Myanmar’s Exchange Rates Mean More Than Election Results
The parliamentary election wins of Aung San Suu Kyi and her party weren’t necessarily the best news out of Myanmar in the past week.
That distinction could just as easily go to the government’s decision to unify and float its exchange rates -- a move with the potential to immediately reduce corruption, improve economic performance and lift the lives of millions.
There’s no denying the symbolic power of this victory by “The Lady,” as Suu Kyi is known in her country. After boycotting 2010’s elections, the National League for Democracy appears to have won 43 out of 45 seats in parliamentary by-elections, a strong affirmation of its political appeal.
Still, that represents only a small fraction of the seats in Myanmar’s legislature, of which 25 percent are automatically allocated for the military. The true test will come in 2015, when most parliamentary slots are up for election. What’s more, because Myanmar’s voting districts tend to be ethnically homogenous, the current electoral system has the potential to exacerbate troubling divisions between Myanmar’s ethnic groups. For all the hoopla and symbolism of free and fair elections, they are no guarantee of peace and harmony, and represent a moment in time rather than a sustained commitment to freedom, human rights and democracy.
More promising in some ways are the government’s recent decisions on economic policy. The April 1 implementation of a managed float for Myanmar’s kyat, and the elimination of a more than 100-to-1 discrepancy between the official and black market exchange rates, will help Myanmar’s manufacturing and agricultural sectors and make it harder for corrupt officials to hide illicit gains.
A planned law on foreign investment promises to give investors the right to lease land, repatriate profits and import skilled workers, as well as allow foreign banks the right to operate in country. Two critical additional initiatives that the outside world should promote are property reform that would give farmers the right to own the land they cultivate and the granting of credit to farmers and small-business owners.
Last weekend’s election results have prompted calls to lift sanctions and provide more aid and investment to Myanmar. There are good reasons to think twice, and they can be summed up in one word: Cambodia. That nation, the beneficiary of huge amounts of foreign aid after the fall of the Khmer Rouge in the 1980s, is now a paragon of corruption and crony capitalism. Myanmar lacks the institutional capacity to absorb much aid and investment, which at this stage would probably only enrich the already powerful. Moreover, color us skeptical about the current government’s intentions, which have yet to be tested by the prospect of surrendering any real power.
Instead of unleashing a flood of investment and assistance, the outside world should grant Myanmar liberal technical assistance, including parliamentary and ministerial exchanges, and pay for initiatives to improve its agriculture and manufacturing.
The lifting of sanctions and the application of aid to those areas should also be limited to where they can do the most good. Congress, for example, should renew sanctions laws such as the Burmese Freedom and Democracy Act (which blocks imports and international financial institution assistance, freezes assets and bans visas for certain Burmese officials) and the JADE Act (which bars importing gemstones of Burmese origin, expands the ban on visas and restricts financial transactions) while ensuring that President Barack Obama can waive their implementation based on the regime’s actions. The administration can then be as forward-leaning as circumstances warrant. It also makes sense to waive the ban on U.S. visas for members of Myanmar’s current government; exposure to democracy can’t hurt.
For all the strides that Myanmar is making, the trick with sanctions will be to maintain leverage by loosening the right ones, in the right order.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.