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Business Insight: Myanmar

A road less traveled

By Pete Troilo14 May 2012

U.K. Secretary of State for International Development Andrew Mitchell meets Nobel Peace Prize laureate Aung San Suu Kyi in the former's landmark visit to Myanmar in 2011. Photo by: U.K. Department for International Development / CC BY-NC-SA

If you were to compare the travel itineraries of officials within various aid agencies in the last six months compared to the previous several decades, the most glaring difference would probably be the listing of the obscure airport code “RGN” as a destination. RGN? Even the most worldly and well-traveled would be excused for failing to link the code to the city of Yangon (also known as Rangoon) or country of Myanmar. But that unfamiliarity is subsiding quickly.

Landmark visits to Myanmar began with U.S. Secretary of State Hillary Clinton back in December 2011. In April 2012, U.K. Prime Minister David Cameron landed in Yangon, marking the first visit of a Western head of government to Myanmar in over 50 years. The symbolic visits have opened up the door for other aid agency officials and development workers who appear to be converging on Southeast Asia’s most closed off country.

Hailed among the region’s brightest development prospects in the 1950s, totalitarianism and isolation have led Myanmar to become the region’s poorest and least developed nation in just over 60 years. The U.N.’s Human Development Index positions the nation at 149 of 187 countries. According to the Asian Development Bank, 32 percent of the population or over 17 million people live below the poverty line, while the World Health Organization reports that about 35 percent of Burmese children suffer from stunting.

Despite the country’s desperate socio-economic condition, decades of oppressive military rule resulted in debilitating Western sanctions and pariah nation status, blocking access to official development assistance and branding the country as a “donor orphan.” Indeed, the need for foreign assistance and political reform has been well-known in the country with two names (the country is still commonly referred to by its colonial name Burma, which the US, among others, still uses to demonstrate opposition to the undemocratic process of changing the country’s name by the military junta in 1989), but international donors were forced to remain on the sidelines as Myanmar’s military leaders stubbornly resisted change.

There are now, finally, some glimmers of hope. Since the military-backed civilian government took over in early 2011, even the most optimistic analysts and country experts have been surprised by the pace and depth of early reforms. For example, the new parliament has enacted laws granting larger press freedom, the formation of trade unions and released hundreds of political prisoners.

Myanmar’s opposition movement the National League for Democracy – under the stewardship of democracy icon Aung San Suu Kyi – has taken advantage of these reforms by rekindling the official political process. While the constitution guarantees 25 percent of parliamentary seats to the military and the Union Solidarity and Development Party, or USDP – the military’s political proxy, still dominates parliament, the NLD captured 43 out of 45 possible seats in recent elections, constituting a legitimate minority opposition that is expected to strengthen. All eyes are now on the 2015 parliamentary elections when an overwhelming NLD victory could further redistribute and shift political power in the country.

Foreign aid outlook

Foreign aid donors are tracking political developments closely and appear ready to assist. Indeed, while many foreign aid pledges are still in the symbolic gesture stage, Western governments have vowed widespread support for Myanmar’s transition that many hope will materialize.

“Reforms have been justified in part by an expectation of increasing aid and a failure of meeting these expectations could be dangerous,” notes Myanmar expert and Georgetown University Professor David I. Steinberg in an interview with Devex. “It is very important that foreign funds arrive quickly, but are implemented responsibly” he says.

Based on an analysis of donor data and pledges, Devex estimates 2012 foreign aid to nearly double from 2010 levels. The following is a summary of both new and pre-existing international community pledges to engage Myanmar in 2012 and beyond.

  • United States: pledged to establish a U.S. Agency for International Development mission in the country (the first since 1988) and a partial waiver lifting U.S. restriction on global financial institutions which would pave the way for international organizations, such as the World Bank, the International Monetary Fund, and the Asian Development Bank to return to Myanmar and resume operations.
  • Japan: canceled a stunning 60 percent or about $3.7 billion of Myanmar’s debt in April and is taking concrete steps to issue development loans and other forms of assistance.
  • United Kingdom: became Myanmar’s largest bilateral donor – ahead of reforms – committing more than $50 million in 2011. The U.K.’s overall aid package currently stands at $300 million for the four-year period of 2012-2015.
  • Australia: expected to increase its current aid levels of $47 million a year and surpass the United Kingdom as largest bilateral donor in line with a special commitment to developing countries across Southeast Asia.
  • Norway: shifted its approach to Myanmar in 2008, publicly questioning the wisdom of sanctions and increasing its development engagement inside the country. In 2011, development assistance from Norway was roughly $23 million.
  • Sweden: committed an estimated $27 million in 2011.
  • France: pledged to triple development assistance to about $4 million a year.
  • Denmark: pledged to at least double development assistance to $17 million.
  • Germany: pledged to at least double development assistance to $21 million.
  • Global Fund: officially resumed funding grants in January 2011 worth approximately $105 million over the next two years.
  • World Bank: announced that it will open a country office in June 2012, a quarter century after the military junta brought an end to its aid program, but emphasized that the need to settle arrears of approximately $400 million.

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A 2011 Hauser Center for Nonprofit Organizations report notes that from 1990 to 2007, Myanmar’s ODA per capita was below $5 – the lowest among all of the 50 least developed countries worldwide. Foreign aid increased in response to the Cyclone Nargis disaster in 2008, but dropped by nearly 30 percent since, quickly retreating to pre-Nargis levels. In 2010, ODA per capita to Myanmar stood only at around $7, while Laos received nine times ($63) and Cambodia seven times ($50) that amount. On that basis, ODA to the country would need to rise sevenfold to be at par with Myanmar’s neighbors. Testifying to the still cautious approach donors are taking in Myanmar, Devex estimates 2012 ODA per capita will amount to roughly $12 – a significant increase from 2010 levels, but still comparatively low.

Recognizing the extraordinary developmental needs across the country, a few non-traditional partners in the Asian region are also getting involved. Despite long-standing border and ethnic tensions between China and Myanmar, the PRC continues to invest heavily in the country through state-owned enterprises and other vehicles. South Korea’s assistance to Myanmar rose to $3 million for 2012, while India has pledged to donate $10 million worth of agricultural equipment. 

The Western regime of sanctions meant for years that donors such as the United Kingdom and the European Union required their aid to be channeled largely through United Nation systems and a selected crop of international nongovernmental organizations. Under the European Union’s sanction scheme, for instance, non-emergency assistance is highly regulated limiting the provisioning of aid and implementation of development projects. These realities have left U.N. institutions as critical providers of aid. The central role that the UN plays in this system, however, is expected to change as sanctions are relaxed, foreign aid increases, and new development actors enter into the country.

The United Kingdom’s 2011-2015 operational plan to Myanmar portends an evolving donor landscape. The U.K. Department for International Development notes: “In the event of a major improvement in government accountability and respect for human rights our choice of aid instruments would widen. Although we cannot anticipate significant political change over this Plan period, we are making some investment in preparing the ground for the day when we can consider alternative delivery options.”

Target sectors

From 2007 through current, Devex procurement opportunities data reveals that donors have focused on three primary sectors in Myanmar: (1) agriculture, (2) health, and (3) infrastructure, but development experts agree that additional sector priorities will come in view as donors reengage. The US has already pronounced its strategy to support reforms by strengthening civil society and building the capacity for institutional processes for good governance. After its long absence, the World Bank is expected to focus on diagnostics, specifically evaluating Myanmar’s economy through public expenditure reviews and an investment climate assessment. Other sector priorities for the international donor community:

1) Conflict resolution and stateless people – ethnic groups have been in conflict with the government for decades, displacing large numbers of people. Steinberg noted both the significance and complexity of the issue.

“The most important problem facing the state has been the minority issue. To me, it’s not democracy, it is the minority issue. The civilians didn’t solve it and the military made it worse,” he noted.

2) Health – total government expenditure on health is only 0.5 percent of GDP the lowest of any government in Southeast Asia. At the same time, the country is plagued with high rates of infant, under-five and maternal mortality, and high tuberculosis and malaria rates. While prevalence is low, HIV/AIDS rates are among the highest in Southeast Asia second only to Thailand. The lack of access to antiretroviral drugs makes HIV a serious epidemic.

3) Macroeconomic stability and livelihoods – inflation rates are high while the majority of the population lacks access to credit and agricultural inputs, negatively impacting livelihood. Initial steps to attract more trade and investments are being made with Myanmar floating its currency rate for the first time in 35 years, devaluing the ‘kyat’ by about 125 times from 6.4 kyat per dollar to 818 kyat per dollar.

4) Education – Myanmar’s education system has suffered dramatically under military rule. Government expenditure averages around 1.3 percent of GDP and only around 50 percent of students finish primary school with very few obtaining university degrees. 

5) Agriculture – with a rural population of between 60 percent to 70 percent, poverty alleviation will need focus on agriculture and the rural economy. At present, agriculture, fisheries and forestry accounts for about 40 percent of GDP, 25 percent of exports and half of all employment.

6) Natural Disasters – disaster risk reduction and capacity building for appropriate disaster response are lacking. A glaring example of this is the poor response to Cyclone Nargis, which claimed an estimated 138,000 lives and affected over 2.4 million people. Rural areas are tremendously under-resourced to withstand and recover from natural disasters.

Implementation considerations

There are valid questions over how the influx of foreign aid will be applied and administered. While some donors will continue to leverage existing U.N. channels, at least in the short term, an increasing amount will be distributed through multi-donor trust funds, INGOs, and local NGOs. In the much longer term, increasing bilateral aid could be directed to the national government and local government units – a rare occurrence over the course of the past two decades due to a culture of sanctions, incapacity and mistrust – in an effort to rebuild key judicial, political, and economic institutions. During a February visit, EU Commissioner Andris Piebalgs expressed his desire to work closely with the government of Myanmar as sanctions are lifted. Depending on how the political reform process plays out, other leaders and the agencies under their authority could follow suit.

In order to harmonize development efforts, manage risks, and address differences in donor policies towards Myanmar’s government, the majority of donors work with and through multi-donor trust funds. The three central funds are: the Livelihoods and Food Security Trust Fund, or LIFT; the Three Diseases Fund, or 3DF, both managed by UNOPS; and the Multi-Donor Education Fund operated by UNICEF. These funds are getting a boost from the latest donor commitments. LIFT for example, a fund that supports food security in Myanmar, recorded a $30 million funding increase in the early weeks of 2012, ostensibly extending operations two years past the planned end of its mission to 2016.

Despite all this new funding and activity, it is critical to note that INGOs have been operating in Myanmar for many years and will be instrumental in channeling increasing aid resources. Moreover, engaging and coordinating with these established groups represents the most logical entry point for any donor, aid agency, or development organization.

“Yes they [INGOs] should be involved” not only as implementing agencies, but also for “the development of pluralism in the society and civil society can assist that project,” asserts Steinberg.

Approximately, 65 INGOs operate in Myanmar, spanning the whole spectrum from the local to regional to national level. The US, for instance, provides nearly all of its development assistance in Myanmar through INGOs, as its sanction system continues to restrict US participation in multi-donor trust funds. Perhaps unsurprisingly, a detailed review of INGO programming reveals a focus on health, water and sanitation, food security, emergency relief and rehabilitation, and construction.

Action Against Hunger, for example, has been present in the country since 1994 responding to the various natural disasters that seem to strike Myanmar year after year and addressing nutritional and mental health, food security, and water and sanitation needs.

Since the 1990s, Pact has served as a key implementer of health and humanitarian programs, employing over 1,200 people and operating the largest microfinance project in the country which targets more than 470,000 active borrowers across Myanmar’s Dry Zone, Delta Region, and Shan State.

Oxfam also provides disaster relief and management services while at the same time engaging in broader development work focusing on local community development, civil society strengthening, and local governance and administration.

Mercy Corps, in partnership with local civil society, operates on the Irawaddy Delta helping vulnerable populations there understand how to manage natural resources and rebuild essential infrastructure.

Since 1986, the International Committee of the Red Cross has been working in Myanmar, providing physical rehabilitation for landmine victims, improving water and sanitation in prisons and promoting international humanitarian law.

Save the Children is among the largest INGOs operating in Myanmar today. In the aftermath of Cyclone Nargis, the organization assumed responsibility for roughly 10 percent of total humanitarian aid raised by the international community, reaching 40 percent of severely affected children.

The INGO community inside and outside of Myanmar seem to agree that the operational environment for development practitioners has opened up markedly since the Nargis disaster and further improved under the recent reform process, but major obstacles remain. Topping the list of difficulties are government-imposed hurdles and bureaucratic obstacles coupled with an air of local suspicion regarding any international intervention. Aid workers commonly complain that the government exercises arbitrary control by selecting access to project sites, scrutinizing visa approvals for international staff, and mis-regulating organizational registration.

“The Burmese have a very strong sense of sovereignty,” said one aid worker. “It is a very nationalistic country so it is critical that these reforms are initiated by the Burmese. Foreigners should not attempt to take them over or take credit for them.” No one knows this sense of nationalism better than the democracy icon that was forced to spend most of the past 20 years under house arrest. After recently being sworn in as Member of Parliament, Aung San Suu Kyi was asked what she expects of the international community. “Not too much euphoria but rather long-term support for the country. What we need is sustainable, sound aid,” she said.

Nicolas Gloeckl contributed to this report.

About the author

Pete troilo 2 400x400
Pete Troilo

As director of global advisory and analysis, Pete manages all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp.


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