Economic Policy-Making in Myanmar PDF

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 REFORM S 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,
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
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)
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 P ARTIES AND P ARLIAMENT

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.
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).
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).
49 Cf. Than, Tin Maung Maung (2012): Chapter 7. Myanmar’s Security Outlook and the Myanmar Defence Services. In
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,
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.)
Military
appointed;
110 Military
USDP; 123 appointed; 56
Independent; 1
USDP; 220 Independent; 1
Ethnic
parties ; 43
Ethnic
NLD; 37 parties ; 29
NUP; 12
NLD; 5
NNDP; 2 NDF; 6 NNDP; 1
NDF; 1 NUP; 5
Source: Own visualization, data from: ALTSEAN-Burma (2012): Source: Own visualization, data from: ALTSEAN-Burma (2013):
People's Assembly (Phyithu Hluttaw). 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
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.
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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 I NSTITUTIONALIZATION OF I NFLUENCE
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,
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
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
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.
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.
P a g e | 11
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).
P a g e | 12
3.3 I NDIVIDUAL I NFLUENCE AND P ERSONNEL P OLICY

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
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.
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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).

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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 I NFORMAL S TRUCTURE AND S ELF -P ERCEPTION

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

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 F ACTIONAL C OMPETITION

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

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.
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 T HE H IDDEN P ATH

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
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).
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,

P a g e | 22
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,
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).

156 See Mon, Kyaw hsu (2014): Out of Reach. In The Irrawaddy, 2/12/2014 (Online Edition).

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,

169 See Boot, William (2013): Irrawaddy Business Roundup (December 21, 2013). In The Irrawaddy, 12/21/2013 (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.
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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Economic Policy-Making in Myanmar PDF

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Economic Policy-Making in Myanmar PDF

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POLICY-MAKING

2. Economic Structure and Reforms in Myanmar 2

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

4. Factionalism within Myanmar’s Military 13

5. Indications for Rent-Seeking Behavior 21

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

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)

2. ECONOMIC STRUCTURE AND REFORM S IN MYANMAR

12 See World Bank (2014): Myanmar. Data.

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

3.1 P ARTIES AND P ARLIAMENT

3.2 I NSTITUTIONALIZATION OF I NFLUENCE

Graph 2: The Tatmadaw in the new constitutional framework

3.3 I NDIVIDUAL I NFLUENCE AND P ERSONNEL P OLICY

89 See ALTSEAN-Burma (2014): Cabinet.

development of centrifugal or centripetal forces regarding the federalization of the

4. FACTIONALISM WITHIN MYANMAR’S MILITARY

The extraordinary transition is especially recognizable since no violent or whatsoever

95 Cf. ALTSEAN-Burma (2012): People's Assembly (Phyithu Hluttaw).

4.1 I NFORMAL S TRUCTURE AND S ELF -P ERCEPTION

buying support. In Third World Quarterly 32 (7), pp. 1200f.

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

coercion to buying support. In Third World Quarterly 32 (7), p. 1203.

4.2 F ACTIONAL C OMPETITION

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

BurmaNet News, 3/14/2011.

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

4.3 T HE H IDDEN P ATH

"Roadmap"? In Asian Survey 48 (1), p. 15.

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

5. INDICATIONS FOR RENT-SEEKING BEHAVIOR

2/20/2014 (Online Edition).

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

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

& Development, 51), p. 12.

Eleven Myanmar, 7/28/2013 (Online Edition).

2/18/2010 (Online Edition).

Irrawaddy, 9/13/2013 (Online Edition).

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

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

ALTSEAN-Burma (2007): Maung Aye. Military Career. Available online at

ALTSEAN-Burma (2009): Than Shwe. Military Career. Available online at

ALTSEAN-Burma (2012): People's Assembly (Phyithu Hluttaw). Available online at

ALTSEAN-Burma (2013): National Assembly (Amyotha Hluttaw). Available online at

ALTSEAN-Burma (2013): President Thein Sein. Personal Info. Available online at

ALTSEAN-Burma (2014): Anatomy of the Regime. Judicial. Available online at

ALTSEAN-Burma (2014): Cabinet. Available online at

ALTSEAN-Burma (2014): President Thein Sein. Personal info. Available online at