Burma poised to emerge from the global economic wilderness

Partnership deal with Asian Development Bank signals return to wider financial fold for country undertaking democratic reforms  

• Mark Tran, guardian.co.uk, Friday 26 October 2012 13.00 BST  

Burmese people try to catch the money thrown by well-wishers during the Pagoda festival in Rangoon, the former capital city. Photograph: Nyein Chan Naing/EPA

Burma has taken another step towards reintegration into the global economy with the announcement by the Asian Development Bank (ADB) of a strategy that sets the stage for a resumption of full operations in a country cut off from western funds for decades.

The bank has not provided direct assistance to Burma since 1988, but has maintained contact with the government through the country's participation in the Greater Mekong sub-region programme, a regional economic integration initiative. The ADB is the first multilateral development bank to approve an interim country partnership strategy for Burma.

"ADB will work with the government to create jobs and lay the foundation for long-term economic growth that benefits the country as a whole," said Stephen Groff, ADB's vice-president for east Asia, south-east Asia and the Pacific. "This strategy will guide our re-engagement with Myanmar [Burma] to make sure the country is set on a path of sustainable and inclusive growth."

Burma has undertaken democratic reforms under President Thein Sein, including byelections held this year for parliament, in which Aung San Suu Kyi, the Nobel laureate and pro-democracy leader, won a seat. A second wave of reforms was announced in June.

The democratic opening has prompted the US and other countries to lift sanctions against Rangoon. Last week, Thein Sein said Burma's foreign investment law could be ready soon. However, western companies are still wary because of legal uncertainty over foreign investment laws, which are governed by a decades-old code.

Burma, the largest country in mainland south-east Asia, sits on considerable natural riches, including arable land, forests, minerals, natural gas, fresh water and marine resources. The economy is dominated by agriculture and farm-related activities, which account for 36% of GDP and 60-70% of employment.

Despite some progress on poverty reduction, primary education and gender equality, Burma remains one of the world's poorest countries, with a per-capita GDP of $857 (£536). It is ranked 149 out of 187 countries in the UN human development index.

Burma's economic outlook is positive, however. The ADB notes that the country has been bolstered by strong export earnings from commodities and increased foreign investment, and forecasts that Burma's GDP growth will accelerate from about 5.5% this year to 6.3% in 2013 and 6.5% in 2014. In the near term, the ADB will roll out grants aimed at helping government ministries to better plan and implement development projects, manage reforms and improve data gathering.

A central aim of the ADB's strategy is to narrow the income gap between urban and rural areas, and to close the development gap with Burma's neighbours. To boost growth, the ADB will work with the government to identify key infrastructure investments, particularly in transport and energy. The bank will collaborate with communities on infrastructure and other projects to improve livelihoods in rural areas – including ethnic minority areas – where the majority of people live.

However, full resumption of ADB operations is contingent on the full settlement of Burma's $520.5m arrears with the bank. Japan has agreed to provide bridge loans to Burma through its Bank of International Co-operation so that the country's arrears to both the ADB and the World Bank can be cleared. This is expected to be done by January, paving the way for multilateral lending for Rangoon. In August, the World Bank said it was considering restarting aid to Burma, adding that it was preparing up to $85m in grants.

The UN special rapporteur on the human rights situation in Burma, Tomás Ojea Quintana, has emphasised that human rights should lie at the heart of the country's reform. He acknowledged in a report the dramatic economic development Burma will experience over the coming years (pdf), but highlighted concerns about land and housing rights, including "land grabbing". He also made recommendations on private companies and foreign investment to help ensure a sustainable form of development that is not exploitative.

"Human rights considerations need to shape the process of economic growth, legislative reform and institutional change, while also guiding responses to ongoing serious human rights situations, including in Rakhine and Kachin states," he said. Conflict between Buddhist and Muslim communities in Rakhine (video) has left scores dead, more than 850 people detained and tens of thousands displaced.

http://www.guardian.co.uk/global-development/2012/oct/26/burma-emerge-global-economic-wilderness