Quantcast

Asia’s Next Tigers? Burma, the Philippines, and Sri Lanka

President Obama’s post-election visit to Asia last November was a vivid reminder that America is in the process of making a strategic pivot east. That Burma was one of his destinations was good for many reasons, one of which was to remind the development community that this country is once again full of potential, as it was half a century ago. Indeed, in the 1960s Burma, along with the Philippines and Sri Lanka (then Ceylon), was seen as one of the most likely candidates in Asia to follow Japan into sustained economic growth. The fact that neither Burma nor Ceylon nor the Philippines ever quite made it—indeed, for different reasons, each became an also-ran in terms of development—is an interesting story in its own right, but a topical one too. After years of frustrated hopes and dashed expectations, each of these countries, surprisingly, has another chance to fulfill its long-stalled potential. Development delayed, it seems, is not necessarily development lost.

To paraphrase Tolstoy’s famous maxim, all successful countries are alike, but each unsuccessful country is unsuccessful in its own way. Fifty years ago, Burma, Sri Lanka, and the Philippines seemed ready to bloom economically. Each was blessed with an excellent resource base and a strong export sector. Burma was the world’s leading rice exporter, Sri Lanka one of the leading exporters of tea (it became the leading exporter in 1965), and the Philippines the second-largest sugar exporter and largest exporter of coconut products. Literacy rates in each were quite high by the standards of the developing world. According to Norton Ginsburg’s authoritative Atlas of Economic Development, published in 1961, all three ranked in the top fifty-four countries in the world in literacy, ahead of places such as Thailand, South Korea, Malaya, Turkey, and China (including Taiwan), and far ahead of the rest of South Asia, Indonesia, Vietnam, Cambodia, Laos, all of Africa, Brazil and most of Latin America, and the entire Middle East but for Israel. The fact that English was widely spoken in all three countries added yet another advantage in an increasingly Anglophone world.

In terms of per capita income, each of these countries also fared relatively well in international league tables. Ginsburg showed both the Philippines and Sri Lanka ahead of later Asian high fliers such as Taiwan, Thailand, and South Korea (not to mention India and China), and a just-released report from the Asian Development Bank points out that Burma’s per capita income in 1960 was triple that of Indonesia and twice that of Thailand, both of which are now far ahead of Burma on that count. To be sure, cross-national income comparisons for earlier periods of history are difficult to make and challenging to interpret, but few knowledgeable students of Asia’s economic history would deny that these countries seemed to be on the move.

Related Essay

Burma’s Taste of Freedom

Burma’s new leaders have introduced genuine but tentative reforms that have sparked a new optimism among the youth and a level of public discourse unthinkable only a year ago.

But “takeoff” (in development lingo) never happened. As the century wore on, each of these countries turned out to be a development disaster, albeit each “in its own way.” If it is true that none of the three were actually as well prepared for development as they appeared at the beginning of the 1960s, it is also true that they all made and repeated serious missteps over a fifty-year period that hindered their way forward.

 

Burma is on everyone’s mind today because of what appears to be a dramatic new beginning that has separated the country from the decades-long military dictatorship beginning with General Ne Win’s coup in 1962, which led to the daunting economic stagnation from which the country has only just recently begun to recover. Burma’s dismal developmental cocktail under military rule—autarky cum kleptocracy topped by epic financial incompetence—in this case led not to the Burmese Way to Socialism, as Ne Win promised, but to the Burmese path to dire poverty.

Yet it is also true that Burma was quite fragile in 1960, even when its prospects seemed to many in the development community to be quite good. The country had been in a state of crisis of some sort—political, economic, or both—for almost forty years. During the 1920s and 1930s the country’s rice-export complex was beset by a plethora of problems, notably rising agricultural debt and increasing landlessness in the 1920s, exacerbated by low rice prices during the 1930s. During the same decades, violent opposition to British rule was intensifying all over the country. When World War II exploded, these tensions wrought havoc on the economy, both revealing and reinforcing latent ideological and ethnic fissures in the country that would divide Burma after the war, as the anti-colonial movement reached a crescendo. The divides were dramatized by the assassination in July 1947 of Nobel laureate Aung San Suu Kyi’s father, Bogyoke Aung San, leading architect of independence and the founder of the Union of Burma. From the beginning the state he created was plagued by severe political instability, waves of social unrest, and outright rebellion in various parts of the country. Exacerbating these problems, the country soon got caught up—involuntarily—in the Cold War when the US used it as a staging area for covert anti-Communist military operations in southwestern China.

So while Burma’s development prospects in 1960 may have seemed good on paper, the facts on the ground presented a more complex picture. In the face of overwhelming instability, Ne Win’s coup in 1962, though not predictable, was not a surprise either. If no one could have predicted how long a military junta would hold sway and how much economic mischief and mismanagement would occur, in retrospect it seems naive to have expected Burma’s path to development to have been linear or smooth.

Sri Lanka’s story is somewhat different. This country entered independence in 1948 in better shape than Burma, but policy blunders and social rifts soon took their toll on its chances for sustained developmental success. Erratic policy turns plagued the economy through much of the post-independence period, particularly during the long period under the Bandaranaikes (1956–1977)—first S. W. R. D. Bandaranaike, then, after his assassination in 1959, under his widow Sirimavo—when the economy was increasingly subjected to nationalizations and unsuccessfully reorganized under socialist lines.

But blunders in economic policy, however serious, were only part of the problem. More serious still were the social upheavals that grew out of both political conflicts—especially the Marxist insurrection led by the group JVP in 1971—and out of longstanding ethnic tensions between the Sinhalese majority and Tamils, the largest minority. These tensions, which had been festering for much of the twentieth century, rendered the densely settled island at the foot of the Indian peninsula a political and social powder keg.

Until 1983 such ethnic conflict was more or less suppressed, but that year an insurgency movement led by the Liberation Tigers of Tamil Eelam (LTTE) sparked the horrendous civil war between factions of the Tamil minority and the government dominated by the Sinhalese majority. The war, in its various phases, lasted from July 1983 until May 2009, bringing about political instability and disrupting development efforts everywhere on the island, not just in the Tamil-dominated north. Although successive governments have pursued more market-oriented economic policies in Sri Lanka since 1977, the on-and-off war significantly affected the investment environment on the island, greatly impeding growth, particularly sustained growth. Natural disaster played a role too: the devastating Indian Ocean earthquake and tsunami of December 2004 killed more than thirty-five thousand Sri Lankans, displaced more than a half million more, and leveled much of the eastern and southern coastal areas of the island, resulting in total property losses of more than $2 billion.

And what of the Philippines? Over the past fifty years, development efforts in this unwieldy archipelago of more than seven thousand islands have been consistently set back—and, at times, blocked completely or even reversed—by bad governance, corruption, political clientelism, striking socioeconomic inequalities, and often catastrophic weather “events” such as Typhoon Bopha, which smashed the southern island of Mindanao in early December 2012. Perhaps even more detrimental in the south were the persistent problems caused by longstanding Muslim separatist movements, most notably that led by the Moro Islamic Liberation Front, but also, beginning in the early 1990s, by the al-Qaeda-linked spinoff known as the Abu Sayyaf Group (ASG), both of which destabilized the region and poisoned the investment environment.

Such problems, compounded by surging population growth, inadequate infrastructure, capital flight, large foreign debt, and general macroeconomic mismanagement, detoured the Philippines as a whole into the developmental slow lane over the decades as numerous East Asian and Southeast Asian competitors caught up and accelerated past them.

 

So it was not a pretty half century for this troubled threesome, which all entered the 1960s with great expectations. But for each of them down has not meant out. Over the last few years, things have changed for the better for all of them. In the Philippines, for instance, greater political stability under President Benigno Aquino has helped the economy gather momentum, and indicators are looking up pretty much across the board. GDP growth is currently in the range of five to five and a half percent annually—not great for a developing country, but a lot better than it had been in previous decades. National accounts are looking good, unemployment is down, and inflation is under control. The call center/back-office operations sector is booming and remittances from expat Filipinos continue to flood in, helping to boost both investment and private consumption. Moreover, the country’s demographics—it has the youngest population in Asia—are propitious for future growth. With forty years of turmoil in the south perhaps ending as a result of the treaty in October 2012 with the Moro Islamic Liberation Front, there may well be a sizable peace dividend as well.

Such a dividend has certainly helped Sri Lanka. The country’s economy began growing at a solid clip during the last years of the civil war, but with the end of the fighting in 2009, the growth rate accelerated further to an annual rate in the range of eight to nine percent. With such rapid growth, unemployment and poverty levels on the island have both declined significantly. Foreign direct investment has skyrocketed—infrastructure projects are proceeding at a rapid clip all over the island—and the tourism industry is booming. Macroeconomic fundamentals remain a problem—the country is running large deficits and its debt-to-GDP ratio is troubling—but optimism in Sri Lanka is again running high.

And what of Burma, most badly wounded of the three by history? It is difficult to overstate the economic devastation the generals inflicted on the country over their many decades of misrule. Export agriculture was destroyed, infrastructure of all kinds degraded, the financial and educational and health-care systems trashed. That doesn’t even take into consideration the costs of squandering one of the country’s principal human-capital assets coming out of independence: the widespread use of English in the country. Generally speaking, the best English in many parts of the country today is spoken by geriatrics, people who were educated before or shortly after the British left.

But even in backward Burma, mirabile dictu, things have been changing for the better over the last decade or so, particularly over the past few years. According to the Economist, between 2000 and 2010 Burma’s economy grew at an annual rate of more than ten percent—placing it seventh in the world in that category. Although the country is still desperately poor, infrastructure and information and communications technology have been getting better; a real middle class is beginning to emerge in larger cities; and populations even in rural areas are seeing some improvement in living standards. In light of the surprising reforms undertaken by President Thein Sein’s more or less civilian government and what looks right now like solid steps toward national reconciliation, international investors, public and private, have returned and future growth prospects appear promising. Much can still go wrong—ethnic tensions remain problematic, as shown by the ongoing conflicts in Kachin State and Rakhine State—and many of the hot-money, short-term wheeler-dealers currently crowding Yangon will get burned. But, on balance, there is a margin of hope.

The Philippines. Sri Lanka. Burma. Each, rightly or wrongly, was a darling of the development community in 1960. Each tanked, but each may soon be appearing on what Jim O’Neill, who coined the term BRIC in 2001, has more recently called the “Growth Map.” None of these three countries is out of the woods yet, but each, somewhat unexpectedly, may at long last be in the process of righting its ship. Their reversals of fortune suggest that in the world of development it is best never to say never.

Peter A. Coclanis is the Albert R. Newsome Distinguished Professor of History and director of the Global Research Institute at the University of North Carolina at Chapel Hill.

OG Image: