Nobel Laureate points out flaws in Burmese economy

Tuesday, 22 December 2009 19:00 Mungpi

New Delhi (Mizzima) - The high cost of rural credit, low investment in education, and lack of participatory political process has dragged down Burma’s economy, Prof Joseph Stiglitz the Nobel Prize winning economist said.

Following his trip to Burma last week, Prof Joseph Stiglitz on Monday held a press conference in Singapore and told reporters that he had advised Burma to reform its rural credit system, invest more on education and open up political participation, in order to sustain its economy.

“Without an intensive effort to develop, Burma may fall further behind, ‘In economics you have to run to stay still. The world is changing and you have to change too’,” Prof Stiglitz said.

At the press briefing, a transcript of which was received by Mizzima, Prof Stiglitz said he had advised the Burmese generals to increase investments in education, as the gap between educated old people and the uneducated younger generation is getting bigger.

Burma has many well educated people in their fifties but there is a big gap emerging between these old people and the younger generation, Prof Stiglitz said.

“If you don’t renew your human capital it depreciates just like human capital,” Prof Stiglitz said. “Current investment levels in education are not enough to renew human capital at the level the country requires.”

The former World Bank Chief, during the press conference organized by the United Nations Economics and Social Commission for Asia-Pacific (UNESCAP) said, the cost of credit in rural areas of Burma is as high as 10 per cent a month, and that hinders farmers from realizing their full capacity.

“The cost of credit in rural areas is as high as 10 per cent a month. It is very clear from the evidence that this is a real problem with credit…irrigation increased agricultural potential but because farmers could not get credit to buy fertilizer and seeds, they could not realize their full potential,” Prof Stiglitz said.

According to Dr. Sean Turnell, Associate Professor at the Department of Economics of Macquarie University in Australia, Burma’s rural credit system has totally collapsed with no cash available.

Turnell, in an earlier interview to Mizzima, said the Burmese government needs to revive the rural credit system by pumping in cash earned from selling its natural resources including sales of oil and natural gas.

The Nobel Prize winning economist said he had also advised the Burmese generals to use the money earned from sale of natural resources for widespread development, urging “the government not to squander this opportunity.”

Prof Stiglitz told the Burmese government that “You can’t separate economic and political processes. If you want to achieve political and economic stability then you have to engage in participatory processes.”

“We hope that this is a moment of change. It would be a mistake to miss this opportunity,” he added.

Prof Stiglitz was visiting the military-ruled Southeast Asian nation on the invitation of the UN Under-Secretary-General and ESCAP’s Executive Secretary Noeleen Heyzer, who organised a series of seminars on development and poverty reduction.

During the trip, the Nobel Laureate was able to visit various places and meet local officials and get a sense of the country side and the villages.

Prior to his visit, some critics expressed concern that the economist’s expert advice might fall on deaf ears, as the Burmese military government, that has ruled the country for nearly half a century, is known to be less interested in developing the country but are only determined to hang on to power.

Despite the speculation, Prof Stiglitz said he was encouraged by the reaction of the Burmese Minister of Agriculture and Irrigation Maj-Gen Htay Oo and Deputy Minister of Economics, who were attentively listening and asking numerous questions.

“We were told later by some of the foreign diplomats that this event was a 'major breakthrough' and that they had never heard of this kind of discussion in public before, and that this may have been the first time the military had heard these sorts of things,” Prof Stiglitz said.