Amid all the talk of economic reform in Burma, one major problem is yet to be properly addressed: at present nearly a quarter of the government’s budget goes directly to the military – in comparison, less than five percent is allocated for the health and education sectors combined. Despite efforts at reshaping the economy into something more palatable for western investors, there’s been little talk of a slimming down of the military’s expenditure.

Burma military

US and EU leaders risk supporting an entity glaringly absent from Burma’s wider picture of reform, the military. Pic: AP.

With as yet little pressure from international business lobbies on how the government will spend the money it gains from foreign investment, there’s a substantial risk that overseas companies moving into Burma will directly support the army (which, with no external enemies, uses its hardware to crush internal dissent).

While this has long been the case – a significant portion of the revenue from gas sales has gone to the military-owned Union of Myanmar Economic Holdings – this financing will rise dramatically over the coming years as more countries target Burma’s resources.

Speaking on the lawn of Aung San Suu Kyi’s home in Rangoon last week, British PM David Cameron said that all EU sanctions on Burma, bar the arms embargo, should be dropped as a reward for recent reforms (the EU is due to announce its decision on sanctions on 23 April). What Cameron fails to realise however is the opaque web of transactions that allows (often even the most superficially benign) foreign investors to fund the army – maintaining the arms embargo, while talking up the benefits of investment, thus allows the EU to project an image of concern for democracy and human rights all the while throwing money at certain sectors of the economy that provide plunder for the army.

While one factor that helped the junta to siphon money out of the state budget – the dual exchange rate (which for years allowed the former junta to get away with pocketing $9 billion from the Chevron and Total-run energy projects in southern Burma) – has been streamlined, thus ostensibly allowing a greater degree of transparency regarding how much money goes to the government, endemic corruption remains a massive obstacle to human and economic development.

Arguing for a drastic overhaul of government spending, economist Sean Turnell says that, “Currently Burma spends less on these critical determinants of human capital [health and education] than any comparable nation, and it is among a tiny cohort of countries that spends more on its military than these two items combined.”

He says that certain western sanctions should be removed, including “the range of licences and taxes that are imposed upon Burma’s exporters, the prohibition against banks lending to farmers, the restrictions on telecommunications providers (which makes mobile phones in Burma amongst the most expensive in the world, despite the huge benefits these simple devices can yield in making for better living standards)…”

As I argued in last week’s post on sanctions, the eagerness of the US and EU to kick-start trade with Burma means they risk overlooking the sizeable grey areas that remain in the economy – unless Britain et al push for stronger regulations regarding what the government does with the money it is soon to earn from western business, then US and EU leaders will have to acknowledge that they are supporting an entity glaringly absent from Burma’s wider picture of reform – the military.