The Governance of Myanmar - Case Study Example

Myanmar Name Institution Course Date Myanmar Since 2010, Myanmar has undergone multifaceted transition that has included economic reforms, transition to democratic rule and resolution of civil conflicts among others (Noland and Hendrix, 2015). These changes are occurring in the midst of a resource-led economic boom. These changes have offered a chance to take part in the broad governance reform as well as an opportunity to create the foundations required for a growing economy. For a long-term economic boom, there is the need for good governance and transparent public affairs and resources allocation. Governance comprises of both formal rules and norms regulating the undertakings of public affairs (Holliday, 2013). Although policy is very essential, good governance is a very important requirement for economic development as it assists in generating exports and employment, creating of infrastructure, and transparent regulation among other things. For these benefits to be witnessed in a country, there is need for policies to be developed in collaboration with civil society groups (Clapp and DiMaggio, 2013). Without good governance, nations often fail to unlock and exploit the potential resources. This essay will give an overview of the state of governance in Myanmar and the governance challenges that the state faces. It will also offer solutions for these challenges. Based on the research carried out in Myanmar, it is clear that the state needs some improvement in its governance since financial and governance issues are obstacles to development (Holliday, 2013). In 2012, Myanmar underwent a period of change as the reforms passed by the president pressed ahead. In the beginning of the year, leading political prisoners were set free and opposition part swept the parliamentary by-elections, which led to the Western countries appending economic sanctions as well as improving aid (Holliday, 2013). In addition, in the same year, the opposition party leader and the president maintained a good relationship and held a number of peace talks with minority groups (Holliday, 2013). Nevertheless, Myanmar’s challenges during the military misrule which has taken place for five decades have proved resistant to the transitions and resolutions put in place (McKinsey Global Institute, 2013). National reconciliation proved to be futile in Kachin State due to violence in Rakhine State. Economic development in the state was as a result of leaders grabbing lands, but nothing was done to citizens living in poverty. In addition, there is still unstable relationship between the state and other Asian states. It is unclear of what might become of Myanmar in the years to come (Holliday, 2013). Even with the transitions done, Myanmar is considered to having several governance challenges. While much has changed in Myanmar, the impacts of the reforms are confined to elites (Holliday, 2013). Given that the state dominates the financial sector, omnipresence of SEEs and the fact that enterprises are politically interconnected in the economy, Myanmar governance has been challenging (Givens, 2013). A problem was that hard budget constraints were not imposed on the SEEs which made them benefit from capital controlled by financial sector as well as provision of subsidies. Nevertheless, the recent changes and reforms mean that such practices should be mitigated. It has been suggested through the reforms that SEEs stop receiving subsidies and start paying taxes just like other enterprises (Holliday, 2013). SEEs are required to finance themselves while the state takes care of 20 per cent of the working capital of loss-making. Such reform is a move towards larger financial independence for SEEs. Nevertheless, in 2011, there was a huge privatization of states assets. As a result, the issue of soft budget constraints will re-occur (Mieno, 2013). The challenge is considered a moral hazard as private enterprises take part in risky behaviour since they know they are protected against loss as a result of their political connections. Such private enterprises could seek assistance from the government after making bad investment this may increase the occurrence of bad investments among private enterprises (Min and Kudo, 2012). This challenge is made worse since banks are connected through ownership to the borrower. In addition, the privatization of state assets without regulatory oversight has created probability for implicit monopolies and oligopolies (Holliday, 2013). The governance of Myanmar has brought about land market challenges. According to the law of the state, all land is owned by the state. Historically, the state has exercised eminent domain which has led to land grabbing (Mieno, 2013). Myanmar has insufficient land ownership registries which have increased land disputes. Currently, the state does not have a powerful national program to simplify the access to the justice system. Programs such as pre-socialist era cadaster maps have not been able to establish transparent property rights and appropriate valuation (Mieno, 2013). The military is a huge ‘land-grabber’ in the state as it was estimated that it seized almost 100,000 ha since 1988. In order to protect the farmers from land grabbing, the government has established the Farmland Law. However, despite the presence of this law, farmers and general people are still being unfairly displaced from their lands without any adequate compensation. The law allows large lands to be seized and the governance in Myanmar has given a lot of power to large businesses and political elites who are known to take part in land grabbing (Mieno, 2013). Myanmar is also faced with poverty. The country is among the poorest countries in Asia, although it is the richest in terms of land, water and agricultural activities. The agriculture sector is the backbone of the economy with rice being the most important crop grown (Nehru, 2013). Even with its potential for growth, the sector has suffered due to lack of technology transfer, marketing and capital. In the country, there is a strong connection between poverty and agriculture. Although Myanmar produces surplus food, many people from the rural areas suffer from food insecurity. Rural areas lag behind with regard to health and education (Nixon et al., 2013). People from rural areas have been exploited by outsiders since their lands contain valuable minerals. Poverty in rural area is higher due to political neglect. In addition, although there are some efforts made to correct the current labour market policy, Enterprises in Myanmar are relying on the indirect capital market which is a challenge (OECD, 2013). The banking system is state-owned and there is no foreign banking presence although there is a plan to establish a joint venture between a foreign and local bank. Many private banks are subsidiaries of huge corporations which is a problem in some settings. The state-owned banks together with private banks have almost half ownership of all bank assets with Myanmar Economic Bank being the largest owning 40 per cent of the total bank assets (World Bank, 2014). In such a setting, the banking system is considered a single bank dominant system with smaller competitors. Moreover, the banking regulations in Myanmar are restrictive including ban on “at call” deposits, a ban in private lending of farmers and deposits withdrawals from MADB etc. These bans have discouraged new deposits (OECD, 2013). Apart from the problems experienced in the banking system due to poor governance, the lack of financial inclusion has the potential to result to undesirable political economy developments (World Bank, 2012). Groups like the military which has access to capital outside the local financial sector may in the future dominate the private sector economy as well as the middleclass. This development will have an impact on socioeconomic mobility and will create tension in the state. Also, Myanmar is rich in mineral resources such as steel, oil and natural gas. It has about 300 billion cubic meter of natural gas and 50 million barrels of oil reserves (United States Energy Agency, 2013). The country also exports considerable amount of timber and semi-precious stones. Due to its potential, FDIs have targeted the mineral sector. However, it has been reported that the government is incapable of successfully managing the wealth generated by the mineral. The overdependence on mined commodities by Myanmar can bring about negative effects such as political violence and may inhibit bureaucratic capacity (Van and Wender, 2001). Myanmar is at high risk of resource-related conflicts due to its past histories of violence. Also as a result of many decades of centralized military dictatorship, Myanmar is faced with the challenge of trying to slacken off the grip of the military on public administration (Steinberg, 2013a). In addition, another challenge of the country is its effort to drive the government agencies to offer better social services to the people in the country. One striking feature in the country is the lack of local government. Administration work is handled through the home affairs ministry. The local government is considered unreformed but the Union government has evolved through the institution of the parliament. However, below these structures lie superficial reforms (Steinberg, 2013b). The government made some changes in the administration by electing ward and village administrators. In the midst of these changes, however, the Union ministries still dominate. Interaction of citizens with the government is done through the offices of Union ministries. This means that the local governance is distinctly out of touch which has led to poor delivery of public services as well as social justice (Turnell, 2014). Corruption is another top concern for Myanmar (Weismann, 2008). After five decades of military control, the country has been left in poverty and elevated levels of corruption with reforms enacted in order to clean up the economy. However, these reforms have only had a limited impact on corruption. Corruption is a huge challenge to many companies operating in Myanmar (Weismann, 2008). Corruption in companies comes in form of paying bribe for business permits or registrations. Myanmar passed the anti-corruption law recently in order to fight the increasing levels of corruption and bribery. Despite these laws, the World Bank ranked the country 182 out of 189 with regard to business environment due to corruption. Myanmar is also faced with poverty (Weismann, 2008). In addition, another governance challenge facing Myanmar is the economy dominated by cronies from past military regime (Steinberg, 2013a). Since the country is from a period governed by the military, it still has control over all the branches of the government. The military has penetrated into the bureaucracy and former military commanders have occupied senior positions in the government. Up to date, the military is very involved in the economy of the country and the operations of companies (Turnell, 2014). Organisations in the country are control by the ministry of defence. This arrangement act as a barrier to investment and has led to mismanagement and economic sanctions. This has led to the government opting to negotiate their position with the military in order to ensure effective governance structure. The government of Myanmar has the potential to determine the future of the country in the midst of governance challenges. There are a number of solutions that the country can adapt in order to ensure economic development (Tun, 2013). Since the anticorruption laws did not work for Myanmar, the country should appeal to other strong jurisdictions like the United States for assistance in investigating and prosecuting corruption cases. It should enlist the participation of strong anti-bribery statutes in investigating and prosecuting people involved in corruption. In addition, in order to prevent and minimize the incidences of land grabbing and poverty, the government through the Ministry of Finance and Revenue should focus on conducting an extensive land survey in order to be able to identify a current map of the territory and enhance transparency in land ownership and use (Tun, 2013). Additionally, in order to minimize the control of the military, it is important for the government to carry out power-sharing arrangements. The power of the military in the country has the potential to cause tension and conflict and therefore it is important to institute power sharing arrangement in order for the interests of different groups to be equally represented in the governance institutions (Hartzell and Hoddie, 2003). This arrangement will minimize the likelihood of returning to conflict. In addition, in order to lever good governance efforts in mining sector, Myanmar should use the Extractive Industrial Transparency Initiative so as to anchor greater policy reforms. The government should extend the transparency initiative to other sectors such as procurement and construction sector in order to minimize corruption (Tun, 2013). In conclusion, Myanmar has undergone multifaceted transition through policy reforms. The reform initiatives have been going on well, yet significant governance challenges remain. Although policy is very essential, good governance is very important requirement for economic development. Myanmar was under military control for five decades which left it under poverty, corruption and other issues that the government is trying to tackle. As a result of the state dominating the financial sector, there have been some problems when it comes to bad investments in the part of SEEs due to their close-connection to the government. Also, enterprises in Myanmar are relying on the indirect capital market which is a challenge for investors and companies. Corruption has dominated the business sector as more and more companies get pay bribes for registration and licence acquisition. Myanmar is dominated by cronies from past military regime which has control over all the branches of the government. This creates a problem for the government due to limited power over the country. Another challenge facing the Myanmar government is land ownership problem. The military own huge portions of land and elite grab land from farmers and poor people without any implications. In order to solve these challenges, the government should institute power-sharing arrangement, transparency initiatives and collaborate with strong anti-bribery statutes in fighting corruption. References Clapp, P and DiMaggio, S 2013, Sustaining Myanmar's Transition: Ten Critical Challenges, Washington, DC., Asia Society. 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