As Myanmar heads into general elections in November of this year, even the most well informed Myanmar-watchers seem unsure what outcome to predict. Myanmar’s turbulent history and on-again, off-again efforts at reforms in the 1990s make the country appear highly unstable – at least on the surface.
However, as Nassim Nicholas Taleb, author of The Black Swan writes in last month’s issue of Foreign Affairs, “Countries that have survived past bouts of chaos tend to be vaccinated against future ones. Thus, the best indicator of a country’s future stability is not past stability but moderate volatility in the relatively recent past.”
The author draws our attention to the divergent examples of Syria and Lebanon. As protests spread across the Arab world in 2011, Syria looked well positioned to resist political upheaval. The Assad family had ruled for more than four decades. In the same time, civil war had gripped Lebanon throughout the 1970s and 1980s and the country’s Prime Minister had been assassinated in 2005. Fast forward to today and Syria is in shambles while Lebanon continues to tick on.
Taleb and co-author Gregory F. Treverton point to the deep structural fragilities that helped to conceal a façade of pseudo stability in Syria and the decentralization of power and experience in coping with relative instability in Lebanon that helped it absorb the shocks of the Arab Spring.
Myanmar presents a more complex case. The five principal sources of fragility (a centralized governing system, an undiversified economy, excessing debt and leverage, a lack of political variability and no history of surviving past shocks) are a mixed bag in this emerging Southeast Asian growth story. While it’s highly centralized governing system compounds fragility of nonexistent political variability in recent decades, its economy is relatively diversified – and growing more so – it maintains a healthy debt to GDP ratio of 42% and has cut its teeth on previous shocks to its system in recent history.
With so many unknowns ahead of the Myanmar election – from the tolerance of military hardliners to change, to the willingness of the current administration to reform, to the results of mooted constitutional changes – those watching Myanmar would do well to focus on assessing how Myanmar can manage disorder, not guessing what might happen.
Factors of Fragility
Lack of Decentralization
Perhaps the most obvious source of fragility draining Myanmar’s ability to absorb shocks and manage disorder is its highly centralized system of government. Myanmar’s widely disputed 2008 constitution did little to resolve discord in the country’s ethnic border states where armed conflict continues to make headlines. The prospect of political change in 2015 has worked to further agitate conflict as armed non-state actors look to leverage international attention and pressure the current administration for concessions on the decentralization of power and control over natural resources.
Myanmar has used its centralized power base since the country’s postcolonial era to suppress ethnic tensions in areas that have never fully been integrated in Myanmar’s central economic, social and political systems. While these efforts may contribute to the appearance of stability, the inability of the Myanmar government to tolerate and manage demands for autonomy – either political or economic – in its border states is a clear weakness in its ability to withstand shocks. While countries that leave room for political dissent and sectarian division often appear more unstable, it is precisely this experience with managing difference that equips them well to withstand highly impactful events. Those that repress marginalized groups – like Myanmar’s numerous non-Bamar ethnic groups – limit vents to sectarian frustration, forcing them to brew silently instead.
Lack of Political Variability
Compounding problems with the country’s highly centralized governance system, is its limited experience with political variability. Counterintuitively, countries that experience regular (and moderate) swings in political power are much more stable than those which experience little or no political change at all. Italy, with 14 different Prime Ministers in 25 years, has proven itself remarkably stable precisely because its systems have grown so used to change.
In Myanmar, a lack of political variability has failed to bring in fresh faces with most of the old guard merely shuffled in between cosmetic name changes to the ruling party. Even in its most recent metamorphosis from a military-ruled to nominally civilian government, many of the most powerful military actors have maintained their positions, simply swapping military uniforms for civilian garb.
Markers of Stability
A Diversified Economy
Despite a continued reliance on revenues from gas production, Myanmar has a relatively well diversified economy. Exports of gems and precious stones, timber and agriculture produce is balanced by a growing manufacturing and service sector economy. Tourism figures growing by 43% year-over-year for the past three years has dramatically lifted foreign exchange earnings from foreign visitors and FDI overall has grown from US$901 million in 2010 to more than US$5 billion in 2014.
Myanmar’s economic diversification have helped to insulate it from falling global oil prices, provided it exposure to growing regional commodity demand and helped it maintain balanced GDP growth of 15% year-over-year for the past three years.
Weighing on Myanmar’s performance on this metric of stability however, is the continued dominance of large state-owned firms. These – often military-linked – conglomerates are bastions for corruption, highly uncompetitive and increase the impacts of declines in their sectors, responding sluggishly to market signals.
Myanmar’s debt to GDP ratio of 42% remains manageable and the country’s risk of debt distress remains low, according to the International Monetary Fund’s most recent assessment on Myanmar, subject to debt restructuring with Paris Club creditors proceeding as envisaged.
According to Taleb and Treverton, indebtedness is among the most critical sources of fragility leaving the entire system exposed to shortfalls in revenue. Myanmar’s rapid growth forecasted near 8 percent in the coming years conversely is a major source of stability. The broadening (increasing numbers of people benefiting from economic growth) and deepening (the increasing impact of economic benefits on those exposed to growth) have increased the numbers of people with a stake in continued political and economic stability. This powerful relationship between economic growth and stability is perhaps best evidenced by China where the country’s stunning economic success has helped buoy fragility brought on by heavy governance centralization and export dependence. Whether Myanmar’s own economic strength can support weakness in other areas is yet to be seen.
A History of Surviving Past Shocks
Myanmar has had its fair share of shocks to date. Natural disasters, most concretely Cyclone Nargis that ravaged the country in 2008, as well as manmade disaster, such as the gross economic mismanagement of the economy under the Burmese Way to Socialism, social and political upheaval and imposition of crippling international economic sanctions. Research from Taleb and Treverton suggests that states that have experienced a worst-case scenario in the recent past and recovered from it are likely to be more stable than those who haven’t. While the types of rebounds Myanmar has seen to its system shocks have not been as robust as those in its neighborhood (such as the rebound of Asean economies following the Asian Financial Crisis), the country has demonstrated that shocks can be educational, causing them to experience posttraumatic growth.
Change on the Horizon
Myanmar’s exposure to sources of fragility – excessive government centralization and highly limited political variability – may be on the wane. Mounting pressure from non-state actors on Myanmar’s border regions calling for the decentralization of power and granting of limited forms of economic and political autonomy are likely to yield results if Myanmar ruling government is serious about achieving a nationwide ceasefire.
This internal pressure is mixed with external attention from state and non-state groups taking both a ‘carrot’ and ‘stick’ approach. Myanmar transition to civilian rule in 2010 and the suspension of US sanctions in 2012 has unleashed a tsunami of international donor aid focused on everything from strengthening institutional capacity to improving electricity distribution infrastructure. Foreign Direct Investment has also added the choir of voices calling for regulatory reform and modernization of outmoded legislation.
More ominously, Myanmar’s history of surviving past shocks has been a checkered one. While the ruling regime has managed to maintain power – at least in the central regions of the country – its heavy handed response to volatility has often resulted in severe violence and repression of democratic freedoms. A repeat of this historical approach to political and social instability is likely to have much more dire consequences for Myanmar growth trajectory; much more is at stake economically. A backslide on democratic reform or a violent response to increasingly loud calls for political and constitutional change could trigger legislative action in the US Congress, ending the suspension of economic sanctions and potentially putting growth into a tail spin.
Whatever does happen for Myanmar in 2015, it is not going to be easily predicted. There are remarkably few useful warning signs of instability available in historical data. Those with a stake in Myanmar continued growth and stability would be better served by trying to assess its underlying structural properties and its ability to withstand disorder. Despite its reputation, Myanmar has lots of sources of stability going for it and reform measures to date suggests the country’s government is working to reduce or eliminate sources of fragility. While some countries fall to pieces at the onset of trouble, Asian economies, Myanmar included, have demonstrated an ability to withstand substantial shocks.
Myanmar may be more stable than it appears.
 The Calm Before the Storm: Why Volatility Signals Stability and Vice Versa BY NASSIM NICHOLAS TALEB AND GREGORY F. TREVERTON. Foreign Affairs vol. 94, 2015 pg. 86 – 95