The Prospects for Burma’s Economic Development

By Myint Thin 6 February 2013

Burma can now move forward with its various economic development plans in a holistic manner. The World Bank and Asian Development Bank have recently provided new loans. This has been one of the most important developments inside the country since its dramatic political and economic reforms started in March 2011.

Some of the most frequently asked questions about Burma’s economy are: What kind of economic model would it like to adopt? Are there any lessons to be learned from economic developments in East and Southeast Asia? The economic planners in Naypyidaw have to struggle to find an appropriate model to ensure the right mix of economic and political reforms. Whatever the outcome, it will be closely watched by the international communityA.

Last June, President Thein Sein made clear that the government’s strategy for the second phase of reform would seek to promote a high economic growth, targeting 1.7-fold rise in per capita GDP after the first five-year plan. He also outlined four guiding principles. First, agriculture and all round development will be the top priority. Second, growth must be balanced and proportionate among states and divisions. Third, it has to be inclusive for the entire population. The last principle is the most interesting, as the president said the country needs reliable statistics and an overall improvement in the way statistics are collected.

To maintain high economic growth, Burma is mindful that it must create an environment conducive to attracting foreign direct investment and expanding foreign trade. Before it was approved at the end of last year, the new investment law was amended several times in response to comments and criticism from foreign experts and the private sector. So far, foreign direct investment continues to focus on extractive industries such as oil and gas and mining, but the government is trying to lure investment in the tourism, ICT and agriculture sectors.

As a member of the Association of Southeast Asian Nations (Asean), Burma must utilize the bloc’s economic framework to boost foreign trade and FDI. To do so, the action plan under the Asean Economic Community (AEC) serves as a useful guide for Burma to liberalize and facilitate trade in various areas such as service and investment. The country is also a land bridge between South Asia and Southeast Asia, including the southern region of China.

In addition, Burma can follow up on the Initiative for Asean Integration (IAI), launched in 2000. The IAI aims to narrow the intra-regional development gap by providing assistance to new members in accelerating their integration and development with the core members. So far, Vietnam and Laos have made numerous proposals to improve their capacity building in various areas such as legal frameworks related to customs, business management, tourism promotion and so on.

Under the IAI scheme, Burma has only a few proposals to enhance institutional capacity in areas of standardization, as well as legislation and technical regulations. In the food, agriculture and forestry areas, it wants to strengthen agricultural market information services inside the country. The country is keen to promote market access of agricultural products and build up a network mechanism linking agricultural cooperatives among Asean members.

As Burma is taking up the chair next year, Asean officials are confident that the country will make new initiatives to accelerate its economic integration with the AEC. When Cambodia chaired last year, Phnom Penh identified 16 prioritized projects for the new members.

With Japan’s assistance, Burma is working on the so-called “Myanmar Comprehensive Development Vision (CDV). It is a long-term economic development plan, comprising five 5-year plans (25 years in total). The vision aims to lay the foundation for infrastructure and human resource development plans both in urban and rural areas.

Given the large and young population based in major cities such as Rangoon and Mandalay, the country’s economic planners will focus on ways to promote income, jobs and capacity building.

Rangoon has a population of about five million, while the Irrawaddy Delta, its rural hinterland, is the second most populous region. Mandalay, the second largest city in Burma, has one million people and is surrounded by Sagaing and Magway, giving it a large extended population base. Some economists have envisaged a pattern of two growth poles in Rangoon and Mandalay. Obviously, this approach will create the unbalanced growth within the country.

However, the supporters of this strategy argue that it could nonetheless be inclusive. As the World Bank’s report last year highlighted, as economies grow from low to high income, production bases become more concentrated. The report argued that the concentration of production and the long-term benefits of a convergence in living standards would be the much-needed economic integration.

As such, future FDI would be concentrated on two cities due to their large and dense labor pools and industrial base. It is hoped that it can create positive spillover effects across various regions. Given the uniqueness of its location and its function, Naypyidaw will remain the administrative center.

In addition, there are other strategies such as special economic zones both inside the country and along its borders. One way Burma can benefit from this is by shifting labor-intensive industries from the Thai side of the border to the Burmese side.

It’s strange but true that Burma is benefiting from the “latecomer’s syndrome.” It can learn from the numerous mistakes of neighboring countries and so choose the most suitable path for its own future economic development.