to have a high growth in this economy, while the global disease brings disaster to the country’s already-impoverished population. That’s because the majority of Burmese people live in a non-official economy, which is – in design or not – linked to the outside world, a primary reason why Burma gets devastated by the global crisis.

A significant result is that large human costs that the country’s young people and poor families have to bear in neighbouring countries and border areas – such as human trafficking and unprotected migrations. Whenever a crunch comes, the burden falls fatally on the poor and the masses at the lowest rung of society in a country like Burma. How can it be quantified? No monetary value could be placed on them and it can never be reflected in the official statistics.

So the idea that Burma need not worry about external economic shocks is alarmingly wrong. Other reasons to worry include undiversified economic structure, poor infrastructure, insufficient foreign reserves and limited administrative capacity that do not have effective shock-absorbers, resilient measures and safety nets to counter or cope with any kind of economic disturbance.

In fact, the vulnerability of Burma to get hurt by economic disturbances, especially those outside the border is the primary reason why the international community has recommended that it be given special treatment in aid, trade, debt relief and technology flows.

Given the fact that financial crises keep coming again and again in history in different parts of the world, the best thing a poor country like Burma can do is to join its neighbours and the international community in order to set up a better international financial system and its institutions.

It is not true Burma is not affected by the global crisis. Actually, it is helpless and does not have the capacity and means to protect itself, and it would be more devastating for Burma, which is, in turn, expected to take keen interest in the global financial crisis – its causes, consequences and remedies by undertaking economic reforms to become a modern, developed nation.