Economic focus for Rakhine relief

By Fiona MacGregor

Myanmar Times

September 22, 2013

When ethnic tensions erupted into bloody riots in Rakhine last year the immediate toll of the destruction to life and property was graphically evident.

Less instantly obvious was the long-term financial fallout. It has hit not just those who lost breadwinners, businesses and property in the riots, but also the entire state and Myanmar’s international reputation as a stable place to do business. 

As concerns grow about the impact of Rakhine’s troubles on foreign investment, some experts say a focus on the economic costs of sectarianism can help change attitudes.

It’s an idea that is increasingly making itself felt and can be heard from diverse and influential figures including government ministers, opposition leader Daw Aung San Suu Kyi, religious figureheads and business analysts.

When the national government announced earlier this month it was launching the tender process for the Kyaukpyu special economic zone in the south of Rakhine, ministers downplayed the trouble and sought to assure international investors that they had nothing to fear from local tensions. 

U Maung Maung Thein, deputy finance minister and vice chairman of the Kyaukpyu SEZ bid evaluation committee, said, “The conflict is not very huge, not a gigantic problem ... They are not insurmountable problems. It can be tackled in due course.”

Rakhine‘s newly appointed minister for planning and economics, U Maung San Shwe, last week assured The Myanmar Times that “we will provide 100 percent security for investors. We won’t let the conflicts continue anymore.”

Yet Rakhine State government officials do acknowledge the violent clashes between Buddhists and Rohingya Muslims – which left over 200 people dead and 140,000 homeless last year – have had a significant impact on the economy, scaring off foreign investment from the resource-rich state.

With tensions remaining high on both sides and over 120,000 people, mainly Rohingya, still living in camps for displaced people, long-term social solutions remain vague at best, and concern over violent flare-ups remain. At present attempts to “prevent conflict” seem more focussed on tough policing around the Internally Displaced Persons (IDP) camps rather than boosting economic strength.

Rakhine’s finances have been affected by fallout from the violence, said U Mra Aung, former state minister for planning and economics who is now responsible for development affairs.

“Due to the crisis, investors from foreign countries are not brave enough to come. Because of that finances of Rakhine State are a little bit not okay,” he said last month.

He said to help address the problems, ministers are considering building a special industrial zone at Ponnakywn township some 60 kilometres (37 miles) outside of state capital Sittwe in a separate project from Kyaukpyu. The proposed zone could provide up to 100,000 jobs in light industry.

A feasibility study is currently underway, and according to financial analysts the proposal could help ease ethnic disputes as well as boost state coffers.

Jeremy Rathjen, vice president of research at Myanmar financial consultants Thura Swiss, said, “It is definitely possible that developing an economy could relieve tensions. The tensions in Rakhine are not just social and religious tensions, they are economic ones too.”

He said an industrial zone could help change perceptions and the status of the Rohingya in Rakhine because there would be a demand for labour.

“Many people in Myanmar consider the Rohingya to be illegal immigrants. That is something that remains unclarified because of the citizenship law, which is a key issue,” he said.

He added that if the Rohingya were to be given some kind of legal status, even if it were just temporary work permits that allowed employment in factories in the special industrial zone, it could help raise their status.

“If you look at the US, many of the people who are pro-immigration are business leaders because they need workers. If a lot of entrepreneurs were to start factories in Rakhine then they might well be pro-Rohingya because they could provide labour.”

It is a view which allows for some optimism, but such is the divide between the ethnic Rakhine and Rohingya communities right now that it is difficult to envisage them working side by side on a production line.

Much of the Rohingya population may have worked in low-level jobs before the troubles, but such roles play a vital part in propping up the rest of the economy, especially in a port town like Sittwe where manual labour is in high demand.

Most wealthier Rohingya businesspeople have long since fled the area, taking their money with them. Small businesses formerly run by Rohingya remain closed, their owners often surviving on handouts in the IDP camps next door. 

Government attempts to set up official markets in the camps have been met with distrust by residents. “I don’t want to open a business here because I don’t want to stay here. I want my old shop in Sittwe back,” explained one 31-year-old Rohingya IDP.

Although many former Rohingya business properties in Sittwe have been taken over by Rakhinese, a large number remain empty or ruined from the riots.

“Even the streets in Sittwe remain unswept because there is no one to do the job. They are struggling to get porters at the port”, international NGO workers in the area pointed out.

So far the potential contribution the Rohingya people could be making to the state’s economic recovery is not enough to ensure they are welcomed back to the community.

Thousands of Rakhine Buddhists also lost their homes and businesses in the riots. In the large new settlement created for Rakhine IDPs on the edge of Sittwe, small enterprises sprang up within days of people moving in last month. There is no lack of entrepreneurial spirit, but scars from the conflict remain and there is a distinct lack of will to do business with the Rohingya community.

However even political groups who were previously accused of promoting anti-Muslim tensions are recognising the economic need for change. U Aye Maung, chairman of the Rakhine Nationalities Development Party, said his party plans to make a proposal to the township government to create a SEZ where Arakanese and Rohingya can do business.

“The local government should protect the livelihood of both the Arakanese and of the Bengalis,” he said, though he went on to reaffirm his belief that the two communities should mostly live and work separately, at least for the next five or ten years.

Meanwhile influential religious leaders are also starting to put out the message that allowing the conflict to continue leads to economic suffering for the entire population.

Earlier this month Daw Aung San Suu Kyi met for behind the scenes talks with senior Rakhine Buddhist monks in Yangon.

The NLD leader has faced international criticism for not tackling head-on the human rights abuses of the Rohingya people in Myanmar, while simultaneously drawing condemnation from many within the country when she has spoken out on the highly sensitive issue.

During the meeting on September 8, she and the most venerable Alodaw Pyei Sayar Daw Kyi discussed the impact of last year’s violence in Rakhine on the state’s economy, said the venerable Ashin Kumara, who attended the meeting.

He added Sayar Daw Kyi had said peace must be established if the economy in Rakhine was not to suffer and that Daw Aung San Suu Kyi said that if rule of law was established the sector could perform confidently.

Finding a solution to the human tragedy in Rakhine may seem far away, but factions looking at its economic potential offer a possible solution. However, persuading investors it is a safe place to do business may be more difficult.

“At the moment the risk is so high that foreign investors are not going to touch it, but Rakhine with its border and coastal position could do a lot to attract investment,” said Mr Rathjen.

According to state ministers potential investors from China and Japan have expressed interest in the SEZ outside Sittwe.

Mr Rathjen said Asian investors tended not to be so adverse to the political repercussion of investing in a controversial region such as Rakhine.

“The potential to repair Rakhine’s reputation is there. It’s going to take time, but people have short memories and in two or three years’ time [foreign investors] won’t remember the trouble, as long as there isn’t more of it.”