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Impact of Law and Order on Economic Development

Adam Smith’s was right and wrong at the same time. He was right because his four factors of production needed for economic growth hit the nail right on the head, leaving the path for the study of economics to help the nations develop. Yet, he was wrong because he left the most important part of the equation; he failed to mention the key among those factors – adherence to the rule of law and protection of property rights and contractual rights by a country’s government so that markets can work effectively and efficiently.

That’s what has differentiated Myanmar from our compatriots around the neighbourhood. Other than China, India and Indonesia, Myanmar has the biggest land mass. The quantity of labor is fairly large, with a sizeable youth and working population. The quality of labor is not worse off than our neighbouring countries, evidenced by many Myanmar youth contributing towards economic development of our neighbours. Capital is obviously deficient. Efforts to promote the FDI are probably hampered by, law and order and enforcement issues again. As one ex-world bank’s chief economist put, simple two words: political stability. That’s what is needed in Myanmar right now to resume economic development. Entrepreneurship is not lacking either, especially during the crisis times – seeing from how unscrupulous businessmen collected and stored incendiary fuel during the recent shortage and sold it back later at exorbitant prices to those in dire needs.

A recent study in the US highlighted the correlation between higher current crime rates and lower job growth rates in the future, inferring that the higher crime rates (because of poor law enforcement and order) reduces investments into the region or city and hence create little future job growth or prosperity. As law and order improves in a country, its citizens and businesses have greater confidence that they can enjoy the benefits of their investment in physical and human capital; that increased incentive to invest in physical and human capital leads to more jobs and income for the broader citizenry, resulting in less poverty.

The study also found that cities that had higher current violent crime rates experienced lower job growth rates in the future, and higher poverty rates in the future. This leads to the following policy recommendation for political leaders in various cities and states around the USA: Focus on ensuring respect for private property rights, effective police forces, prosecutors willing to enforce the rule of law, and fair courts. This will enhance the economic prosperity of your citizens and diminish poverty in your region.

We can also study our regional countries, e.g., China, Vietnam, etc. Some sceptics may even term their law and order situation as Orwellian, but look at their economic growth rates! China GDP growth rate averages 9.5% in the past 40 years, unheard of in the history of this known world. Vietnam was a war torn country in the early 80s. Look at where they are now. Unlike colonial powers who achieved economic development through colonisation e.g., getting raw materials cheap or FOC, selling back the finished goods at higher prices and monopolising their colonies, the two former countries achieved admirable growth without invading others. Perhaps law and order play a part too?

Adam Smith, to his credit, did mentioned in “The Wealth of Nations” in a related context: “Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property.”

By establishing law and order (including enforcement), government provides the minimal degree of predictability necessary for all social interaction, including economic activity. By defining the rules of property and engagements, government protects the incentives individuals have to create, produce, and accumulate wealth. In addition, the rule of law in the commercial sector promotes economic stability and growth, encourages investors to make investments, creates jobs, increases the standard of living, and promotes prosperity.

Here comes Myanmar!

Before talking about law and order, it would be wise to make the usual disclaimers first. The empirical evidences mentioned hereto are experienced by the writer and people whom he knows.  The sample may not necessarily be reflective of the population, as there would always be skewness and exceptions. The opinions expressed are purely that of the writer, with the sole aim of enhancing law and order of this country.

If you consider the areas are in need of law and order right now, it seems like a mission impossible for the government and military. As the proverb says “The man who moves a mountain begins by carrying away small stones.” If you are a bit on the Confucian orientation, “When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps”  and “Faced with what is right, to leave it undone shows a lack of courage.”

The recent criminal convictions of Soe Htut, Moe Myint Tun and Yan Naung Soe highlighted how high the corruption, abuses of power, and absence of law and order situation went within the Myanmar government. Soe Htut himself was the tsar of  law enforcement and Moe Myint Tun was probably third in line for the top job. The only silver lining coming out from this has been the fact that senior leadership is not afraid to punish those found guilty and the slight upgrade of Myanmar image abroad.

The first place in serious need of law and order are autonomous regions. Unlike autonomous regions of other countries, such as India or China, the law enforcement in Myanmar autonomous regions do not involve the central government. These regions have their own police and their own Army. It would not have been possible in any other country on earth. The current situation happening in the border regions are a direct consequence of that. Sooner or later, they have to be disarmed or brought under the control of the central government. Else, the history will repeat itself.

The second are the EAOs. They sprout everywhere near the border regions. As long as you have money to buy a thousand rifles and pay a hundred or so followers, hooray! With an ethnic sounding name, you are now the leader of your own EAO! That’s how easy it is. The government and the military must be strong to rid of them or disarm them as these areas are devoid of law and order, run like wild wild west, ruled by guns.

And the third relates to terrorism, perpetrated by NNCP terrorists. They affect law and order situation even in major cities. Citizens and residents bereft of timely and reliable information, resort to relying on fake news and malformation from them ended up living a life under constant fear of becoming a victim or being caught in a cross fire. Most of these terrorists are now living in border areas, supported by EAOs and autonomous governments. Many of them have been captured and convicted, and an extra strong arm is still needed to continue anti terror campaigns to bring  those, who killed many innocents and destroyed countess businesses and infrastructure, to justice.

The fourth relates to pardons. Myanmar leaders want to look good through committing good deeds. One of the misguided deeds done though successive leadership has been government pardons for criminals. We have had pardons on New Year day, Independence day, Union day, Armed Forces day, Myanmar New Year day, Labor Day, Thadingyut full moon day, National day, etc. If this rate continues, we have no one left in prisons. The process itself is shrouded with mystery. Lack of transparency encourages corrupt practices.  A minimal requirement, other than good behaviour, should be established e.g., serving at least half of the term. Imagine the recently trio mentioned above, just get pardons next year. The whole world would laugh at our law enforcement situation in Myanmar.

The fifth relates to commercial cases and civil suits. Ask anyone who has experienced being in one. They will caution you to get yourself loaded with money first. We are in serious need of a Commercial Affairs Department. Many of the employees who has committed crimes against their employers run away and commit the same crimes again elsewhere, without ever getting caught. Warrants are issued, but the rate of capture of those with outstanding warrants are in low single digits. The writer’s related entity has two employees who has stolen thousands of $ from the Company but still on the run after many years. May be the police did nothing to track them down or may be the Company has to hire its own bounty hunters! This lack of arrests or enforcements dared the current and prospective criminal employees to be so brazen about their wrong doings that the youth may end up thinking this as an acceptable behaviour – to cheat and steal from their employers.

The last but not least, relates to judicial system. The writer has been in around ten court cases, both civil and criminal and there have not been a case, where a payment to a judge was not necessitated brokered by the lawyer. Payment initially to advocate a favourable decision and another after making the final judgement. The judicial system has gone so bad that even the lawyers are now taken money from both sides of the fence. The writer has even encountered a lawyer who refused to return the money borrowed from him and threatened him to do whatever he wanted, saying the famous ‘Gone with the Wind’ phrase: Franky honey, I don’t give a dam…!

Myanmar AG (Attorney General) said in one meeting in early this year: “There are sufficient laws in Myanmar already. It is the application and enforcement of the laws that needs to be addressed”. The writer could not agree more. As long as this lack of law enforcement and punishment continues, Myanmar will retain its famous title of being the poorest country South East Asia for many years to come! Now that’s food for thought.