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The Strategic Value of Burma

Myanmar’s state newspapers ran commentary warning Aung San Suu Kyi, the leader of the opposition democracy movement, that her continued political activity is unlawful and that her plan to tour the country could provoke chaos. The last time she toured the countryside her motorcade was attacked by a mob, apparently aligned with the government. Miss Suu Kyi was blamed for that incident.

This quote comes from the “World this Week” section of the Economist from July 2nd, 2011, a little more than five months ago.  In the interim, the government of Myanmar has undergone a series of reforms, including de-criminalizing Aung San Suu Kyi’s National League for Democracy party and releasing 200 out of an estimated 2,000 political prisoners.  The progress is welcome, but why the sudden change of heart?

There are a lot of possible answers to that question and no shortage of speculation.  Secretary of state Hillary Clinton recently visited Suu Kyi and the head of the new civilian government, Thein Sein, in the first diplomatic visit by the country’s chief diplomat in more than a half-century.  Clearly, the United States has an interest in extending its hand to the country.  Given its strategic location right between two of the four BRIC countries (India and China) and its abundance of natural resources, including natural gas and oil, Burma is going to only become more important, strategically, over the next few decades.  I wrote extensively about this in a previous post titled “How Burma Will Modernize.”

Another possible explanation is that Burma is just one of several hard-line regimes around the world that are opening up to Obama’s conciliatory overtures to allow dictators to escape with their lives and treasure.  In an article titled “Pragmatism Drives Burma Reform,” the Bangkok Post writes:

If credit is due for reshaping the mindset of Burma’s leaders, then no small part of it should go to President Barack Obama who a short time after he was elected president in 2009 said to despotic regimes around the globe the US was willing to extend a hand if ”you are willing to unclench your first”. According to US diplomatic cables this struck a chord with the junta’s generals who were already laying down a ”roadmap to democracy” which resulted in last year’s election, the first in two decades which was criticised by some as a show to legitimise the generals’ shift to civilian rule. The US diplomatic cable from April 2009 said conversations with the generals indicated they wanted; an ”escape strategy”, the lifting of sanctions and to be accorded the respect shown to other world leaders. They were also seeking assurances that the older generals, after voluntarily ceding power, would not be stripped of their assets and face prosecution.

This, to me, seems reasonable.  Obama may be having some trouble on the domestic front, but his foreign policy is undeniably one of the best in recent memory.  This is a corollary of his strategy of “leading from behind” – instead of forcing enemies into submission, use a combination of hard and soft power and reconciliation to entice leaders into reform.  Harsh economic sanctions took a toll on Burma at the same time the Burmese government and people were feeling the imposing hand of China securing resources in their country.  By voluntarily issuing a series of political reforms, which will hopefully be followed by more, the Burmese government starts to become an ally of the United States – something that we wanted all along, given its strategic location next to China and the fact that the winds of change are increasingly blowing to the east.

This is a good example of how a smart foreign policy achieves its goals without trying to force change.  Creating a scenario in which we coax and welcome change, and set the conditions for its genesis, has given us Libya, Egypt, and now Burma.  Conversely, trying to create those conditions by force – eliminating the government and rebuilding the nation – has given us Iraq and Afghanistan.  This is why Obama’s foreign policy has been so successful. Clearly, his biggest challenge in the next four years (insha’Allah) will be Pakistan, followed by Yemen and Somalia – all borderline failed states with weak or non-existent governments, Islamic extremism, and a shared hatred of the United States.  If Obama can bring reconciliation and development to those countries, he might just have the best foreign policy of any modern president.

Develop Economies Music Recommendation

How Burma Will Modernize

Learning to read in Burma.

The photo on the header of this blog was taken in Bagan, a city in the center of Burma that is home to thousands of ornate Buddhist temples.  I was sitting atop another of the thousand temples that litter the skyline, wondering how such a stunning place could have so few visitors.  The temples in Bagan are relics of a once-prosperous society.  Today, the country appears frozen in time, its potential ruined by a repressive military government that has left Burma in a developmental stasis for the last thirty years.

The strategic geography of Burma is undeniable.

But all of that is changing now.  Traditionally, the West has always viewed Burma as a basketcase – a country rich in natural resources beset by post-colonial woes and chock full of human rights violations.  Despite its hideous record of government and poor economic growth, Burma has always had a few things going for it.  First, it has a wealth of natural resources.  Diamonds, natural gas, oil, etc.  Second, it is strategically located between two of the fastest-growing economies in the world, China and India.  Combined, China and India make up a third of the world population and are contributing an increasing percentage of the global GDP.  When speaking about the future of geopolitics and the world economy, these two countries are increasingly part of the conversation.  And Burma, the basketcase of East Asia, sits conveniently between these two rising giants.  Given that Russia lies further north, and Brazil dominates the Americas south of the Equator, Burma holds the distinction of being the only country in the world to sit directly in between two of the BRIC countries.

It makes sense that China and India would want to facilitate trade as efficiently and cheaply as possible.  To do that, only one thing stands in the way: Burma.  Given the Chinese government’s track record of long-term strategic thinking when it comes to developing its future trading partners, China has taken an active role in building up the infrastructure in a future vital trading partner.  On Burma’s western front, India is taking a similarly proactive approach in making sure it takes advantage of the country’s location and resources.  And, amazingly, it sounds like it could be a win-win-win situation:

A Hindu rite of passage. Day one in Burma

Watching these developments, some have warned of a new Great Game, leading to conflict between the world’s largest emerging powers. But others predict instead the making of a new Silk Road, like the one in ancient and medieval times that coupled China to Central Asia and Europe. It’s important to remember that this geographic shift comes at a very special moment in Asia’s history: a moment of growing peace and prosperity at the conclusion of a century of tremendous violence and armed conflict and centuries more of Western colonial domination. The happier scenario is far from impossible.

The generation now coming of age is the first to grow up in an Asia that is both post-colonial and (with a few small exceptions) postwar. New rivalries may yet fuel 21st-century nationalisms and lead to a new Great Game, but there is great optimism nearly everywhere, at least among the middle classes and the elites that drive policy: a sense that history is on Asia’s side and a desire to focus on future wealth, not hark back to the dark times that have only recently been left behind.

And a crossroads through Burma would not be a simple joining up of countries. The parts of China and India that are being drawn together over Burma are among the most far-flung parts of the two giant states, regions of unparalleled ethnic and linguistic diversity where people speak literally hundreds of mutually unintelligible languages, of forgotten kingdoms like Manipur and Dali, and of isolated upland societies that were, until recently, beyond the control of Delhi or Beijing. They are also places where ballooning populations have only now filled out a once very sparsely peopled and densely forested landscape. New countries are finding new neighbors. Whereas the fall of the Berlin Wall reopened contacts that had only temporarily been suspended, the transformations under way are enabling entirely new encounters. There is the possibility of a cosmopolitan nexus at the heart of Asia.

Readers of this blog know that I have a soft spot in my heart for Burma and its struggle.  I’ve often ruminated on whether anything good would ever befall the Burmese people.  But now, with two of the four BRIC countries looking to one another for a mutually-beneficial partnership in the post-American world, things are finally looking up.

Trekking to Inle Lake

I will close with a long paragraph from the Foreign Policy article quoted above that speaks to the optimism in the Far East:

A new friend.

It’s a fragile opening. The president seems determined to push ahead, but his is not the only voice. There are other powerful ex-generals in parliament and in the cabinet, and the structures of repression remain intact. Burma is at a critical turning point.

And now, for the first time, Burma’s politics matter beyond its immediate borders. If this opportunity for positive change is lost, Burma may remain a miserably run place — but it will no longer be an isolated backwater. The great infrastructure projects under way will continue, as will the much longer-term processes of change. Asia’s frontier will close and a new but dangerous crossroads will be the result.

But if Burma indeed takes a turn for the better and we see an end to decades of armed conflict, a lifting of Western sanctions, democratic government, and broad-based economic growth, the impact could be dramatic. China’s hinterland will suddenly border a vibrant and young democracy, and India’s northeast will be transformed from a dead end into its bridge to the Far East. What happens next in Burma could be a game-changer for all Asia.

As it turns out, rather than sanctions and a tourism boycott, simple economics might be just what Burma needs to become a vibrant democracy after decades of brutal military rule.  I will look forward to going back.

Here are a few of my favorite pictures from this amazing place.  The photos were taken by my friend, Gemma North, a fellow Kiva Fellow in Cambodia.

My first trip to the Kingdom

The Development Matrix: Wake Up

Two World Bank economists scientifically prove that first-world countries pay more than third-world countries:

Ask most people to name the most effective means of raising incomes of people in poor countries, and what would they say?

Microfinance? Perhaps not after the recent experimental assessments.

Deworming? It increased primary school participation and improved health, but in the short-term at least seems unlikely to raise household income.

Conditional cash transfers? This might be a popular answer, with evidence from a number of countries that they have increased household expenditure , schooling, and health outcomes. But even though Governments devote significant resources to such programs, the absolute annual increases in household income and expenditure are still at most US$20-40 per capita for participating households.

I bet that facilitating international migration is not very high up the list of interventions people think of. But it should be. In a new working paper, John Gibson and I evaluate the development impacts of New Zealand’s new seasonal worker program, the RSE. The figure below compares the per-capita income gain we estimate to those from microfinance, CCTs, and from my previous research giving grants of $100-200 to microenterprises. It is simply no contest!

Really?  The finding here is that seasonal migrant workers who move to developed countries make much more money than they could were they to participate in economic development projects?  The fact that this is even worth the ink it is printed on seems crazy to me.   Continue reading

Do Elections Improve Economic Policy? Democracy in Burma

Today, the people of Myanmar for the first time in twenty years will elect a new government.  Actually, they will simply participate in a rigged election process that will legitimize the repressive military regime that has controlled the country by force for the past half-century.  Under pressure from the West and perhaps craving a bizarro sense of legitimacy, the military is holding elections for the first time in twenty years, yet it has effectively guaranteed that the country will remain under its control.  No matter what, the military will maintain 25% of the seats in parliament and will control three key cabinet posts (defense, interior, and border).  The two main political parties are offshoots of the military.  And the ethnic regions in the east and north will not even be given the chance to vote, as it is “too dangerous” to man polling stations in these regions.   No foreign journalists or elections monitors will be allowed in the country and the flow of information has been stifled as the Internet is all but crippled.   Not exactly ideal conditions for creating a fair and truly participatory democracy.

This is the reality of these types of elections.  But this kind of outrageous and brazen election-rigging is not uncommon in countries like Myanmar.  Unfortunately, holding elections in countries that are not ready to have them is a core component of our foreign policy.  According to the theory, when leaders are voted into office in free and consistently-held elections, they have greater accountability in terms of supporting sensible economic policies that benefit the country.  This theory is true…in theory, but not always in practice The belief that elections are a necessary tool for creating economic growth is too simplistic, and lacks an understanding of the institutions that make democracies successful.  In order for elections to actually translate into positive policy reforms and economic growth, a country requires a system of checks and balances that prevents the incumbent party from using illegal means to secure its place in government.  What is happening in Burma right now is a perfect example of how a country without these necessary checks and balances is basically f-ed.

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Golfing in Burma’s New Capitol

Burma is a strange country.  It feels like the clock stopped in the 1950’s, and most forward progress along with it.  In the capitol city of Rangoon, everything is old – the cars, the buildings, the infrastructure, the money.  And this is the capitol, where most of the wealth in the country is concentrated.  Very little has been invested in modernization, mostly because it is tightly controlled by an authoritarian military junta that keeps the country isolated from the rest of the world.  Foreign Policy just included the country in its list of the 20 least free places on earth.  With the exception of other reclusive nations and kindred spirits, like North Korea, and trading partners trying to gain access to the country’s abundant natural resources, Burma keeps its distance.  A fraction of the money coming from the lucrative contracts with neighboring Asian countries for oil and gas exploration is reinvested in developing the country.  Despite money coming in, the country has its share of problems. Continue reading