Foreign aid in Myanmar: A precarious balance

As Myanmar transitions from military dictatorship toward democracy, the country has become a development darling. International news is awash with pledges from governments keen to demonstrate their support for the nascent reforms. The European Union, for instance, plans to more than quadruple its annual development assistance to as much as €90 million (US$123 million) starting next year; U.K. aid will double in 2014 to more than £60 million ($95 million). Dwarfing both of these commitments, Japan announced a package of aid and investment worth ¥40 billion ($394 million) and the World Bank plans to put $2 billion in a multi-year development program. This has led to easy characterizations of the rush to invest as a “feeding frenzy.” “Every respectable aid agency and international NGO in the world is planning to initiate or expand operations in Myanmar,”’ said the Brookings Institution in a recent report. However, impressions that funding is “too much, too soon” may be misleading. Global development leaders and professionals working in Myanmar describe a more complex situation where donors and their implementing partners walk a fine line between leveraging the current momentum and pushing too hard for change. And with 2015 presidential elections looming, the next couple of years may well be a game changer for this former pariah state. Two parallel trends appear to dominate in terms of international cooperation: a gradual yet insufficient increase in overseas assistance and a substantial rise in the number of development actors keen to scope out new opportunities. “What we see is a lot of bilateral aid being pumped into the government, but we do not see the capacity of the government actually absorbing and feeding it back to ... the roots where aid is actually needed,” said Birke Herzbruch, who has worked in the country for eight years with Malteser International and the iNGO Forum Myanmar. For NGOs, she suggested, “there is not much more funding available.” Development indicators, meanwhile, remain shockingly low. According to U.N. statistics, 35 percent of children under five are stunted as a result of malnutrition, and poverty levels are as high as 44 percent in some parts of the country. Though by the World Bank’s latest calculation, net per-capita official development assistance has risen from $2 in 2003 to $10 in 2012, this pales in comparison to neighboring countries such as Cambodia, which receives $54 per capita in foreign aid. Coordination and government capacity Myanmar emerged from international isolation in 2011, after its 49-year military dictatorship formally ended. Today, the country is at a critical juncture in its economic, social and political evolution, and foreign assistance has the potential to shape long-term development. But in such a volatile environment, government dependency on overseas assistance is a very real danger — underscoring the importance of coordination among all stakeholders. The establishment of several multidonor trust funds may allow donors to better align their work. Andrew Kirkwood leads one such MDTF, the Livelihoods and Food Security Trust Fund. “There are a lot of pressures that play on the donors,” said Kirkwood, who has worked in Myanmar for almost 10 years — including as country director for Save the Children in the aftermath of Cyclone Nargis, whose devastation in May 2008 prompted much international goodwill and an influx of relief groups. “So far, I think they have been pretty good at resisting that pressure and maintaining a harmonized approach, and maintaining support for these existing pooled funding mechanisms.” Myanmar officials have been overwhelmed by the stream of scoping missions, delegations and requests for meetings. In a country that still lacks a functioning bureaucracy, the sheer administrative weight of foreign aid is a heavy burden for them to bear. The government does “not have effective systems in place for how to deal with it,” Geoff Poynter, Save the Children’s deputy country director in Myanmar, suggested in an interview with Devex. Frank Smithuis, director of Medical Action Myanmar and previous head of mission for Médecins Sans Frontières in Myanmar, agreed. “Ministries are overloaded and cannot absorb what is thrown at them,” he said. “It is impossible to scale up 10-fold within one, two years.” READ: Is Myanmar ready for a telecommunications revolution? Many international NGOs and consulting firms, meanwhile, have come under fire for “ignoring national systems and networks” and failing to properly invest in building local capacity. Competition over a limited pool of trained Burmese professionals is making it difficult for local aid groups to hold on to skilled employees who are pulled in by international nonprofits and consulting firms that are able to pay much higher salaries. Interestingly, despite Myanmar’s reputation as a highly restrictive environment for development and humanitarian programs, the degree of control exerted over how and where aid money is spent has so far been minimal. “They’ve controlled where people go and have witnessed what they do, sat in on meetings, but they have absolutely zero oversight on what people prioritize and what they’re actually working on,” said Kirkwood, the director of LIFT. “That’s just starting.” Kanthan Shankar, country manager for the World Bank in Myanmar, agreed, suggesting that the Myanmar government has begun to take a stronger leadership role to improve the coordination of foreign aid through initiatives such as the Development Cooperation Forum, the Framework for Economic and Social Reform and the Naypyidaw Accord, a non-binding agreement which outlines government-donor cooperation guidelines. In Shankar’s view, the Myanmar government has “surpassed” expectations. “They had a very clear action plan, and that action plan was followed out throughout the year,” he said. “Everything is not going perfectly, but at least they have made a good start by trying to identify what are the things they would need.” A positive outlook There is general agreement that the current time presents an unprecedented opportunity to generate lasting and positive change in one of the poorest countries in Southeast Asia. Development groups are increasingly able to engage on issues that only a few years ago would have been off the table. So how do development groups carve a trajectory that avoids the pitfalls of aid dependency, ineffectiveness and corruption — and helps secure meaningful and equitable improvement in the lives of Myanmar’s disadvantaged? First and foremost, they must truly appreciate the complexity and volatility of working in Myanmar, and not expect change overnight. The challenge for organizations seeking to establish programs in Myanmar lies in the need to balance a sense of urgency with the importance of dealing carefully with this incredibly complex environment, without underestimating the time and resources required to build trust with local partners, many of whom have been frustrated about the influx of foreign contractors. Speaking in a personal capacity, Hlaing Myat, program director of the Local Resource Center, a coordinating body for local NGOs and civil society organizations, told Devex that international donors “are rushing in to find quick wins” but they “don't have common understanding on the balance between aid flow and the level or speed of reform. Some use the wait-and-see approach at the same time the others are trying to [rush] in.” Smithuis, of Medical Action Myanmar, emphasized the importance of taking a long view. “The structures take time,” Smithuis said. “It’s got to be a gradual process.” This sentiment was echoed by Kirkwood, who cautioned that “there will be setbacks.” “The government has certainly done a heck of a lot more right than it has done wrong … but there has to be some mistakes coming up, and I hope we don’t have unrealistic expectations about seamless transition,” he said. “The goal posts keep changing and the expectations are already extremely high.” As elsewhere around the world, there is a huge need in Myanmar to invest in building local capacity. That transfer of power and resources back into local institutions may change the business calculus for foreign institutions operating in Myanmar, but it is necessary to advance sustainable development. “Stronger emphasis needs to be placed on strengthening civil society capacity and putting more trust in them as well,” said Trocaire’s Herzbruch. “That would require a change in donor policy, making more money available for local organizations, for civil society organisations.” Effective coordination and information sharing between all stakeholders is acutely important — while finding ways to gather behind the government and enable it to take a leading role, providing genuine support to a government-led strategy and planning processes. Human rights organizations stress the importance of securing rights and peace alongside economic development. Ensuring a conflict-sensitive approach in programming is equally critical, as seen by recent riots against international NGOs in Rakhine State. The private sector will play a key role in Myanmar’s development, one way or another. “It’s not going to be aid that overwhelms this country, it’s going to be private investment,” said Poynter, of Save the Children. “The private sector is potentially far more dangerous than some poorly coordinated aid in terms of long-term damage to the structure of the country and the society.” The international community has a huge opportunity to help Myanmar leapfrog in economic growth. The country has a “latecomer’s advantage,” as Shankar put it. “They are aware of experiences from other countries — both good and bad,” he said. “If they use all the good will and support from the international community … to take on board the best lessons, then they can leapfrog in some critical areas of development and avoid mistakes — and ultimately providing a better standard living for their citizen.” Creating trust between local and foreign actors may take time, but it is essential if the country is to continue its path toward peace and sustainable development. Is foreign aid and investment overwhelming Myanmar — and what can be done to ensure sustainable development in the fledgling democracy? Let us know what you think by leaving a comment below. Interested in development in the Asia-Pacific region? Join some of the biggest movers and shakers in the region at the first-ever Devex Partnerships & Career Forum in Manila. Here’s how you can participate.