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A legacy of mismanagement: the state of Burma'seconomy
by MungpiMizzima News - A legacy of mismanagement Part I 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 someexperts 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, whichhas for years produced research papers on Burma’s economy, as well asauthor of a recent in-depth publication on the history of Burma's financialinstitutions.
Mizzima:Sean, can you briefly explain to us the premise of what yourbook says about Burma and its financial evolution?Sean Turnell:My book, Fiery Dragons: Banks, Moneylenders andMicrofinance in Burma, is the history of Burma's financial system, itsbanks, 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 decadeBurma’s GDP has consistently grown by double digits. Do you thinkBurma’s economy is really growing as fast as the generals' claim? Howmuch do the GDP figures provided by the generals reflect true economicgrowth?Sean Turnell:I think those numbers are wildly inappropriate. Burma'seconomy has not been growing at anything like ten percent a yearbecause if it had Burma would now be quite a wealthy country. Clearly ithasn't been growing at that level at all. We think it's probably beengrowing at one-third of that over the last ten years.Mizzima:Could you tell us at what rate you think Burma's GDP is currentlygrowing?Sean Turnell:Well, we think at the moment it's about zero, but in the pastprobably 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'renot bringing in much growth at all. But the gas numbers have definitelypushed the numbers positive, but not anything like the ten percentclaimed by the regime.Mizzima:To what degree would you attribute the current estimated zerogrowth to the global economic crisis?Sean Turnell:While it's partly the after effects of Cyclone Nargis last year,but it is probably overwhelmingly at the moment because of the globalfinancial 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 sufficientemployment to see the Burmese population through the global economiccrisis, suggesting that Burma’s economy is surviving the global recession.How much do you think Burma’s economy is impacted by the globaleconomic downturn?Sean Turnell:Burma is not at all avoiding the latest financial crisis and it'simpacting the country in a couple of ways. First of all the gas earnings Imentioned earlier are way down compared to last year, but also in otherways. As we know, a lot of Burmese people live outside Burma and sendmoney home in the form of remittances. All of those numbers are likely tobe way down as Burmese people lose jobs overseas and as their incomesfall. 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 foreigninvestment is likely to be down too. If we look at the totality of all that plusthe regime's mismanagement of the economy, which is the one constantfeature, then I think we can say that growth is way down this year.Mizzima:As we know, the generals are earning billions of dollars annuallyfrom the sale of gas and oil. But with the fall in oil prices, how much doyou 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 ingeneral will have a big impact on the generals' wallets. It might not havesuch a big impact on the Burmese economy itself because the generalsdon't allow that money to come onshore. So, the people who are mostaffected by that part are actually the generals themselves. And the impactfor 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 in2007. 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 goesprimarily to the generals, will be down by quite a bit.Mizzima:Can you give us some idea as to the how much the generals aremaking from the sale of gas? And how much they might be losing from thefalling price of oil?Sean Turnell:At the peak, in 2007, the generals earned about 3.5 billiondollars from the sale of gas. We think that will be down to around the twobillion number. So, you can see it's quite a significant reduction. Butequally, the amount of money they are still taking in is quite significanttoo.Mizzima:With Cyclone Nargis devastating Burma’s main rice productionregion of the Irrawaddy Delta, some economists have predicted thatBurma’s economy, or at least the agricultural and rice production sector,will be badly damaged to the extent that it could potentially cause foodinsecurity. Sean, how much do you think Nargis has or will impact Burma’seconomy?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'sinteresting though, because I think with the broader food shortage issueit's less to do with Nargis and more to do with some of the institutionalfailures more broadly, and in particular the failure to provide rural creditand 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 along-term problem than it is about Nargis, but certainly Nargis would havehad a massive impact on the Irrawaddy Delta itself.Mizzima:Do you have an idea as to how much the government is actuallyspending, of its own money, to help the regions devastated by Nargisrecover?Sean Turnell:It's actually very little effort that is being expended by theBurmese regime on post-Nargis reconstruction. In fact, it seems they'revery much leaving that up to the international community, theinternational donors and so on. Again, the exact numbers are difficult toestimate, 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 communityhas spent in post-Nargis reconstruction. So, the regime is spending verylittle on that and leaving it up to the international community. This isanother way the regime could be using gas earnings in a more productiveway than they are at the moment.
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