POLICY-MAKING

IN MYANMAR UNDERSTANDING ECONOMIC REFORMS WITHIN A

TRANSITIONAL POLITICAL SYSTEM

NIKLAS WÖHLK

25.04.2014

Contact:

s3niwoeh@uni-trier.de

TABLE OF CONTENTS

1. Introduction

Page 1

2. Economic Structure and Reforms in Myanmar

2

3. The Tatmadaw’s Role in the “Disciplined Democracy” 4

3.1 Parties and Parliament 5

3.2 Institutionalization of Influence 8

3.3 Individual Influence and Personnel Policy

12

4. Factionalism within Myanmar’s Military 13

4.1 Informal Structure and Self-Perception 14

4.2 Factional Competition 16

4.3 The Hidden Path

19

5. Indications for Rent-Seeking Behavior

21

6. Conclusion

24

7. Bibliography

26

LIST OF ABBREVIATIONS

ADB Asian Development Bank

CIC Commander-in-chief of the Tatmadaw

DSA Defence Services Academy

FDI Foreign Direct Investment

IMF International Monetary Fund

MI Military Intelligence Branch of the Tatmadaw

MP Member of Parliament

NDC National Defence College

NDSC National Defence and Security Council

NLD National League for Democracy

OTS Officers Training School

PEC Presidential Electoral College

SLORC State Law and Order Restoration Council

SOE State-Owned Enterprise

SPDC State Peace and Development Council

Tatmadaw The armed forces of the Republic of the Union of Myanmar

USDP/USDA Union Solidarity and Development Party (former: Association)

WB World Bank

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1. INTRODUCTION

Since 2011, when the government in the former British colony of Burma changed its

state’s name to “The Republic of the Union of Myanmar”1, the Southeast Asian country

has experienced a remarkable transformation of the polity and the transition of power from

the former military regime to the now civilian government. The transformation process

which started with the constitutional referendum in 2008 was widely recognized by the

international community and the active Burmese diaspora.2 Indeed, Myanmar has long

been a hot spot for international human rights and democracy activists and these kinds of

topics are broadly observed by Western media and researchers.

In contrast to these issues commonly associated with Burma this paper will focus on the

rather little-known economic side of the transformation process. My objective is to open up

the black-box3 of economic policy-making in contemporary Myanmar by analyzing a

broad scope of literature and media reports and transferring my findings to the political

economic sphere. It is certainly impossible to provide the ‘all-embracing truth’ with the

limited capabilities of a student in a faraway country, but my argumentation provides one

logical and well-founded perspective to explain the privatization process in Burma.

The guiding research question is as follows: Why has Myanmar rapidly implemented a

policy of privatization of its hitherto state-led economy since 2007? By ‘privatization’ I

refer to a series of auctions to sell state assets like properties and state owned enterprises

(SOEs) that peaked in 2010.4 My first hypothesis is that the main factor to explain the

reforms and privatizations was not the concern of improving the well-being of the people

by increasing the overall economic performance but rather the rent-seeking of influential

patronage networks5 among Burma’s military elites. This hypothesis inevitably leads to the

question why the ruling regime had not simply continued its existing authoritarian rule

which apparently offered the best opportunities for uncontrolled rent-seeking? To deal with

that puzzle I set up the second hypothesis that the main factor which led to democratization

and privatization was the state of the internal power balance within the Burmese military

(Tatmadaw).

However, there are no simple answers in a complex world. That is to say there is no

monocausal reasoning for economic reforms but rather a bunch of influential factors out of

which, in my opinion, rent-seeking against the background of military factionalism is the

pivotal one. Therefore, I will analyze some additional factors to put the military

1 In the following, I will use the terms Myanmar and Burma synonymously. 2 See Zaw, Aung (2014): Letter from the Editor. In The Irrawaddy, 1/1/2014. 3 See Zarni, Maung (2013): Evolution of a mafia state in Myanmar. In Asia Times, 10/16/2013 (Online Edition).html 4 See The New York Times (2010): Myanmar’s Ruling Junta Is Selling State’s Assets. In The New York Times,

3/7/2010 (Online Edition). 5 See Sang, Lian Kual (2014): Patronage, sexism and the way forward. In Myanmar Times, 2/2/2014 (Online Edition).

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factionalism in a broader political context and thereby enhance the explanatory power of

my arguments

My research paper is structured in four analytical chapters to prove my hypotheses and to

provide empirical indications that the reforms and privatizations were not primarily rooted

in a democratic and philanthropic change of mind of the leading generals. After a brief

look at the general economic conditions in chapter 2, the following chapter 3 deals with the

new polity to provide a basic understanding of the constitutional and political framework

for decision-making in Myanmar and thereby analytical indication of the persistent role

and influence of Burmese military elites in the new system. The fourth chapter covers the

structure and internal dynamics of the Tatmadaw itself and the reasons for the change of

course in (economic) policy-making. With these analytical findings in mind, I finally

examine the concrete privatization process in the fifth chapter to provide some evidence in

support of my hypotheses.

2. ECONOMIC STRUCTURE AND REFORMS IN MYANMAR

In recent years, Myanmar in her role as “one of the last large frontier markets”6, showed

numerous signs of a positively changing political and economic environment. The 2013

Article IV consultations with the International Monetary Fund (IMF) acknowledged a

broad process of political liberalization and economic reforms.7 The government

encouraged domestic enterprises to form joint ventures with foreign companies and to

establish special economic zones as first steps to integrate Burma in the global economy.8

Actually, traditional state monopolies like the telecom sector were liberalized9 and foreign

capital and companies got access to most sectors of the economy.10 Import substitution

policies were abandoned and the import of foreign products, e.g. automobiles, started to

flourish.11

To understand why the ruling military regime chose to open the market, one has to

understand the role of the military in the economy. Since Burma is a rather unfamiliar

market I will first provide some basic knowledge by briefly examining the general

structure of the economy in the following.

6 Mon, Kyaw Hsu (2013): As Car Market Expands, Japanese Models Rule. In The Irrawaddy, 12/28/2013 (Online

Edition). 7 Cf. International Monetary Fund (2013): Myanmar. 2013 Article IV Consultation and First Review under the Staff-

Monitored Program. 8 See Snaing, Yen (2013): NGO Raises Concerns With Japan Over Dawei SEZ Involvement. In The Irrawaddy,

12/12/2013 (Online Edition). 9 Cf. Lewis, Simon (2013): End of the Drought. In The Irrawaddy, 12/30/2013 (Online Edition). 10 See Boot, William (2013): Irrawaddy Business Roundup (December 14, 2013). In The Irrawaddy, 12/14/2013 (Online

Edition). 11 Cf. Mon, Kyaw Hsu (2013): ibid.

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The first problem in analyzing Myanmar’s economic performance is the lack of credible

data. Even the most basic information like population estimates differ in a range from 53

(World Bank12) to 61 million (ADB13) depending on the source. The main reason is the

non-existence of any central statistics office.14 Myanmar’s data collection is therefore

decentralized and broadly dysfunctional, with numerous ministries and agencies running

their own statistics departments with differing standards and inconsistent methodologies.

However, a biannual published WB report guessed Myanmar’s modestly accelerating

growth at 6.5% in the years 2012/2013 and projects a stable GDP growth for the next

years. Myanmar is not experiencing a rapid economic take-off in comparison to other

prospering Asian economies, especially since GDP growth is mainly based on increased

raw material exports. However, Myanmar has a significant economic potential due to a

young workforce, huge raw material deposits and an advantageous geographical position

connecting China, India and Southeast Asia.15 Unfortunately, the actual outcome of this

potential is low due to a critical lack of even basic infrastructure. Actually, Myanmar has

no highway or railway connection to any of its neighboring countries.16 Hence, the border

trade is mostly limited to the local level. Nevertheless, due to raw material shipments to

China and Thailand, Myanmar is believed to run a net trade surplus since 2002.17

Myanmar’s economy can be categorized into two different levels. The military-controlled

top level consists of strategic branches like banks, energy and extractive industries,

whereas the private bottom level includes services, agriculture and small-scale industries

like garment manufacturing.18 These private enterprises are generally hampered by a lack

of available funding sources. Myanmar has no relevant stock exchange19, no bond market

and a dysfunctional banking system.20 Private saving is unusual due to high inflation rates

in the last decade,21 simultaneously government regulations fixed interest rates at low

levels, which means that banks had no incentive to lend and private household no incentive

to save money.22 Hence, investment capital has to come through informal private lending

or from abroad.23 And indeed, the military and crony controlled top level is traditionally

strengthened by foreign direct investments (FDI), with investments in lucrative energy

12 See World Bank (2014): Myanmar. Data. 13 See Asian Development Bank (2014): Statistical Database System. 14 See Ministry of National Planning and Economic Development, Myanmar (2014): Central Statistical Organization

(CSO). 15 Cf. Rieffel, Lex (2012): The Myanmar Economy: Though Choices. Edited by Brookings (Global Economy

& Development, 51), p. 4. 16 Cf. Rieffel, Lex (2012): ibid. p. 11. 17 Cf. Alamgir, Jalal (2008): Myanmar's Foreign Trade and its Political Consequences. In Asian Survey 48 (6), p. 980. 18 Cf. Seekins, Donald M. (2009): Myanmar in 2008: Hardship, Compounded. In Asian Survey 49 (1), p. 172. 19 See Lee, Ashley (2013): Myanmar capital markets: what to expect. In IFLR, 6/27/2013 (Online Edition). 20 See Turnell, Sean (2008): Burma's Insatiable State. In Asian Survey 48 (6), p. 967. 21 See Turnell, Sean (2008): ibid. p. 967. 22 See Turnell, Sean (2008): ibid. p. 970. 23 Cf. Turnell, Sean (2008): ibid. p. 967.

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related projects for example oil and gas extraction and hydropower plants accounts for

approximately 90% of accumulated total FDI.24 Even though major raw material deposits25

and potential dam sites are often located in ethnic minority regions,26 it was exclusively the

central government and therefore the military that hitherto benefited from the extraction

and the foreign investments. This finding is of special importance since it implies that even

during the time of harshest Western sanctions the top level sectors flourished and

generated sufficient revenues for the military patronage networks through the trade with

China and Thailand.27 Therefore, Western sanctions can be ruled out as main triggers for

the reform process.28 Rather the prospect of the lifting of sanctions and hence further

increasing revenues could have been a supporting side factor to reduce resistance among

rent-seeking Tatmadaw elites in the decision-making process.

Indeed, with the opening of the economy the FDI in extractive industries increased even

further29, leaving military controlled top level businesses with their traditional and

comparatively growing structural advantages. Hence, SOEs like the Myanmar Oil and Gas

Enterprise30, crony-controlled national champions like Max Myanmar31 and directly

military-owned businesses32 like the Union of Myanmar Economic Holdings or the

Myanmar Economic Corporation remain the pillars of Myanmar’s economy33, at least in

the nearer future.34 The government’s handling of these top level businesses during the

reform process thus provides important hints regarding the degree of military influence in

the reform process (see chapter 5).

3. THE TATMADAW’S ROLE IN THE “DISCIPLINED DEMOCRACY”

The changes in economic policy-making in Myanmar are not isolated researchable. This

means, to understand the economic reforms we have to analyze them by paying attention to

the background of the political transition process and the transformation of the polity,

which provides the institutional framework for policy-making. Since Myanmar is rather

seldom in the focus of mainstream political science research, there is little comprehensive

24 Cf. Seekins, Donald M. (2009): Myanmar in 2008: Hardship, Compounded. In Asian Survey 49 (1), p. 172. 25 See Hilton, Isabel (2013): China in Myanmar: implications for the future. Edited by The Norwegian Peacebuilding

Resource Centre, p. 3. 26 Cf. Turnell, Sean (2011): Myanmar in 2010. In Asian Survey 51 (1), p. 153. 27 Cf. Beech, Hannah (2010): Soldiers of Fortune. In TIME, 6/26/2010 (Online Edition). 28 See James, Helen (2010): Resources, Rent-Seeking, and Reform in Thailand and Myanmar (Burma). The Economics-

Politics Nexus. In Asian Survey 50 (2), p. 444. 29 See Shein, U. Win (2013): Statement by the Hon. U Win Shein, Governor of the Bank for Myanmar. 2013 Annual

Meetings World Bank Group - International Monetary Fund. Edited by IMF/World Bank, p. 4. 30 Cf. Ministry of Energy, Myanmar (2014): Myanmar Oil and Gas Enterprise. 31 See Holland, Hereward (2014): In Pictures: Myanmar's 'crony capitalists'. In a new era of foreign investment, analysts

are split on what role elites connected to the military junta should play. In Aljazeera, 1/27/2014 (Online Edition) 32 Cf. Rieffel, Lex (2012): The Myanmar Economy: Though Choices. Edited by Brookings (Global Economy

& Development, 51), p. 13. 33 Cf. Alamgir, Jalal (2008): Myanmar's Foreign Trade and its Political Consequences. In Asian Survey 48 (6), p. 977. 34 See Beech, Hannah (2010): Soldiers of Fortune. In TIME, 6/26/2010 (Online Edition).

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literature on the new political system. Hence, by analyzing the current constitution I will

undertake some basic groundwork myself and thereby providing the necessary knowledge

to explain policy-making in Myanmar. Actually, the decision-making process changed

significantly (at least formally) during the transition period beginning in 2008 and

ultimately culminating in March 2011 in the handover of power to the first civilian

government after countrywide general elections in November 2010.35 The objective of the

chapter is to show the persistent military influence and the Tatmadaw’s ability to direct

decision-making in the privatization process even after the enactment of the new

constitution in 2008.

3.1 PARTIES AND PARLIAMENT

The new constitution created the legislature at the national level in form of a bicameral

Union Parliament (Pyidaungsu Hluttaw). Both Houses are led by elected Speakers, which

take the position of the joint Union Parliament Speaker for half of the five year legislative

period respectively.36 The Union parliament has a comparatively powerful position since it

elects the President and the two Vice-Presidents through the Presidential Electoral

College37 (PEC). The parliament has to approve Ministers appointed by the President38 and

has the right to impeach not only the president39 but also individual ministers40 (see Graph

2). The legislature is therefore – at least potentially – capable to strictly control the

executive.

The 2010 parliament election was the first general election since 1990 and was commonly

considered as “neither free nor fair”.41 The electorate had to vote for 75% (for the

remaining 25% see next section)42 of the total 664 seats of the new Union Parliament’s two

Houses: the People’s Assembly (Pyithu Hluttaw, 440 seats)43 and the Nationalities

Assembly (Amyotha Hluttaw, 224 seats)44. The People’s Assembly is elected on the basis

of electoral districts with equal population sizes (townships)45, whereas the Nationalities

Assembly is composed of an equal number of 16 Members of Parliament (MPs) per

35 See Seekins, Donald M. (2010): Myanmar in 2009: A New Political Era? In Asian Survey 50 (1), pp, 200ff. 36 Cf. International Crisis Group (2013): Not a Rubber Stamp: Myanmar’s Legislature in a Time of Transition (Asia

Briefing, 142), p. 3. 37 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 60. 38 Cf. ibid. Art. 232. 39 Cf. ibid. Art. 71. 40 Cf. ibid. Art. 233. 41 Than, Tin Maung Maung (2012): Chapter 7. Myanmar’s Security Outlook and the Myanmar Defence Services. In

National Institute for Defense Studies, Japan (Ed.): Security Outlook of the Asia Pacific Countries and Its Implications

for the Defense Sector, vol. 7 (NIDS Joint Research Series, 7), p. 89. 42 See Banyan (2014): What is wrong with Myanmar’s constitution? In The Economist, 3/4/2014 (Online Edition). 43 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 109. 44 Cf. ibid. Art. 141. 45 Cf. ibid. Art. 109 (a).

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Region or State.46 The whole system is designed to assure checks and balances47

(similarities to the US Congress are not just coincidental).

The main opposition party, the National League for Democracy (NLD) under Nobel

laureate Aung San Suu Kyi decided to boycott the 2010 election. Consequently, the well-

organized pro-military Union Solidarity and Development Party (USDP) won in a

landslide victory48 with over 70% of all contested seats in all regions, states and the

national parliament.49 This USDP victory probably facilitated the whole transition

significantly since USDP MPs were majorly former military officers50 and many

influential regime elites have retired – often not entirely voluntarily but without desirable

alternatives51 – to join the new parliament or government. Thus, the old stakeholders were

directly incorporated in the new democratic governance and were not confronted with an

immediate loss of power. The regime ensured this development by the late announcement

of the new party law and thereby reduced time for the formation of parties and election

campaigns of oppositional groups.52 This protective design assured that inner-military

resistance remained exceptionally low. On the other hand, oppositional resistance vanished

as soon as it became clear, that the new system was not solely planned to legitimate the

former authoritarian regime. Media censorship was lifted53 and party laws were changed

according to democratic standards.54 Hence, the NLD officially registered and finally

joined parliament after winning 43 out of 44 contested seats in the 2012 by-elections55,

which were this time actually deemed free and fair.56 Again the limited NLD victory

supported the transformation of the system by just incrementally increasing opposition’s

share and influence in the legislature (see Graph 1).

Even though the two traditional main cleavages (1) between ethnic Burmese and

minorities57 and (2) between military and civilians remained in place, overall parliamentary

work has so far evolved in a surprisingly consensual pattern.58 This becomes even more

46 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 109. Art. 141 (a),(b). 47 Cf. ibid. Art. 11 (a). 48 Cf. International Crisis Group (2013): Not a Rubber Stamp: Myanmar’s Legislature in a Time of Transition (Asia

Briefing, 142), p. 5. 49 Cf. Than, Tin Maung Maung (2012): Chapter 7. Myanmar’s Security Outlook and the Myanmar Defence Services. In

National Institute for Defense Studies, Japan (Ed.): Security Outlook of the Asia Pacific Countries and Its Implications

for the Defense Sector, vol. 7 (NIDS Joint Research Series, 7), p. 89. 50 Cf. MacDonald, Adam P. (2013): What does Myanmar’s military want? In East Asia Forum, 11/8/2013 (Online

Edition). 51 See Shwe, Thomas Maung (2011): Myint Aung rejects defense minister job; reportedly under arrest. In Mizzima,

2/10/2011 (Online Edition). 52 Cf. Seekins, Donald M. (2010): Myanmar in 2009: A New Political Era? In Asian Survey 50 (1), p. 200f. 53 Cf. Holliday, Ian (2013): Myanmar in 2012: Toward a Normal State. In Asian Survey 53 (1), p. 93. 54 See Turnell, Sean (2012): Myanmar in 2011: Confounding Expectations. In Asian Survey 52 (1), p. 159. 55 Cf. Olarn, Kocha (2012): Myanmar confirms sweeping election victory for Suu Kyi's party. In CNN Online, 4/4/2012. 56 Cf. Bünte, Marco; Portela, Clara (2012): Myanmar: The Beginning of Reforms and the End of Sanctions. In

GIGA Focus (3), p. 2. 57 See Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through

coercion to buying support. In Third World Quarterly 32 (7), p. 1212. 58 Cf. International Crisis Group (2013): ibid. p. 14f.

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astounding with regard to the immanent lack of parliamentarian tradition. The MPs are

reportedly low in party discipline and voting coherence59, and party affiliation is

additionally weakened by the seating order in both Houses, which is (with exception of the

military MPs) organized in alphabetical order.60 This led to a “notable absence of

politics”61 in policy-making. The consensual pattern of decision-making within the

parliament is not a consequence of fear or repression but of the observable inclusive

attitude of both Speakers.62 In spite of USDP domination in both Houses and no official

regulation which forced them to act, the Speakers (both are members of the USDP) assured

the participation of every party in parliamentarian working committees and even placed

several non-USDP members as chairs.63 Since the Speakers behave in a bipartisan manner

they play a central role as leaders of the assemblies and by unifying the different parties in

consensual decision-making and mutual supportive voting patterns – regardless of party

affiliation64 – the Speakers strengthened the role of the parliament and thus their own

influence within the new political system.

Graph 1: Distribution of Seats in the two Houses of Parliament after the 2010 By-Elections (People’s Assembly l.; Nationalities Assembly r.)

Source: Own visualization, data from: ALTSEAN-Burma (2012): People's Assembly (Phyithu Hluttaw).

Source: Own visualization, data from: ALTSEAN-Burma (2013): National Assembly (Amyotha Hluttaw).

Consequently, the legislature has quickly emerged as an active key player in driving

reforms and the general transition process by passing numerous fundamental laws to create

a modernized legal framework for political and economic development.65 The question

remains, why the military allowed the formation of MPs as a new group of actors in

59 Cf. Holliday, Ian (2013): Myanmar in 2012: Toward a Normal State. In Asian Survey 53 (1), p. 94. 60 Cf. International Crisis Group (2013): Not a Rubber Stamp: Myanmar’s Legislature in a Time of Transition (Asia

Briefing, 142), pp. 14f. 61 International Crisis Group (2013): ibid. p. 14. 62 See International Crisis Group (2013): ibid. pp. 6ff. 63 Cf. International Crisis Group (2013): ibid. p. 6. 64 See International Crisis Group (2013): ibid. pp. 6f. 65 Cf. International Crisis Group (2013): ibid. p. 1.

USDP; 220

Military appointed;

110

Ethnic parties ; 43

NLD; 37

NUP; 12

NDF; 6NNDP; 2

Independent; 1

USDP; 123

Military appointed; 56

Ethnic parties ; 29

NLD; 5

NUP; 5NDF; 1NNDP; 1

Independent; 1

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decision-making. I would argue that this is exactly because of the above mentioned

incorporation of former regime elites, which will be discussed in-depth in the following

sub-chapters.

3.2 INSTITUTIONALIZATION OF INFLUENCE

The former military regime monopolized political decision-making within the State Peace

and Development Council (SPDC), an assembly of the highest ranking military officers,

the so-called “Top Generals”.66 To finalize the “praetorian transition”67, the SPDC was

officially dissolved in 201168 and all formal power was given to non-military institutions

within the “genuine, disciplined multi-party democratic system”69 of the new Republic of

the Union of Myanmar. Nevertheless, the Tatmadaw retained the ability to claim an

influential role within the new system.70 For analytical purpose I differentiate two

dimensions of this Tatmadaw influence, on the one hand informal individual influence

depending on former regime elites who joined the new system, and on the other hand

formal influence institutionalized by the 2008 constitution. The latter type is often

described as “the Tatmadaw is a state within the state”.71 In the case of Myanmar this is

already seen as a political improvement since the military actually was the state itself for

decades.72

Certainly, the new constitution grants the military an exceptional degree of independence

and unlike the American system the president is not the supreme commander of the armed

forces, instead the Commander-in-chief (CIC) of the Tatmadaw has this central

competence.73 The CIC is not only the supreme commander but also has the right to self-

administer the armed forces separately from any civil administration.74

However, in my opinion, the state-in-state thesis is at best partially correct. While the

Tatmadaw has a high degree of independence in its internal affairs, it is on the other hand

deeply integrated in the executive and legislature. The constitution provides the CIC with

the right to directly appoint Tatmadaw members to the Union Parliament (1/4 of seats) and

to the state and region parliaments (1/3 of seats) without votes from the electorate (see

Graph 2). Due to the 75-percent-plus-one voting requirement for constitutional

66 BBC (2012): Burma's top general defends army's role in politics. In BBC Online, 3/27/2012. 67 Egreteau, Renaud (2013): Patterns of Military Behavior in Myanmar's New Legislature. In Asia Pacific Bulletin (233),

p. 1. 68 Cf. Oo, Shwe Yinn Mar; Lynn, Soe Than (2011): Mission accomplished as SPDC ‘dissolved’. In Myanmar Times,

4/4/2011 (Online Edition). 69 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 6(d). 70 See Egreteau, Renaud (2013): Patterns of Military Behavior in Myanmar's New Legislature. In Asia Pacific Bulletin

(233), p. 1. And: Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 6(f). 71 Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through coercion to

buying support. In Third World Quarterly 32 (7), p. 1202. 72 Cf. ibid. p. 1202. 73 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 20 (a). 74 Cf. Williams, David C. (2011): ibid. p. 1202.

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amendments75, military MPs obtain a de facto veto player role in the Union Parliament.76

Intriguingly, these representatives of the old vested interests neither happened to act as

obstacles to the reform process nor showing permanent central coordination in voting

behavior. Actually, the military MPs seem to be free to vote along their individual opinion

as long as no topics of Tatmadaw’s vital interest are in question.77 Though frequently the

middle-ranked, barely politically interested military MPs (Captains or Majors), who remain

in active duty during their term in Parliament78, refuse to take any position at all and stay

passive during debates and votes.79 In an interview conducted by Professor Egreteau of

Hong Kong University in 2013 with the Nationalities Assembly Speaker Khin Aung Myint

(USDP), the former Top General described the self-perception of the military MP bloc as

“arbitrators” between the political parties.80 Indeed, the MP bloc is no static element within

parliament since it varies in voting behavior by supporting the opposition or the USDP at

some point and sometimes even voting against joint USDP/NLD bills in favor of

government proposals or to prevent changes of the constitution.81 However, in general the

military MP bloc is supportive to reformist legislation in most policy fields.82

Through its MPs the Tatmadaw also retains a say in the Presidential election within the

PEC, a legislative body consisting of three equal MP groups from the People’s Assembly,

the Nationalities Assembly and the bloc of Military MPs in both House.83 As a first step

each MP group is in charge of electing one Vice-President out of which in a second step

the President becomes elected by the majority of the joint PEC.84 This procedure assures

that the Tatmadaw can appoint at least one of the Vice-Presidents, who in return could

provide the military with leverage in the government.

Beyond this rather indirect connection, the Tatmadaw directly participates in the executive

by the constitutionally granted right of the CIC to appoint three Ministers of Defence,

Home Affairs and Border Affairs to the government (see Graph 2). Even though the Union

Parliament has to approve the individual appointments, the procedure ensures that besides

a (Vice-) President at least three key cabinet positions are reserved for the military. These

posts are especially important because they are part of another executive organ, the rather

cryptic National Defence and Security Council (NDSC). The constitution specifies the

75 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 436. 76 Cf. Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through

coercion to buying support. In Third World Quarterly 32 (7), p. 1199f. 77 See International Crisis Group (2013): Not a Rubber Stamp: Myanmar’s Legislature in a Time of Transition (Asia

Briefing, 142), p. 7. 78 Cf. ibid. p. 6. 79 Cf. ibid. p. 7. 80 Cf. Egreteau, Renaud (2013): Patterns of Military Behavior in Myanmar's New Legislature. In Asia Pacific Bulletin

(233), p. 2. 81 Cf. Turnell, Sean (2012): Myanmar in 2011: Confounding Expectations. In Asian Survey 52 (1), p. 138. 82 Cf. International Crisis Group (2013): ibid. p. 6. 83 Cf. Constitution of the Republic of the Union of Myanmar (2008): Art. 60. 84 Cf. ibid. Art. 60 (e).

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composition of the NDSC as having eleven members out of which the President has the

Chair (see Graph 2). The competences of the NDSC in the new polity range from the

declaration of the state of emergency, to the imposture of martial law whereby legislature,

judiciary and executive functions could be temporary transferred (up to 1 ½ years) to the

Tatmadaw.85 Although the internal procedures are just partially defined by the

constitution86, the military holds an informal majority through its (Vice-) President, the

CIC, Deputy CIC and the three Ministers appointed by the CIC (see Graph 2).87 The

NDSC composition reveals again the exceptional distinguished role of the Commander-in-

chief in the new polity. Hence, the importance of the NDSC is best illustrated by its

function to propose candidates for this powerful CIC post to the president, who in return is

responsible for appointing one of the candidates only with an additional approval of the

NDSC. Therefore, the military is de facto able to choose its own commander without

severe civilian interference. The Tatmadaw under the CIC is thus to a lesser extent a state-

in-state but rather an integrated, interwoven yet widely independent fourth power branch

within the system of the checks and balances of the “Disciplined Democracy”.

These analytical findings regarding the strong legislature and the influential CIC raise the

question of the degree of remaining power for the presidential office. Although, the

President is the Head of State and Head of Government, he has indeed a comparatively

weak position. His competences mainly consist of representative functions, foreign

relations, promulgation of administrative ordinances, appointment of some ministers (with

parliamentarian approval) and decision-making in case of necessary immediate action like

military operations between the sessions of the Union Parliament.88 In such urgent cases

the President has to seek parliamentarian approval as soon as possible by asking the Union

Parliament’s Speakers to call an emergency session. Even for ordinary administrative

ordinances the President needs the approval of both houses. Hence, the presidential power

is severely constraint and subject to the densest framework of checks under the new

constitution, especially due to the parliamentarian right to impeach the president and his

ministers. This constitutional design guarantees that the CIC remains the most powerful

and independent individual in the new system.

The granted institutional influence in the legislature and the executive will allow the

Tatmadaw to maintain a powerful position even in the case that the current opposition will

win the parliamentarian majority and the presidential office in the next elections. Actually,

the whole system is designed to safeguard Tatmadaw influence in decision-making

85 See MacDonald, Adam P. (2013): The Tatmadaw’s new position in Myanmar politics. In East Asia Forum, 5/1/2013. 86 Cf. ibid. 87 Cf. Shan Herald (2014): Insiders: Leopards won’t change spots. In Shan Herald, 1/9/2014 (Online Edition). 88 See Constitution of the Republic of the Union of Myanmar (2008): Chapter III Head of State.

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independent from any electoral votes. Therefore, the analysis of the constitution (de facto

formulated by the SPDC) provides strong indication that it was not the pursuit of genuine

democracy that guided Tatmadaw decision-makers.

Graph 2: The Tatmadaw in the new constitutional framework

Source: Own visualization on the basis of the Constitution of the Republic of the Union of Myanmar (2008).

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3.3 INDIVIDUAL INFLUENCE AND PERSONNEL POLICY

It is fair to say that the power of an office depends on the formal provisions as well as on

characteristics and influence of the individual office holder. Such informal influence is in

this case defined as a strong position in a former regime’s elite network (see chapter 4.2).

This kind of influence was especially valuable during the transformation where all kinds of

official posts were still assigned to former regime members. Since this kind of influence is

solely based on personal networks and loyalties, it may probably vanish over time.

Particularly when new actors like legislators and civilian cabinet members can offer similar

advantages to potential followers and thereby create their own entourages. However, if the

old networks can manage to remain successful in occupying the most influential positions

for a while, new ambitious actors may find it necessary to join them for their own benefit,

which hence would stabilize the established networks in the long run but would also

transform their structure to a more diversified and less military dominated one.

Nonetheless, up to this date the most salient positions in all power branches are still staffed

with former regime servants.89 This is to a certain degree simply a necessity, since during

the decades of military reign no independent professionals were able to rise through the

hierarchy. Hence, the only Burmese which gained domestic administrative expertise and

decision-making routine are former members of the regime. Therefore, the democratized

state depends to a certain degree on the capabilities of former regime members.

However, there is an additional component of the staffing policy in the new political

system, namely the perpetuation of power during the transformation. By placing fellow

officers in high posts the continuity of Tatmadaw-friendly decision-making is secured and

uncertainty is reduced. The participation of former military elites is obvious when

analyzing the backgrounds of President Thein Sein and his cabinet. Thein Sein himself is a

former General and was Prime Minister in the SPDC from 2007 until its dissolution in

2011.90 Actually, the entire government “exhibited a heavy military legacy”91 due to the

personnel composition of three active Generals and the majority of the remaining cabinet

posts filled with retired military officers.92 Even the leaders of the provincial governments,

the Chief Ministers appointed by Thein Sein, are majorly retired officers.93 The

combination of military Chief Ministers and CIC appointed MPs in regional parliaments

(1/3 of seats)94 grants the Tatmadaw strong leverage in the direction of further

89 See ALTSEAN-Burma (2014): Cabinet. 90 Cf. ALTSEAN-Burma (2013): President Thein Sein. Personal Info. 91 Than, Tin Maung Maung (2012): Chapter 7. Myanmar’s Security Outlook and the Myanmar Defence Services. In

National Institute for Defense Studies, Japan (Ed.): Security Outlook of the Asia Pacific Countries and Its Implications

for the Defense Sector, vol. 7 (NIDS Joint Research Series, 7), pp. 89. 92 See ibid. pp. 90ff. and ALTSEAN-Burma (2014): Cabinet. 93 Cf. Moe, Wai (2011): Changes within Burmese military take shape. BurmaNet News. 94 Cf. Holliday, Ian (2013): Myanmar in 2012: Toward a Normal State. In Asian Survey 53 (1), p. 95.

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development of centrifugal or centripetal forces regarding the federalization of the

multiethnic state. Since the drifting apart of the state is one of the main concerns of

Tatmadaw members (see chapter 4.1), the strong control retained by the military under the

new constitution had probably a calming effect and further decreased inner-military

resistance.

A salient example for an office that is boosted by its holder is the Speaker post in the

Union Parliament or one of its houses. Although the constitution grants few direct rights to

the Speakers, they actually developed an important role in politics (as mentioned in chapter

3.2). This role is supported by the individual characteristics of the office holders and their

backgrounds. For example former SPDC member and top General Shwe Mann became

Speaker of the People’s Assembly in 2011 and Union Parliament Speaker in 2013.95 This

was a surprise to foreign observers since Shwe Mann was the third highest ranking General

and was therefore expected to become President after the 2010 elections.96 The military

hierarchy is still significant for the retired top Generals, especially since former high ranks

were also an indicator of influence in the internal military power structure (see chapter 4).

Hence, Speaker Shwe Mann’s seniority in rank over President Thein Sein likewise elevates

the potential of the legislature and especially his People’s Assembly to enforce checks on

the (lower ranking) government.

The analysis of institutional and individual influence reveals the persistent role of the

Tatmadaw in the new polity. The far reaching constitutional influence is at least in the

current phase of transformation underpinned by individual influence of the old elites,

which occupy all important state positions. Therefore, policy- and decision-making is still

clearly dominated by (former) military actors. Due to this remaining dominance, important

decisions like privatizations of state assets were necessarily influenced by the interests of

Tatmadaw elites.

This analytical conclusion inherently induces the question of the coherence of these

interests and whether the Tatmadaw is a monolithic actor or should be seen rather

differentiated?

4. FACTIONALISM WITHIN MYANMAR’S MILITARY

The extraordinary transition is especially recognizable since no violent or whatsoever

revolution overthrow the old military regime beforehand. Hence, the entire polity

transformation was organized within the autocratic leadership and is therefore a clear top-

down process. The immanent question is why should the military leadership give up its all-

95 Cf. ALTSEAN-Burma (2012): People's Assembly (Phyithu Hluttaw). 96 Cf. International Crisis Group (2013): Not a Rubber Stamp: Myanmar’s Legislature in a Time of Transition (Asia

Briefing, 142), p. 6.

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encompassing powers in favor of democracy? I argue that the factors to explain this

decision can be found within the structures of the military itself. First and foremost, while I

hitherto referred to the military as the Tatmadaw the following sub-chapters will contest

this monolithic view and establish a differentiated analytical perspective.

4.1 INFORMAL STRUCTURE AND SELF-PERCEPTION

To explain the actions of military policy-makers in regard to economic reforms it is

necessary to understand the internal structures by analytically subdividing the Tatmadaw

into different groups of actors. This is best done by differentiating between the two

categories of factions and networks. In the case of the Tatmadaw, I define factions as

informal groups consisting of several interwoven patronage networks (in the sense of the

German word ‘Seilschaften’) loosely unified by one leading figure.97 The networks

themselves are also informal but hierarchical in structure since they reflect the military

ranks of connected officers. The factions can be called ‘feudal’98 since they are built on

individual loyalty relations between the faction leader and its subordinate network leaders

based on the granting of benefits e.g. promotions and “income streams”99 by the patron to

his protégés, who themselves maintain their own networks by transferring a share of the

benefits to their respective followers.100 The term ‘feudal’ fits well in the Tatmadaw

context for three reasons: Firstly, it implies the uncertainty whether different patronage

networks within a faction – even though loyal to the same factional leader – act in a

cooperative or competing mode against each other.101 Secondly, it implies that the loyalty

along the faction hierarchy is solely focused on the respective direct superior who provides

benefits like promotions in command positions which grant control over regions and thus

the chance to exploit local economic revenue sources.102 Since the Generals on the top of

the central hierarchy normally have no direct access or control over the armed troops

deployed in the provinces, ‘feudal’ thirdly well describes the dependence of faction and

network leaders on their ability to transfer benefits to subordinates in regional and division

commands who in return use their armed troops to safeguard the power and the interests of

their patrons.103

Due to their fundamental role in the internal structure of the Tatmadaw, the mechanics of

network development are of interest to this research. Many cadets enter the networks

directly during their training in one of Burma’s military academies e.g. Defense Services

97 See Min, Win (2008): Looking inside the Burmese Military. In Asian Survey 48 (6), pp. 1020, 1021. 98 Cf. Zarni, Maung (2013): A class above, the heaven-born. In Asia Times, 10/13/2013 (Online Edition). 99 Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through coercion to

buying support. In Third World Quarterly 32 (7), pp. 1200f. 100 See ibid. pp. 1201f. 101 See ibid. pp. 1208f. 102 See Min, Win (2008): Looking inside the Burmese Military. In Asian Survey 48 (6), p. 1021. 103 See Williams, David C. (2011): ibid. p. 1208.

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Academy (DSA), National Defense College (NDC)104 or Officers Training School

(OTS)105. For instance, faction leader Maung Aye is known for his radical favoritism for

DSA candidates.106 Later integration into networks mainly depends on the affiliation of

their first direct superior, who will integrate young officers in his sub-network if they

prove loyal. Therefore, the patronage networks grow along the lines of academy and

service branch affiliation, which allows the converse conclusion that different academy and

branch background could be taken as an indicator for participation in different networks.

Consequently, the organizational structure imposes cleavages into the informal internal

network structure on the one hand between the different branches of service (Army, Navy,

Air force) and on the other hand within the Army between the central, regional and

division commands (depending on the career path).107

Of certain relevance is the conclusion that these networks are solely based on personal

loyalty and not necessarily on the same personal beliefs or a common ideology.108 The

networks and factions are therefore heterogeneous and rather apolitical in nature which is

one explanation for their flexible handling of reforms in several policy-fields. But how is it

possible that a politically heterogeneous organization consisting of hundreds of thousands

armed individuals (again clear statistical numbers are unknown, maybe even to the CIC)109

and numerous patronage networks competing for a limited number of posts in the

hierarchy, has never fallen apart or broken out into armed struggle? The explanation roots

back in the early history of the Tatmadaw. After its independence in 1948, the former

British colony of Burma experienced a decade of virtual political stalemate and was

destabilized by violent ethnic or communist insurgencies110 and US-supported Kuomintang

warlords in the border provinces.111 During this period of fighting on all fronts, the

members of the Tatmadaw developed a self-perception of their role as the only guards of

national unity.112 It was also the time when the Tatmadaw experienced the inability of

Burmese political parties to govern the country which eventually led to the establishment

of a military caretaker government under CIC Ne Win in 1958.113 Since this time the

officers of the Tatmadaw share the belief that political decision-making has to be

disciplined by the military to maintain effectiveness.114

104 See Zarni, Maung (2013): Fascist roots, rewritten histories. In Asia Times, 10/17/2013 (Online Edition). 105 See ALTSEAN-Burma (2009): Than Shwe. Military Career. 106 Cf. The Irrawaddy (2011): Maung Aye: Not just standing in the shadows. In BurmaNet News, 3/14/2011. 107 Cf. Min, Win (2008): ibid. p. 1020. 108 See ibid. pp. 1019ff. 109 Cf. Selth, Andrew (2010): Burma’s armed forces: Does size matter? In East Asia Forum, 9/17/2010. 110 Cf. BBC (2013): Myanmar profile. A chronology of key events. In BBC Online, 7/16/2013. 111 Cf. Chang, Wen-chin (2014): The Tragic History of the KMT Troops in the Golden Triangle, 1950-1981. Harvard-

Yenchin Institute. 112 Cf. Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through

coercion to buying support. In Third World Quarterly 32 (7), p. 1203. 113 Cf. Oxford Burma Alliance (2014): The Ne Win Years: 1962-1988. 114 Cf. Min, Win (2008): Looking inside the Burmese Military. In Asian Survey 48 (6), p. 1019.

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To survive the fight on all fronts during the first decades after Burma’s independence, the

soldiers adapted and internalized the persisting115 political paradigm116 that a united

military is the only thing which keeps the nation from falling apart. Hence, military unity

has to be maintained at all costs and has to guide every decision.

The unity paradigm has set the boundaries for actions among the military elite ever since

then. General Ne Win and his factions remained in power (by some means or others) until

the early 90s and was, through its control of the academy system, able to imprint the

paradigm on all following cadet cohorts. Furthermore, today’s powerful military patrons

began their service in the 1940s and 1950s and were hence directly shaped by the threating

environment that led to the emergence of the paradigm. Consequently, for more than half a

century now, none of the factions – though seriously competing – has caused a spilt of the

Tatmadaw by risking any armed internal struggle.

4.2 FACTIONAL COMPETITION

The lack of armed internal conflict solution becomes even more surprising with regard to

the extent of factional competition, which led to several purges along the inner-military

cleavages, for instance in 1983 occurred an inter-branch conflict due to the rising power of

the military intelligence service (MI) which eventually led to the purge of the MI patronage

networks by the dominant army faction of Ne Win.117 Another example is the conflict

between the central and regional commands which led to several commanders becoming

sacked or reshuffled since the 1980s.118 Those purges had strengthened the then

predominant faction under CIC General Ne Win and thus the Tatmadaw’s internal stability

and integrity.119

When Ne Win began his gradual retreat from day-to-day policy-making in the late 1980s,

the Tatmadaw’s internal power balance started to shift and became significantly less

monolithic since none of the network leaders was powerful enough to claim Ne Win’s

predominant position alone.

The factional power (im-) balances in recent years were a direct consequence of the power

vacuum that followed Ne Win’s retirement at the age of 78 after 26 years of being the

leading figure in Burmese politics.120 During the 1990s and early 2000s the military

patronage networks aligned themselves to three different factions under the Generals Than

115 See The Economist (2007): Revolution in Myanmar. The saffron revolution. In The Economist, 9/27/2007. 116 For a further discussion and definition of political paradigms see Howlett, Michael; Ramesh, M.; Perl, Anthony

(2009): Studying public policy. Policy cycles & policy subsystems. Ontario: Oxford University Press. 117 See Min, Win (2008): Looking inside the Burmese Military. In Asian Survey 48 (6), p. 1023. 118 Cf. ibid pp. 1022f. 119 See Williams, David C. (2011): Cracks in the Firmament of Burma's Military Government: from unity through

coercion to buying support. In Third World Quarterly 32 (7), p. 1208. 120 See ibid. p. 1208.

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Shwe, Maung Aye and Khin Nyunt. The latter was a protégé121 of Ne Win and based his

power on his patron’s former networks. The triumvirate’s power balance changed again

dramatically with the death of Ne Win in 2002. Since Khin Nyunt was promoted along the

central hierarchy without gaining combat experience in the regional commands, he had no

chance to build up his own troop powerbase.122 Then without the support of his patron the

MI leader Khin Nyunt lost his few connections to the armed troops.123 Consequently, he

was no longer under the implicit protection of the unity paradigm, since no troops meant

no risk of internal armed struggle when the other factions decided to settle the competition

in the hard way by purging Khin Nyunt and his whole MI apparatus in 2004.124

This development is critical to understand today’s power constellation. After the purge of

the Khin Nyunt faction the Tatmadaw became increasingly bipolarized. Due to the limited

number of available top post Than Shwe (OTS graduate)125 and Maung Aye (DSA

graduate)126 played a zero-sum game in providing benefits and promotions to their

followers. Every gain of one faction came at the expense of the respective other. Indeed,

CIC Than Shwe was comparatively more successful in securing posts in the central

hierarchy for his followers than Deputy CIC Maung Aye.127 Aye in return had a broader

powerbase in the middle ranking members of regional and division commands.128

Nevertheless, both factions were (and are) based on loyal army troops and were therefore

locked in an armed stalemate. Since both leaders getting inevitably older (both were born

in the 1930s) and their health conditions are decreasing,129 the question of succession

became urgent in the second half of the last decade. However, both factions consisted of

several patronage networks with ambitious leaders which would have to compete with each

other for the top posts after an eventual passing of Than Shwe and Maung Aye. This

probable multipolar power vacuum would have endangered the integrity of the Tatmadaw.

The two faction leaders apparently found a solution for depoliticizing and thereby

stabilizing the Tatmadaw by introducing democracy and placing the most ambitious

network leaders like Shwe Mann outside the armed forces into the new parliament. This

solution was especially advantageous for the dominant Than Shwe faction since Than

Shwe himself was since 1993 the patron130 and leading founder of the USDP predecessor

121 Cf. Pitman, Todd (2014): From Feared Burma Spymaster to Art Gallery Owner. In The Irrawaddy, 1/2/2014 (Online

Edition). 122 Cf. Min, Win (2008): Looking inside the Burmese Military. In Asian Survey 48 (6), p. 1028. 123 See ibid. p. 1028. 124 See ibid. p. 1030. 125 See ALTSEAN-Burma (2009): Than Shwe. Military Career. 126 See ALTSEAN-Burma (2007): Maung Aye. Military Career. 127 See Min, Win (2008): ibid. pp. 1034ff. 128 See Min, Win (2008): ibid. pp. 1034ff. And The Irrawaddy (2011): Maung Aye: Not just standing in the shadows. In

BurmaNet News, 3/14/2011. 129 See Moe, Wai (2012): Maung Aye Hospitalized in Singapore. In The Irrawaddy, 7/10/2012 (Online Edition). 130 Cf. Bünte, Marco (2011): Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of

Military Rule? In GIGA Working Papers (177), p. 20.

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Union Solidarity and Development Association, which was the only legal mass-

organization outside the Tatmadaw during the military reign, and had several million

members. With this civil powerbase, which was easily conversable to a political party

(USDP since 2010)131, Than Shwe and his faction enjoyed a structural advantage which

certainly alleviated the decision to switch to a democratic system.

The other Tatmadaw core problem is the retirement question implicated by the feudal habit

of ‘benefits for loyalty’. For most of the senior officers who raised through the hierarchy of

the old regime and managed to build-up their own networks, it was virtually impossible to

simply retire from their posts. If they would have given up their active duty they would

have lost the ability to provide promotions and other benefits to their followers, which

would have led to the immediate disintegration of their patronage network. Without the

support of the lower ranking officers and their armed troops, the retirees and the wealth of

their families would have been unprotected and vulnerable to the actions of active

competitors and old enemies. Therefore the top Generals had to try to stay in power as long

as possible. Unfortunately for the Generals, the military hierarchy naturally only offers a

limited number of positions. The officers who reached the circle of top posts and stuck

there for decades, as for instance in the cases of the former CICs Ne Win, Than Shwe or

Deputy CIC Maung Aye, have caused a back pressuring promotion jam. More junior

officers who already deserved promotions due to their length of service became trapped in

lower ranks, were forced to retire or were “kicked-upstairs” by promoting them into

civilian government or administration posts which were less influential during the rule of

the military regime.132 These developments led to growing discontent among the middle-

ranks and intensified faction competion in the Tatmadaw.133 During the last years of the

SPDC the accumulating build-up of internal pressure had increased the risk of coups by

frustrated younger officer cohorts significantly. One may assume that Than Shwe and

Maung Aye were well aware of that problem, since it was one of the reasons why they

staged their own gradual ‘soft-coup’ against the remains of the Ne Win faction in the 90s

which ultimately culminated in the purge of Khin Nyunt in 2004.

However, with regard to the paradigm another purge to create some space for promotions

was out of questions since both remaining factions possessed a strong troop powerbase.

The democratization was therefore a proper solution for the interconnected core problems

of feudal competition and retirement. On the one hand, the establishment of a parliament

created a new arena for formalized (and unarmed) conflict settlement and policy-making

131 See Turnell, Sean (2011): Myanmar in 2010. In Asian Survey 51 (1), p. 150. 132 Cf. Bünte, Marco (2011): Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of

Military Rule? In GIGA Working Papers (177), p. 17. 133 See ibid. p. 20.

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outside the Tatmadaw which prevented any violent showdown within the factional

duopoly. On the other hand the emergence of legislators as a new class of influential actors

eased the retirement problem by offering well-connected, ambitious senior officers a

perspective outside the armed forces. Whereas the legalization of the system and the

increasing rule of law reduced the uncertainty for top Generals and thereby allow them to

retire in time.134 The most salient examples are Than Shwe135 and Maung Aye136 who both

retired from their posts after the SPDC was dissolVed in 2011. They thereby respected the

paradigm by not have letting the factional competition escalate into a final violent

showdown. From a Tatmadaw point of view the democratization therefore served the

purpose of a valve which has released pressure out of the internal military structure.

4.3 THE HIDDEN PATH

At first glance, one could argue that the democratic transition of military rule in Myanmar

appeared to be an exceptional example of path breaking.137 Instead, I would argue that

there is strong evidence of traditional patterns of actions.

The transformation officially dates back until the early 90s when the political decision-

making organ called State Law and Order Restoration Council (SLORC) announced the

establishment of national conventions to discuss a new constitution.138 However, it is

unlikely that these reforms were true goals of the SLORC (and later SPDC) at this time.139

General Than Shwe, since 1992 the strong man of the regime, merely used the

announcement to ease pressure from the international community and appease the

domestic public opinion after the military regimes refused to give over power to the

oppositional National League for Democracy (NLD) under Aung San Suu Kyi after their

landslide victory in the 1990s general elections.140 A national convention to elaborate a

constitution proposal was adjourned since 1996 and real work on the new constitution did

not begin until 2003 when then Prime Minister General Khin Nyunt announced the “Seven

Step Roadmap to Democracy”.141 Several minority representatives, opposition politicians

and the military met for preliminary talks in 2004, which marked the start of a series of

meetings until the final national convention in 2007 finished the constitutional draft.142

134 Cf. Bünte, Marco (2011): Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of

Military Rule? In GIGA Working Papers (177), p. 20. 135 See Horn, Robert (2011): Is Burma's Strongman Really Retiring? In TIME, 4/11/2011 (Online Edition). 136 See Pai, Yan (2013): Junta’s Former No. 2 Maung Aye Ailing: Sources. In The Irrawaddy, 11/11/2013 (Online

Edition). 137 For a discussion about the definition of path-dependence and path-breaking see Pierson, Paul (200): Increasing

Returns, Path Dependence, and the Study of Politics. In The American Political Science Review 94 (2), pp. 251–267. 138 Cf. Human Rights Watch (2008): Chronology of Burma’s Constitutional Process, p. 2. 139 See MacDonald, Adam P. (2013): The Tatmadaw’s new position in Myanmar politics. In East Asia Forum, 5/1/2013

(Online Edition). 140 Cf. Seekins, Donald M. (2009): Myanmar in 2008: Hardship, Compounded. In Asian Survey 49 (1), p. 169. 141 Cf. Human Rights Watch (2008): ibid. p. 7. 142 Cf. ibid. p. 8.

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Even though representatives from minorities and political opposition groups were invited

to the national conventions, they later complained about their inability to influence the

representatives of the military in decision-making on the draft.143 The drafting of the

constitution was hence a clear top-down process.

Ironically, it could be exactly this process design that ultimately locked the military in a

certain degree of path dependence. The factional power balance shifted significantly during

these years, primarily due to the purge of the Khin Nyunt and his former Ne Win faction.

The remaining two leading factions under Than Shwe and Maung Aye had to fear one of

them will become the next victim. As mentioned, both factions were well-established and

based on loyal armed troops. Therefore, for the first time in decades, a factional struggle

could have led to a split in the Tatmadaw and ultimately to an armed conflict. In this

critical situation there were two options regarding the ongoing series of national

conventions144: Unilaterally boycott it or jointly proceed it. Most likely none of the two

factions was willing to act against the paradigm and to take the risk of a joint bloc of the

respective other faction together with opposition and minority rebels, hence both factions

proceeded with the process. The national conventions became an arena where all

influential patronage networks had to regularly prenegotiate with each other to elaborate an

internal compromise on fundamental constitutional principles before facing opposition and

minority groups. The complaints of the non-military participants about their inability to

change the Tatmadaw’s position could hence be interpreted as a sign of a reached factional

minimum consensus on the topics. This consensus offered no room for further negotiations

since, during the internal prenegotiations, both factions and their networks already made

the highest degree of concession to which they were willing to agree. Even if the

constitutional drafting process wasn’t meant earnestly in the first place (which is quite

likely regarding the historical experiences), it finally became locked in path dependence

due to the unwillingness of both factions to stand aside. The series of national conventions

consequently institutionalized the inter-factional minimum consensus in the form of the

new constitution and thereby incrementally established the democratic system as the most

predictable and secure option among many violent alternatives with uncertain outcomes.

The reduction of uncertainty and instability was in this case the main incentive (increasing

return)145 for Tatmadaw decision-makers to lock themselves in the path to democracy.

143 Cf. Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of Military Rule? In

GIGA Working Papers (177), p. 16. 144 See Thawnghmung, Ardeth Maung; Myoe, Maung Aung (2008): Myanmar in 2007: A Turning Point in the

"Roadmap"? In Asian Survey 48 (1), p. 15. 145 See Pierson, Paul (200): Increasing Returns, Path Dependence, and the Study of Politics. In The American Political

Science Review 94 (2), pp. 252ff.

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To emphasize it, I would argue that there is no path-breaking in the whole change and

reform process, rather the remaining dominance of the existing path, which is: Hold the

your own network in power and channel benefits to your followers, but respect the

paradigm of unity. In my opinion, the entire democratization and economic policy process

is not path breaking but the rational continuation of this path.

5. INDICATIONS FOR RENT-SEEKING BEHAVIOR

Equipped with all background knowledge gained from the in-depth research in the

previous chapters, it is now feasible to provide a well-founded explanation for the course

of economic reforms in transitional Myanmar. While the pace and range of reforms in

numerous areas is certainly remarkable, the area of privatization and liberalization of

hitherto state controlled sectors is of special interests, since these processes are usually

particularly vulnerable to vested interests. The high stakes involved made the process of

privatization to an indicator for the degree of influence of military elite networks.

The analytical findings of the chapter 3 reveal the significant institutional and individual

influence that the Tatmadaw and its (former) members still maintain in the new polity. At

the same time, due to the reasons mentioned in the previous chapter, factional balance

within the military has started to shift and has become increasingly fragile whereas

certainty was best granted by locking themselves in the path of democratization. Therefore,

whilst still in control of decision-making, especially during the first phase of reforms146,

the two leading factions had to adapt their feudal benefit-granting and rent-seeking

behavior147 to the changing framework of policy-making.

This first phase ranges from approximately 2007 to 2011,148 when the military leadership

was already widely committed to the transition of power to a civil government, but was

still free from the checks intended by the new constitution. One clear sign is the

concentration of policy-making on sectors of military interest like banks and raw material

exploitation. In contrast, most private branches like agriculture where widely ignored149,

even though most Burmese work in this subsistence sector and corresponding private

funding reforms could have unleashed vast economic growth potential. Even tax reforms

were focused on expanding incentives for domestic large scale enterprises, which were

146 See Lim, Hank; Yamada, Yasuhiro (2013): Introductory Chapter. Economic Reforms in Myanmar: Pathways and

Prospects. In Hank Lim, Yasuhiro Yamada (Eds.): Economic Reforms in Myanmar: Pathways and Prospects:

Bangkok Research Center (BRC Research Report, 10), p. 3. 147 See YENI (2010): Privatization? What Privatization. In The Irrawaddy, 2/27/2010 (Online Edition). 148 See The Irrawaddy (2011): Gov't to Continue Privatization: Official. In The Irrawaddy, 1/13/2011 (Online Edition). 149 See Boot, William (2014): Small Business Hopes for Millions of Burmese Face Govt Squeeze. In The Irrawaddy,

2/20/2014 (Online Edition).

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military- or crony-controlled, whereas SMEs were obliged with disproportionately high

shares in tax burden.150

However, the most significant development in the first phase of economic reforms was the

wave of privatizations of state assets. Officially the SPDC had followed a general

privatization program since 1995 to abandon the Burmese way to socialism, but actually

the process only gained momentum before the start of the transition process.151 Beginning

in 2007 with the sale of 288 mostly smaller businesses like printing shops,152 the media

reported in 2010 a peak of privatizations including 110 SOEs153, 32 former government

buildings, 246 gas stations and several major ports.154 According to a Myanmar Times

report from April 2011, more than 344 state-owned properties were privatized within the

first two month of the year 2010 alone and often sold to known business cronies of Than

Shwe155 and other influential regime figures.156 These nontransparent privatizations157

contained neither the publication of details like, in the case of former SOE factories, the

names of the buyers158 nor the simultaneous formulation or implementation of competition

regulations. This provides strong indication that not a flourishing private sector and market

economy was the foremost priority in economic policy-making during the first phase of

economic reforms but rather rent-seeking of Generals and their cronies.159

Regime elites even managed to make their networks to money by offering their influence

to outsiders for cash. In 2011 the renowned Irrawaddy newspaper accused Than Shwe’s

grandson, who reportedly secured some “prime properties” for himself, and the son of Soe

Thar, then minister in charge of the privatization auctions, of accepting bribes in exchange

for arranging preferential sale agreements of certain state assets through their powerful

connections.160

A striking and salient (in this case the buyers were revealed to the public) example of rent-

seeking is the auction of the hitherto state-owned gasoline stations in 2010. Among the

buyers of the 247 stations were Myawaddy Trading, a subsidiary of the Tatmadaw-owned

150 Cf. Aung, San Yamin (2014): Over 10,000 Companies Called Out for Evading Tax Collectors. In The Irrawaddy,

3/7/2014 (Online Edition). 151 See Xinhua (2010): Myanmar privatization move gets momentum. In People's Daily, 2/5/2010 (Online Edition). 152 See Xinhua (2007): Over 200 state-owned enterprises privatized in Myanmar. In People's Daily, 4/4/2007 (Online

Edition). 153 Cf. Xinhua (2010): ibid. 154 Cf. The Irrawaddy (2011): Gov't to Continue Privatization: Official. In The Irrawaddy, 1/13/2011 (Online Edition). 155 Cf. Bünte, Marco (2011): Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of

Military Rule? In GIGA Working Papers (177), p. 17. 156 See Mon, Kyaw hsu (2014): Out of Reach. In The Irrawaddy, 2/12/2014 (Online Edition). 157 Cf. Rieffel, Lex (2012): The Myanmar Economy: Though Choices. Edited by Brookings (Global Economy

& Development, 51), p. 12. 158 Cf. Eleven Myanmar (2013): Former industry minister says he showed transparency in privatization of factories. In

Eleven Myanmar, 7/28/2013 (Online Edition). 159 See Turnell, Sean (2011): Myanmar in 2010. In Asian Survey 51 (1), p. 153. 160 Cf. Pai, Yan (2011): Privatization Linked to Money Laundering. In The Irrawaddy, 3/23/2011 (Online Edition).

P a g e | 23

Myanmar Economic Holding Ltd.,161 and companies of known regime cronies like Htoo

Trading (12 stations) and Max Myanmar (8 stations),162 which bought the stations well

below their actual market value.163 In several cases even the parcel of land was worth more

than the sales price,164 which was especially significant for the gas stations located in the

booming cities of Yangon and Mandalay where land and property prices started to

skyrocket during this time.165 The reason for the low sale prices was explained by USDP

Vice chairman Htay Oo in an interview with Irrawaddy published in April 2013:

“Everyone involved in the transfer was given discounts since the government

encouraged the opening of private gas stations.”166

Actually, at least 19 of the auctioned gas stations were bought by the USDP itself.167 The

party hence benefited from the price discounts set by their own fellow colleagues. It is

certainly questionable if this process of discount sales to well-connected relatives and

cronies corresponds with the understanding of privatization that Westerners share.168

Intriguingly, even the contrary of low price sales provides evidence of crony capitalism.

The rapidly surging property prices in the larger cities like Yangon (Rangoon) and

Mandalay and the partially absurd amount of money paid per square foot169 are most

probably signs of the ongoing military and crony money laundering.170 Researches by IMF,

ADB and several journalists suggest that during the regime rule military elites and cronies

deposited their profits out of raw material exploitation in offshore accounts e.g. in

Singapore and Dubai to prevent them from taxation.171 Since buyers were not obliged by

law to provide a proof of origin for cash payments when purchasing real estate or other

state assets172 cronies and regime elites enjoyed convenient ways to repatriate and launder

their illicit wealth.173 The accelerating efforts to establish a new stock exchange in

Myanmar with the help of Japan174 is for similar reasons completely in line with the

161 Cf. Eleven Myanmar (2014): 4 million cubic meters of sand exported to Singapore. In Eleven Myanmar, 4/2/2014

(Online Edition). 162 Cf. Lwin, Ye; Myo, Myo (2010): Fuel stations to open as private operations. In Myanmar Times, 3/17/2010 (Online

Edition). 163 Cf. Htet, Tha Lun Zaung (2013): Calls Grow for Inquiry into Sales of Gas Stations. In The Irrawaddy, 4/10/2013

(Online Edition). 164 Cf. ibid. 165 See Mon, Kyaw hsu (2014): Out of Reach. In The Irrawaddy, 2/12/2014 (Online Edition). 166 Htet, Tha Lun Zaung (2013): ibid. 167 Cf. ibid. 168 See The Wall Street Journal (2010): Myanmar Moves to Privatize Key State Enterprises. In The Wall Street Journal,

2/18/2010 (Online Edition). 169 See Boot, William (2013): Irrawaddy Business Roundup (December 21, 2013). In The Irrawaddy, 12/21/2013 (Online

Edition). 170 Cf. Pai, Yan (2011): Privatization Linked to Money Laundering. In The Irrawaddy, 3/23/2011 (Online Edition). 171 Cf. Naing, Saw Yan (2013): Burma Govt Denies Reports That It Holds $11B in Singaporean Banks. In The

Irrawaddy, 9/13/2013 (Online Edition). 172 Cf. ibid. 173 Cf. Pai, Yan (2011): Privatization Linked to Money Laundering. In The Irrawaddy, 3/23/2011 (Online Edition). 174 Cf. NIKKEI Asian Review (2014): Japan to become catalyst for Myanmar stock exchange project.

P a g e | 24

interests of the patronage networks, since the sale of their shares in cheaply acquired

former SOEs offers additional potential for revenue creation (and legalization).

It is also important to note that not only the Than Shwe faction was successful in securing

a share in the privatized state assets. The process was again marked by the current power

balance between the factions, with Maung Aye’s crony businesses like Aung Ko Win’s

(known as Maung Aye’s “adopted son”)175 Kanbawza Bank successfully acquiring gas

stations (and probably SOEs even though details were not published).176

6. CONCLUSION

Although it is clearly beyond a student’s capability to provide final prove, my analytical

findings presented in this paper provide a valid perspective in understanding the process

and motives of Myanmar’s decision-makers regarding their economic policy especially

during the first phase of economic reforms beginning in 2007 and culminating in a wave of

privatizations in 2010.

The research conducted in this paper supports my second hypothesis by showing that the

internal military power balance impended to begin a shift towards a more insecure

multipolar network constellation, especially with the decreasing health conditions of the

two powerful factional leaders Than Shwe and Maung Aye. This impending development

led to the preemptive action of creating a top-down democratic transformation of the

system, which reduced conflicts within the Tatmadaw by outsourcing them into the new

arena of parliament and civil government. That a genuine democracy was not the General’s

prime motive becomes obvious when analyzing the role of the Tatmadaw in the new polity

and its persisting institutional and individual influence.

Hence, with regard to the research question and my first hypothesis, my research shows

that the main reason for privatizations was merely the transfer of traditional ‘feudal’

benefits-sharing and rent-seeking behavior into the new political system.

By privatizing state-owned enterprises, the patrons have not only decreased the state’s role

in the economy but also reduced the role of the military since all SOEs were de facto

military-controlled during the regime reign.177 Consequently, by privatizing these assets to

their own relatives and cronies the members of the leading factions consolidated their own

individual foothold in the economy and deprived potential successor networks in the

Tatmadaw of future opportunities to claim direct influence in valuable industries.

175 Cf. The Irrawaddy (2000): Burmese Tycoones Part I. In The Irrawaddy, 6/1/2000 (Online Edition). 176 See Lwin, Ye; Myo, Myo (2010): Fuel stations to open as private operations. In Myanmar Times, 3/17/2010 (Online

Edition). 177 Bünte, Marco (2011): Burma’s Transition to “Disciplined Democracy”: Abdication or Institutionalization of Military

Rule? In GIGA Working Papers (177), p. 17.

P a g e | 25

Furthermore, the ongoing inclusive behavior of the President and the Speakers leads to an

incremental increase in the degree of democratic control and oppositional participation,

which continually improves the overall legitimacy of the system and of the decisions that it

has produced.

However, the patron’s arrangements will have to prove their endurance by surviving the

coming elections in 2015, the inevitable decease of Maung Aye and Than Shwe, and the

rise of new factions within the Tatmadaw. This looming developments are determined to

shifting Burma’s internal political power balance, with uncertain outcome for all

participants.

S e i t e | 26

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