Myanmar: Imperatives to Economic Reforms
18 Feb, 2013 · 3819
Nayantara Shaunik assesses the prerogatives critical to Myanmar's economic reconstruction
Since 2011, Myanmar has embarked upon a series of reforms, including political, economic, and administrative amendments. Progress has been made on the economic front with reforms initiated to address issues of corruption, currency exchange rates, and integrated foreign investment and taxation laws. However, the pace and extent of economic reforms in the country remains slow and leaves much to be desired. Ergo, what are the imperatives and opportunities that are critical to furthering the country’s economic reconstruction in 2013?
Imperatives
The Search for an Appropriate Economic Model: In June 2011, President Thein Sein highlighted four critical markers to the reforms process: a balanced and proportionate growth amongst all states and divisions; priority to food security and ameliorating the agricultural sector; all-inclusive development; and finally, the reliability of statistics and an overall improvement in how primary data is collected.
Naypidaw is yet to find an appropriate economic model that ensures the right mix of financial and political reforms, along with an independent legal structure to insulate employees, assets and supply chains of businesses.
Although macroeconomic policy reforms have been initiated in Myanmar, they have largely been pursued in isolation since the country lacks a consolidated framework for achieving its economic goals. This was not a major concern over the last two years. However, today, at a juncture where the country has successfully met its first set of policy reform objectives, the issue has become requisite. Given that Myanmar’s neighbours have largely undergone democratic transitions over the last few decades; in 2013, perhaps Naypidaw could draw upon its contemporaries’ experiences to devise its own indigenous model for growth and development.
Resolution for Peace and National Reconciliation of Ethnic Minorities: It is also critical for Naypidaw to reach permanent ceasefires in all its ethnic crises to ensure that development equilaterally integrates and empowers Myanmar’s society. This is crucial since a large proportion of its natural resources are situated in the peripheries, which is where most of the crises were engendered.
Attracting FDI: Myanmar’s high economic growth needs to be sustained by creating an environment conducive to attracting foreign direct investment (FDI) and expanding foreign trade. The country’s new investment law, implemented at the end of 2012, allows for large-scale liberalisation of the economy with huge incentives for international businesses to invest in Myanmar. So far, FDI remained concentrated on extractive industries such as oil, gas and mining, but in recent times, the government has tried to encourage investment in tourism, agriculture and, information and communications technology (ICT). These positive phenomena need to be maintained and diversified in 2013.
Opportunities
International Re-engagement: The global community, over the last two years, has welcomed Myanmar’s democratic transition vis-à-vis its re-engagement with the country. International institutions such as the ADB, the IFC and the World Bank believe that Myanmar’s reform process has now progressed to a stage where it can robustly engage with development partners to define its priorities and projects critical to maximising opportunities that have emerged from the country’s transformation. On 17 January 2013, the Asian Development Bank (ADB) for the first time in almost 30 years, sanctioned an USD512 million loan to the Myanmar government. On 5 February 2013, the International Finance Corporation (IFC) declared that the country would receive an interest-free loan of USD 165 million, besides the previously earmarked USD 80 million loan from the World Bank.
This confidence and commitment to support and aid the reform process seems to be largely reiterated in the country’s recent debt rescheduling agreements with the World Bank, the ADB and the Paris Club (an informal group of creditor governments from major industrialised countries; including France, Germany, Norway, the US and the UK).
Naypidaw is also set to implement the Myanmar Comprehensive Development Vision (MCDV) to lay a solid foundation for infrastructure and human resource development with assistance from countries such as Japan. These financial stimuli will help the country sustain its developmental reformation by focusing on building public finance and capacity-building, implementing standardisation, legislation and technical regulations; improving trade and investment in small and medium-sized enterprises, increasing public infrastructure such as access to financial services, roads, electricity; and bridging gaps in access to technical and secondary education.
Imperatives
The Search for an Appropriate Economic Model: In June 2011, President Thein Sein highlighted four critical markers to the reforms process: a balanced and proportionate growth amongst all states and divisions; priority to food security and ameliorating the agricultural sector; all-inclusive development; and finally, the reliability of statistics and an overall improvement in how primary data is collected.
Naypidaw is yet to find an appropriate economic model that ensures the right mix of financial and political reforms, along with an independent legal structure to insulate employees, assets and supply chains of businesses.
Although macroeconomic policy reforms have been initiated in Myanmar, they have largely been pursued in isolation since the country lacks a consolidated framework for achieving its economic goals. This was not a major concern over the last two years. However, today, at a juncture where the country has successfully met its first set of policy reform objectives, the issue has become requisite. Given that Myanmar’s neighbours have largely undergone democratic transitions over the last few decades; in 2013, perhaps Naypidaw could draw upon its contemporaries’ experiences to devise its own indigenous model for growth and development.
Resolution for Peace and National Reconciliation of Ethnic Minorities: It is also critical for Naypidaw to reach permanent ceasefires in all its ethnic crises to ensure that development equilaterally integrates and empowers Myanmar’s society. This is crucial since a large proportion of its natural resources are situated in the peripheries, which is where most of the crises were engendered.
Attracting FDI: Myanmar’s high economic growth needs to be sustained by creating an environment conducive to attracting foreign direct investment (FDI) and expanding foreign trade. The country’s new investment law, implemented at the end of 2012, allows for large-scale liberalisation of the economy with huge incentives for international businesses to invest in Myanmar. So far, FDI remained concentrated on extractive industries such as oil, gas and mining, but in recent times, the government has tried to encourage investment in tourism, agriculture and, information and communications technology (ICT). These positive phenomena need to be maintained and diversified in 2013.
Opportunities
International Re-engagement: The global community, over the last two years, has welcomed Myanmar’s democratic transition vis-à-vis its re-engagement with the country. International institutions such as the ADB, the IFC and the World Bank believe that Myanmar’s reform process has now progressed to a stage where it can robustly engage with development partners to define its priorities and projects critical to maximising opportunities that have emerged from the country’s transformation. On 17 January 2013, the Asian Development Bank (ADB) for the first time in almost 30 years, sanctioned an USD512 million loan to the Myanmar government. On 5 February 2013, the International Finance Corporation (IFC) declared that the country would receive an interest-free loan of USD 165 million, besides the previously earmarked USD 80 million loan from the World Bank.
This confidence and commitment to support and aid the reform process seems to be largely reiterated in the country’s recent debt rescheduling agreements with the World Bank, the ADB and the Paris Club (an informal group of creditor governments from major industrialised countries; including France, Germany, Norway, the US and the UK).
Naypidaw is also set to implement the Myanmar Comprehensive Development Vision (MCDV) to lay a solid foundation for infrastructure and human resource development with assistance from countries such as Japan. These financial stimuli will help the country sustain its developmental reformation by focusing on building public finance and capacity-building, implementing standardisation, legislation and technical regulations; improving trade and investment in small and medium-sized enterprises, increasing public infrastructure such as access to financial services, roads, electricity; and bridging gaps in access to technical and secondary education.
Geographical Advantage: Myanmar must capitalise on its strategic location to its economic advantage. The recent loan impetuses allow for reviving previously stalled plans of developing special economic zones (SEZs) both within the country and along its borders with neighbouring countries, including countries of the ASEAN and India. This may enable, for example, shifting labour-intensive industries from the Thai side of the border to the Myanmarese side, as well as cross-border financial transactions. The consequent increase in employment opportunities, and the feeling of inclusiveness in the country’s war-torn peripheries is an added incentive.
Membership in Regional Organisations: Like other member states, Myanmar could also use its membership in the ASEAN to avail of the bloc’s economic framework in boosting its foreign trade and FDI. In this regard, the Initiative for Asean Integration (IAI) provided by the Asean Economic Community, aims to narrow the intra-regional development gap by stipulating that new members be provided assistance in accelerating their development for greater integration with the core members. This could serve as a useful guide to aid the reform process.
As it prepares to take up the ASEAN chair in 2014, Myanmar must avail of its economic prerogatives to ensure the continuity and sustainability of its democratic transition.
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