"Australian economist Sean Turnell served as a policy adviser to Daw Aung San Suu Kyi’s National League for Democracy government during its first term. He was detained by the military shortly after the February 2021 coup and later imprisoned on charges—widely dismissed as trumped up—of violating state secrets and immigration laws. After nearly two years behind bars he was released in November 2022 as part of a general amnesty and has continued to speak out against the military junta from his home country, prompting the regime to revoke its pardon. In the following interview with The Irrawaddy’s Justin Higginbottom, Turnell discusses in detail the economic fallout of the military’s disastrous ‘mismanagement’ of the economy—and whether or not that is in fact the correct term to describe its actions—the post-COVID economic recovery plans the NLD was preparing to implement in its stolen second term, as well as the regime’s access to foreign reserves and what actions foreign governments can take to limit it. He also discusses his forthcoming book describing his experiences as a political prisoner in Myanmar. THE IRRAWADDY: Can you talk about the general economic situation in Myanmar? What’s going on since the coup? What’s the general situation? Where do they find themselves right now? TURNELL: I mean it’s just awful.… “Catastrophe” is the word that I generally like to employ. And I don’t think that’s even hyperbole. No matter what you look at, it’s negative essentially. I mean if you begin with growth, economic growth in Myanmar took a bit of a knock with COVID, so we’d been expecting for 2020 a growth rate of about 7 percent, and similar for 2021, but then COVID arrived and growth went down to about 1.8 percent for [2020], and no one was clear about 2021. And it went [to] negative 18 percent [-18 percent] in 2021 [and has] recovered a bit since, but.. If you’d said, OK, where can you reasonably apply the trend line? So in other words you get the knock from COVID but then good policy sort of gets you back on track—which is exactly what’s happened all around the world and all around the region—so it’s not an unreasonable expectation [that] we’d have been back to those sort of growth levels – 6, 7, 8 percent—hopefully, because there actually had been a very aggressive reform program to come into place with that second term of the government; you know, many of the things that weren’t done in the first term were geared up and ready to go in the second term. So, anyway, just to say that growth rates of 6, 7 percent—we’d have been disappointed if we weren’t hitting those. But irrespective of that, even on the worst assumption of where we’d be at, the economy is now 30 percent below any sort of modest trend; the economy’s about 30 percent down. It’s about 20-odd percent down anyway, but by trend it’s nearly a third. Which is just catastrophic for a country like Myanmar, that is poor to begin with, one of the poorest countries in the world, and people are now one-third poorer than where they should have been. There’s no fat in the system; people are desperately poor now, and they can’t take a knock of one third of their income. But anyway that’s just growth numbers. No matter what the metric is: the budget deficit is now dramatically blown out. Taxation revenue has now shrunk dramatically along with it. The bond sales are not really proceeding as they could be. The banks are not really in a position to take up the bonds on offer; so all of that means the government is just printing money hand over fist. As a consequence of that we’ve got monetary instability, whether it be measured in terms of high inflation rates, particularly relative to peers in Southeast Asia. [And] a collapsing exchange rate, so the exchange rate is less than half of what it was before the coup. The trade situation’s dire: There’s a bit of holding up in terms of gas revenues, because hydrocarbon prices were quite high, but other than that even other energy prices and income are down; agriculture is down. There’s been a bit of a recovery from the really deep lows immediately after the coup in terms of textiles, but overall the trade situation is terrible. Debt levels have more than doubled. Unemployment, to the extent that it’s measured properly, a lot of the measures are not really there anyway, but we do know that there’s been a wholesale shift from the formal economy to the informal economy—and you don’t get a growing, transforming economy out of one that is based in informality. Informality is really just a coping mechanism and that is where most people are. On top of that, just the opportunities lost. Back in 2020, young educated Myanmar people had real prospects and had choices about where to get employment, and now people are scattered to the winds outside the country, within the country. People with expensive degrees that they thought would yield them a good income in a growing economy are now on the front lines or in prison. It’s just a catastrophe. I get depressed over so many things in Myanmar; obviously the loss of life and the violence above all, but if you look at the economy, compared to the hopes that people reasonably had for it, it just makes you want to cry. THE IRRAWADDY: So how much can we chalk this economic ruin up to mismanagement by the junta, or is a lot of it caused by sanctions, or just the general conflict, just the country being in a state of war right now? TURNELL: I’m probably a little bit biased in this obviously, but to me it comes from… In fact [it’s an] interesting word “economic mismanagement”. I wonder if that is the expression? It’s an expression I’ve used, I hasten to add… The more I think about it, it isn’t really economic mismanagement because in terms of policy—and that’s where a lot of the damage is being done—there is the damage of course being done by violence and so on as well, of course, perpetrated by the regime and instigated by them—but I’m just wondering about that term “mismanagement”, because in some ways what they’re doing is gearing the economy to a war economy and neglecting or abusing everything else, so to some extent it’s management for a purpose. It’s just that that purpose is greatly destructive. But in some ways, if you think about it, what they’ve essentially done is created a war economy, [so] the management that has yielded terrible economic outcomes is in once sense quite deliberate in terms of transferring resources into the military state. But anyway, it’s only “mismanagement” from an economist’s perspective, and what you’d think would be the objective of any sort of sovereign government. I think we’d have to locate it there, but I think it’s mainly because if we just go to the counterexamples around the world—you don’t have to go to the developed world or rich or even fast-growing economies. You just go to the region and you see the bounce-back [from COVID], and Myanmar is such an extraordinary outlier in terms of economies that just haven’t bounced back, so I think the blame for it is really there. COVID had damaged things but there were some very comprehensive plans to deal with that. Nothing too radical—it was more just the [same] playbook of just about anywhere else, about protecting incomes. And all of that was dismantled after the coup and of course the response to COVID itself was greatly mismanaged and the rest, and repression of medical workers, etc., so even though clearly there were external events, if we look at comparable countries around Myanmar you’d really have to slate most of the economic damage home to the regime and, again, it’s mismanagement, is the word we use for it. THE IRRAWADDY: We had a story recently that reported that the regime-controlled Central Bank of Myanmar had about US$6.8 billion in foreign reserves as of March 2023. More than half of that’s in Singaporean banks. Do you know how much of that is actually accessible to the regime? If the international community wanted to block access to those reserves what might they want to do? TURNELL: It’s an interesting one. In terms of “accessible”, it’s hard not to get technical here, because reserves by definition are financial assets that are either issued by other countries like US dollars, euros, Singapore dollars, Australian dollars or whatever, or commodities of some form—valuable commodities such as gold—so in a sense they’re accessible to the point that they still have value. By which I mean, if you have US dollars in a US bank account, those dollars only have value if you can access them at the US bank. So in some ways the question of accessibility is really the critical issue when we think of a country having assets because if they’re not accessible those assets in a sense don’t exist. That’s the first thing to say. That is nothing unusual in a way… It’s not like the regime could access them and bring them home. It could if it was gold. You could just store it at the central bank. But the only way for foreign currency-denominated assets to have value is to have them in foreign currency accounts and usually it’s the case that they’re going to be in foreign banks, so the question of accessibility is caught up with the value of those reserves. It’s a big thing to constrain access to foreign assets of governments. This is why you’ll notice that even with the suspension of access to funds at the [US] Federal Reserve, that that [suspension] is what we’re talking about, rather than the transfer of those assets to anywhere else. This gets into areas of untouchablity or…. a lack of precedent, I would say, for that. So measures to transfer those reserves to anyone else become quite problematic. Which doesn’t mean you still can’t do things. For instance, the NUG [Myanmar’s shadow, civilian National Unity Government] could come up with some quite creative measures to use the value of reserves in ways that they could … essentially financially engineer other financial assets out of reserves that are not accessible to the regime. I know that’s getting complex because we’re getting into the area of financial engineering and the extent to which [denying the regime] access to reserves—does that create value for anyone else, like an alternative government such as the NUG? And there I think you get into some interesting gray areas. But denial of access is one thing and transferring those assets somewhere else is a different thing, so it’s hard to imagine other countries doing that, apart from the US. The US would be the only one to move in that sort of direction and obviously they have to a certain extent in terms of blocking the regime’s access to the funds at the Federal Reserve, but the others, it’s hard to imagine blocking that. THE IRRAWADDY: So it’s not realistic to think that Singapore might just one day say, “All those assets you have with us – those aren’t accessible. You can’t take those out.”? TURNELL: It would be a big leap. Where I was going before with this whole issue of access, this is where this becomes important as well, you would probably have degrees of freedom of movement. So for instance, it’s hard to imagine a country actually blocking another country accessing its reserves. On the other hand, if a country decided that it was going to transfer all of its reserves, it’s hard to imagine that being an easy process either. And in the case of Myanmar, a process that wouldn’t involve extraordinary complications. So the degree to which those reserves are fully accessible to the regime would have to be questionable I think. THE IRRAWADDY: You’re writing a book about your experience in prison, I believe? Did you want to say anything about that? TURNELL: Sure. We’ll probably go on a big publicity thing in a few weeks. It’s finished. Just a few technical things with the publisher, which is Penguin. It starts with my arrest back on Feb. 6, 2021. I’ve got a couple of chapters that deal with what we were trying to do in Myanmar, just a broad outline of the reform process, things like that. But for the most part it’s all about the prison experience—arrest, Insein [Prison in Yangon], up to Naypyitaw, the trial, the incredible support I got from my fellow political prisoners and then from the Burmese people more broadly. It doesn’t hold back from detailing the horrors all around me but it’s still a little bit of a “love letter” to the Burmese people, because even though there were these terrible people who were keeping me in the prison, it was the case that 99 percent of the people I dealt with even in the prisons and so on were incredibly compassionate, and incredibly courageous in demonstrating that compassion. I’m very, very blunt in saying how awful the prison was and saying how absurd the trial was and what a terrible injustice was meted out not just to me but more importantly to my Burmese colleagues and people who weren’t even connected with my case, but whose cases I got to know about. I met people who were being tortured and so on, and ill-treated. They even ill-treated me—you know, one would have surely thought that I would have told the story once I got out and of course I did so, which caused the SAC regime [the State Administration Council, as the junta calls itself] to get extremely upset anew. So I think they’re going to get upset again in a few weeks when the book’s out. (Turnell concluded the interview by offering to add to his earlier reply to the question regarding the junta’s access to foreign reserves.) If you hold US dollars in a bank, obviously they’re not physical, all they are is on the balance sheet of a bank, and they’re just a promise from the bank to pay US dollars. So you open an account, let’s say it’s 1 billion US dollars, and that account is really just a liability of that bank to pay you. So you give them a billion dollars and they then open up a liability, which is just a deposit account, which says that they will repay that billion at some point in time. But it’s only an asset that sits on the balance sheet of that bank. I guess what I was trying to get at is that access to reserves depends on that relationship between you and the financial institution. Again, it’s so different to gold, etc. It’s not a physical commodity that can just be moved about. It depends on the decision [of the bank] and so if a bank grants access then those assets have value. If that access is in any way compromised, those assets no longer have value, and I think that was the nuance I was trying to get at with respect to even places like Singapore—that the extent to which there’s any doubt of you being able to access quickly and in full your reserves puts a shadow over those reserves, even if there’s no sanctions and so on.