Wednesday, March 10, 2010

Guest Voices: Building Stupas in the Sand

Introducing our new guest blogging series called "Guest Voices."

To inaugurate our series we turn to Jane Ginn, who writes for Sedona Cyber Link. Jane recently took a trip to Myanmar, the country that is ruled by an oppressive military regime. The military government was so oppressive that it prevented humanitarian aid from reaching it's people after Cyclone Nargis.

Jane was thinking about how much better life in Myanmar if some bottom of the pyramid opportunities were allowed into the country.

On my recent trip to Myanmar (Burma) I took the time to read several important books analyzing the root causes of the economic crisis of 2008. As I was floating up the Irrawaddy, one of the major rivers in Asia flowing from the Himalayas, I reflected on the way of life of the peasants living along the banks while immersing myself in the abstract thoughts of macroeconomics and theoretical finance [more on these books in a later article]. One image was especially poignant for me; two children were building stupas (Buddhist-style temples) along the banks of the Irrawaddy. When they had almost completed their masterpiece, two older children came by and destroyed it by bombarding it with sticks.

The readiness of the older children to destroy the fruits of the labor of the others was, in some ways characteristic of the governance of the country. During this excursion I began to see the effects to the real economy of the type of zero-sum thinking that is practiced in Myanmar by the ruling elite. This same type of thinking is what led to the bursting of the housing and credit bubbles in the U.S. and beyond: zero-sum thinking [more on this later].

Although most of export-dependent Asia was severely hit by the economic downturn, countries like Myanmar were relatively insulated from the excesses of the developed world markets. This is because they had not yet become integrated into the global trade community. This was true both by fiat, and by design. That’s the good news. The bad news is that the 30+ year rule by a military junta has so severely arrested economic development in Myanmar that the commercial landscape is more like 10th century Europe than a post-modern S.E. Asian country.

The leadership has, evidently, based their leadership and management philosophy more on zero-sum thinking than on the non-zero-sum type thinking that is so evident in the Tiger countries like Malaysia, Singapore and Thailand. The closed-society, total control approach has created an impoverished nation with the poorest transportation and communications infrastructure in all of Asia, except perhaps, North Korea. It has also led to an autarky-type economy whereby almost all of the products (such as they are) are produced locally, that is, except for the trickle of products coming in from China. For other nations of the world that would like to participate in the growth of this economy, this early dominance by the Chinese is a bit distressing. This is especially true given the current state of the global economy and the recognition that the growth of a consumer base in Asia would help to ameliorate the global imbalances so evident in the current account and trade deficits of countries like the U.S. The U.S. has only recently begun a rapprochement with Myanmar after many years of trade sanctions. Perhaps this can lead to an opening of trade relations.

The large segment of the population that live on less than $1/day would make this an ideal country for targeting some Bottom of the Pyramid (BOP) products. And, given the well established handicraft industries that I witnessed, a fair trade initiative sponsored by the government would help to bring some of their unique products to the world markets. A regional model from the Malaysian or Indian governments could be emulated; much like the Kraft Komplex in Kuala Lumpur or those storefronts in Chennai established by the provincial government of Tamil Nadu.

Any producer of products, whether BOP or mainstream, seeking to penetrate that market will encounter many other obstacles other than the “keep the prosperity pie small” syndrome practiced by the military junta officials. Since the infrastructure is so poor, there are few formalized and efficient distribution systems. The river continues to be the main route for nbound and outbound commercial and passenger traffic; however there are virtually no docks and cargo are loaded and unloaded almost entirely by hand.

The lack of a transportation infrastructure is not the only problem.

The electrical grid is highly unreliable. We stayed one extra day in Mandalay after the 15-day cruise on the Pandaw river boat. We had an electrical surge about every hour. It is hard to work on a computer or do anything productive under those conditions.

The other key element that is lacking that could significantly enhance the development potential is a communications infrastructure. Cellular coverage that is linked to region-wide systems is non-existent. SIM cards for operating on the Myanmar-controlled cellular system are priced so high that only members of the ruling elite and a few foreign business men and women can afford them. It is only with integration of the world telecommunications community that prices will be brought down so that cellular phones are affordable by the common person, family or village.

Furthermore, the Internet is also not widely available and slow dial-up connections at Internet Cafe’s are prohibitively expensive.

The role of the World Bank and the Asian Development Bank in the financing of an infrastructure for economic development must first be ascertained. Further, the willingness of the junta to “liberalize” trade and capital markets will, in some ways, depend on how integrated with the global trade community they would like to be. It is rumored that an election is upcoming; although no date has been set and there is some question about who could run for the opposition. This is because the European-educated leader of the opposition has been under house arrest for much of the past 20 years.

Resolution of this issue and a more gradual development approach such as has been implemented by the Chinese would be more suitable in Myanmar, given the need to be concerned about the equity implications of economic growth. Joseph Stiglitz, who recently visited Myanmar to advise them on their development strategy, outlines a valuable approach in his 2003 book “Globalization and Its Discontents.”

The innocence of the young people building their stupas in the sand is a reminder of the frailty of life and the economy in Myanmar. To improve the state of the economy they need to use sound, rational management and avoid crony capitalism. I am not necessarily advocating shock capitalism or strategies such as those advocated under the auspices of the Washington Consensus; however, a gradual opening to trade would greatly enhance the quality of life of millions. The lessons that the world investment and trade community have learned from the 2008 global economic crisis can be put to work in a creative way for supporting gradual development in Myanmar that will help to benefit the poor, and integrate the society with the global community.

Non-zero sum thinking, if practiced by those children on the banks of the Irrawaddy, would not have led the older children to destroy the work of the younger ones. Quite the opposite would be true; the older children would have offered to help. When will the adults set the right example?

Non-zero-sum thinking and gradual development is the way of a hopeful future for the people of Myanmar.

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