Imitate global success stories: Stiglitz

Star-studded economic team presents series of talks on equitable and sustainable development for Myanmar dealing with forex reform, agriculture, natural resource management, competition, legal structure reform and policy formation

By Stuart Deed
Volume 31, No. 615
February 20 - 26, 2012

From left: Professor Ronald Findlay, U Myint and Professor Joseph Stiglitz.
Pic: Stuart Deed

WITH television cameras, a small army of journalists and a fully packed hall, the team of economists who delivered a seminar in Yangon last week received a welcome more akin to that normally reserved for movie or rock stars.

The three speakers comprised Nobel prize winner and former World Bank chief economist Professor Joseph Stiglitz, Professor Ronald Findlay, a former professor at the Yangon Institute of Economics and now at Columbia University, and Professor U Hla Myint, a former rector of Yangon University and Emeritus Professor of Economics at the London School of Economics.

U Myint, a former senior economist to the United Nations and now chief economic adviser to President U Thein Sein, moderated the discussion.

The seminar was titled “An Agenda for Equitable and Sustainable Development for Myanmar” and was hosted at the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) headquarters in Lanmadaw township on February 11.

It probably helped that one was a Nobel laureate and the other two were home-grown economists who have gone on to carve out heavyweight reputations in prestigious American universities. The fact that Myanmar appears to be on the brink of a momentous economic flowering after more than 50 years of relative isolation could also have been a contributor to the high level of interest in the seminar.

Change has swept Myanmar in the months since President U Thein Sein’s government took power on March 30 and as little as 12 months ago it would have been highly improbable that Professor Stiglitz would have been allowed to give a public presentation.

Late arrivals were condemned to the far reaches of the main hall or an adjoining hall, where they watched a television feed, while plastic chairs were hastily brought in to seat people in the aisles and around the periphery.

After brief introductions by U Myint and chairman of the UMFCCI, U Win Aung, Professor Stiglitz took the podium, describing Myanmar’s situation as an “enormous opportunity in a very difficult economic climate”.

He joked that Myanmar had been fortunate enough to choose its location well, since it sits between the two emerging economic powerhouses of Asia – China and India.

He added that Myanmar’s delayed entry into the world’s economic playing field enabled its leaders to enact the most effective and inclusive policies for development from around the globe.

“The advantage of being late [is that] you can learn from the mistakes and successes of others … to avoid making the same mistakes but imitate the successes,” Professor Stiglitz said.

However, while the country is blessed with a large population and natural resources, it also faced its own “special challenges” of high levels of poverty, low spending on education, a lack of depth and competition in its markets and serious weaknesses in the rule of law.

Professors Stiglitz said the challenge for Myanmar would be to harness its natural resources and manpower to transform the economy to promote sustainable development that benefits all citizens.

Professor Stiglitz repeatedly stated the importance of “comprehensive” develop-ment strategies and urged Myanmar’s policy makers to avoid putting too much emphasis on gross domestic product (GDP) as a measuring stick for the health of the economy, adding that some economists appeared to suffer “GDP fetishism”.

“GDP is not a good measure of economic performance and social progress,” Professor Stiglitz said in his presentation.

He used the global economic crisis, which was initiated by the sub-prime lending collapse in the United States, as an example of GDP numbers failing to provide an accurate picture of a country’s economic health. He added that while America’s GDP had been growing through the 2000s, it had hidden the growing inequality between the rich and poor, with median incomes – a key indicator of middle-class prosperity – not increasing since 1997.

“We came to the conclusion that GDP does not say if growth is inclusive or sustainable.

GDP did not tell us that in the United States that people were in fact worse off, that the majority of people were actually worse off,” he said.

Professor Stiglitz’s presentation listed a number of development priorities for Myanmar, including foreign exchange, agriculture, natural resources management, competitive business sector, finance, education and health, legal structures, infrastructure, nationwide development, and policy formation and implementation.

However, he focused his attention on exchange rate unification, natural resources and agriculture.

“Managing this issue [of the exchange rate] is critical and China has done well on this, which has been a key to its success,” he said, adding that it was a “very complex” issue in Myanmar because there were multiple rates to consider.

He predicted the pressure to unify the exchange rate and find an acceptable value would increase in coming months.

“[It’s] likely to get worse for two reasons: incoming foreign aid and foreign investment,” he said.

Professor Stiglitz said avoiding the natural resources curse was a “real puzzle” that has been studied a great deal. Myanmar could look to countries such as Norway, Chile and Botswana for guidance on how to properly manage the issue.

“If a country doesn’t reinvest wealth below the ground above ground, [the] country is poorer and growth is not sustainable,” Professor Stiglitz’s presentation said.

“If a country doesn’t invest revenues in its people, the country can become a rich country with poor people.”

To mitigate the negative effects of foreign investment and revenues collected from the exploitation of its natural resources, Myanmar needed an effective taxation policy, he said.

“A good system collects revenues and corrects market failures. Tax can be used to shape and direct the economy the way that you want it to go,” he added.

Professor Stiglitz said it was essential that Myanmar found a way to increase the prices that farmers receive for their crops because so many people relied on the agriculture sector.

He said the huge gap between the prices that farmers received for their crops and what consumers paid for their food was a result of malfunctioning markets, inefficient infrastructure and too many “middlemen” transactions.

“Those costs can be brought down by building more and better roads and making the market for middlemen more competitive … to make it act more like a market,” he said.

Professor Stiglitz also touched on the issue of sanctions, which he said had been counterproductive.

“While removal of sanctions would be helpful, sanctions are not a major impediment to growth or even to foreign direct investment and trade,” his presentation stated.

However, Myanmar needed to set standards for both domestic and international firms, adding that higher standards attracted investment and deterred investment from countries with lower standards.