12 April 2017
Will the new NLD government move forward with neo-liberalism at the cost of a welfare state?
(This is an analysis from our June 2016 print quarterly, ‘Myanmar: Troubled Transitions’. See more from the issue here.)
The key expectation of the National League for Democracy (NLD) government in Myanmar, which fills the majority of seats in both houses of parliament, is for it to deliver social justice, an end to poverty, and a stable democracy. The country’s challenges are enormous: nearly 75 percent of the population is clustered very close to the poverty line. Recent data on income and wealth inequality are not available, and though World Bank data suggests low income inequality, a visit to any part of the country manifests stark income and wealth disparities, especially in the ethnic minority areas. Access to health and education is difficult and typically a privilege of those from upper income groups.
The government’s path to achieve economic, social and climate justice has two inherent hurdles. The NLD heads the ministries crucial to economic and social development and environment, and also the newly combined ministry of finance and planning. These ministries are under the centralised control of the NLD party leadership which translates into less room for professional and technical – as opposed to politicised – decision-making. In addition, the military retains its absolute power over home, defence and border affairs and 25 percent of the total seats in parliament. Without genuine control, to what extent is there a scope for the government to take a proactive role in substantively improving human well-being and re-shaping the economy? In other words, what is the new government’s vision for social-economic transformation?
The manifesto did not flag any of the country’s other pressing issues directly, such as income inequality, poverty and the political and social exclusion of ethnic and religious minorities are not addressed in a systematic manner.
The inaugural address by President Htin Kyaw in March 2016 provides a few clues as to what NLD’s policy plans may be. Somewhat cryptic and short, it contained only four points: national reconciliation, internal peace, pursuing the constitution to ensure a democratic federal union, and raising the quality of life. It does not refer to the NLD election manifesto, possibly in a conciliatory and realistic effort to stand as a government of unity, not one representing the victorious NLD.
In the election manifesto, issued in 2015, the focus of attention was on peace, security and freedom, and a “strong and durable union”. The manifesto did not flag any of the country’s other pressing issues directly, such as income inequality, poverty and the political and social exclusion of ethnic and religious minorities in a systematic manner. According to the NLD’s economic strategy, as reported by Myanmar Times, its five priorities are: fiscal prudence; a lean and efficient government; revitalising the agriculture sector; fostering monetary and fiscal stability; and providing functioning infrastructure.
Taking these documents as an orientation of NLD’s policy would suggest that the party relies on a patchy analysis of Myanmar’s social-economic challenges, which is surprising given its strong grassroots presence. One may also surmise that the NLD is unimaginative and weak on social policy, and has a neoliberal bias in its economic policy. The manifesto, and anecdotal conversations with experts, suggests that the ruling party appears uncertain as to the role of the government in social-economic development – with the exception of infrastructure development. It wants the government to be small, and it does not show any inclination to tackle the economic monopoly of the crony class and the military. For instance, it is continuing the previous government’s policy of establishing special economic zones (SEZs) – a hallmark of neoliberal development strategies – and shows no interest in increasing spending for education and health, let alone introducing income support measures in the form of government-financed social protection.
On education and health
Though the education policy is cast comprehensively as stretching from early childhood development through higher education and vocational training and a call for ethnic language instruction and a good teacher-student ratio in the manifesto, access to education is not framed as a right. With no acknowledgement of the need to significantly raise additional public resources for this sector, the plans lack a solid budgetary foundation. The previous government had undertaken a comprehensive education policy review, and decided to raise the education budget by 10 percent. Over the last two fiscal years, however, the education budget has barely increased and, in 2015, the previous government allocated 1.5 trillion Myanmar kyat (USD 1.2 billion) or only seven percent of the budget to education. The matriculation pass rate is still just 30 percent which has strong knock-on effects on school attendance.
Health services too are to expand – in the minimalist form of basic healthcare provision. There is a shift to private sector healthcare delivery, but one does find a commitment to increase the national health budget and reduce out-of-pocket health expenditures of families. The Ministry of Health’s expenditure trend is rising, but has been minimal, and well below what would be required to fulfill the aspirations towards the global commitment made in the Agenda for Sustainable Development of universal health coverage by 2030. The health budget rose from 2.78 percent to about 3.36 percent of the fiscal budget over the last five years. Even the commitment of the NLD government to healthcare during pregnancy and to maternity leave remains vague. Women employed in the formal sector have been entitled to such provisions since the 1950s, and the manifesto does not spell out whether provision for healthcare is to extend universally to all women, regardless of their employment status.
There is a general appeal to avoid environmental and ecological damage, but it remains superficial, as it does not chart out paths and decisive action for sustainable development.
On urban development, it talks about re-housing homeless migrants who have come to cities following natural disasters or land confiscation but neither mentions the many internally displaced people, nor the communities who have fled ethnic wars or religious persecution. The manifesto includes proposals to introduce basic infrastructure, and a modern farming sector and livelihood programmes for landless and migrant workers. In a standalone section on workers, it calls for an appropriate salary, equal pay for equal work, rights of child workers, and the signing of the core ILO labour conventions regarding the right to form trade unions, to negotiate and bargain, and for minimum wage. Safeguards for migrant workers overseas also find mention.
But these are too conservative to be considered social protection and measures such as cash transfers to address poverty or unemployment are not part of the policy design. The manifesto’s most elaborate section is devoted to environmental issues: to tackle unchecked timber extraction, shifting cultivation, contaminated waste, air pollution, and to adapt agricultural practices to climate change. Regarding energy, the NLD manifesto opts for small-scale private energy production enterprises based on renewable sources, and also proposes developing community forestry, and enacting environmental legislation. There is a general appeal to avoid environmental and ecological damage, but it remains superficial, as it does not chart out paths and decisive action for sustainable development.
All of this suggests that the new NLD-led government, which is vested with so much hope for dramatic, socially just change, peace, and economic development, lacks a vision and may not – at least not yet – be equipped to deliver. This is a big problem.
There are several explanations for this. The recent ascent of the NLD into government office in many ways began with the impact of the 2008 cyclone Nargis, which shook up the political system. It led the military junta to seek new forms of governance and to accelerate its seven-step “roadmap” for a transition to democracy, which it had adopted in 2004, with an indefinite timeline. The military government’s roadmap was not concerned with inequity and poverty and had little regard for social policy. In some respects, the NLD manifesto appears to be in continuity with that roadmap. The roadmap was adjusted to react to the country’s vulnerability to ecological hazards. Since cyclone Nargis, there has been both awareness and pressure, domestically and internationally, to address the environmental situation. In 2011, the then government cancelled an agreement with China to build a large hydropower plant in Kachin State, signalling the beginning of a foreign and investment policy reorientation.
Ideologically, the NLD’s neoliberal bent is perhaps a reaction to the excessive planning and steering of all economic processes that Myanmar experienced for six decades, causing technocrats to now fall for a small state, hands-off approach to economic management and social development. This also allows them to steer clear of addressing the economic power of the military and of the small group of cronies.
Myamar, with an NLD government, favours laisser faire over decisive, pro-poor government interventions. The crony economy remains untouched. Thus, it will be difficult to conceptualise active labour market policies for decent work.
This neoliberal stance, which does not foresee a large role for the state in offering social welfare, also – subcutaneously – builds on certain strands of Myanmar’s political thinking of past decades. Aung San, the father of NLD leader Aung San Suu Kyi, co-founded the Communist Party in 1939 and then the People’s Revolutionary Party, which was later named Socialist Party of Burma. In subsequent years, the “Burmese way to socialism”, the government’s policy from the 1960s to the 1980s, also drew on the Soviet model. In the Soviet socio-economic model, social services were seen as part of the governmental system – but not as a citizen’s right. Notionally, all citizens are in employment, and housing, health services and old-age pensions are covered by the workplace. Thus, the neoliberal notion of a small state and a communist notion that incomes and social services must be derived from work, rather than as an entitlement, merge into an unholy alliance that renders the NLD wary of today’s global progressive orientation to universalist, rights-based social policy thinking.
One way forward for the NLD to develop a progressive vision could be to build on and reinforce those legislative steps in the area of social policy taken by the Thein Sein government, such as the adoption of a minimum wage law, the freeing of trade unions, a foreign investment code that includes provisions on protecting the environment, and a Social Security Act, adopted in 2012, covering old age, disability, family benefits and unemployment insurance on a contributory basis for employees in the formal economy. An ambitious Social Protection Framework Strategic Plan covering child benefits, social pensions, disability grants, employment services, as well as the training and deployment of a network of social workers to support families in difficult situations was also floated in December 2014. However, despite presidential endorsement in January 2015, it did not get the necessary fiscal budget and now lies dormant, despite the efforts of several donors to begin its implementation.
The previous government’s decision to develop special SEZs (for textile, petrochemical products, steel, fertislisers etc) may be a step in the wrong direction, unless these zones guarantee labour rights and ensure not just minimum but fair wages and decent work conditions.
One of the other areas that needs urgent policy intervention is the agriculture sector. The roadmap of the military government recognised this as a key to economic development, since 70 percent of the population lives in rural areas and constitute the majority of the country’s poor. The backwardness of the agriculture sector became starkly obvious after cyclone Nargis destroyed the country’s main rice-growing areas. In a series of international consultations on agricultural reform, started by the previous government as early as 2009, there were proposals for land titling, access to agricultural credit, as well as modernisation of technology and inputs so as to quickly raise productivity. Land grabbing is a major issue in Myanmar, especially in ethnic minority states. It has been displacing farmers from their land and villages and has intensified since Myanmar’s economy began to open up. Private investors and the military are procuring large swaths of land for commercial agriculture, industrial estates, for mining, and for prospective hydropower dams. The NLD has taken a decision to address land grabbing, and the government has begun compiling lists of land grabbing cases (for instance, in Mandalay). It had promised to resolve disputes between communities and companies and return land to their rightful owners. But this will involve addressing the power of the military, and there have been no restitutions so far.
Myamar, with an NLD government, favours laissez faire over decisive, pro-poor government interventions. The crony economy remains untouched. Thus, it will be difficult to conceptualise active labour market policies for decent work. In-country employment is slowly picking up as old industries such as labour-intensive textiles and garments are taking off, with garment exports growing by 28 percent in 2015. The previous government’s decision to develop special SEZs (for textile, petrochemical products, steel, fertilisers etc) may be a step in the wrong direction, unless these zones guarantee labour rights and ensure not just minimum but fair wages and decent work conditions. There is a temptation for the Myanmar government to attract low-skill, low-paid jobs into the special zones, to pull in jobs from Thailand and other neighbouring countries, where unit costs and the minimum wage have been rising. The “low road” path to development would, however, not address poverty and income inequality.
Two emerging sectors which are expected to employ many are the telecom and tourism industries. The Ministry of Hotels and Tourism projects that the number of international visitors will grow to six million in 2016 from one million in 2012. Employment opportunities have increased accordingly, both in hotel construction and services. However, even the service sector, like industry and infrastructure, is highly monopolised in the hands of the crony class who are likely to resist legislation and regulation favourable to workers.
If political and social peace is to come, there will need to be comprehensive and generous modalities to reintegrate internally displaced persons, refugees and out-migrants in the labour market. Professionals who fled the dictatorship have begun returning, but low-skilled workers are waiting to see new job opportunities unfold before they leave their jobs elsewhere. A particular challenge will be to accommodate refugees who may have no choice but to return if the Thai government follows through on an agreement with Myanmar to close the refugee camps along the border.
The challenge will be to deliver education and health services to all, including the religious minorities, notably the Rohingya, and the ethnic minority groups, especially those living in the border areas where the delivery of social services has been left almost exclusively to NGOs, faith-based groups and the militarised ethnic governments. Special political, fiscal and personnel efforts will be necessary to overcome antagonisms in these areas.
Acquiring enough resources to be able to allocate for policies towards an equitable society is also a challenge for the new government. At the moment, Myanmar has one of the lowest tax to GDP ratios in the world, at only 11.3 percent of GDP (2015-16), but tax reforms are underway and have begun yielding results. Recent reforms in public financial
management have included the establishment of tax payers offices. The most recent ADB projections suggest that Myanmar could achieve a real GDP growth rate of eight to nine percent per year, and coupled with higher tax income generation, it could lead to improved living standards for all.
Indeed, one could quote the NLD’s manifesto which contains a call to broaden the tax base. It also recommends that the country “eradicate the monopolistic management and unfair distribution and usage of natural resources” and to “distribute profits from natural resource extraction fairly across the country”. The government can build on these political commitments and could usher in proper progressive tax reform which would serve two purposes in one – raising the revenue necessary for social expenditure, and launching income and wealth redistribution.
The proposal then, in sum, is for the NLD to lead Myanmar’s return not merely to democracy, but to democracy in a deeper sense, and work towards a welfare state through a form of government that is committed to citizens’ economic, social and ecological well-being. In other words, it needs to be socially just as well as rights-based. Suu Kyi’s position as State Counsellor means she is effectively functioning as a prime-minister, coordinating between the executive and legislative branches of the government. This is an opportunity but also bears a great risk: it could help expedite decisions, and ensure that economic, social and environment policy come together as coherent policies. It could conversely mean that too much power is monopolised in a single person who – very deservedly – has enormous moral status, but does lack deep governmental experience, and who does not have a team of experienced economists and social policy experts to guide her decisions.
Commitment to a socially-oriented welfare state could meet the public’s expectations of justice. This is a daunting task, but given Myanmar’s rich resources, entirely doable – with firm political will and an inclusive social vision.
~ Aniruddha Bonnerjee is an applied development economist and the CEO of Policymetrika. He divides his time between Yangon and Kolkata.
~ Gabriele Koehler is a senior research associate with the UN Research Institute for Social Development. She has worked with the UN in Myanmar, Nepal and other countries in Southasia. She is based in Munich.