An Analysis on Myanmar Government’s Reforms

He Guiquan

Since U Thein Sein took office as president of the Union of Myanmar in March 2011, the Myanmar government has executed a range of bold and resolute reform measures which include taking the initiative to have reconciliation with the political opposition and carrying out democratic reform,signing ceasefire agreements with ethic armed organizations to actively push forward national reconciliation, strengthening macro-regulation and improving the environment for economic development, and paying more attention to people’s livelihood.Such bold reforms taken from above exceeded the expectations of the international community. While welcoming the reforms in general, people, both in and outside Myanmar, also have differing views on the motives of the reforms carried out by U Thein Sein, with a few even doubting his sincerity in doing so. This article attempts to make an analysis on the motives,difficulties and prospects of the reforms from the approach of state transition strategy on the basis of reviewing the reform measures adopted by the Myanmar government.

I. Bold and Pragmatic Reforms

In his Inaugural Address, President Thein Sein expressed in explicit terms that he would push forward democratic transition of the state, realize national reconciliation, strengthen rule of law and good governance, and improve people’s basic civil rights and social, economic and educational conditions. Such propositions are obviously different from the position of the former military government, but few people both in and outside Myanmar had much hope toward the new government led by U Thein Sein. As free-lance journalist Larry Jagan put it,“A new quasi-civilian government has taken over in Burma, but diplomats, analysts and pro-democracy activists are dismissing it as nothing more than ‘old wine in a new bottle’.”Yet in a short span of one year and more, the Myanmar government led by U Thein Sein has taken a series of reform measures that are beyond one’s expectations.

Politically, the Thein Sein government adopted a reconciliatory position and earnestly promoted democratization reforms.

First, the government took the initiative to show favor with the leader of the National League for Democracy (NLD), the biggest opposition party in Myanmar. In August 2011, U Thein Sein held talks with Aung San Suu Kyi and expressed to her his aspiration for sincere reforms. The Thein Sein government also proposed to revise the election law and cancelled the“Aung San Suu Kyi Clause”that forbids persons sentenced to prison to participate in political party, thus enabling the NLD to be reregistered as a legitimate political party. The NLD took part in the parliamentary by-elections on April 1, 2012 and won 43 out of the 45 seats under contention, thus entering the parliament.What is more, Aung San Suu Kyi was historically allowed to attend the East Asia Meeting of the World Economic Forum and visit five European countries and the United States. During his recent visit to the United States, U Thein Sein praised Aung San Suu Kyi in public and said he would accept her as president if the people accept her when talking about the possibility of her becoming president.

Second, political prisoners have been released. By January 2012, the government had released more than 300 political prisoners. On September 17, another batch of more than 500 prisoners were released, among whom at least 80 were political prisoners.

Third, press and media censorship has been loosened. The government began to slacken censorship on press and the media not long after U Thein Sein took office, such as narrowing the scope of censorship on publications and opening such banned websites like Skype, Yahoo and YouTube. On August 2012, the Ministry of Information of the Myanmar government announced the abandoning of press censorship and on September 17 it announced the establishment of a more independent ad hoc Press Commission to exercise management over the media pending the enforcement of the new Media Law.

Fourth, measures were taken to earnestly improve and protect the basic rights of the people. In September 2011, the National Human Rights Commission was set up in Myanmar. In November that year, U Thein Sein signed the Peaceful Gathering and Peaceful Demonstration Law. And in March 2012, the new Labor Law was promulgated and put in force.

Famous opposition figure Aung Zaw said that the new Myanmar government had taken more political reform measures in the past less than a year than what were taken by the former military regime in 20 years. Political reform is the brightest spot in the entire reform made by the Thein Sein government. It not only unfolded the process of inclusive politics in Myanmar and served as a key step toward national reconciliation but also demonstrated the government’s resolve in pushing forward political reform as more attention has been put on improving and protecting the basic rights of the people.

With regard to the ethnic problem, the Thein Sein government launched the peace process and advocated political solution for the ethnic problem. In August 2011, U Thein Sein called for all ethnic armed groups to take part in peaceful negotiations and set up two peaceful negotiation groups to be in charge of peaceful talks with all major ethnic armed groups. Up till now, armed groups participating in the talks except the Kachin Independence Organization have all signed ceasefire agreement with the government. Similar in contents, these agreements cover the following major elements: ending fighting and realizing ceasefire; setting up a liaison office; informing the other side of any military action outside the area of jurisdiction; and holding further talks in the future.

The signing of ceasefire agreements is just the first step toward national reconciliation. On March 1, 2012, U Thein Sein put forward in clear-cut terms in his address to the parliament a three-step roadmap for national reconciliation in the spirit of the Panglong Conference: step one, conducting talks at the level of states and realizing ceasefire; step two, holding talks on some major issues at the Union level; and step three,signing agreement in the parliament by all political participants including the government, leaders of various ethnic groups,various parties and political forces, and representatives of the people and making a promise for lasting peace in the principle of mutual understanding, equality and development. The first step has been accomplished by now and the second step has been started. On May 17, the Central Committee for Peace chaired by U Thein Sein and the Work Committee for Peace headed by vice president Sai Mauk Kham were established in Myanmar for the purpose of promoting peace negotiations between the government and various ethnic armed forces to realize lasting peace in the country.

U Thein Sein showed his utmost sincerity in spite of the fact that considerable differences still exist between the roadmap and demands of the ethnic armed groups. First, he explicitly put forward that national reconciliation must be reached by all interested parties, which is more extensive than the three-party talks (the military, NLD led by Aung San Suu Kyi and ethnic groups) proposed by the ethnic organizations. Second, he clearly proposed the principle of mutual understanding, equality and development, which reflected the ethnic people’s fundamental interests in spite of the fact that the roadmap failed to mention directly the Union spirit and the self-rule principle.

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In the economic field, the Thein Sein government has implemented a series of pragmatic reform measures. The first is to encourage export. The government has twice reduced export tariffs, from 10% to 7% in June 2010 and further to 2% in August. The second is to improve people’s livelihood and increase input into education and public health. In late June 2011, the Thein Sein government announced to raise pensions for public servants who retired before January 1, 2010, with the minimum per-month pension raised from 750 Myanmar Kyat(MMK) to 20,000 MMK. Compared with the previous budget,the 2012-2013 budget increased input into education by three times and into public health by two times while reducing military expenditures, whose ratio in the whole budget was lowered from 23.6% to 14.9%. The third is to implement uniform exchange rate. Official exchange rate and black market rate have existed side by side in Myanmar for long, with the official rate fixed at 6.4 MMK to 1 USD while the black market rate at 800 MMK to 1 USD, a difference of more than 120 times.The Myanmar Central Bank announced on March 28 that from April 1, managed floating rate of exchange would be introduced with the official reference rate at 815-820 MMK to 1USD. The fourth is to expand loans to stimulate investment. The banks lowered interest rates in the 2011 fiscal year, with the rates for loans from 17% to 13% and for deposit from 12% to 8%. In September 2011, the parliament adopted the Small Credit Law in order to expand small credits to the farmers. Besides, the revised Foreign Investment Law will soon be promulgated by which foreign investors will get more benefits for investment.

The economic reform carried out by the Thein Sein government was a bit moderate compared with the political reform, yet there are still a number of bright spots.

First, the reform measures are pragmatic. The reform of the exchange rate ended the long-existing chaotic exchange rates,which is conducive to the stability and development of the macro economy. The revision of the Foreign Investment Law,which improves the environment for investment, is helpful to attracting investment and boosting economic development.

Second, more attention is paid to improving people’s livelihood and equal development. Raising the pensions for public servants, increasing input into education and public health, expanding loans to farmers and stimulating export are all conducive to improving people’s livelihood, eliminating poverty and promoting equal development. These measures have resulted in a good momentum for economic development in Myanmar. The GDP growth rate rose from the average 4.9%in the past four years (5.1% in 2010) to 5.5% in 2011, and it is expected that the rate will be 6% in 2012 and 6.3% in 2013;Foreign reserves increased from US$530 billion at end of 2010 to 800 billion by March 2012. The International Monetary Fund holds a favorable view on the prospects of Myanmar’s economic development, asserting that Myanmar was hopeful to become the next economic frontier in Asia.

The reforms implemented from above by the Thein Sein government are bold, pragmatic and unprecedented and have not only shocked the world people but also won wide acclaim from the international community.“Reforms are being introduced so fast that even renowned experts on the country are uncertain about what to make of them,”said economist Joseph E. Stiglitz.Quite few people regarded Myanmar’s reforms as“Spring of Myanmar”and alluded U Thein Sein as“Myanmar’s Gorbachev”or“Myanmar’s de Klerk”. The Thein Sein government’s reforms were also accepted by Western countries which vied each other to improve relations with Myanmar and removed or partly removed sanctions against it that had been in place for over 20 years.

II. Nature of the Reforms

Though the reforms made by the Thein Sein government are widely welcomed by the international community, people still hold differing views on the motives of such reforms and some even have doubts on the government’s sincerity in reform.Some people maintained that the reforms originated from the personal promotion by U Thein Sein. Nay Win Maung, who keeps quite good relations with both the government as well as the opposition, said,“The changes have been ad hoc. There’s been no strategy. It’s been personality-based.”Undoubtedly,the reforms carried out by the new Myanmar government are closely associated with U Thein Sein. However, U Thein Sein’s personality alone is unable to breach the bondage of the traditional system in Myanmar since Myanmar has long been under the direct or indirect rule of the military and the New Constitution also guarantees the leading position of the military.

A review of the development trajectory of Myanmar since the military took power in 1988 demonstrates that the reforms made by the Myanmar government is neither U Thein Sein’s personal extemporal action, nor an expedient measure, but a long-term strategy to deepen the transition of the state already under way during the previous military government.

Soon after taking power in 1988, the military junta started to make reforms and set forth explicitly the task of transition toward the democratic system of multi-party elections and market economy system. What the military government adopted is a state-led development strategy that insisted on drawing up the constitution before handing over power. The military government expressed this position on several occasions on the eve of the 1990 general election. Khin Nyunt, First Secretary of the State Law and Order Restoration Council, said on April 12,1990 that the military would continue to exercise power until a new constitution was drafted and a powerful government was formed. Following the convening of the National Assembly in 1993, the military government clearly set the basic principles and goals for the National Assembly to draw up the new constitution: non-split of the Union, non-breaking-up of national unity, eternity of state sovereignty, participation by the military in political leadership over the state, etc. The 7-step roadmap for Myanmar’s democratization formulated by the military government in 2003 provided in explicit terms that the constitution must be drawn up according to the basic principles and details fixed by the National Assembly before parliamentary elections would be held and new government be formed. The new 2008 constitution stipulates that the military holds one-fourth of the seats in the parliament, thus ensuring by law the military’s political leadership over the state.

Due to political strife and disturbances in the country, the state transition strategy of the military government failed to move forward in a smooth way; nevertheless, it toddled along step by step in accordance with the design of the military government.In the economic field, the government promulgated the Foreign Investment Law, encouraged and fostered the development of private economy, expanded foreign trade, and privatized some state enterprises. Politically, it issued the Political Party Registration Law, abandoned one-party rule, held multi-party elections, convened the National Assembly, formulated the new constitution, carried out general election and formed the new government. While pushing forward political and economic transition, the military government also tried to mitigate ethnic contradictions, reaching ceasefire agreements with 17 major ethnic armed organizations and some smaller armed groups from 1989-1997. In essence, the state transition strategy pursued by the Myanmar military government is the model of state-led development of the Indonesian type which emphasizes powerful state leadership and dual security and political duties of the military.

The 2008 constitution not only defined the goal of establishing the system of multi-party democracy and market economy but also ensured the military’s political leadership over the state,thus providing constitutional guarantee for advancing the state transition strategy adopted by the former military government.The Thein Sein government has been formed precisely according to the new constitution, and hence the reforms it has carried out are a deepening of the state transition strategy pursued by the former military government. First, U Thein Sein emphasizes to push forward reform in the framework of the constitution. No reform measures taken so far by the Thein Sein government overstep the constitution and no change has been made regarding the principle of the military exercising political leadership over the state. Second, the purpose of deepening reform is to consolidate the Union, reinforce the party’s rule and justify the military’s political leadership over the state. The referendum on constitution in 2008 and the general election in 2010 were regarded by the outside as unfair and not free and boycotted by the NLD, and hence, the military group, though winning victory on both cases, lost honor and the purpose of consolidating the Union, reinforcing the party’s rule and justifying the military’s political leadership over the state was questioned. Seeking“performance legitimacy”is a common practice of a country in development transition, and a military junta that adopts the state-led model of development naturally hopes the new government will push forward reforms and score good performance to win acceptance and support from the public.

To the military junta, letting U Thein Sein to serve as president was a good choice. First, honest and clean with broad vision, U Thein Sein was not detested by the people and could present a good image both at home and abroad. Second, with no ambition and no base in the military, U Thein Sein was loyal, disciplined,pragmatic and good at making compromises and thus could do a better job in pushing forward reforms. Quite some people believed that the purpose of Than Shwe in choosing U Thein Sein to carry out reforms is to ensure that he could enjoy a peaceful life in his old age. This demonstrates from one aspect that making reform was an established policy of the Than Shwe military government. Third, the reforms implemented by Un Thein Sein were supported by the parliament. Without such support, the reforms could not be delivered, and especially some of the laws could not be enacted. What’s more, some of the reform proposals were initiated by the parliament. For instance,with the backing of members from the military, the House of Representatives adopted the motion raised by the opposition which requests the president to grant amnesty to political prisoners. All this shows that the Thein Sein government’s reforms are neither acts by any individual person, nor expedient actions but a long-term strategy.

III. Difficulties and Challenges Faced by the Reforms

In his address at his first anniversary as president, U Thein Sein,while affirming the achievements scored in the reforms, frankly admitted that state transition remained unaccomplished and Myanmar had not yet become a genuinely democratic country.He said that lots of work remained to be done and bigger steps must be taken. That is indeed the case.

Politically, Myanmar is far from being transformed into a democracy of multi-party election. Myanmar took the 161st place in the total of 167 countries in Democracy Indicators made by the Information Department of The Economist. The formulation of a constitution that truly reflects public opinion is regarded by the outside as the key to achieving democratic transition by Myanmar. However, U Thein Sein will not face great pressures from the democrats for revising the constitution. The fact that the NLD accepted the Thein Sein government’s reconciliation stand and participated in the government-led political process means that revision of the constitution shall proceed according to procedures set by the constitution. Aung San Suu Kyi said,“We need more than 75 percent of parliament to vote for change,but 25 percent of the parliament is reserved for the Army. So we need at least one soldier to vote for change, as well as the remaining 75 percent.”Hence, revising the constitution will be a difficult task and a long-term project.

The practical challenge the Then Sein government faces in political reform is how to raise the government’s capability and improve its governance. In the Worldwide Governance Indicators issued by the World Bank in 2011, Myanmar scored a total of 19 points, far lower than its ASEAN neighbors most of which got more than 130 points and even lower than the DPRK that got 41 points. State governance in Myanmar has improved somehow since U Thein Sein took power but problems that could not be resolved in a short period of time still remain.

First, the bureaucratic institutions are weak in ability.Myanmar has for long been ruled directly or indirectly by the military which practically controlled the whole bureaucracy.The actual powers, from top to locality, of the Thein Sein government, though a civilian government, are in the hands of military men or former military men, which resulted in the feebleness of the Myanmar bureaucratic institutions. On the one hand, the copying of the ranking system and the practices of obeying orders and appointing high-ranking officials to the bureaucratic institutions resulted in the lack of initiative and creativeness on the part of the officials. On the other, the military or former military men who played the decision-making role in the institutions received mainly military education and hence lacked ability in economic management. Even an important advisor to President Thein Sein admitted that we knew we needed change but did not know what should be changed and how to make the change.

Second, rule of law is deficient. Since 2002, Myanmar has been ranked in the lowest 5% of the total of 213 countries in Governance Indicators issued by the World Bank. On the one hand, Myanmar’s law system is incomplete: laws suiting the market economy and democracy building are lacking and laws becoming obsolete in the present time need to be revised. On the other, Myanmar lacks an independent, just and efficient judiciary system, which is necessary not only for transitioning toward democracy but also for maintaining rule of law.

Third, corruption, which is closely associated with the abovementioned two problems, is most serious. The World Clean Government Indicators issued in 2011 by the Transparency International placed Myanmar on the third from the bottom,just before Somalia and the DPRK. Khin Aung Myint, president of the House of Nationalities of the parliament, admitted frankly that corruption was Myanmar’s biggest problem.

On the ethnic issue, the thorny problem the Thein Sein government faces is how to achieve true national reconciliation.Though the government has signed ceasefire agreements with the major ethnic armed organizations, it is not at all easy to realize truly comprehensive ceasefire. On the one hand, no formal ceasefire agreement has been reached between the government and the Kachin Independence Organization and armed conflicts between the two sides erupt from time to time. On the other hand,to resettle the forces of the ethnic armed groups after ceasefire remains a hard nut to crack. Under the current situation, the ethnic armed organizations are reluctant to disband the armed forces they possess; yet according to the constitution, the state could only have one and only army, that is, the Union Army.So far as the process of national reconciliation is concerned,reaching ceasefire agreement between the government and the ethnic armed organizations is but a small step while the key lies in reaching political settlement.

The ethnic problem in Myanmar, which has been longstanding, originates from the apparent differences on nationbuilding between the government and the ethnic organizations.What the ethnic leaders ask for is mainly the four points: One,each of the major ethnic groups, i.e., the Shan, Kachin, Chin,Kayah, Kayin, Mon, and Rakhine will form a state and together with the Bamar State to constitute the Union of Myanmar.Two, the Union Parliament will be composed of two houses -House of Nationalities and House of Representatives - with equal powers, and the states enjoy equal representative power in the House of Nationalities. Three, the states exercise self-rule and all powers, especially the ownership of natural resources,should be transferred to the states with the exception of foreign affairs, national defense and issuance of currency. Four,revenues collected by the Union government should be shared equally by the states. From the above, one can see easily that the union and national equality pursued by the ethnic leaders are based on the principle of“one nationality, one state”and ethnic equality, which could hardly be accepted by the Thein Sein government. First of all, the areas dominant with the Bamar nationality are divided into seven provinces;“one nationality, one state”means the complete alteration of such administrative division. Secondly,“one nationality, one state”means the representation and share from the revenues of the Union government enjoyed by the Bamar nationality shall be drastically reduced, yet the Bamar nationality comprises twothirds of the total population of the country. And thirdly, the total area of the seven ethnic states amounts to two-thirds of the whole territory of the country and is rich in natural resources. If autonomy should be implemented in each state as demanded by the ethnic groups, it would mean the ethnic groups that take a smaller proportion in the total population possess more natural resources.

Economically, the biggest challenge the Thein Sein government faces is how to save Myanmar from falling into the pit of“resource curse”and eradicate poverty. Rich in natural resources and low in labor cost, Myanmar enjoys big potentials in economic development. However, it may fall into the pit of“resource curse”that plunges the country into poverty if it fails to formulate and implement appropriate policies and execute good management. First, the incomes from resource export have not been turned into production capital. Since 2006, the revenue from natural gas export alone amounted to over US$2 billion a year, yet it failed to enter the account book or budget of the government and nobody from the outside knew the details of its management and use. A popular belief is that these incomes have been actually controlled by the military and spent for military purposes. Second, under the circumstance of unclear ownership system, inadequate legal system and incomplete market regulations, the rich natural resources would induce“opportunist”actions in the use of resources and activities of lease-seeking, which would lead to huge waste of resources and their indiscriminate exploitation, thus undermining the benign development of the resource industry and the normal operation of the macro economy. Third, most of the resources,such as oil, natural gas, precious stones and timber, are in the ethnic areas which are unstable with constant armed conflicts, and new contradictions and conflicts would rise due to interest sharing, forced labor, illegal land requisition and damage to the environment in the course of exploiting the resources.

Paul Sein Twa from the Myanmar Environmental Working Group said,“Myanmar is now in a peace-building process, and we are only at the first step of initial agreements on ceasefires.We worry that if they push forward with investment in these conflict areas at this fragile stage, it will also contribute to more fighting and conflict and tensions.”The unstable situation would undoubtedly impede economic development.

IV. Prospects of the Reforms

Despite the many difficulties and challenges faced by the Then Sein government as well as the differing views within the ruling group and even opposing voices, the general process of reform in Myanmar will not be reversed.

First, shaking off poverty is the strongest driving force for reform. Ethnic conflict and poverty are two major problems confronting Myanmar since independence, and the problem of poverty directly affects the stability of the political situation in the country and even endangers the very existence of the regime. The most immediate reason for the ousting of the Socialist Program Party led by U Ne Win was popular discontent resulting from failed economic construction. During the reign of the military, Myanmar remained one of the least developed countries in the world as its economy saw little improvement and people’s livelihood continued to be the principal cause for social disturbances. In August 2007, the State Peace and Development Council government announced without any sign the cancellation of all fuel subsidies, resulting in a 66% rise in diesel and oil prices, 500% rise in natural gas prices and the ensuing rocketing of prices for food, transportation and other commodities, which led to the so-called“saffron revolution”.Myanmar has abundant hydraulic electricity resources yet 75%of the population in the country has no access to electricity.Due to constant blackouts, protests broke out in Mandalay in May 2012, the largest of its kind in Myanmar in the past five years, and spread to other cities. This event shows that there would be no peace at all in Myanmar if poverty could not be thoroughly eradicated and people’s livelihood guaranteed.Therefore, development through reform is the only way-out for Myanmar.

Second, making reform is the basic consensus of the ruling authorities in Myanmar. The reforms implemented by the Thein Sein government result from the unanimous views reached within the former military government. Even if there are opposing views in the Thein Sein government and within the military, there is no evidence that a hardline group unequivocally opposing the reforms exists in Myanmar. Quite a few people outside Myanmar believe that the military probably does not fully back the reforms. To dispel such doubts, Myanmar’s Defense Minister Hla Min not only stated at the Shangri-La Dialogue on June 4, 2012 that the military supported one hundred percent President Thein Sein’s reform process but also indicated that the stipulation on the military taking one-fourth of the seats in the parliament would be revised at an appropriate time.Furthermore, the position of the reformers in the government has been constantly strengthened and consolidated. In July this year, Vice President Tin Aung Myint Oo, a hardliner, resigned and the parliament elected former naval commander Nyan Tun,a moderate, to succeed him. On September 7, the parliament approved the most extensive cabinet reshuffle since U Thein Sein took office. In this reshuffle, the number of ministers in the president’s office increased to six, nine ministers changed their portfolios and 12 new ministers were appointed, putting professional technocrats and reformist officials in key positions.As renowned Myanmar historian Thant Myint-U put it, the reshuffle was“unquestionably a strengthening of President U Thein Sein’s reformist agenda”.

Third, reform has entered the track of“pacted transition”.After assuming power, U Thein Sein launched the process of inclusive politics, which allowed the opposition parties represented by the NLD to participate in the parliamentary by-elections and enter the parliament, admitted some ethnic political parties into the parliament, and facilitated the signing of ceasefire agreements between the government and almost all ethnic armed organizations so as to resolve the conflicts and realize national reconciliation by political means. In this way, the three major political forces in Myanmar - the militarybacked government, the democrats headed by the NLD and the ethnic parties and organizations, despite their differences, have practically reached compromise and agreed to work together to push forward the reforms and realize state transition. In U Thein Sein’s words, Myanmar’s transition to constitutional democracy has found a peaceful path in an orderly way. From the theory of transition, Myanmar has stepped onto the road of“pacted transition”. Though pacts are not always necessary for transition from authoritarian rule to democracy, yet in most cases successful transitions inevitably involve this or that kind of pacts, which could play a significant role especially in a gradually but not drastically changing system. Therefore, to Myanmar that has been caught in protracted conflicts between various political forces,“pacted transition”has no doubt laid an initial foundation for further reforms.

It must be pointed out that contradictions and conflicts still exist among the three major political forces in Myanmar in spite of the compromises already reached and their willingness to push forward state transition together. In particular, the differences between the government and the ethnic political parties and armed organizations are quite big. Therefore, it is imperative for the various parties involved in“pacted transition”to make mutual reconciliation, reduce differences and avoid conflicts so as to ensure the stable and smooth advancement of the reforms.