The Political Economy of Reform in Myanmar

Myanmar’s sweeping reforms continue with the recent departure of the first Vice President Tin Aung Myint Oo and the announcement last week of Myint Swe as his replacement. Widely regarded as a patron of the old business elite and an obstacle to key reforms, his exit may facilitate smoother decision-making and make it easier for President Thein Sein to now push ahead with his economic agenda.

Myint Swe is the Chief Minister of Yangon region and a retired lieutenant-general who has seniority, the trust of the military, but he is also not a hardliner. His appointment will ease the concerns of more conservative people and the military, but not at the expense of the reforms. He will replace the foul mouthed and abrasive, Tin Aung Myint Oo, a highly decorated battlefield veteran who is also alleged to be extremely wealthy and highly corrupt, having used his past position as head of the Trade Council to enrich himself, his family business and his business allies

Together with a planned cabinet reshuffle, these leadership changes will allow an acceleration of economic reforms that have been made in parallel with the political changes that have attracted greater attention (For more on these political changes read our report Reform in Myanmar: One Year On). The Politics of Economic Reform is the focus of the Crisis Group report on Myanmar released on 27 July. [A full translation is also available in Burmese.]

In a series of public interviews last week ahead of the ASEAN meeting, Thein Sein indicated that these personnel changes were part of a so-called second wave of reform rather than an exercise in house cleaning.

“In terms of any changes in the cabinet, it is not the case that there are hardliners in the cabinet who are actively resisting or against changes or reforms – but there are some in the cabinet who may be slower or who may not be performing as well in terms of trying to realise the objectives the government has set out, so because of that there may need to be changes,” he told the Financial Times. 

If these sweeping changes to the economy are done well, many across the country stand to benefit, but those who profited most from the old regime’s restrictions and privileges will lose access to windfall profits and guaranteed monopolies. What will they do? Indications are that they will try to adjust to the new realities, not block them. They will not always profit as much as they once did, but stand to lose more if they try to push back, and can potentially gain from having a smaller share of a growing market for their existing businesses.

Myanmar’s political transition and economic reconstruction are intimately entwined. Achieving either depends on achieving both. The ethnic peace processes are also closely bound up with the political economies of those border regions (For more on this peace initiative read our report Myanmar: A New Peace Initiative). As ceasefires are being secured, there will be new pressure to produce a peace dividend in these remote but resource rich regions. It is hard to imagine a successful political transition unless the government can ensure macroeconomic stability and a sustained improvement in the lives of ordinary people, just as it is hard to imagine successful economic reform without political stability and a continued shift away from the country’s authoritarian past.

UPDATE 29 Aug 2012

Since this original post, the nomination for Myint Swe to replace first Vice President Tin Aung Myint Oo was withdrawn due to apparent complications related to the foreign citizenship of one of his children. On 15 August, Vice Admiral Nyan Tun, the former head of the navy, was appointed as the replacement. The choice of a senior naval officer from the service known to be peripheral to military politics and with few known vested economic interests is a positive sign for efforts to maintain the reform momentum.

The first stage of the long awaited cabinet reshuffle was announced on 27 August, and was also seen as putting more wind in the sails of President Thein Sein’s transitional agenda. The most significant changes in the ministerial line-up were the promotion of the industry minister Soe Thein, and former railways minister and the key peace negotiator Aung Min, to be Ministers in the President’s Office. Aung Min loses responsibility for trains, but is still charged with keeping peace negotiations on track, and Soe Thein will have authority to continue his role as the government’s economic Czar. Labour minister Aung Kyi, who was the key link between the former regime and Aung San Suu Kyi is to be the new information minister. This came days after the end to pre-publication censorship on 20 August, which was another landmark.

Taken together, these changes show the determination of the president to not let his ambitious reforms falter. More new appointments of individuals outside of government to the vacant portfolios are expected in the coming days, but this requires the formality of legislative approval. The once powerful finance and revenue minister has been demoted opening the way for an experienced technocrat to the post. The new minister, who will probably be someone from outside of government, has not been announced yet but the willingness to move such personnel is seen as a plus for the economic reform agenda.