Burma’s Economy on Track, But Asean Free Trade a Concern: World Bank

By Kyaw Hsu Mon 7 October 2013

RANGOON — The World Bank says Burma’s economic outlook is positive, but its senior country economist has expressed concern over the private sector’s ability to compete with an influx of foreign investment as Asean moves to integrate the markets of its 10 member states.

Khwima Nthara said during a World Bank teleconference on the economies of East Asia and the Pacific that the upcoming implementation of the Asean Free Trade Area in 2015 threatened the survival of domestic businesses that have been isolated from much of the world for decades.

With Burma’s opening up over the last 30 months, the World Bank said the country’s economy “continued to accelerate” in the 2012-13 fiscal year ending in March, growing 6.5 percent. Economic growth, which stood at 5.5 percent in 2011-12, is forecast to rise further, to 6.8 percent, in 2013-14.

Burma’s main export, natural gas, is estimated to have reached US$4 billion in the last fiscal year, surpassing the 2011-12 record of $3.5 billion. Foreign direct investment also grew, from 3.7 percent of GDP in 2011-12 to 5.2 percent in the 2012-13 period.

A report accompanying Monday’s World Bank briefing showed that foreign investment in Burma went into the energy, garment, information and technology, and food and beverage sectors. Against the overall trend, investment in the agricultural sector decreased slightly, owing to flooding in some areas and drought in others that negatively impacted rice production.

Though the quasi-civilian government’s reforms over the last year and a half appear to be benefitting Burma’s economy, the country’s private sector has expressed concern over the added competition that will come with further economic liberalization.

The garment and telecommunications industries, as well as other manufacturing enterprises, are seen as particularly vulnerable to added competition from other Asean nations as the region prepares for the Asean Free Trade Area.

“Those domestic businesses cannot stand on their own at the time. The World Bank is concerned about the [domestic] industries, that’s why we’re going to help the private sector to survive. We would like to see the private sector survive,” said Khwima Nthara, speaking from Rangoon during a teleconference also attended by World Bank regional representatives and journalists from the Philippines, Cambodia, Thailand, Indonesia, Mongolia, Papua New Guinea, India and Singapore.

He added that the World Bank on the whole viewed the integration of the Southeast Asian economies as a great opportunity to bring development to the regional bloc, which is one of the world’s fastest growing but also remains saddled with poverty, outside of Singapore and oil-rich Brunei.

“A commitment by the government to support the private sector can increase [businesses’] efficiency, and then we would like to see foreign investment come in,” Khwima Nthara said.

The Asean Free Trade Area aims to increase Southeast Asia’s competitiveness as a production base to global markets through the elimination of tariff and non-tariff barriers within Asean. The AFTA is also expected to attract more foreign direct investment in the regional grouping’s 10 member states.

Khwima Nthara expected that the garment, information and technology, and telecommunications sectors were most likely to see foreign direct investment in the near term.

“The tourism sector in this country is developing and I can say that it will be a potential sector in the future. The government has a master plan to promote this sector, obviously we see that foreign companies are building hotels,” he said.

“The private sector in this country needs support, and also needs improved capacity-building to survive,” he added.

The United States, the European Union and Japan continued to be Asean’s largest export markets. Japan, followed by the United States and the European Union, were the largest receivers of Asean imports.

In other positive news for Burma, the World Bank said it expected natural gas production to rise significantly with new fields coming on stream in the 2013-14 fiscal year, and many development partners—including the World Bank—are likely to ramp up their support to Burma in the coming years.