GSP: the hid­den ice­berg to the Myan­mar cri­sis

The Myanmar Times - - Business - NGU WAH WIN

CON­TRARY to the cur­rent fo­cus on high-stake hu­man­i­tar­ian diplo­macy, the EU should use its Gen­er­alised Schemes of Pref­er­ences (GSP) re­wards to nudge Myan­mar and Bangladesh to col­lab­o­rate on com­mon prac­tice ar­eas such as aqua­cul­ture and gar­ment man­u­fac­tur­ing, which in­cludes tex­tiles, cloth­ing and footwear (TCF).

While Bangladesh would ben­e­fit from in­creased food and nu­tri­tion se­cu­rity for its eth­nic pop­u­la­tions along the border based on the sup­ply of pop­u­lar fish species such as Rohu from Myan­mar; Myan­mar, on the other hand, can pay close at­ten­tion to Bangladesh’s suc­cess in lever­ag­ing pri­vate sec­tor com­pet­i­tive­ness and har­ness in­no­va­tion and co­or­di­na­tion in the gar­ment and TCF sec­tor to re­alise its full po­ten­tial.

The EU should strate­gi­cally con­sider hav­ing a two-pronged ap­proach of cap­i­tal­is­ing on its “hid­den ice­berg”, that is, the GSP that it ex­tends to Myan­mar and Bangladesh. It should also en­cour­age knowl­edge shar­ing mech­a­nisms that can com­ple­ment diplo­macy and en­sure that ap­pro­pri­ate in­ter­na­tional stan­dards of hu­man rights are met for the ben­e­fit of all stake­hold­ers.

GSP ben­e­fi­ciary In the wake of the his­toric de­ci­sion by the Coun­cil and the Euro­pean Par­lia­ment on the read­mit­tance of GSP and the lift­ing of all sanc­tions against Myan­mar in July 2013, the then EU Trade Com­mis­sioner Karel De Gucht said: “This has the po­ten­tial to make a huge dif­fer­ence to the coun­try’s eco­nomic de­vel­op­ment and to bring real ben­e­fits to the peo­ple there.”

Myan­mar, des­per­ate to rid it­self of its un­for­tu­nate in­ter­na­tional pariah sta­tus ac­cu­mu­lated over the years, took this in­cen­tive from the EU to un­der­take com­pre­hen­sive labour mar­ket re­forms.

In 2013, the then Myan­mar gov­ern­ment in­tro­duced a se­ries of new labour laws, in­clud­ing the min­i­mum wage law as well as the work­ers’ rights to or­gan­ise trade unions through­out the coun­try. It also per­suaded the pri­vate sec­tor to ne­go­ti­ate with the unions to en­force the min­i­mum wage among other such devel­op­ments. Even­tual tri­par­tite ne­go­ti­a­tions on the set­ting of the min­i­mum wage were in­sti­tu­tion­alised fur­ther for the coun­try to catch up with in­ter­na­tion­ally-recog­nised work­ers rights.

Since then, Myan­mar has de­liv­ered re­forms and passed tough tests as a re­sult of its GSP ben­e­fits. Be­fore the EU’s de­ci­sion to bring Myan­mar back un­der the so-called “Ev­ery­thing-butArms (EBA)” scheme of GSP, a spe­cial priv­i­lege re­served for least-de­vel­oped coun­tries (LDCs), the coun­try’s ex­ports to EU was around € 160 mil­lion. But from 2013 on­wards, ex­ports im­me­di­ately in­creased by 35 per­cent. In 2014 and 2015, ex­ports grew at a rate of 75pc per year. By 2017, five years af­ter its read­mit­tance, Myan­mar’s ex­ports to EU reached a re­spectable level of € 1.5 bil­lion, rep­re­sent­ing a ten-fold in­crease over the pe­riod.

The bulk of the ex­ports com­prised of TCF which now stands at 80pc of Myan­mar’s to­tal ex­ports to the EU.

Po­ten­tial re­moval Last week how­ever, Myan­mar re­ceived warn­ing from the EU re­gard­ing the pos­si­ble re­moval of those trade priv­i­leges due to hu­man rights vi­o­la­tions in the north­ern Rakhine state.

The cri­sis in Rakhine was a dis­as­trous hu­man­i­tar­ian emer­gency lead­ing to in­ter­na­tional out­cry for ac­count­abil­ity. What the cri­sis ur­gently now needs at the most is a re­silient Myan­mar that could over­come the un­der­ly­ing so­cioe­co­nomic im­bal­ances and other odds to sup­port the suc­cess­ful rein­te­gra­tion of refugees back into their lo­cal com­mu­ni­ties.

The with­drawal of trade priv­i­leges, ar­gued by the EU of­fi­cials as “smart and tar­geted” in­stru­ments to force Myan­mar into fix­ing the on­go­ing cri­sis, would be coun­ter­pro­duc­tive at the very min­i­mum. In fact, it would cer­tainly push the coun­try into mas­sive layoffs and vi­o­lent back­lashes that could en­tirely un­der­mine any chances of re­solv­ing Rakhine cri­sis and put­ting the over­all pop­u­la­tion – es­pe­cially the sev­eral thou­sands of fe­male work­ers in the thriv­ing gar­ment sec­tor - back into vul­ner­a­bil­ity.

An­other key vari­able are pos­i­tive in­dus­trial re­la­tions or col­lab­o­ra­tive re­la­tion­ships among tri-par­tite mem­bers– the gov­ern­ment, the em­ploy­ers and the unions. Trust was built when the unions and the pri­vate sec­tor co­op­er­ated to set the first min­i­mum wage in 2015 and the sub­se­quent raise of the wage this year. Un­der those cir­cum­stances, Myan­mar achieved rel­a­tive in­dus­trial peace, lesser num­ber of dis­putes and protests while en­force­ment of dis­pute set­tle­ments be­came more in­sti­tu­tion­alised. As a re­sult, the coun­try at­tracted US$ 2 bil­lion worth of for­eign in­vest­ment into the TCF sec­tor in the last few years while all other sec­tors wit­nessed a de­cline.

The EU’s de­ci­sion to re­store GSP in 2013 laid the seeds for in­clu­sive growth that en­abled the coun­try to un­der­take these re­forms and the re­ver­sal of such ben­e­fits could pos­si­bly wipe out all of those achieve­ments. The with­drawal could deprive Myan­mar of a chance to repli­cate its in­clu­sive labour-in­ten­sive in­dus­try in the con­flict-af­fected re­gions and ex­tend its so­cial pro­tec­tion poli­cies to cover mar­ginal groups. Fur­ther­more, it could trig­ger the col­lapse of the ur­ban econ­omy that re­cently be­came acutely vul­ner­a­ble to ex­ter­nal shocks.

Worse still, the pro­posed “pun­ish­ment” could eas­ily back­fire as the Myan­mar pub­lic would per­ceive the EU’s treat­ment as a favour to the coun­try’s main dis­putant, Bangladesh, lead­ing to po­ten­tially strained re­la­tion­ships be­tween all stake­hold­ers.

Ngu Wah Win is Se­nior Pol­icy Co­or­di­na­tor at the Cen­tre for Eco­nomic and So­cial De­vel­op­ment, an in­de­pen­dent and non­po­lit­i­cal think-tank ded­i­cated to in­clu­sive de­vel­op­ment in Myan­mar.

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