Burma’s Business Revolution


It’s difficult to judge which of the reforms underway in Burma will ultimately come to matter the most.

The freeing of Aung San Suu Kyi and the regime’s decision to let her contest a seat in April’s upcoming parliamentary elections were certainly critical in terms of persuading the international community that Burma might be a candidate for rehabilitation. The release of hundreds of political prisoners – including people like 88 Generation Students Group leader Min Ko Naing and former Prime Minister Khin Nyunt, whom few expected to ever see or hear from again – was a similar watershed. The government ceasefire with the Karen will also be of ground-breaking importance, if it holds.

However, the opening of the new session of parliament this week (on January 26) could usher in the most profound change of all, namely the opening up of the country to foreign business and investment through a series of keystone legislative reforms. And these changes, perhaps more than any others, have the potential to remake Burma.

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Two pieces of legislation in particular could transform the country into a viable destination for foreign enterprise, the first being a new foreign investment law. Special laws put in place for the Dawei Special Economic Zone, which is being built by Italian-Thai Development, are being seen as a possible template for the rest of the country. “This is the big thing we’re waiting for,” explains Sean Turnell, an expert in the Burmese economy at Macquarie University. “The new foreign investment law will be critical. It will set out parameters for whether foreigners can buy land, and invest in banks, telecommunications companies, and so on.”

However, Turnell points out that the investment law encountered opposition when it was first introduced to parliament last year, and its passage during the upcoming session is therefore not a certainty. This is hardly surprising: just as some parliamentarians will view the arrival of foreign enterprise as a money-making opportunity, others are bound to interpret it as a challenge to cumbersome vested interests that will most likely wilt in the face of foreign competition.

The second is a foreign exchange law, due to be introduced for the first time in the new parliamentary session. Representatives of the International Monetary Fund, the World Bank and the Asian Development Bank have been in Burma this month to advise on financial sector reforms, with the purpose of helping the government to unify the country’s chaotic exchange rate regime. But from the perspective of foreign investors, financial reform would mean the ability to remit money electronically at the proper market rate, and thus do business there legitimately.

These measures alone won’t open the investment floodgates, and there are some important caveats. First, the country’s political reforms are still nascent and reversible. Hundreds of political prisoners still await release. Government forces continue to wage war on the Kachin, while their ceasefires with other ethnic armies are still new and fragile. And it remains to be seen how the passage of Aung San Suu Kyi and the National League for Democracy into Burma’s political mainstream will sit with the cast of old-regime figures who warm the seats of parliament. So while the EU and the United States appear likely to drop their sanctions against Burma in the months ahead in response to the progress being made, the Thein Sein government must still face many stern tests of its reformist credentials.

Second, there are serious questions about the extent to which Burma’s dilapidated economy can be reintegrated into the global system. As Joshua Kurlantzick has argued elsewhere on The Diplomat, when a country lacks infrastructure and its population is poorly educated, it becomes a dubious proposition for foreign firms.

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