Between Poland and China: The dilemma of Myanmar's economic transition

Poland and China represent two very different models of post-socialist transformation, both of which brought spectacular developmental advancements. In the last 25 years Poland has become a modern and competitive market-based economy. In the meantime China has made spectacular achievements in poverty eradication and elevated itself to the position of global economic superpower. 

Between 1989 and 1991 Poland raced to open its national economy with swift changes of laws, regulations and systemic arrangements that many dubbed shock therapy. Then, Polish policymakers refocused their attention on building institutions, taking care not to impede the pace of reforms. Starting from 1997 Poland concentrated on adopting the regulations and norms of the European Union, in a bid to gain entry to the EU as quickly as possible. That ambition was achieved in May 2004. Regional integration brought the country enormous benefits, which contributed to a steady rise in Poles’ standard of living. Today Poland bears little resemblance to the country 25 years ago when the transformation began. 

In contrast China’s leadership chose gradual, incremental change. For the first decade of gaigekaifang (reform and opening up) under Deng Xiaoping, Beijing hoped to keep a residue of socialism in place. But in the 1990s China turned away from socialism as its political elite concentrated on creating a market economy. The main focus of Chinese reforms has always been development. The results have been impressive. From an impoverished country on the margins of the global economy, it has become an economic powerhouse and a major player on the world stage. However, despite appearances, the Chinese leadership has never had a cohesive plan supported by detailed strategy for reform and development. Thus the process has been full of turns, slowdowns, accelerations, retrenchments and detours. There is still a lot to be done, but the results over the last 35 years are nothing short of remarkable. 

 

Borrowing from both models

Look at the last four years of Myanmar’s economic transformation and you notice that the very different models of transformation undertaken by Poland and China have somehow intertwined in the course of reforms. Between 2011 and 2013 we saw very dynamic systemic and institutional changes that closely resembled the shock therapy of Poland. Liberalisation of the trade and service sector brought clearly visible changes on the street, at least in big cities. At the same time, we witnessed important regulatory reforms such as the new foreign investment law and exchange rate regime. In anticipation of further liberalisation, business people arrived in their thousands. The Japan External Trade Organisation (JETRO) reported that every month several hundred Japanese companies would enquire about business opportunities in Myanmar. More European companies arrived too, some of them winning prestigious tenders, like the Norwegian Telenor (together with Qatari telecoms giant Ooredoo). Polish businesspeople also came, intrigued by new opportunities and driven by a general Polish business strategy of expansion into Asian and African markets. 

Then the economic liberalisation seemed to slow down or even stall. Perhaps after looking at the experience of transformation in other Asian countries, Myanmar’s leadership decided that the reform process needed a different approach. The last two years has seen a growing preference for gradual transformation. At the same time, important reforms are pending; large projects are still decided via a bureaucratic process in one state-dominated sector, banking, which though light years from what it was several years ago, still does not have the institutional capacity to support business. The new companies law is still not in place. 

 

Launch of regional integration

There is another element to the equation – the process of regional integration and the launch of the Asean Economic Community (AEC). Myanmar, like Poland, will only be able to reap the benefits of closer economic cooperation with its neighbours if it continues its economic transformation. It has already passed the first test, successfully chairing Asean last year. 

Myanmar does not need to choose between models of post-socialist economic transformation. Every country is different. However, there is a library of experiences to be utilised. Myanmar’s policymakers need to study it all, pick whatever might be useful, and fit the possible solutions into a cohesive framework of reform and development. It will not be easy. This year will be particularly difficult. Politicians and policymakers are preoccupied by the general election set for November. The end-of-year deadline for the AEC launch is likely adding to feelings of insecurity over what will happen next. Naturally, we, the international community, are here to assist in economic transformation, in development and in regional integration. But we cannot do the job for Myanmar. 

The country’s biggest task remains eradication of poverty. There is consensus about this, whatever the discussion over instruments and models that would best achieve it. And much discussion is needed, as the roads Myanmar chooses now will determine whether it reaches its goals in the future. 

 

DR ANDRZEJ BOLESTA is chief economist at the Embassy of Poland in Bangkok and the author of “China and Post-Socialist Development”.