Commodity prices, cronyism threaten Burma’s economy: UN – The Irrawaddy/Asia Sentinel

BANGKOK — The United Nations believes that Burma’s economic prospects could be undermined by volatile commodity prices, as the country’s reliance on the the ups and downs of oil and gas revenues could hinder much-needed fiscal modernization

The UN’s Economic and Social Commission for Asia-Pacific predicts 6.2 percent economic growth for Burma in 2012 but warns that the region remains vulnerable to fluctuating prices of commodities such as oil and the ongoing debt crisis in Europe.

All the same, Western companies appear eager to tap into Burma’s natural resource bounty, as US and EU sanctions are relaxed or suspended in the wake of a succession of recent reforms such as the freeing of political prisoners and the holding of free and fair by-elections on April 1.

For now, demand for primary resources from large “emerging” economies such as China and India has pushed oil and gas prices up. This means extra revenues for the Burmese government and, given the recent ending of the country’s dual exchange rate system, possibly a more transparent disclosure of the nation’s energy earnings.

But in an April research note on Burma’s economy, the US-based Carnegie Endowment for International Peace warned that “it is critical that these net earnings are transferred to the budget and used for social and infrastructure development, especially in regions with ethnic minorities.”

Otherwise, according to ESCAP, Burma could fall victim to the so-called “resource curse” with “commodity boom countries falling back in terms of overall modernization and diversification of their economies.”

Burma needs a stronger non-resource sector and “investments in education, health, rural development and infrastructure,” says ESCAP.  Around 75 percent of the Burmese population does not have access to electricity, despite the country’s huge oil, gas and hydropower resources — a stark indication of how little benefit has accrued to most of the population from the country’s bounteous resources.

Nonetheless, the lifting of sanctions and apparent emergence of a more business-friendly administration represents “a tremendous opportunity for Myanmar,” said Noeleen Heyzer, United Nations Under-Secretary General and Executive Secretary of ESCAP.

Heyzer cautioned that Burma’s re-joining the global economy is at a very early stage. “There needs to be support for new small and medium enterprises so that growth is not driven by monopolies and families,” she said, speaking at the launch the 2012 Economic and Social Survey of Asia and the Pacific in Bangkok.

Despite a 26 percent increase in tourist numbers and the drafting of a new foreign investment law, Burma’s economy “still suffers from restrictive measures, such as licensing, which pose barriers to manufacturing and agriculture,” she added.

The recent relaxation of some US sanctions and the one-year suspension of EU restrictions will also free-up donor countries to expand aid programs in Burma, ESCAP predicts. But the impact of such assistance can generate problems for the recipient economy, according to The Asia Foundation.  “When international assistance scales up rapidly in a place unaccustomed and unprepared for large-scale aid, problems are likely to follow,” the group cautioned in a recent report.

The Asia Foundation cited examples of aid causing as many problems as it solved in Burma’s crisis-hit Asian neighbours, citing “large-scale aid [that] often created perverse incentives that led to poor program quality and wasted resources” in Aceh, Sri Lanka and Timor-Leste.

In Burma’s case, the political and economic transition could be undermined if donors neglect the country’s ethnic minority borderlands, where on-off fighting has taken place in some regions since the late 1940s.

While the longest-standing ethnic militia, the Karen National Union, has signed a ceasefire with the Naypyidaw administration, fighting continues in Burma’s far north between government troops and the Kachin Independence Organisation.

Kachin NGOs complain that donors and aid agencies are not doing enough to help the more than 70,000 civilians left homeless by the fighting. “Neglecting the remote conflict areas could lead to a renewed cycle of armed resistance and military suppression, putting the whole transition at risk,” The Asia Foundation believes.

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