State-led industrialization in Myanmar was largely influenced by ideas and notions closely associated with socialism and economic nationalism that were embraced and interpreted by the nationalist political leadership that governed Myanmar after independence. Those manifestations of “reactive nationalism” (against Britain, the colonial power) endured for many decades after independence in conjunction with the continued domination of the political landscape by the “1945 generation” of political and military leaders, whose leadership credentials were legitimated by their role in the anti-fascist “revolution” of 1945 (see next chapter). Foremost among them was the student activist turned politician and military hero Bogyoke (literally Major-General but in the pantheon of Myanmar political leadership figuratively symbolizing illustrious military leadership) Aung San, whose political legacy was invoked and reinterpreted by successive governments of Myanmar.

SOCIALISM AND THE LEGACY OF BOGYOKE AUNG SAN

Socialism is an elusive concept which defies exact definition. It is usually characterized by distinctive institutional arrangements and class relations. It has been argued that “as long as public ownership and planning are predominant the economy is socialist”. Though ill-defined, the socialist theme:

The Burma Socialist Programme Party (BSPP) that was transformed into a mass party prior to the institution of the Socialist Constitution that mandated one-party rule became the supreme economic as well as political authority of Myanmar. The elected government formulated and executed long- and short-term economic plans under the guidance of the BSPP cadres whose supervisory and monitoring functions extended from the centre through the regional hierarchy of party apparatus down to the enterprise and ward/village tract level.

BURMA SOCIALIST PROGRAMME PARTY MONOPOLY

Instituted on 3 January 1974, the Socialist Republic of the Union of Burma was a unitary one-party socialist state led by the BSPP. Electoral representation was based on a four-tier hierarchy consisting of three regional people's councils (ward/village, township, and state/division) and the Pyithu Hluttaw (“Parliament”), held on a quadrennial basis. However, given the BSPP's prerogative of nominating “official” candidates, elections implied confirmation rather than competition.

The locus of all three state powers (executive, judicial, and legislative) was the BSPP-dominated unicameral Pyithu Hluttaw, thereby blurring the demarcation between the party and the state. There were regional and local administrative and judicial bodies under the central organs of state power. The state executive operated under the leadership and guidance of the Central Committee and the Central Executive Committee (CEC) of the BSPP. Similarly, the territorial hierarchy of people's councils were supervised by the corresponding regional party organs. The new political order was predicated upon the BSPP's “centralized control, pervasive authority and sole legitimacy”.

Industrialization has been a fixation in Myanmar's vision of economic development, as espoused by the ruling elites, since the country gained independence from the British colonizers in 1948. It has been factored into successive policies and plans that successive governments of Myanmar formulated and implemented in order to modernize Myanmar and bring about prosperity with equity to its citizens. The socialist vision of the first generation Myanmar (nationalist) leaders was premised upon fostering successful industrialization of the agriculture-based national economy.

THE GOAL OF INDUSTRIALIZATION

It seems that the “profound aspiration for economic development in the Third World always involves a desire to industrialize” and “[t]his desire is universal”. For Myanmar, the desire to transform its agriculture-based economy into an industrial economy has resulted in a sustained effort by the state since regaining independence on 4 January 1948. For many decades the Myanmar state has expended a substantial portion of its political and economic resources in the name of industrialization. To understand Myanmar's industrialization effort, it is necessary to explore it as a key link in the state's political economy. By taking into account the interplay of economics and politics, it is possible to arrive at a broader understanding of the state's strategies, policies, and management of industrialization. This study attempts to analyse Myanmar's quest for industrial development along those lines.

In this analysis the “state” is used as a locus for industrialization through motivation, formulation, articulation, and implementation of particular strategies, plans, and policies associated with “state leaders” or “state managers”. This warrants a definition of the state which sets it apart from “regime” or “government”. Following Taylor and Migdal, the state may be defined as an autonomous institution which holds authority over people and other institutions within a territory in such a way that it can determine its relationship with them as well as with each other while monopolizing the right to use coercion and violence. It does not mean, however, that societal responses by non-state institutions or individuals are to be dismissed altogether.

The political system of Myanmar had changed four times during the twentieth century. In 1948 it changed from a colonial political system that allowed limited “home rule” to a parliamentary democracy system of majoritarian rule that mimicked the Westminster model. After the military coup of 2 March 1962, the country was ruled by decree as the ruling Revolutionary Council (RC) assumed executive, judicial, and legislative powers. From January 1974 until the military coup of 18 September 1988, a one-party socialist system that professed “democratic centralism” was in place. Thereafter, Myanmar's political system reverted back to that in which the military junta known as the State Law and Order Restoration Council (SLORC) exercised executive, legislative, and judicial powers. The military regime which has been conflated with the state appears to be determined to “bring the state back in” to play a domineering role after the latter's near-collapse in the upheaval of 1988.

In this latest round of regime change, the ruling military junta (re-established as the State Peace and Development Council, or SPDC, on 15 November 1997) has been managing a dual transition towards “multi-party electoral democracy” and a market-oriented economic system. A challenging task made more difficult because the junta's legitimacy and authority have been contested, since its inception, not only by the legally constituted political opposition and a constellation of illegal or unlawful organizations, insurgents, and expatriate groups, but also by some Western states and non-governmental organizations (NGOs) as well.

This book started out as a doctoral dissertation submitted to the School of Oriental and African Studies, University of London. The original thesis covering the period 1948–88 has been revised and expanded to incorporate the period under direct military rule that followed the military coup of 18 September 1988.

The collapse of the one-party socialist system in 1988 vividly illustrates the failure of Myanmar to develop economically. Apparently, the economic crisis boiled over into a legitimacy crisis that toppled the one-party socialist regime. Though slow economic growth resulting from four decades of state intervention that suppressed markets, distorted factor prices, and marginalized the private sector appears to be the precipitating factor, a comprehensive survey of Myanmar's developmental process that led to this tragedy is conspicuously lacking in the literature on Myanmar.

The empirical focus of the present study is the state's efforts to industrialize, through direct intervention and planning under a socialist economic framework for the first four decades of independence (1948–88) and lately (1989 onwards) through state-controlled outward orientation. Following Evans, the state is taken as “a historically rooted institution”, not just “a simple collection of strategic individuals”. In this context, “[e]conomic outcomes” are regarded as “products of social and political institutions, not just responses to prevailing market conditions”. By most measures, the Myanmar economic experience has not been a success story. Unlike Taiwan and South Korea, and to a lesser extent, Malaysia, several decades of state intervention had failed to foster substantial growth in industrial output together with significant structural change that could have propelled Myanmar into the ranks of newly industrializing economies (NIEs). Thus far, results of the state-managed experiment in marketizing the command economy are mixed, and how far the state would withdraw from controlling the commanding heights of the economy remains to be seen.

Operating within the parliamentary democracy system, the Myanmar Government intervened extensively in the national economy in the 1950s and introduced a strategy of import-substitution industrialization, based on an ambitious master plan known as the Pyidawtha Plan. However, the state-led industrialization effort soon ran into difficulties and faltered within a few years of its inception. Feeble attempts by the government to rectify the shortcomings of its industrial strategy and plans by reducing the state's role in industrial development foundered as political instability and economic uncertainty manifested in the late 1950s, brought about by a series of power struggles within the ruling party (see Chapter 3).

INDUSTRIALIZATION AND THE STATE

The leading role of the state in shaping and controlling the industrial sectors (mining, manufacturing, and power) through an import-substituting industrialization (ISI) strategy is an important characteristic of Myanmar's economy in the period under study.

Myanmar's industrialization was not only driven by a desire to ensure higher productivity and better living standards but also influenced by the trauma of losing its sovereignty to an industrial power. Furnivall made an observation that the success of the colonial economy was “chiefly due to European capital and Indian labourer”. In independent Myanmar, which vowed to do away with both alien capital and migrant labour, the imperatives to industrialize led to state action on a broad economic front. The Union Constitution of 1947 provided a general framework for the state to play an active economic role.

Industrial Strategy, Policies, and Plans

When the Two-Year Plan was announced in April 1948 by the Anti-Fascist People's Freedom League (AFPFL) Government, ISI was the standard recipe for “late industrializers”. The Two-Year Plan's industrial component was more a wish list of projects than a full-fledged plan.

Leaders of the post-independent Myanmar state embraced parliamentary democracy as the principal political system but continued their fascination with socialist principles as a basis for equitable economic development. As such, the political system exhibited competitive party politics in a democratic setting, state intervention in the economic system was characterized by an indigenous interpretation of economic nationalism with socialist leanings. The prime minister of the day invoked a vision of economic development geared towards a welfare state of sorts that turned out to be illusory.

POLITICS OF THE DISPLACED STATE

After independence, the Myanmar state was “displaced as the creator of political order and economic direction” to the extent that it was “no longer able to determine many of the conditions of social and economic life” in Myanmar. The Anti-Fascist People's Freedom League (AFPFL) government was challenged by various groups seeking power. Although political parties were the major players in the formal political process, the existence of such power seekers and those seeking influence on the conduct of state affairs eroded the incumbent leaders’ political hegemony and claim for legitimacy.

Historically, as argued in Chapter 2, “many of the interweaving strands of political and economic developments during these … [post- war] years have [had] pre-war roots”. More significantly, there had not occurred any “legitimizing myth which combined a justification for the activities of the modern state with Burmese rather than British notions of justice”, with the state failing to provide a “focus of identity” for most of its citizens. In this context, the post-independent political order was an unsuccessful attempt to superimpose the form and structure of parliamentary democracy over an inchoate strata of “socialist” aspirations. However, the political leadership's interpretations of socialism as an organizing principle for the state were impractical and inadequate, thereby necessitating appeals to traditional values, primordial loyalties, and charismatic leadership to perpetuate their hold on state power that eventually led to the demise of the parliamentary system of governance.

The socialist era in Myanmar, though usually identified with the rule of the Burma Socialist Programme Party (BSPP), had roots that predated the 1974 Constitution which formally instituted one-party rule under the ideological ambit of the Burmese Way to Socialism. One could say that it began with the rise of young nationalist thakin politicians in colonial Myanmar (see Chapter 2). Consequently, the socialist vision of successive Myanmar political leadership had influenced the strategies and policies for economic development and industrialization since independence, culminating in the BSPP-planned socialist economy with its twenty-year long-term plan that promised to transform Myanmar into a modern industrialized state through growth with equity. This failed to materialize as the state faltered and stumbled near the three-quarters mark of its self-professed journey. It was a story of developmental failure, brought about by self-imposed resource constraints and state over-reach, compounded by the pathology of one-party authoritarian system, that ended the socialist era in 1988.

DEVELOPMENTAL FAILURE

Despite ambiguities in defining “economic development” as such (see Chapter 1), most would agree that economic growth is a necessary (but not sufficient) condition for developmental success. Hence, following Kuznet's concept of a general economic transformation identified as “modern economic growth”, Syrquin's interpretation of “long-term economic growth” as “intrinsically a process of [economic] change” serves a useful conceptual anchor in assessing Myanmar's achievement after four decades of state intervention. According to Syrquin, long-term economic growth entails a “rise in [national] income” associated with “changes in composition of demand, international trade and factor use, all of which interact with the pattern of productivity growth, availability of natural resources and government policies” to “determine the pace and nature of industrial growth”. Such changes may be reflected in the output and employment structures of the economy over the period concerned.

CHINA IN REGIONAL PERSPECTIVE

Since 1979, China's economy has experienced spectacular growth as a result of its successful economic reform and open-door policy. In the process, China's economy has also become more closely integrated with its neighbouring economies in East Asia (EA). China's sustained dynamic economic growth has produced a profound impact on the EA region, including the Association of the Southeast Asian Nations (ASEAN).

Initially, the more developed Japan and the four East Asian NIEs (newly industrialized economies) of South Korea, Taiwan, Hong Kong and Singapore (which were economically complementary with China) captured most of the benefits of China's open-door policy by actively trading with and investing in China.

As China continued to press ahead with its export-oriented development strategies, it started to cast a large shadow on the less developed ASEAN economies to its south, many of which were competing head-on with China to attract foreign direct investment (FDI) and in exporting manufactured products to the same third-country markets. The rise of China was at one time considered to be a disruptive force to ASEAN's economic growth, which had lost quite a lot of its former dynamism after the 1997 Asian financial crisis. In recent years, however, as China's imports of ASEAN's manufactured products as well as its primary commodities and natural resources have sharply increased, China's economy has also operated as an additional source of economic growth for the ASEAN economies.

Furthermore, to allay ASEAN's growing apprehension of China, Beijing took a bold step to arrange an FTA (free trade agreement) with ASEAN in order to turn competition into complementation. Signed in November 2002, this landmark Sino-ASEAN FTA deal is designed to increase the region's trade and investment to the benefit of both sides. But it has also indirectly exerted a lot of pressures on Japan and Korea to follow suit by intensifying their economic relations with ASEAN under the general regional cooperation umbrella of the ASEAN plus China, Japan and Korea (ASEAN+3) scheme.

The Charoen Pokphand (CP) Group of Thailand had been one of the most studied Thai firms both in the vernacular press and the academic circles. Among best-selling books on leading domestic personalities, those on the CP Group's chairman, Dhanin Chearavanont, probably ranked second, only after the prime minister, Thaksin Shinawatra. In the academic literature alike, CP had been the case study favoured by scholars from different fields, ranging from agri-business (for example, Burch and Goss 2005) to business history (for example, Suehiro 1989, 2003).

One stream of academic inquiry that had always featured CP as its main case was the study of the “overseas Chinese” capitalism in Southeast Asia. The CP Group had been frequently referred to as one of the major Thai representatives of the “overseas Chinese” business (see, for example, Gomez 2002, 2004; Suehiro 1989, 2003; Brown 1998, 2000; Yeung 2004). CP's characteristics of family ownership and management, large size, conglomerate diversification, and extensive relationships with politicians, made the group fit under the stereotypical model of Chinese capitalism. The myth of CP as an “overseas Chinese” business was further reinforced after the group and the U.S.-based Continental Grain formed the first foreign joint venture in Shenzen Economic Zone in 1979. Since then, China had been the second most important country for the CP Group after Thailand. Of all the group's 400 subsidiaries worldwide, 213 were located in China (www.cpgroup.cn, July 2005).

The over-emphasis on the ethnicity of CP's founder might have divested some attention from the group's business operations. CP had been regarded more as the Thai face of the “overseas Chinese” capitalism than as a regular business corporation. As a result, most studies overwhelmingly stressed how CP's characteristics resembled other ethnic Chinese businesses throughout Southeast Asia, rather than unveiled the group's behaviour from an economic or business perspective. The weight given to the group's Chinese ethnicity was further emphasized following the group's extensive expansions in China.