Removing the barriers on the road to business growth - Analysis

For the nearly four years I had served as US Ambassador to and board member of the Asian Development Bank (ADB), Myanmar was a bit of a black hole. Little information emerged from the country and what economic data that came out was suspect at best. The road to socialism seemed a road to ruin when it came to economic growth figures.

During my time in the post, there would be no new ADB or World Bank lending to Myanmar given its more than a billion dollars of past loans in arrears. US and European sanctions also meant that even small amounts of technical assistance would be opposed by me and representatives of several other Western countries on the ADB board.

With the recent lifting or suspension of sanctions and Japan’s writing off or providing bridge loans to cover hundreds of millions of dollars of Myanmar’s debt, the development bankers and aid agencies are back with a vengeance. US President Barack Obama included Myanmar on his first overseas visit since winning re-election last November. No longer restricted by US policy, I too have now travelled throughout the country, focusing first on visiting sites and sights once cut off to sanctions-observing western visitors, from Shwedagon Pagoda in Yangon to the traditional fishermen of Inle Lake.

I also have sought to begin to build a better understanding of Myanmar’s most pressing challenges and to think through how the success and failures of development projects in other nations may offer lessons. This will be critical as donor nations and partners begin to map out hundreds of millions of dollars of new assistance to Myanmar – a nation that in the near term may well have limited capacity to absorb such help.

From hydroelectric investments advanced by Chinese state-owned enterprises to educational reform programs supported by European and Australian aid agencies, efforts to assist Myanmar will be driven by varying motives, whether humanitarian, geopolitical or commercial. They likely will also be of varying quality and more often than not may be extremely costly to taxpayers back home. With that in mind, it is worth pausing to ask some questions and garner insight from the experiences of other nations that emerged from decades of isolation. One example is Vietnam.

Having resumed operations in 1993 in Vietnam, the ADB has provided more than US$12 billion in loans and assistance for fighting poverty and building Vietnamese infrastructure, after that nation, like Myanmar today, began to reform and open. Billions more have followed. But has such assistance, whether from the ADB, the World Bank or USAID, been successful?

That is a critical question to ponder as Myanmar’s political leaders – in power and in opposition – ideally come together to move the nation forward even before elections scheduled for 2015. For present and future leaders, it will be important that they too gain a better understanding of the strengths and shortcomings of development assistance, whether for agricultural, transport, energy or financial sector projects.

Ultimately, it will be a strong rule of law and the private sector that will drive job creation and economic growth.

During my time at the ADB, I saw firsthand how lives were improved across the region, whether by donor-assisted increased access to water and roads in Sri Lanka or through support for rural electrification efforts in Bhutan. But I also saw how ambitious projects, such as privatisation efforts and outsourcing in the power sector in Pakistan, failed in implementation. Less-than-successful projects underscored the need for better planning, due diligence, and continued and greater oversight at development partners and within the nations they seek to help. This will also be the case in Myanmar as development partners rush in, often with limited coordination.

Indeed, over the last two decades the record of success in ADB projects, according to its own evaluations, has been mixed. In some countries, such as Pakistan, success rates have dropped significantly in a range of sectors.

Take again Vietnam as an example. While 82 percent of ADB projects that had been evaluated as of December 31, 2012, have been rated “successful”, according to the 2013 ADB country fact sheet on Vietnam, only 66.7pc of projects involving water supply and municipal infrastructure and services, and 69.2pc of agricultural and natural resources projects were deemed successful. Other sectors saw much better success rates, including education and finance.

Though comparing Vietnam in the 1993 and Myanmar in 2013 is a bit like comparing apples and oranges, the question remains whehter the next two decades of development for Myanmar will benefit from lessons learned from the past two decades of official development assistance to Vietnam.

With elections ahead, and political and economic reforms far from locked in, it will be up to Myanmar’s people and the nation’s leaders to shape their own future. There also remain a few persistent questions that I would encourage the nation’s development partners, as well as Myanmar’s business, government and civil society leaders to take to heart, regardless of political affiliation.

Is Myanmar’s government bureaucracy fostering or instead hindering economic growth? The track record of the government’s performance is mixed everywhere. Whether in Bangkok or Washington, DC, a real fight against bureaucracy must be less about new organisation charts and more about assessing what works and what does not, and then getting rid of the latter.

It’s the service quality and not just the size of the bureaucracy that matters. Government jobs should be viewed as neither spoils for victorious parties nor a source of lifetime benefits for those who hold those positions.

How are regulations impacting job creation? With large numbers of people employed, or underemployed, in agriculture and expectations growing for higher-paid jobs, this remains one of the most critical questions for countries everywhere. Some level of regulation is essential. Yet, whether in the power industry or agriulture, rules must be consistent and enforced fairly if citizens and outside investors are to have the confidence to create jobs essential for Myanmar’s future.

When is government intervention appropriate? Governments in Asia have rightly been criticised for seeking to pick winners and losers, often distorting markets and hurting competition. Myanmar’s large neighbors, China and India, provide numerous examples of intervention gone awry. Too often, however, government interventions and inefficiency can go hand in hand. Policymakers need to ensure such interventions are limited and are there as a last resort.

What more can be done to root out corruption? Throughout the world corruption and cronyism go hand-in-hand. The United States is not immune, ranking only 19th “least corrupt” on Transparency International’s 2012 Corruption Perception Index, which looks at perceived levels of public sector corruption, with the lower the number the better the ranking.

Myanmar continues to rank near the bottom out of more than 175 rated countries and territories, alongside Somalia and North Korea, though data sources are limited. China ranks 80th worst and India 94th when it comes to perceived levels of public corruption.

Allegations of favouritism or leniency must be investigated, institutions strengthened and individuals held accountable if people are to have any confidence in the public sector.

At the heart of these four simple questions is my view that policymakers and development partners everywhere must commit to tear down new “bric” walls being built of bureaucracy, regulation, interventionism and corruption. The prescription for economic growth in the world’s developed and developing nations is straightforward: improve the bureaucracy, regulate fairly, intervene rarely and stamp out corruption. Increased sectarianism too must also be addressed. Investment, capital and business confidence and growth will follow. This is also true for Myanmar.

What the nation – and indeed all of South and Southeast Asia, and perhaps even the United States – needs now is to overcome division and discord, and to focus on innovation, infrastructure improvements and a policy environment that will foster the job growth necessary to drive the economy forward. Without question, all the people of Myanmar, regardless of ethnicity or religion, deserve no less than this. Curtis S.Chin served as US ambassador to the Asian Development Bank from 2007 to 2010. He is managing director of advisory firm RiverPeak Group, LLC. 

source: The Myanmar Times
http://www.mmtimes.com/index.php/business/8273-removing-the-barriers-on-the-road-to-business-growth-analysis.html?limitstart=0