The Myanmar Economy: Its Past, Present and Prospects

250 Pages·2016·5.133 MB·English

by  Konosuke Odaka (eds.)

Konosuke Odaka Editor
The
Myanmar
Economy
Its Past, Present and Prospects
The Myanmar Economy

Konosuke Odaka
Editor
The Myanmar Economy
Its Past, Present and Prospects
Editor
Konosuke Odaka
Hitotsubashi University
Tokyo , Japan
ISBN 978-4-431-55734-0 ISBN 978-4-431-55735-7 (eBook)
DOI 10.1007/978-4-431-55735-7
Library of Congress Control Number: 2015951620
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Foreword
I welcome the publication of this book, which fi lls a huge void in the knowledge on
Myanmar. With its potentials and challenges, this populous Southeast Asian country
has attracted a lot of attention and activity, particularly from foreign investors and
international development agencies. There has also been an increase in information
about the country. However, comprehensive analysis of the fundamental structure
of this hitherto-isolated country’s economy and its historical background is still
very scarce.
Myanmar (Burma) under the British Administration in the early twentieth cen-
tury was one of the wealthiest in Southeast Asia. However, decades of political
turmoil, misguided policies, and the seclusion from the rest of the world have
together turned the country into one of the most impoverished in the ASEAN, with
the lowest per capita income in the region and deplorable social indicators.
Since its policy change in 2011, the country has embarked on a new journey—a
journey towards political reform and economic development. Hopes are high, given
its abundant resources including agriculture, forestry, and fi sheries and a highly
educated labour force and its potential as a market with a population of about 80
million. Many challenges, however, continue to confront Myanmar: poverty, lack of
administrative and institutional capacity, poor business environment, and the list
goes on.
I am sure that this book will be useful to the leaders and people of Myanmar as
well as to those who are supporting them. To grow into a country of abundance—
which it deserves to be—Myanmar needs to be led wisely with strategic and realis-
tic development plans with support from international partners; such collective
efforts should in turn be based on an accurate, comprehensive, and systematic
understanding of the country’s economy. I am convinced that this book can be one
of the important sources of such a body of knowledge.
I also rejoice at this publication because my agency [Japan International
Cooperation Agency (JICA)] has been involved in the process leading up to it. Even
during the period of international sanction, Japan continued its cooperation with the
country, largely out of humanitarian considerations. One such activity was an intel-
lectual partnership project conducted through JICA from 2000 to 2003. Entitled
v
vi Foreword
“Myanmar–Japan Cooperation Programme for Economic Structural Adjustment of
Myanmar”, this policy dialogue exercise involved members of academia and high-
ranking government offi cials of the two countries, just like other similar projects for
Vietnam (1995–2000) and Laos (2000–2004). Following the submission of the pro-
gramme’s fi nal report to Myanmar’s prime minister in 2004, its objective was
judged worthwhile to be pursued further, and a small research group was organised
at the JICA Research Institute from 2008 to 2010 to follow up the subject. This
volume represents a report of this intellectual endeavour, and I am very pleased that
it is now available worldwide in book form.
Japan International Cooperation Agency (JICA) Akihiko Tanaka
Tokyo , Japan
Pref ace
A new light is emerging in the Myanmar economy. Whether or not the economy will
progress towards sustained growth greatly depends on how its past structure is
transformed and adapted to the new international economic environment. For this
purpose, a new road map for market development needs to be drawn and executed,
with support both from inside and outside of the country.
As the country has shied away from open contact with the outside world for most
of the second half of the twentieth century, neither the international community nor
the citizens of Myanmar themselves have been suffi ciently informed about the real-
ity of the country’s economic conditions. It is essential, under the circumstances,
that the public be given accurate information as to the basic tasks required of the
economy, where diffi culties may lie, and how to overcome them in order to achieve
the objective of sustained improvement in economic welfare. This volume aims to
fi ll the gap in understanding these issues with the hope of assisting concerned citi-
zens to formulate a basic policy agenda for the nation. The book’s originality, if any,
lies in its analyses of Myanmar’s economic structures, which seek to identify the
socio-economic and historical reasons that have yielded the current conditions in
the Myanmar economy. Moreover, these analyses were carried out with the convic-
tion that such knowledge is essential to formulating a policy road map for raising
the economic welfare of the nation.
T he book is composed of eight chapters and consists essentially of three parts:
(1) two chapters (Chaps. 1 and 2 ) that review past literature; (2) fi ve empirical stud-
ies that utilise information collected and analysed by the authors since the end of the
twentieth century, which is the result of fi eld surveys and innumerable dialogues
with Myanmar citizens, both public and private, in addition to intensive desk stud-
ies; and (3) a brief summary and conclusion. Throughout the volume an effort has
been made to interpret the outcomes of the studies in light of the nation’s economic
history, as historical experiences constitute an important socio-political condition in
which market development occurs.
The second part of the book, mentioned above, lays out the essential ingredients
for drawing a road map for realising the above-mentioned objective. Specifi cally, it
vii
viii Preface
focuses on the issues of fi nancial development, physical social capital, agrarian
development, indigenous modern manufactures, and economic relations with China.
A brief explanation may be in order here to explain why the fi ve topics have been
selected.
W hen modern economic development began in Myanmar (then called Burma)
after its independence, the basic guiding economic principle was chosen to be that
of state planning and was later renamed “the Burmese way to socialism”. The coun-
try’s political leaders at the time chose this as a natural testament of their exposure
to anti-capitalist ideologies (such as Fabian socialism) in their youth, when they
earnestly sought ways and means to assert their country’s post-colonial
independence.
T he planned way of managing the economy through the late 1980s, however, did
not quite fulfi l original expectations. First of all, its quantity-oriented mindset
weighed the role of prices too lightly, leading it to ignore the importance of mone-
tary policy. It is almost imperative to rectify the lingering memory of follies com-
mitted by past macro monetary policies (e.g. demonetisation, slow and inadequate
action at the time of bank crush, etc.), which may have abetted distrust in the gov-
ernment’s economic policies. Furthermore, although in its colonial days Myanmar
had earned the title of the top rice exporter in the world, the government’s agrarian
policy-making, with little concern for proper pricing, failed to improve the effi -
ciency of the country’s rice production. On the industrialisation side, its production
enterprises, which were in principle state-controlled, tended to be excessively
capital- intensive and ineffi cient due partly to overcapacity and underutilisation and
did not create large enough employment opportunities. In addition, as the regime’s
inward-looking economic policies resulted in a chronic shortage of foreign
exchange, the country faced diffi culties importing the materials, parts, and compo-
nents highly essential to manufacturing. These economic policies also made it hard
to construct and/or to maintain the suffi cient number of electricity-generating sta-
tions required for industrialisation.
In 1988, the ruling military junta, who had taken over the socialistic regime,
replaced planning with the market principle. However, when the junta was deter-
mined to stay in power despite having lost the 1990 general election, international
sanctions were imposed on the country and were further strengthened after 2004.
These sanctions had the effect of limiting Myanmar’s international transactions to a
minimum and led the country to seek to establish closer ties with China.
Following the 2010 general election, a new administration was duly established
in 2011. The social and international environment of the country changed drasti-
cally, as international sanctions were gradually lifted and the market principle could
fi nally be put into practice. It would still take some time, however, before the rem-
nants of the planned economy disappear and the rules of the market assume the full
extent of their effects.
Economic development purports to achieve and maintain a reasonable rate of
improvement in the standard of living or national income per capita, with little or
low rates of infl ation. In the early phases of industrialisation, the most important
areas for policy consideration are the proper provision of (a) physical social over-
Preface ix
head capital and the building of social frameworks for market development,
particularly in areas of rulemaking and regulatory devices, and of (b) fi nancial
development. It is also essential to mobilise national savings for capital formation
and to supply a healthy, motivated labour force (entrepreneurs, administrators, engi-
neers, and production workers). In addition, the choice of industry, as well as that of
technology, should be in line with the medium- and long-term comparative advan-
tages of the nation, with due consideration being paid to environmentally friendly
resource endowment. Concurrently, there should be a place for public policy to play
its role, such as assisting the private sector to overcome information asymmetry, to
improve its productive effi ciency, and to protect against unforeseeable business
risks.
I n carrying out this grand task in the age of globalised economic transactions,
Myanmar should be able to weave a unique growth strategy. This could best be
achieved by taking note of past incidents of failures in economic growth throughout
the world and by skilfully inviting the now plentiful international fi nancial sources
to assist the national economy to stand on its own feet without resorting to an overly
aggressive strategy for industrialisation—as was once adopted by some latecomers
to development, such as Japan.
Tokyo, Japan Konosuke Odaka
December 2014