How can Myanmar effectively regulate corruption in its banking and public finance sectors?

Abstract

This project investigates public finance sector and the regulation of the banking industry in Myanmar, and in particular, how to manage corruption more effectively. It focusses in particular on the period of Myanmar's democratic transition in the decade 2011 to 2021, which was cut short (as this project was) by a military junta seizing control on 1 February 2021 and ousting the democratically elected National League of Democracy government. The future prosperity of Myanmar, both then and now, depends on managing corruption in its both private economic entities and public policy institutions. Many of the measurable governance indexes show that the quality of policy agencies in Myanmar up to 2021 had been declining, while the rates and quantities of corruption were increasing. The onset of the COVID-19 pandemic in 2020, followed by the 2021 coup, which provoked ongoing armed conflict and a civil disobedience movement in Myanmar, means that reliable economic data from Myanmar is now unavailable. This thesis argues, however, that cronyism, regulatory discrimination and fiscal corruption in Myanmar have been major problems during the country's second round of economic reforms and remain a threat to national integrity and the country's future economic security. In the decade leading up to the coup, Myanmar's public finance sector and banking industry suffered from fiscal corruption and rent-seeking and were under pressure from global regulatory agencies on multiple fronts. The economy has a small banking industry, with advanced financial technologies still under development and is overseen by policy agencies with limited regulatory capacity and competence, and an unclear regulatory mandate. This thesis analyses the nature, types and activities of corruption of both the public finance sector and the banking industry in Myanmar prior to 2021 and finds corruption in the country is systematic and widespread. Periods of economic transition are also ripe environments for opportunistic corruption, where rules are changing or are unclear. Arbitrary prosecution and discriminatory regulation are customary in Myanmar's legal system, and its laws --including the 2008 Constitution -- are shaped by the legacy of authoritarianism that continues to influence political and economic outcomes. A major objective of the thesis is to ask how Myanmar can regulate corruption more effectively in future, particularly if the National Unity Government (NUG) in exile succeeds in returning to and leading the country. Drawing on over 20 elite-interviews and more than 3000 pages of the Parliamentary reports, it analyses how current regulation shapes Myanmar's public financial agency and banking industry, incentivizes rent-seeking practices and mistrust, and how this impacts regulatory agency performance. Outmoded regulation of policy agencies in Myanmar also underpins corruption, deters trust and competition, leads to extra corruption, and distorts the mobilization of public goods. Regulatory discrimination in the pre-coup period led to distrust between the government, the market and institutions, which has been exacerbated by the brutality of the coup and its aftermath. This thesis argues that improving the Central Bank of Myanmar (CBM) matters for better policy outcomes. Democratic concepts such as policy credibility, public accountability and regulatory transparency are required for the leadership team of the CBM to improve trust, their management of monetary policy, and the banking industry in Myanmar more broadly. This research indicates that the CBM can participate in managing corruption and anti-money laundering actions with regulatory support from the global institutions responsible for making a rules-based market, and that this is likely to have the effect of achieving more economic prosperity and reducing cronyism and corruption in the system. Show more