Business

Burma Must Invest in Education to Boost Growth: ADB

By Simon Lewis 11 September 2014

RANGOON — Burma needs to invest more than US$80 billion if the country is to reach its economic potential over the next 15 years, the Asian Development Bank (ADB) said in a new report, which highlighted the economic case for boosting funding forschools.

The 217-page report—titled “Myanmar: Unlocking the Potential”—was launched in Rangoon on Thursday. The authors analyzed different scenarios for economic growth, concluding that, in the best case, Burma’s gross domestic product could grow by an average of 9.5 percent annually, reaching $4,800 per person per year in 2030.

The economy grew by 7.5 percent in the last fiscal year, but GDP per capita remains less than $1,000, according to the ADB.

To achieve growth, “The main thing is stability,” lead author Cyn-Young Park told The Irrawaddy. “Economic, social, political [stability]: those things are really fundamental.”

“In terms of policy priorities, what comes out [of the analysis] is that the country needs to make a lot of investment—now—for the future. That includes the infrastructure, that includes the human capital and it includes putting business in an investment-friendly [environment].”

Park, who is the Manila-based bank’s assistant chief economist, said building roads, power infrastructure and mobile phone networks was a priority in the realm of physical infrastructure. But she emphasized the large impact that investing in schools and universities could have on the future of Burma’s economy, where employers often complain about low levels of education in the workforce.

“Education plays a very big part,” she said, adding that a bump of almost 1 percent GDP growth per year could eventually result if schools and universities were improved.

“There has been underinvestment for a really long time, which has left a shortage of skilled workers.”

Burma’s education system, once the envy of much of Asia, has been starved of funding by successive governments who prioritized military spending. The proportion of GDP spent on education more than doubled in the two years up to 2013, to 1.7 percent, but today it remains well below that of most other countries in the region.

The ADB recommends that the government builds more schools or expands transport in rural areas, while also overhauling curricula and considering cash transfers and scholarships to expand access to higher education.

The report estimates that a massive $80.2 billion of investment is needed across the board by 2030, with more of that investment required in the earlier part of the next decade and a half.

Public-private partnerships, or PPPs, are seen as an important way to attract funding. However, the ADB report says, “Even with strong emphasis on PPPs, the bulk of infrastructure and social sector investment will likely remain a government responsibility.” To find the cash, the government must improve its tax yield, currently only about 5 percent of GDP, the ADB said.

“[Officials] have to start mobilizing more actively the domestic resources,” said Park.

“There are places they can work very hard, like in terms of tax collection, tax administration. They can introduce new taxes. They need to make sure that they get very stable and adequate streams of domestic revenues for that kind of investment.

“You cannot spend if you don’t have stable sources of income.”

This would involve capturing more revenues from the exploitation of Burma’s natural resources, and reforming state-owned enterprises through corporatization.

Winfried Wicklein, the Burma country director for ADB, said the government could also seek outside funding—through development grants from foreign donors, borrowing, or from the private sector. The ADB itself is providing $1.2 billion to Burma from 2013-16, but that includes an initial injection of $512 million to clear the government’s historic debts to the bank.

“The capital markets have to be fixed first, and the commercial banks are still hesitant and international banks even more so. Generally the financing options are relatively small, and [officials] are working hard to expand them. But the private sector will, no question, play a very important role,” Wicklein told The Irrawaddy.

“The trick to unleash the power of the private sector is to get the regulatory frameworks right, get the processes right.”

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