Is Burma the next Asian Tiger? Jared Bissinger, writing at Foreign Policy, doesn’t think so. He lists seven myths about Burma’s economy and the recent reforms, concluding that all is not as rosy as the Burmese government and more than a few international businessmen might lead you to believe:
The economies of the Asian Tigers don’t look anything like Burma’s, which is driven by primary industries such as natural gas, agriculture, timber, jade, and minerals. Together these industries made up over 80 percent of exports last year. They also dominate foreign investment: oil, gas and mining alone comprised almost 90 percent of FDI over the last half decade. Burma’s rapprochement with the West has brought even more interest in these sectors. The new government signed deals for 10 oil and gas blocks earlier this year and is offering 23 more. They’re also awarding mining concessions and land for plantations. While there’s also some interest in telecoms and banking, it’s the extractive industries that are Burma’s main draw for potential investors.The Asian Tigers, by contrast, were mostly resource-poor and relied on export-oriented manufacturing to develop. Their foreign direct investment (FDI) was mostly in manufacturing, not resources. They also developed in a much different international environment, one with far fewer competitive exporting countries. They sold their wares mostly to the high-consuming countries of the West, the same countries that are now grappling with the lingering effects of the global financial crisis.
The resource curse will be Burma’s biggest challenge in the years ahead. How will the Burmese build a profitable economy on renewable, value-added resources instead of on its natural wealth, of which there is only a limited supply?Other problems loom: well-connected Burmese are getting rich but have only property to invest in, since banks are unreliable and there are few alternatives. At the same time, rural farmers, unable to make a profit on their produce, are withering under the burden of unregulated, high-interest loans from informal sources instead of actual banks. Bissinger writes, “Private banks are prohibited from lending to farmers at all—one of many needless restrictions inherited from socialist days past. The result is a system in which capital can’t get to the rural sector.” Infrastructure is atrocious, corruption widespread, and old ways of doing business persist, leading to what some point to as a growing oligarchy in Burma.It all amounts to a grim economic picture: “That the current economic reform program will bring broad-based development is the greatest myth of them all. The reforms to date are a mixed bag, with positive ones such as currency liberalization mixed with poorly designed moves like the new land laws.” Burma still has a long way to go before it can join the “rising Asia” club of sustainable economies.