Sunday 28 October 2012

Socialism or free markets? Consider Myanmar, Thailand

By Lee Kuan Yew, Published The Straits Times, 27 Oct 2012

IN TERMS of land area and population, Myanmar and Thailand are close in size, and in the 1960s, both countries had similar rates of growth.

But in 1962, Myanmar's General Ne Win led a coup d'etat, establishing a nominally socialist military government that followed an economic policy of autarky. The country closed its doors to the world and expelled the Indians, who had come with the British to help in the retail industry many decades before. Although Ne Win resigned in July 1988, the military junta remained firmly in control of the country.

During the same period, Thailand experienced multiple army coups, but its leaders chose a different economic path. Thailand became a free-market economy, open to all investments from all countries, and it absorbed its Chinese immigrants, who had arrived during and after British rule. Today, Thailand is one of Asia's busiest manufacturing hubs.

Because of its closed-door socialism, Myanmar's per capita gross domestic product (in current international dollars) has lagged behind Thailand's. In 1980, Myanmar's was US$172 and Thailand's, US$1,060. By this year, the gap had widened, with Myanmar's per capita GDP reaching US$1,950 (S$2,400) and Thailand's, US$8,516.

In May 1997, the United States imposed strong economic sanctions against Myanmar for human rights violations, banning all investment and trade activities. With the country's diminished economic growth and its multiple other problems, citizens in need of medicine were forced to travel to the Thai border so they could trade gems or other valuables for medical supplies. At the same time, the government was allowing China to extract whatever resources in gems and precious metals Myanmar held.

Positive signs

THERE are signs of change in Myanmar. One catalyst has been Ms Aung San Suu Kyi, the third child of Aung San, the father of modern-day Myanmar. Born in June 1945, Ms Suu Kyi spent many years abroad as a young adult. She returned home in 1988 to care for her ill mother and later became a leader of the pro-democracy movement, helping to found the National League for Democracy (NLD). She was first placed under house arrest in July 1989, but in the 1990 elections, her NLD won 59 per cent of the national vote and 81 per cent of the seats. The military ignored the results. Ms Suu Kyi was under house arrest for almost 15 of the 21 years following her initial arrest, and was awarded the Nobel Peace Prize in 1991. She was last released in November 2010.

In April, the NLD won 43 parliamentary seats in the by-elections, and Ms Suu Kyi took a seat in the Lower House of Parliament. Her brave presence in Myanmar has been an important factor in forcing change and bringing about the new Myanmar.

Equally crucial has been the military government's change of heart. State Peace and Development Council chairman Than Shwe resigned in March last year. He was succeeded by another member of the military government, Mr Thein Sein, who seems to be a genuine reformer. Under his leadership, Myanmar has transitioned to a civilian government.

When President Thein Sein met US Secretary of State Hillary Clinton in December last year, she encouraged him to further open the country to foreign trade and investment. When they met again last month, Mrs Clinton announced that the US would lift its import sanctions, which will allow Myanmar to gradually close the economic gap with Thailand.

Thailand itself transitioned from an absolute monarchy to a democratic constitutional monarchy. Regular and rambunctious elections are held, but the army continues to stage coups whenever it considers the government unreliable or going against the monarchy. Over the last 80 years, there have been 11 successful coups and seven failed ones. The most recent was the ouster of prime minister Thaksin Shinawatra in September 2006. The military's interference has resulted in a perpetual state of political uncertainty and has shaken investor confidence.

Both countries' governments would do well to remember that it was the open-door policies of free trade and investment that made Thailand prosperous, and the passive closed-door policies that held Myanmar back for 50 years.

This article first appeared in the November issue of Forbes Asia magazine in a column rotated among Mr Lee Kuan Yew, former prime minister of Singapore; Mr David Malpass, global economist, president of Encima Global LLC; Ms Amity Shales, director of the 4% Growth Project; and Mr Paul Johnson, eminent British historian and author.


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