Acumen Magazine July 2013

8/12/2019 Acumen Magazine July 2013

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Editors Note

ACUMEN enters into its second month as the political and economic changes in

Myanmar keep on coming. President U Thein Sein landed a major diplomatic coup

in May, as the United States announced its intention to lift a longstanding ban on

imports from Myanmar coinciding with his visit to Washington, the first such

appearance by a Myanmar head of state since 1966. The steady flow of foreign

interest in Myanmar shows few signs of abating; General Electric announced its

intention to make investments totalling half a billion US dollars over the next few

years. But as ever, the attitude of most would-be foreign investors is still tinged with

caution, a sentiment that has been reinforced by ethnic tensions spilling over into

violence in recent months and corruption allegations leading to the reassignment of

at least one prominent minister, among other occurrences.This issue ofACUMEN takes a look at many of these issues, in the form of

features on the relationship between conflict and economic growth and the pernicious

problem of corruption. We take an in-depth look at the prospects for Myanmar's

garment sector, as well as the issue of extractive industry transparency and the

ASEAN common market that is set to go into effect - at least in part - in 2015. What

is certain about Myanmar today is that the narrative of exuberant growth and

democratic opening popularised in the West has come into question as of late. While

Myanmar's recently-forged economic ties with the outside world are not likely to

recede entirely, lingering governance issues have casted doubt on the prospect of

Myanmar's trajectory to prosperity occurring in a linear fashion.

But in uncertain times, it falls upon the Fourth Estate to tell Myanmar's

story to the world, even if that story is not resoundingly positive on all counts. Thepress is a critical tool for promoting transparency - especially in an environment in

which transparency cannot be taken for granted - and, as we hope has been reflected

in our editorial stance thus far -ACUMEN strives to provide its readership with high-

quality, incisive and critical content every month. Last month was a success - and

hopefully what we've managed to put together this month is even better. A

CEO / Chief EditorDr. Htet Zan Linn

DirectorDr. Hein Thu Aung, Tin Tun Kyaw

Executive EditorPhyo Wai

Editor English EditionAlex Bookbinder

EditorsHein Zaw, Khin Win, Su Le`Nandar

ContributorsDanielle Bernstein, Naing Thit, Vincent MacIsaac

ReporterNang Aye Chan Moe

DesignersAung Aung (AN Computer), Thaw Tar Oo

Computer OperatorZin Wai Wai Shein

Marketing DepartmentJanuary Khine Mon, Naw Keziah, Yadanar,

Nan Mo, May Hsu Mo Mo

Cover PhotoAung Kyaw Moe (New Image)

PhotographersHla Maung Shwe, Aung Kyaw Moe (New Image),

Han Saw, Alex Bookbinder, Christopher Symes,Hein Zaw

Publisher and CopyrightDr. Htet Zan Linn

Printer

Editorial Board

ACUMEN

[email protected]

[email protected], [email protected],

[email protected], [email protected],

AdvisorsAdvisorsAdvisorsAdvisorsAdvisorsProf. Dr. Aung Tun ThetProf. Dr. Aung Tun ThetProf. Dr. Aung Tun ThetProf. Dr. Aung Tun ThetProf. Dr. Aung Tun Thet (Senior Advisor, UN Resident Coordinator's Office)

Dr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg Thein (Ph.D. (Law), LL.M., LL.B., B.A.(Law), ANZIIF (Australia), Pg. Dip in Applied Psychology)

Prof. Maw ThanProf. Maw ThanProf. Maw ThanProf. Maw ThanProf. Maw Than (Rector (Ret), Yangon Institute of Economics Yangon)

Soe Tint AungSoe Tint AungSoe Tint AungSoe Tint AungSoe Tint Aung (Special Consultant for Advocacy, PSI Myanmar)

Dr. Tun LwinDr. Tun LwinDr. Tun LwinDr. Tun LwinDr. Tun Lwin (Consultant, Myanmar Climate Change Watch,Tun Lwin Foundation)

Than LwinThan LwinThan LwinThan LwinThan Lwin (Deputy Governer (Ret), Central Bank of Myanmar)

Tin Zan KyawTin Zan KyawTin Zan KyawTin Zan KyawTin Zan Kyaw (Principal, Device Business Management Academy)

Grace Swe Zin HtaikGrace Swe Zin HtaikGrace Swe Zin HtaikGrace Swe Zin HtaikGrace Swe Zin Htaik(Media Advocacy Advisor, PSI Myanmar)

OfficeNo. 24/26, 4B-C, Race Course Condo, South Race Course Street, TAMWE TOWNSHIP, YANGON

Tel : (+959) 420033355~ 66~77 (Hot Line), (+959) 73045140, 49317457, 73143313, (+951) 8603886, 8603887


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ACUMEN 11

The transition

process is al-

ways fraught

with danger,

and there are

risks we cannotavoid. But I

know what my

country and my

people are like.

I understand

that they ex-

pect this transi-

tion to democ-racy to be suc-

cessful.

President U Thein Sein

May 22th, 2013 (The Mirror

Newspaper)

We need to identify international partners that are willing

to help Myanmar develop. This is the only way we will be

able to move forward in a meaningful sense.

U Tin Naing Thein

Minister of National Planning and Economic Development

(2013 ckESpfarv (28)&ufxkwfThe Flower News *sme,ftwGJ (9) trSwf(20) yg]EkdifiHwumacs;aiGrsm;xyfrH&&Sd&ef pDrHudef;rsm; taumiftxnfazmfaqmif&Gufoifh}owif;aqmif;yg;rS aumufEkwfcsuf)

]]The Thilawa Special EconomicZone is the first - and most important- SEZ in Myanmar, and will serve tobolster Myanmar-Japanese relations.It will provide Myanmar with job op-portunities, new technologies and aninflux of investment.}}

U Hsat Aung

Chairman

Thilawa SEZ Management Committee

(2013 ckESpfarv 26 &ufxkwfaMu;rkH;owif;pmyg ]oDv0gpDrHudef; jrefrmukrPDukd;ckESifh

*syefukrPDokH;ck yl;aygif;taumiftxnfazmfrnf} owif;rS aumufEkwfcsuf/)

"A TIFA (Trade and Investment Framework Agreement) would make sure that

our countries engage regularly on trade and investment - identifying issues that

are important to us both, looking for opportunities and solving problems. A

TIFA would be an important step in normalizing our bilateral commercial rela-

tionship."

Demetrios J. Marantis, Acting US Trade Representative, in an address at the American Center, Yangon,

April 26, 2013.

oicesV


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News in Brief

14 ACUMEN www.myanmarb2bmagaz ine . com July 2013

News in Brief

14 ACUMEN www.myanmarb2bmagaz ine . com

Multimedia Showcase on Myanmar Launched

go on sale worldwide in December 2013,

according to Editions Didier Millet, the

publishing house behind the project.

The photographers who will be partic-

ipating in [7 days in Myanmar] have been

selected after a careful study of their

photographic backgrounds, said Melisa

Teo, a professional photographer whohas published photos for National Geo-

A press conference held at Yangons

Chatrium Hotel on April 27 th saw the

announcement of the 7 Days in Myan-

mar project, a multimedia showcase

that will be produced by 30 award-win-

ning multimedia journalists and photog-

raphers from Myanmar and abroad. The

organizers expect to produce a photo-book through the project, which is set to

graphic and other outlets. Media relat-

ing to Myanmars natural environment

and cultures will be the projects prima-

ry emphasis. U Aung Thura, a local

photographer selected as a participant

in the project, feels that while the it will

serve as an important platform for local

photographers, the contributions by in-

ternational photographers are important.

To make the world know about the

changes and developments that are tak-

ing place in Myanmar, he said, its goodthat we have photos from international

professionals as well, as theyre better

than what local photographers can pro-

duce. Projects similar to 7 Days in My-

anmar have been launched in other

Southeast Asian countries, including Sin-

gapore, Indonesia and Thailand. The

photography project is being made pos-

sible through the contributions of numer-

ous local and foreign backers, including

Chatrium Hotels, Chevron, Loi Hein

Group, City Mart Holdings and Myan-

mar Brewery, Ltd., along with mediapartners Ignite Marketing and SkyNet.A

Venture to provide much-needed economic information about MyanmarThe Directorate for Investment and Com-

pany Administration, the government

body which oversees foreign investment

in Myanmar, signed a memorandum of

understanding on May 11 with Oxford

Business Group, an international eco-

nomic research and publishing firm, to

produce a comprehensive study on theprospects for foreign investment in

Myanmar. The book issued by the ven-

ture should serve as a reliable source of

information in what has been, up to now,

a highly opaque investment climate for

foreign investors to operate in.

[Myanmars process of economic reform]

has attracted substantial attention from

foreign multinationals, as well as SMEs

(small-and-medium enterprises), said U

Aung Naing Oo, DICAs Director-General.

94 foreign investors came to Myanmar

over the past year, particularly from the

hotel industry and other businesses in

the service sector. The book will make

information gathered through research

undertaken over the past year available

to prospective foreign investors, accord-

ing to Stephanie Harl, Business Director

at Oxford Business Group. Myanmar has

re-entered the global economy at last,

and we are very glad to have the oppor-

tunity to work in this golden land, she

said. According to Oxford Business

Groups research, Myanmars economy

is set to grow at least five percent per

year for the next 20 years. A


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ACUMEN 15

Ford enters Myanmars burgeoning

automobile market

Ford Motor Company, one of the worlds largest auto

manufacturers, has entered into a partnership with local firm

Capital Diamond Star to market and distribute its products in

Myanmar. At a press conference held April 30 at Yangons Inya

Lake Hotel, Ford announced its intention to sell a full range of

cars and trucks in Myanmar by the fourth quarter of 2013. Ford

will strive to provide extensive employment opportunities for

local people and will train new employees in quality-assuranceand customer service practices, claimed David Wester-man, Fords

Export and Growth regional manager for the Asia-Pacific Region.

Ford will provide comprehensive after-sales service through

a nationwide network of dealerships, said U Ko Ko Gyi, the CEO

of Capital Diamond Star. Fords first showroom in the country

will be located on Insein Road, in Northern Yangons Hlaing

Township. Among the most important products for Ford in

Myanmar will be the companys popular line of F-Series pickups,

which are among the best-selling trucks in their class in the United

States. Ford is the first US automaker to have an official presence

in Myanmar, and US Ambassador Derek Mitchell was present at

the historic event. Ford is making its investment in Myanmar on

the recommendation of the US government, said Westerman. A

Parkson FMI, YangonsParkson FMI, YangonsParkson FMI, YangonsParkson FMI, YangonsParkson FMI, Yangonsfirst internationalfirst internationalfirst internationalfirst internationalfirst internationaldepartment store, opensdepartment store, opensdepartment store, opensdepartment store, opensdepartment store, opensfor businessfor businessfor businessfor businessfor business

Malaysias Parkson Asia Retail Ltd.,

which operates a number of high-end

department stores throughout Asia,

inaugurated its first branch in

Myanmar on May 11. The 43,000

square-foot outlet, built in cooperation

with local partner Yoma Strategic

Holdings, is located in Yangons

Pabedan township in between two

hallowed icons of commerce, the

Bogyoke Aung San and Theingyi

Markets. Parkson FMI offers Myanmarshoppers international cosmetics and

perfumes from international brands, as

well as a full range of mens and

womens apparel , jewellery and

household goods. Many of the brands

sold by Parkson FMI, including

Lancme, Gucci, Coach, Lacoste and

Tommy Hilfiger, have never been

officially imported to Myanmar before.

A food court, serving a wide variety

of international cuisines, is located in

the basement of the department store.Through the full suite of services the

facility offers, Parkson FMI fills a new

niche in Myanmar retailing: a

department store which, aside from its

role as a high-end retail outlet, serves

as a destination in its own right. As a

leading department store in Asia,

Parkson strives to satisfy its customers

by providing quality goods, top-notch

service and reasonable prices, said

Tham Tuck Choy, the stores managing

director. A


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Cover Story



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ACUMEN 17ACUMEN 17


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Work model of its own, but steps are being taken to preparefor it, Marshall said. Essentially, what everybody has agreed

is that at this stage it is too early to introduce a Better Work

type scheme here because the legal structures do not exist

for it, he added, citing the absence of a minimum wage law

and a lack of occupational health and safety regulations as

examples.

Laws addressing these concerns are pending, however,

and are expected to be passed during Parliaments next session,

which begins on June 25.

Western garment and footwear brands areconducting due diligence on individual

Myanmar garment factories, the industry as a

whole and the governments political and

economic reform process as they continue to scour the globe for

the latest source of inexpensive - but productive - factories they

can outsource production to.

Officials and industry representatives say that the Western

brands are drawn by the easing of sanctions on imports to key

markets, a new legal framework that establishes basic workers

rights, and nascent efforts to improve working conditions at

factories.

Foreign producers expect that production costs in Myanmar

will fall as access to reliable electricity improves; economicreforms should also serve to drive down the cost of freight,

telecom and conducting financial transactions .

The depreciation of the Kyat - hitting new lows against the

US dollar - also adds to the excitement.

Myanmars high unemployment rate and low wages are

another draw. Of the countrys roughly 60 million people, labour

force participation sits at only 67 percent, according to Dr. Than

Win, Director-General of the Ministry of Labours Department

of Labour Relations. His department has been at the forefront of

revamping labour laws, most of which were drafted before

1950, to bring them into harmony with global standards.

The International Labour Organisation (ILO) has also been

busy. Steve Marshall, its liaison officer, said that several globalbrands had contacted his office as part of their research on

Myanmar. Obviously they are concerned about reputational risk,

he said, adding that they are doing their due diligence, seeking

reports on broader human rights and also specifically on labour

market issues.

Global brands fled Myanmar a decade ago due to widespread

media reports of human rights abuses and the imposition of

sanctions by Western governments, tossing 80,000 garment

workers out of their jobs, according to the Myanmar Garment

Manufacturers Association. Marshall said he would not be

surprised if global brands started sourcing from Myanmar fairly

quickly, but preferred not to name the brands that had contactedhis office because it is a very competitive business.

Aside from the market factors that are making Myanmar

increasingly attractive to global brands, two key developments

are underway that could clean up the countrys image, and

possibly fuel the sort of social justice politicians like to talk about.

Myanmar is rewriting its labour legislation, while the ILO is

working with the Ministry of Labour, industry groups and

workers organisations to lay a foundation for establishing its

Better Work program in the garment industry (sidebar). This

will allow it to monitor factories for compliance with labour

laws and ILO conventions.

Myanmar is a few years away from establishing a Better

In this photo set, workers at various factories in Yangons Hlaing

Thar Yar township produce garments for export. Hlaing Thar

Yar is one of Yangons largest industrial zones, and is an important

site for light manufacturing, dominated by the garment business.

In this photo set, workers at various factories in Yangons Hlaing

Thar Yar township produce garments for export. Hlaing Thar

Yar is one of Yangons largest industrial zones, and is an important

site for light manufacturing, dominated by the garment business.

Cover Story


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ACUMEN 19

Better FactoriesBetter FactoriesBetter FactoriesBetter FactoriesBetter FactoriesThe Better Factories model was initiated in Cambodia in 2001, following a trade agreement between

Washington and Phnom Penh that gave Cambodia better access to American markets in exchange forimproved working conditions in the garment sector. Trade negotiators refer to such agreements as trade

privileges or preferential access, but one buyer for a global brand described it differently. The Americans

were the first to discover their brands could get cheap labor in Cambodia, he said.

Still, the industry now employees about 500,000 Cambodians, and the value of garment exports hit

US$4.61 billion last year - up 9 percent from 2011. Garment exports account for about 80 percent of

Cambodias exports, according to the IMF. Before Better Factories Cambodia, the country had only 90

garment factories employing a total of about 100,000 workers. Last year, the Council for Development of

Cambodia - the equivalent of the Myanmar Investment Commission - approved the building of 12 more

garment factories with a total capital investment of US$499 million. Wages also rose last year from $61 to

$80 a month for a six-day work week. Real wages, including bonuses and overtime, push this up above

$120, in a country where the average teachers salary is roughly $30 per month.

The model has received scathing criticism from US academics and the Clean Clothes Campaign in

Europe over the past year, with both saying its monitoring reports whitewash ongoing problems. The

reports present a synthesis of data from all factories without publicly naming the individual factories that fall

short of compliance.

The programs country director, Jill Tucker, has managed to revamp Better Factories since assuming

her role in late 2011. At the time, the industry had a massive expansion of orders, which led to coerced

overtime and a rash of mass fainting incidents at factories. In early 2012 she told a forum on working

conditions in garment factories that other countries considering setting up such a model should ensure

complete transparency from day one, because Better Factories faced a backlash against attempts to publicly

name individual factories found to be in breach of ILO standards or Cambodian labour law. Following the

collapse of a shoe factory complex in April that killed two workers, however, Tucker has said the ILO

intends to name and shame factories that consistently breach ILO conventions and Cambodian labour law.


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Labour law reform is a prerequisite for attracting Western

brands to Myanmars factories, as they face pressure from unions

and human rights groups in the West to uphold labour standards.

They also fear that their carefully crafted brand images - the

main drivers of their profit margins - will be tarnished by an

association with the sweatshop label.

Legal movesLegal movesLegal movesLegal movesLegal movesDespite its many contradictory and controversial sections,

the 2008 Constitution laid a foundation for a revamp of labour

legislation: section 24 of chapter 1 calls for the enactment oflaws to protect workers rights, and article 3 of section 354

enshrines the right to form associations and organisations.

Since then, two key pieces of legislation have been passed:

The Labour Organization Law of 2011 (promulgated in 2011, it

was not enacted until March 9, 2012), and the Settlement of

Labour Disputes Law, which was enacted on March 28, 2012.

These acts enshrine the right to collective bargaining, allow

unions to form, require employers to recognize them and make

it legal for workers to strike.

Employers are also allowed to lock out staff during disputes,

though limits are placed on both strikes and lockouts. Pending

labour legislation includes four key bills on social security, the

minimum wage, workers compensation, as well as employment

and skills development. The Payment of Wages Act, Factories

Act and Leave and Holidays Act are also set to be amended,

according to Dr. Than Win.Marshall described the process of drafting and fine-tuning

these laws as collaborative and excellent. The labour ministry

is also receiving technical assistance from the European Union,

trade-related agencies of Western governments seeking bilateral

deals with Myanmar, and Western brands seeking to source


Cover Story


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ACUMEN 21

from Myanmar factories.

The ILO is aiming to coordinate this. It is helping develop a

legal framework for the industry, to establish enforcement

mechanisms, and help build more responsive institutions for

factory owners and trade unions alike. A major goal, according

to Marshall, is developing industrial relations that are

cooperative rather than confrontational.

He is betting that this can be achieved by ensuring

constructive social dialogue between factory owners and

workers so that the interests of both sides are taken into account

in the decision-making process. It is a goal he acknowledgeswill be tricky to pull off in a country that has recently emerged

from 50 years of military rule.

This country has basically been an orders-based

environment. Orders were issued, orders were received, orders

were passed on and orders were obeyed, Marshall said. This

applied in all environments, including the workplace.

An internationally-competitive garment sector will require

this attitude to shift, and those working to achieve this are under

no illusions that it will be easy. The timing may be right for a

swift change in social attitudes to occur. Aside from ongoing

political and economic reforms, Myanmar has a demographic

advantage: about half the population is under the age of 25. The

emergence of an independent trade union movement could

also help ensure that the rhetoric of reform is at least partially

realized.

The system of organized labour is actually a very importantpart of the social fabric in the development of a democratic

society, but there will always be disputes between capital and

labour, Marshall said. But what we got to try and do is get

people to understand is that workers need employers as

much as employers need workers. And it is very important

ACUMEN 21


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that they build a relationship in which the respective interests

of both parties are taken into account in the decisions that are

made.

A competitive industry is in the interests of both owners

and workers, said Marshall. An unprofitable company does

not employ staff so we have make sure that companies can

be competitive and maintain profitability, and that is achieved

not on the back of low wages but on its back of high productivity,

high quality, low waste, less rework , he said.

He believes that Myanmars advantage is that it is starting

from scratch, which will allow the formation of effective unions

and industry associations as wells as a collaborative approach

to creating a garment sector that benefits both. I actually believe

[starting from scratch] creates opportunities, which if we are all

clever we could actually use for very useful ends in terms of

developing not just the economy, but as a tool for supporting the

development of society, because what goes on in the work is amicrocosm of what goes on outside, he said. If we can develop

those attitudes [of inclusiveness and collaboration in the

workplace] then you can see them develop more broadly in

society.

Risks?Risks?Risks?Risks?Risks?Although Myanmars garment industry is close to gaining

direct access to Western markets, it does face several hurdles.

Exports of garments are expected to near $1 billion this year,

with the lions share going to Korea, Japan, China and Hong

Kong. It is an open secret that Myanmar garments are already

selling in Western retail shops after being repackaged in China,

but direct access would allow manufacturers here to move up

the value chain and improve their access to high-end markets.

They will face pressure from human rights groups, who

will seek to tie access to markets with changes they want to see

here. US-based Human Rights Watch is the most vocal on this

front, and has called for more reforms before preferential trade

status is given.

If the US moves too fast, it will undermine the ability of the

US government to push for improved respect for labour rights,

Human Rights Watch said in a statement in late April. The

statement did not note, however, that activists in the United

States have accused some of its state governments of turning

prison labor into an industry.

Perhaps the biggest risk facing Myanmars garment industry

is a possible failure of the peace process. The peace process is

absolutely critical, said Marshall. Everything is contingent on

it. He is confident that the desire for peace is universal. Wedeal closely with all the non-state armies [they] are not just

going to roll over and accept everything, but they have a desire

for peace, he said. The government also understands that

having a semi-democratic, semi-developed Myanmar with eight

civil wars going on the outside is not the model they are looking

to achieve.

While the future of Myanmars garment industry may hinge

on stitching together a peace deal, the rebranding that has

already occurred has caught the eye of global brands.

The opportunities are huge, said Marshall. You have to admire

the courage of the people to grab this opportunity.A

Many of Myanmars recent labourreforms have been the result of con-

sultations with the International Labour

Organization, whose Director-General,

Guy Ryder, is pictured here.

- DGEMPL/Flickr

Cover Story


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In his address at Yangon University last November, US President Barack Obamastated his belief that the governments ongoing process of reform will [not] succeedwithout national reconciliation. This statement, and the public forum in which it wasmade, underscores the threat to stability and prosperity posed by Myanmars ongoing

ethnic conflicts, and the increasing attention paid to them in the international arena.

Feature


By Phyo Wai


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ACUMEN 27ACUMEN 27

Since President U Thein Seins government came to power in April 2011, it has had to

balance three difficult, delicate and often contradictory priorities: political and economic

reforms, as well as launching a peace process with Myanmars restive ethnic minorities.

These reforms are interdependent: peace and stability are crucial for democratic norms to

deepen. Democracy and transparency will, in turn, facilitate Myanmars economic development.

As foreign investment is likely to flood into Myanmar in coming years, the absence of

internal peace could prove to be a serious challenge to the staying power of recent reforms.


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Federalism - the solution?Federalism - the solution?Federalism - the solution?Federalism - the solution?Federalism - the solution?

Ever since Myanmar gained independence from Britain in

1948, the country has been beset by civil war. Myanmars myriad

insurgencies are widely considered to comprise the longest-

running civil war in the world, a complicated pattern of internal

conflict that has involved ethnic armies and communist insurgents

over the years. Few pathways to national reconciliation are in

sight.

Myanmars ethnic peoples have long demanded equality,

and have advocated for Myanmar to become a genuinely federal

state granting them a modicum of self-determination under the

law. These demands have been raised by the ethnic leaders

in our talks with them, said U Hla Maung Shwe, an advisor tothe President who is acting as a mediator in the peace processes.

And I think, he said, all these demands are sensible.

These demands have a historical basis in the Panglong

Agreement, the first abortive effort to establish a federal state,

led by martyred nationalist leader Aung San in the late 1940s.

Ethnic leaders claim that successive military regimes have

ignored the spirit of Panglong in their dealings with ethnic

minorities. Armed uprisings, including that by the KIA (Kachin

Independence Army) are, simply,the result of the governments

failure to honour it [Panglong], said Kachin Nationalities Advisory

Committee member NHtung Hka Naw Sam. They [the

government] still insist on [maintaining] a unitary form of

administration.Different ethnic groups conceptualise the notion of a federal

system differently. To us, its a system that ensures peace and

equality, said Mahn Aung Pyi Soe from the Karen-ethnic Phalon-

Sawaw Democratic Party. I believe that a federal system will

allow Myanmar to become a prosperous nation.

Nai Min Kyaw Win, an official from the Mon Democratic

Party, noted that many in Myanmar fear federalism, which raises

the spectre of secession from the Union of Myanmar, he said.

I am in favour of promoting the development of a genuine

Union along federal lines - which I firmly believe will bring

peace.

Aside from Panglong, there have been other dalliances with

federalism in Myanmars political past. In the time of Prime

Minister U Nu, representatives of various indigenous races took

part in a conference on federalism, U Win Tin, a veteran

journalist, former political prisoner and high-ranking member

of the opposition National League for Democracy, toldACUMEN.

The consensus was that some sort of federal system needed

to be established, whereby judicial power would be vested in

the central government and most other powers would be

devolved to the states and divisions. But this did not happen,

as in 1962, General Ne Win used it as pretext for the coup

which toppled U Nu, ushering in direct military rule, he

explained.

To many people in Myanmar, both in the government and

among the general public, the association between federalism

and secession is a deep-seated one. But the reality is morecomplicated. Above all, it is an avenue for self-determination

without secession and most ethnic armed groups have officially

dropped demands for sovereignty as a result.

But federalism is not perfect. Federalism alone is by no

means a cure-all, claims Dr. Sein Sein Thein, an NLD

representative from northern Shan State. Regional governments

working separately from one another just wont work. Myanmar,

sandwiched between its two giant neighbours, is in danger of

being influenced or even engulfed by either of them. The problem

of Chinese influence in Shan State is particularly worrisome.

Federalism is still an issue of national security, she claimed. At

(Left/Upper Right) KachinIndependence Army soldiers

wait in anticpation ofgovernment attacks. Lajaiyang, ,

Kachin State, January 2013 -Christopher Symes/Alex

Bookbinder

Feature


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ACUMEN 29

clash of interests between the government which owns 70

percent of the resources in the state - and the Kachins, who are

reluctant to part with the natural resources on their land withoutreceiving a fair share. This is the essence of the resource curse.

The phenomenon of natural resources fuelling internal conflict

exists in other countries, as well. In Africa, theyre fighting for

diamonds, said U Myo Yan Naung Thein, director of Bayda

Institute. In Myanmar, natural resources such as teak - are

being sold abroad by the government as well as by non-state

armed groups.

Towards a durable peaceTowards a durable peaceTowards a durable peaceTowards a durable peaceTowards a durable peace

To a certain extent, President U Thein Seins government

has made an effort to secure peace in Myanmar once and for

present, ethnic conflicts are still going on. So federalism is not

the solution. Our people are not ready for democratization, as

we are not unified. As the saying goes, if there are two peopletheyll form three groups the inability of Myanmar people get

united towards a common goal is well-documented.

Myanmar is rich in natural resources, including gemstones,

oil, minerals, and forestry products. Armed conflicts across

Myanmar, between various non-state armed groups and the

central government, are rooted in the fact that minorities have

historically benefited little from the bounties of their land.

For example, U Win Tin explained, the people of Rakhine

State should have the right to decide, at least in part, what

happens to revenues from the offshore natural gas projects in

their backyard. Armed clashes in Kachin State are essentially a

(Above) Recently felled timber at the Port of Yangon.


32/85


all. Were trying to bring about peace that will endure for a

long time and make national reconciliation possible. The peace

process takes place on a number of levels: first, both sides meet

at the state level to negotiate a ceasefire, the President said in

a recent statement. Both sides must stay in agreed-upon areas,

and arrangements can be made for a second round of

negotiations at the national level. There will be no political

dialogue at first, but a genuine desire for peace will make these

negotiations run smoothly, he said.

He subsequently explained that Union-level negotiations

are intended to extract promises from non-state armed groups

to accept the Three Main Causes (non-disintegration of the

Union, non-disintegration of national solidarity, perpetuation of

sovereignty), to cooperate on economic development, and theeradication of narcotics. As well, Union-level dialogue is intended

to normalise the status of armed groups by allowing them to

form political parties and participate in national political life.

The constitution allows for the country to have only one armed

forces, which may prove difficult when it comes to disarmament.

At the third stage, all political players in the country the

government, ethnic leaders, political parties and

hluttaw(parliamentary) representatives will sign the

agreement, U Thein Sein said. These three stages constitute

the governments roadmap to eternal peace in the country.

The government will have to tread delicately in its dealings

with ethnic armed groups, says Dr. Aye Maung, the chairman

of the Rakhine Nationalities Development Party and a hluttawrepresentative. Just as a physicians skill is important for curing

a disease, so is the skill of a peacebroker. Effective mediators

need to be trusted by both sides.

Naypyidaw has managed to secure ceasefires with some

armed groups, but in the absence of a political solution, military

conflicts are most likely to continue, according to analysts. These

negotiations can be successful in bringing about ceasefires, but

because armed conflict is just politics by other means, if political

problems persist, the chance that armed conflict will break out

remains a possibility, said Dr. Min Zaw Oo of the Myanmar

Peace Centre, an organisation that has taken an active role in

the peace process. Our country has more than 20 armed groups,

explained U Hla Maung Shwe. In no other country has there

been a government that has tried to settle that sheer number of

insurgencies. But well try our best to achieve peace.

A fledgling democracy in a raging stormA fledgling democracy in a raging stormA fledgling democracy in a raging stormA fledgling democracy in a raging stormA fledgling democracy in a raging stormRecent communal violence in Myanmar of a religious and

racial nature underscores the problems Myanmars reformist

government faces as the country transitions from a dictatorship

to a democracy. Myanmars rapid opening to the outside world

has served to reignite sectarian hatreds. These disturbances

may pose a threat to the countrys prospects for achieving true

democratization, and could hinder economic development.

As there are invariably a handful of hardliners behind this

violence, President U Thein Sein has called for the violence to

end and for Myanmars citizens to help build a democratic state.

When a problems arise, some people try to exacerbate them,

he said. Some work behind the scenes to incite violence, andother actively participate in carrying it out. According to the

President, peace and stability are prerequisites for foreign

investment to come in.

U Aung Minand Maj GenHtein Maungat Karen affairmeeting inPha-An 2013March 29.

- Hla Maung Shwe

Feature


33/85

ACUMEN 31

Myanmars economy is like a car with a dead battery.

Pushing the car wont get you anywhere: what you really need

is a new battery from somewhere else, Dr. Aung Tun Thet, a

noted economist and member of the Myanmar Investment

Commission, explained. Thats the role that FDI will play in

Myanmars economy moving forward, and this is the way

Myanmar people should think. Myanmars business leaders

have been wishing a massive inflow of foreign capital for years

and for sanctions to be lifted. To a degree, the international

community has been responsive to these requests in response

to the reforms of the past two years. But trying to open up as

internal conflict rages on is like inviting guests into a homewracked by domestic violence.

To be sure, some foreign investors have already made the

leap into Myanmars untapped economy, especially from

Myanmars neighbouring countries, but most are here just to

test the waters, so to speak, and think strategically about future

investment plans. Foreign investors are not philanthropists: they

are not going to risk large investments in a country where their

security cannot be assured. While theres no way of knowing if

Myanmars dictatorship-turned-democracy will revert back to

its old repressive ways, one thing is certain: if there is no peace

and stability in Myanmar, foreign investors will begin to look

elsewhere.

In February, The Voice Weeklyquoted Union Minister U

Soe Thein claiming the government has made significant

headway when it comes to ending Myanmars insurgencies. By

negotiating ceasefires, entering into constructive dialogue with

armed groups and holding a conference of nationalities in

Myanmar, we believe that we will be able to achieve a

comprehensive peace plan by 2015. His statement underscores

the importance of U Thein Seins efforts throughout his tenure

in office; if the governments efforts succeed, the FDI needed to

jumpstart Myanmars economy may finally be forthcoming. A

When problems arise, some

people try to exacerbate them.

Some work behind the scenes to

incite violence, and others actively

participate in carrying it out.

President U Thein Sein poses with members of the Karen NationalUnions executive committee. - Hla Maung Shwe


34/85


Feature

By Hein Zaw



35/85

ACUMEN 33

Myanmar is gradually

undergoing a process of

profound reform. Some

foreign investors have

already made large-scale

investments, and more are

expected to arrive in short

order. Despite the general

spirit of optimism, corruptionand bribery cases are still

cause for concern. This

problem threatens

Myanmars development

prospects, and should be

addressed as a matter of

utmost urgency.

ACUMEN 33


36/85


Corruption as it is todayCorruption as it is todayCorruption as it is todayCorruption as it is todayCorruption as it is todayOver the first few months of this year, a number of media

reports and articles were released about corruption and brib-

ery. Over 1,000 government employees were reprimanded for

corrupt practices, 16 customs officers were dismissed, and se-

nior officials in the Ministry of Communications came under

investigation. These scandals rightfully provoked public out-

rage. While the governments response might appear to reflect

transparency and openness, these cases represent the tip of

the iceberg, ac-

cording to

some analysts,

who claim that

gove rnmen temployees who

bear the brunt

of the punish-

ment are those

on the lowest

echelons of the

bureaucracy,

and that rela-

tively fewer ac-

tions are taken

against corrup-

tion at the top.

In itsannual Corrup-

tion Perceptions

Index (CPI),

Transparency

International

(TI), a Berlin-

based NGO

that monitors

public and pri-

vate sector cor-

ruption, ranks

Myanmar as the 172ndmost corrupt country in the world, a

score worse than all but Sudan, Afghanistan, North Korea and

Somalia. Within ASEAN, Singapore is ranked as least corrupt

by TI.

Tea money cultureTea money cultureTea money cultureTea money cultureTea money cultureBribery and corruption have become deeply rooted in

Myanmar over many years, and as such have become part of

Myanmar culture. They are seen as acceptable for getting things

done and buying influence. Tea Money, in particular, has

become a common euphemism for bribes used in everyday

language. Daw Khin Aye Than, an economist with 20 years of

teaching experience at foreign universities, isnt convinced that

these cultural traits are going to die out any time soon. Bribery

has become a habit with the people. They consider it a must-do; nobody bothers to question why, she said. This is a long-

running problem, and its grown into a major one, but nobody

can be bothered to stop it.

Building a society that is intolerant of corruption will take

a while, says Dr. Aung Tun Thet, a prominent local economist.

If corruption is only in the blood, you can remove it by taking

the blood out, he said. But its deep in peoples DNA, its

embedded in their genes. The whole genetic engine, so to speak,

needs overhauling. He is not particularly optimistic, either.

Thinking about corruption, its just frustrating, he continued.

People have grievances about so many things and the countrys

administrative machinery is falling apart. Things dont function

very well, which leads people to show little respect for the

law.

Although corruption exists in the private sector as well as

within the government, government departments are likely the

most corrupt institutions in the country. The fact that people

have little faith in public institutions underscores the magnitude

of the social corrosion caused by corruption and bribery.

Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?As the old Myanmar saying goes, one cannot afford to be

moral on an empty stomach. Most people intuitively see a

correlation between corruption and bribery and the relative

Rank Ten Most Corrupt Countries Score

165 Haiti 19

165 Venezuela 19

169 Iraq 18

170 Turkmenistan 17

170 Uzbekistan 17

172 Myanmar 15

173 Sudan 13

174 Afghanistan 8

174 Korea (North) 8

174 Somalia 8

Rank Ten Least Corrupt Countries Score

1 Denmark 90

2 Finland 90

3 New Zealand 90

4 Sweden 88

5 Singapore 87

6 Switzerland 86

7 Australia 85

8 Norway 85

9 Canada 84

10 Netherlands 84

Result of CPI (2012) released by TI

organization

North Korea (left) and Somalia (right)are at the bottom of the CPI -but Myanmar is not far off- EU Aid and Civil Protection/Flickr

Feature


37/85

ACUMEN 35

level of poverty in a country. In this country, making an

adequate living is difficult, said U Toe Hlaing, technical directorat MAGA Manufacturing Company, Ltd. Government employees

find it hard to live without outside income. The majority of

educated people in this country agree, but a comprehensive

analysis of the factors at play still needs to be done.

The backward state of Myanmars economy makes it

difficult for people to earn enough for food, clothing and shelter,

which invariably leads them to resort to corruption and bribery.

But how do things function in other countries? Corruption is a

fact of life everywhere in the world to varying degrees, even

in the United States, the worlds sole economic superpower.But in developed countries, there is generally a healthy system

of checks and balances in place to tackle corruption. There is

a correlation between per capita income and corruption

perceptions: highly advanced and wealthy states, such as

Singapore, Australia, and Switzerland, are in the top 10 in terms

of income and the bottom ten when it comes to corruption.

South Korea, despite the fact that is a prosperous, has always

had its fair share of corruption to contend with. Income levels

5

10

15

20

2

5

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Corruption Perceptions Index (2003-2012) for Myanmar


38/85


and corruption are related to a certain

extent, but low incomes alone cannot

explain the pervasiveness of corruption

in Myanmar. Many government

employees are not corrupt, despite their

low salaries and their exposure to the

structural factors that breed corruption.

Many high-ranking officials, however,

cannot resist the temptations of outside

money.

Power and responsibilityPower and responsibilityPower and responsibilityPower and responsibilityPower and responsibilityThe element of power is crucial to

understanding corruption, said U MinSein, a high court lawyer. Historically,

nobody dared question those in positions

of power and authority. If, for example,

it became known that an official took a

bribe, it would be impossible to report it

to a higher authority, as the next level

up would also be complicit in accepting

bribes. When systemic abuses of power

become normalised, the problem of

bribery thus becomes a cancer that

pervades the entire system.

It is commonly perceived that these

kinds of practices are rampant on allechelons, from top to bottom, including

in law enforcement. This does not

engender much trust towards

government departments across the

board.

The current government has only

been taking action against people

responsible for corrupt practices between

2010 and 2012, said U Than Maung, a

high court lawyer from Sittwe. There

was a lot of corruption going on before

then, as well. Weve had to deal with the

devastating effects of corruption for the

past 20 years now. The ascent to

prominence by the cronies over the

past two decades - businessmen that have

profited off of close ties to the

government - are a case in point. The

people in charge claim that American

sanctions were responsible for

corruption but paradoxically, weve

seen the emergence of millionaires and

billionaires in Myanmar. This indicates

that its impossible to isolate one issue

as being responsible for the problem. Its

a case of so many things being wrong

on all levels.

Tradition exploitedTradition exploitedTradition exploitedTradition exploitedTradition exploitedGiving presents and paying respects

to teachers and elders are cultural

traditions that need to be preserved as

Myanmar modernizes. But over time, the

significance of these traditions has

changed as money has come into the

equation; gift-giving has become

synonymous with buying influence. Put

simply, Myanmars cultural traditions arebeing exploited. Since gift-giving is part

of Myanmar culture, I would have no

problem with my students coming to pay

respects after they graduate, said Daw

Khin Aye Than, the economics professor.

There is no obligation for teachers to

reciprocate by handing out high grades.

These gifts arent bribery: they are part

of traditional Myanmar culture. But there

need to be limits. Expensive gifts, like

cars and jewelry, arent acceptable. These

are, in practice, more than gifts; gifts

should just be small tokens of gratitude.

Effects of corruptionEffects of corruptionEffects of corruptionEffects of corruptionEffects of corruptionCorruption and bribery adversely

affect Myanmars prospects for

modernization and accountability, and

petty corruption affects the functioning

of government offices and how they are

able to deal with the public. But despite

recent steps to improve accountability

and transparency, the public is fed up

with the slow pace of change, says Dr.

Aung Tun Thet. It takes a week for a

document to go from one desk in an office

to the next. Under the new government,

while things have improved, problems

remain. Continued corruption and

bribery may result in a backlash against

recent reforms. Recent disturbances in

Rakhine State, for example, have raised

questions about how the government has

handled citizenship issues. Corruption

disproportionately impacts the poor, as

they are made to pay the same bribes

for the same services as rich people are.

Feature


39/85

ACUMEN 37

Continued corruption can also

tarnish Myanmars image as a reforming

state in the eyes of the international

community. A lack of international faith

and trust in Myanmars reform process

has already held back foreign investment

and international economic engagement.

There will be no investment in a

corruption-ridden country, said Dr. Aung

Tun Thet, because potential investors

are aware that their investments will only

be enjoyed by a handful of people at the

top. This extends to the aid sector as

well: Myanmar receives a paltry amountof foreign aid just eight dollars per

capita.

Good governance, clean government

- these are the buzzwords President U

Thein Sein has employed in his major

policy speeches, and they have struck a

chord with Myanmars population.

Whether or not the rhetoric matches

concrete action remains to be seen.

But the government does, at least

superficially, seem to be committed to

stamping out corruption. On January 8,

a commission to end corruption andbribery was founded, and will be led by

Vice-President Sai Mauk Kham. The

following month, Parliament passed

comprehensive legislation that stipulates

harsh penalties for people found to be

engaging in corrupt practices.

A major point of contention has been

government officials lack of openness

about their personal assets, and on this

count Parliament has not been as

responsive. A motion demanding that

government officials declare their assets

was defeated in Parliament late last year,

which will invariably compromise the

sticking power of recent reforms.

Common wisdom suggests that

corruption in Myanmar reached a zenith

under previous military governments, but

this is not necessarily the case. Things

today are arguably much worse than they

were during the Ne Win regime, when

opportunities for corruption were more

limited. The period of SLORC/SPDC rule

between 1988 and 2010 was arguably

the most corrupt in Myanmars history,

and it is this legacy that the current

government must make a concerted effort

to undo. It is clear that previous military

governments fostered a climate of

corruption, said U Than Maung. Those

governments were not governments for

the people, especially the regime that

immediately preceded the current

government. It is demoralising to see

Myanmar lagging behind while other

countries make tremendous strides

forward.

How to go about reformHow to go about reformHow to go about reformHow to go about reformHow to go about reformAnti-corruption campaigns cannotbe static: rooting out corruption needs to

be an ongoing process. We need an

action plan, Dr. Aung Tun Thet said. In

the past, close relationships between

businesses and government were normal,

and bribing government officials for

contracts was commonplace. These

dealings need to be made transparent in

order to prevent bribery and it is up to

all government departments to be

responsible for their own disclosures.

U Than Maung feels that no matter howgood the legal framework gets, the greed

inherent to human nature will always

reign supreme. Laws dont necessarily

need correcting, but men do, he said.

You cant reform anything when the

people who are entrusted with

maintaining the social contract have no

external checks and balances on their

impunity. All of those responsible law

enforcement officials, businessmen,

parliamentarians, etc., must act in a fair

and just way.

Dignity and humility need to play a

part in stemming corruption, according

to some thinkers, and people in Myanmar

need to start looking at bribes as personal

assaults against their integrity. The media

may also have a role to play in

normalising non-corrupt practices, and

expose corruption when it occurs. First

and foremost, societal attitudes towards

corruption need to change, and this will

only occur if people on an individual

level refuse to pay or accept bribes.A

A lack of internationalfaith and trust in

Myanmars reform

process has already

held back foreign

investment and

international economic

engagement. Therewill be no investment

in a corruption-ridden

country, said Dr. Aung

Tun Thet, because

potential investors are

aware that their

investments will onlybe enjoyed by a

handful of people at

the top.


40/85

ACUMEN 33

Myanmar is gradually

undergoing a process of

profound reform. Some

foreign investors have

already made large-scale

investments, and more are

expected to arrive in short

order. Despite the general

spirit of optimism, corruptionand bribery cases are still

cause for concern. This

problem threatens

Myanmars development

prospects, and should be

addressed as a matter of

utmost urgency.

ACUMEN 33


41/85


Corruption as it is todayCorruption as it is todayCorruption as it is todayCorruption as it is todayCorruption as it is todayOver the first few months of this year, a number of media

reports and articles were released about corruption and brib-

ery. Over 1,000 government employees were reprimanded for

corrupt practices, 16 customs officers were dismissed, and se-

nior officials in the Ministry of Communications came under

investigation. These scandals rightfully provoked public out-

rage. While the governments response might appear to reflect

transparency and openness, these cases represent the tip of

the iceberg, ac-

cording to

some analysts,

who claim that

gove rnmen temployees who

bear the brunt

of the punish-

ment are those

on the lowest

echelons of the

bureaucracy,

and that rela-

tively fewer ac-

tions are taken

against corrup-

tion at the top.

In itsannual Corrup-

tion Perceptions

Index (CPI),

Transparency

International

(TI), a Berlin-

based NGO

that monitors

public and pri-

vate sector cor-

ruption, ranks

Myanmar as the 172ndmost corrupt country in the world, a

score worse than all but Sudan, Afghanistan, North Korea and

Somalia. Within ASEAN, Singapore is ranked as least corrupt

by TI.

Tea money cultureTea money cultureTea money cultureTea money cultureTea money cultureBribery and corruption have become deeply rooted in

Myanmar over many years, and as such have become part of

Myanmar culture. They are seen as acceptable for getting things

done and buying influence. Tea Money, in particular, has

become a common euphemism for bribes used in everyday

language. Daw Khin Aye Than, an economist with 20 years of

teaching experience at foreign universities, isnt convinced that

these cultural traits are going to die out any time soon. Bribery

has become a habit with the people. They consider it a must-do; nobody bothers to question why, she said. This is a long-

running problem, and its grown into a major one, but nobody

can be bothered to stop it.

Building a society that is intolerant of corruption will take

a while, says Dr. Aung Tun Thet, a prominent local economist.

If corruption is only in the blood, you can remove it by taking

the blood out, he said. But its deep in peoples DNA, its

embedded in their genes. The whole genetic engine, so to speak,

needs overhauling. He is not particularly optimistic, either.

Thinking about corruption, its just frustrating, he continued.

People have grievances about so many things and the countrys

administrative machinery is falling apart. Things dont function

very well, which leads people to show little respect for the

law.

Although corruption exists in the private sector as well as

within the government, government departments are likely the

most corrupt institutions in the country. The fact that people

have little faith in public institutions underscores the magnitude

of the social corrosion caused by corruption and bribery.

Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?Is poverty the root cause?As the old Myanmar saying goes, one cannot afford to be

moral on an empty stomach. Most people intuitively see a

correlation between corruption and bribery and the relative

Rank Ten Most Corrupt Countries Score

165 Haiti 19

165 Venezuela 19

169 Iraq 18

170 Turkmenistan 17

170 Uzbekistan 17

172 Myanmar 15

173 Sudan 13

174 Afghanistan 8

174 Korea (North) 8

174 Somalia 8

Rank Ten Least Corrupt Countries Score

1 Denmark 90

2 Finland 90

3 New Zealand 90

4 Sweden 88

5 Singapore 87

6 Switzerland 86

7 Australia 85

8 Norway 85

9 Canada 84

10 Netherlands 84

Result of CPI (2012) released by TI

organization

North Korea (left) and Somalia (right)are at the bottom of the CPI -but Myanmar is not far off- EU Aid and Civil Protection/Flickr

Feature


42/85

ACUMEN 35

level of poverty in a country. In this country, making an

adequate living is difficult, said U Toe Hlaing, technical directorat MAGA Manufacturing Company, Ltd. Government employees

find it hard to live without outside income. The majority of

educated people in this country agree, but a comprehensive

analysis of the factors at play still needs to be done.

The backward state of Myanmars economy makes it

difficult for people to earn enough for food, clothing and shelter,

which invariably leads them to resort to corruption and bribery.

But how do things function in other countries? Corruption is a

fact of life everywhere in the world to varying degrees, even

in the United States, the worlds sole economic superpower.But in developed countries, there is generally a healthy system

of checks and balances in place to tackle corruption. There is

a correlation between per capita income and corruption

perceptions: highly advanced and wealthy states, such as

Singapore, Australia, and Switzerland, are in the top 10 in terms

of income and the bottom ten when it comes to corruption.

South Korea, despite the fact that is a prosperous, has always

had its fair share of corruption to contend with. Income levels

5

10

15

20

2

5

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Corruption Perceptions Index (2003-2012) for Myanmar


43/85


and corruption are related to a certain

extent, but low incomes alone cannot

explain the pervasiveness of corruption

in Myanmar. Many government

employees are not corrupt, despite their

low salaries and their exposure to the

structural factors that breed corruption.

Many high-ranking officials, however,

cannot resist the temptations of outside

money.

Power and responsibilityPower and responsibilityPower and responsibilityPower and responsibilityPower and responsibilityThe element of power is crucial to

understanding corruption, said U MinSein, a high court lawyer. Historically,

nobody dared question those in positions

of power and authority. If, for example,

it became known that an official took a

bribe, it would be impossible to report it

to a higher authority, as the next level

up would also be complicit in accepting

bribes. When systemic abuses of power

become normalised, the problem of

bribery thus becomes a cancer that

pervades the entire system.

It is commonly perceived that these

kinds of practices are rampant on allechelons, from top to bottom, including

in law enforcement. This does not

engender much trust towards

government departments across the

board.

The current government has only

been taking action against people

responsible for corrupt practices between

2010 and 2012, said U Than Maung, a

high court lawyer from Sittwe. There

was a lot of corruption going on before

then, as well. Weve had to deal with the

devastating effects of corruption for the

past 20 years now. The ascent to

prominence by the cronies over the

past two decades - businessmen that have

profited off of close ties to the

government - are a case in point. The

people in charge claim that American

sanctions were responsible for

corruption but paradoxically, weve

seen the emergence of millionaires and

billionaires in Myanmar. This indicates

that its impossible to isolate one issue

as being responsible for the problem. Its

a case of so many things being wrong

on all levels.

Tradition exploitedTradition exploitedTradition exploitedTradition exploitedTradition exploitedGiving presents and paying respects

to teachers and elders are cultural

traditions that need to be preserved as

Myanmar modernizes. But over time, the

significance of these traditions has

changed as money has come into the

equation; gift-giving has become

synonymous with buying influence. Put

simply, Myanmars cultural traditions arebeing exploited. Since gift-giving is part

of Myanmar culture, I would have no

problem with my students coming to pay

respects after they graduate, said Daw

Khin Aye Than, the economics professor.

There is no obligation for teachers to

reciprocate by handing out high grades.

These gifts arent bribery: they are part

of traditional Myanmar culture. But there

need to be limits. Expensive gifts, like

cars and jewelry, arent acceptable. These

are, in practice, more than gifts; gifts

should just be small tokens of gratitude.

Effects of corruptionEffects of corruptionEffects of corruptionEffects of corruptionEffects of corruptionCorruption and bribery adversely

affect Myanmars prospects for

modernization and accountability, and

petty corruption affects the functioning

of government offices and how they are

able to deal with the public. But despite

recent steps to improve accountability

and transparency, the public is fed up

with the slow pace of change, says Dr.

Aung Tun Thet. It takes a week for a

document to go from one desk in an office

to the next. Under the new government,

while things have improved, problems

remain. Continued corruption and

bribery may result in a backlash against

recent reforms. Recent disturbances in

Rakhine State, for example, have raised

questions about how the government has

handled citizenship issues. Corruption

disproportionately impacts the poor, as

they are made to pay the same bribes

for the same services as rich people are.

Feature


44/85

ACUMEN 37

Continued corruption can also

tarnish Myanmars image as a reforming

state in the eyes of the international

community. A lack of international faith

and trust in Myanmars reform process

has already held back foreign investment

and international economic engagement.

There will be no investment in a

corruption-ridden country, said Dr. Aung

Tun Thet, because potential investors

are aware that their investments will only

be enjoyed by a handful of people at the

top. This extends to the aid sector as

well: Myanmar receives a paltry amountof foreign aid just eight dollars per

capita.

Good governance, clean government

- these are the buzzwords President U

Thein Sein has employed in his major

policy speeches, and they have struck a

chord with Myanmars population.

Whether or not the rhetoric matches

concrete action remains to be seen.

But the government does, at least

superficially, seem to be committed to

stamping out corruption. On January 8,

a commission to end corruption andbribery was founded, and will be led by

Vice-President Sai Mauk Kham. The

following month, Parliament passed

comprehensive legislation that stipulates

harsh penalties for people found to be

engaging in corrupt practices.

A major point of contention has been

government officials lack of openness

about their personal assets, and on this

count Parliament has not been as

responsive. A motion demanding that

government officials declare their assets

was defeated in Parliament late last year,

which will invariably compromise the

sticking power of recent reforms.

Common wisdom suggests that

corruption in Myanmar reached a zenith

under previous military governments, but

this is not necessarily the case. Things

today are arguably much worse than they

were during the Ne Win regime, when

opportunities for corruption were more

limited. The period of SLORC/SPDC rule

between 1988 and 2010 was arguably

the most corrupt in Myanmars history,

and it is this legacy that the current

government must make a concerted effort

to undo. It is clear that previous military

governments fostered a climate of

corruption, said U Than Maung. Those

governments were not governments for

the people, especially the regime that

immediately preceded the current

government. It is demoralising to see

Myanmar lagging behind while other

countries make tremendous strides

forward.

How to go about reformHow to go about reformHow to go about reformHow to go about reformHow to go about reformAnti-corruption campaigns cannotbe static: rooting out corruption needs to

be an ongoing process. We need an

action plan, Dr. Aung Tun Thet said. In

the past, close relationships between

businesses and government were normal,

and bribing government officials for

contracts was commonplace. These

dealings need to be made transparent in

order to prevent bribery and it is up to

all government departments to be

responsible for their own disclosures.

U Than Maung feels that no matter howgood the legal framework gets, the greed

inherent to human nature will always

reign supreme. Laws dont necessarily

need correcting, but men do, he said.

You cant reform anything when the

people who are entrusted with

maintaining the social contract have no

external checks and balances on their

impunity. All of those responsible law

enforcement officials, businessmen,

parliamentarians, etc., must act in a fair

and just way.

Dignity and humility need to play a

part in stemming corruption, according

to some thinkers, and people in Myanmar

need to start looking at bribes as personal

assaults against their integrity. The media

may also have a role to play in

normalising non-corrupt practices, and

expose corruption when it occurs. First

and foremost, societal attitudes towards

corruption need to change, and this will

only occur if people on an individual

level refuse to pay or accept bribes.A

A lack of internationalfaith and trust in

Myanmars reform

process has already

held back foreign

investment and

international economic

engagement. Therewill be no investment

in a corruption-ridden

country, said Dr. Aung

Tun Thet, because

potential investors are

aware that their

investments will onlybe enjoyed by a

handful of people at

the top.


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Kaufman is president of Revenue Watch Institute (RWI), an

international watchdog organization that ranks how transparent

countries are about their extractive resource revenues. In RWIs

annual Revenue Governance Index (RGI), Myanmar is currently

ranked 58thout of 58 countries looked at by the study. To date,

23 countries have achieved EITI-compliant status worldwide.

In early May, President Thein Sein appointed U Win Shein

to head a high-level committee to recommend reforms to

Myanmars natural resource sector, replacing former minister

U Soe Thein in that position. The President set the committee a

deadline of December 31 this year to create an EITI work plan

and initiate reforms.

While implementing EITI standards alone cannot solve the

numerous problems plaguing the extraction of natural resourcesin Myanmar today, it certainly can help make a dent in

Myanmars poor RGI performance. Considering Myanmar scored

four out of a possible 100 points on RGIs criteria, however, at

least marginal improvement next year is likely.

At the same time as U Win Shein was in Sydney, the EITI

secretariat approved revised performance standards, requiring

EITIs 39 signatory states to release information about production

volumes, companies holding licenses, license allocations, state-

owned companies, corporate social responsibility payments and

transfers from central to local governments, as well as disclosing

revenue data.

These new, more stringent standards will give the EITIs

mechanisms more teeth, allowing it to address the complexities

of resource allocation in the extractive industries, according to

Kaufman. The EITI has finally recognized that, when it comes

to complex industries, merely disclosing payments is not enough.

By including contracts and licenses, beneficial ownership, state-

owned companies and production information, the new standard

could make EITI more effective in addressing the vast governance

challenges facing resource-rich countries.As the mid-June deadline for 30 licenses to operate in

Myanmars Bay of Bengal waters for oil and gas exploration

approaches, the governments ability to crack down on accepting

or soliciting bribes to award contracts will be under scrutiny.

U Win Shein stated that Myanmar wishes to reenter the

international community, which unambiguously identifies

Panning for gold near Thabeikkyin

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ACUMEN 41

increased international trade as a motivation for improving

transparency. It suggests deeply corrupt industry could

perfunctorily satisfy certain minimum requirements set by a

weak international governing body, in exchange for emergence

from economic isolation. And even if EITI is effective and the

ministers intentions are truly geared towards reform, just how

long is the road ahead for U Win Shein and his committee?

At present, legislation covering Myanmars natural resources

does not define the licensing process, the role of governmentauthorities, or the fiscal system for extractive revenues. Almost

no information is available on the management of the extractive

sector. Myanmar has no freedom of information law, and requires

no environmental or social impact assessments.

According to RWI, one of the biggest obstacles to a

functioning regulatory system is that the ministry of energy and

state-owned Myanmar Oil and Gas Enterprise (MOGE) oversee

the petroleum sector, award contracts, and require foreign

companies to sign a production-sharing contract with them. The

monopoly forces foreign investors to accept the risk that the

government may announce policy changes at any time. An

overhaul of the system is important, as reforms could allow

space for civil society to participate in the regulatory mechanism,

clarify which authorities receive payments from which extractive

companies, and identify which politically connected people are

receiving licenses. EITI have seconded a group of Australian

lawyers to help MOGE reform, but can military or government

owned enterprises get genuinely clean without privatizing?

The joint venture between Union of Myanmar Economic

Holdings (UMEH) and Chinese military-linked company Wanbaoat the Latpadaung copper mine is a case in point, underscoring

how politically-connected companies in Myanmar are currently

accountable to nobody. EITI will report on just how much money

is actually received by which parties, and hold Wanbao

accountable for its stated profit-sharing scheme, which would

see 17% of the spoils go to the government, 13% to UMEH, and

12% to itself. But even with transparent profit reporting, the

project still fails to adhere to international standards with regards

to land grabbing, compensation, and environmental degradation.

Even the opposition-led Letpadaung investigation commission,

headed by Aung San Suu Kyi, decided to allow the project to

Underground shaft ata gold mine near Thabeikkyin


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ACUMEN 43

proceed. Key to the commissions decision was the concernthat cancellation of the contract would deter much-needed

investment in the mining sector and complicate relations

with China. It would be erroneous to believe that accurately

reporting profits gained through projects that are egregious

in the first place solves any problems.

For Myanmars reforming economy, the way the

extractive resource industry develops will be the single

most important factor in determining its success. The

extractive sector accounted for 39 percent of exports in

2010, and the majority of foreign income came from oil

and gas revenues. The International Monetary Fund

estimates gas revenues will increase by 85 percent over

the next three years as the Shwe gas project becomesoperational. Myanmar has an estimated 10 trillion cubic

feet of offshore natural gas reserves, and precious metals,

gems, minerals timber, and hydroelectric power to boot.

Yet despite it all, Myanmar remains one of the least

developed nations in the world.

Resource-rich countries frequently fare worse than their

better-off neighbors on most governance measures, resulting

in corruption, increased poverty rates, and escalating civil

unrest. All of these are problematic factors currently present

in Myanmar. Furthermore, the value of the Myanmar kyat

was, in the very recent past, inflated due to an influx of

foreign currency in the extractive industry sector, another

destabilizing effect extractive industries can have. Non-

renewable resources can create economic prosperity for

generations if managed effectively, but as RWIs Anthony

Richter said, resources and their mismanagement can mean

impunity for those perpetrating human rights abuses.

In short, human rights abuses in countries with

geopolitical or economic significance receive less criticism

than countries without the same trade, energy or strategic

significance, Richter said at the most recent US Helsinki

Commission hearing, and most importantly, where

corruption and mismanagement are present in such

economies, there are often human rights abuses. Wanbao

and UMEH were able to convince the commission thattheir project should go ahead, and even got away with

perpetrating a brutal crackdown on peaceful protesters at

the mine because of their position as political and financial

giants. While measures enshrining transparency are a step

forward, initiatives like EITI will be relatively powerless

when it comes to stopping human rights abuses. A


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Interview



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ACUMEN 47

D

agon Win Aung is one of Myanmars best-known businessmen. As

President of both his own company, Dagon International Limited,

and the Union of Myanmar Federation of Chambers of Commerce

(UMFCCI), he has garnered a reputation as an effective advocate for

Myanmars businesses both at home and abroad. In conversation with our

Dr. Aung Tun Thet, he shared some of his proudest moments in life, as well

as his outlook on the future prospects for Myanmars business community.

Dr. Aung Tun Thet :Dr. Aung Tun Thet :Dr. Aung Tun Thet :Dr. Aung Tun Thet :Dr. Aung Tun Thet : The purpose of Myanmar B2B is to share information

on Myanmars most successful enterpreneurs with its readers. In keeping

with that mission, there are three topics I am keen to discuss with you. First

of all, I want to know: what has allowed you to become as successful as you

are? Second of all, I am interested to hear about your activities today . Last

but not least, I am curious to know what your prognosis for Myanmars

business community looks like as reforms begin to take root.What sets you apart from other businessmen is the fact that you juggle

two important positions simultaneously: that of public figure and advocate,

on top of being a successful businessman. So that others may be able to

emulate your successes, please tell us about the journey that got you to

where you are today.

U Win Aung :U Win Aung :U Win Aung :U Win Aung :U Win Aung : Im descended from merchants; both of my parents were

traders. They came from Padigon, in Pegu Region, and subsequently moved

to Pyay, where they founded a company that produced digestive medicines.

At that point, they enrolled me in St Pauls school in Yangon, which gave

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me the opportunity to receive a good education and move on to

university. When I was still in university, I started my first

business, buying and selling cars. After I got married, I opened

a glass factory, which employed 65 workers. Aside from the

glass factory, I managed two factories I inherited from my father-

in-law, which produced tin cans and wire mesh.

Things were very hard during the socialist era. In 1984, I

started producing paper from recycled materials; I was the first

businessman in the country to do so. Most businessmen were

concerned with heavy industry at the time; the pulp-and-paper

operation was my hobby, in a sense.

In 1989, after the transition to a market economy, I founded

Dagon International Trading Co, Ltd, which serves as thecorporate umbrella for my business ventures to this day. My

first office was located on Sule Pagoda Road in downtown

Yangon, and I only had three employees to start out with. I

should clarify that at this point, I was still managing the businesses

I mentioned earlier. I thought it wise to use my established

ventures to prop up my new business, and seize commercial

opportunities as they presented themselves. I started to do import-

export under the Dagon banner, and at around the same time, I

made my first foray into logging.

Before the first wave of economic liberalization in the late

80s, forestry licences were auctioned off. During the socialistera, only selective felling of mature trees was allowed, a policy

that dated bac

Acumen Magazine July 2013

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Transcript of Acumen Magazine July 2013