Academic journal article Journal of Southeast Asian Economies

Introductory Overview: Myanmar's Economic Reforms

Academic journal article Journal of Southeast Asian Economies

Introductory Overview: Myanmar's Economic Reforms

Article excerpt

I. Economic Reforms in Myanmar

In March 2011, Myanmar's first elected government in five decades was instituted in accordance with the 2008 Constitution, after the multi-party general elections in November 2010. Having inherited an economy which was rife with cronyism, rent-seeking and misallocated resources and saddled with dysfunctional policy-making (Aung 2005; Earth Rights International 2008; Turnell 2010), the Government of Myanmar (GOM) led by the

Executive President Thein Sein launched a series of political, economic and administrative reforms. In particular, the economic reform agenda emphasized good governance, transparency and accountability premised upon attracting local and foreign direct investment (FDI), liberalizing trade, enhancing regional economic cooperation, reducing the state's economic role, boosting productivity and balancing equity with efficiency. (1)

Beginning with poverty alleviation, new economic policies that liberalized trade, investment, industry, finance and banking were introduced rapidly to enhance marketization and allow private sector participation. An outward orientation policy stance has been taken, as embracing regional economic integration and linking up with the global economy is part of the strategy to lift Myanmar out of the least developing nation category. Major macroeconomic reforms undertaken successfully include, inter alia, rationalizing the multiple exchange rate system, restructuring the Central Bank of Myanmar (CBM) to allow it to have more autonomy, revising the foreign investment law to attract more foreign direct investment (FDI) and establishing special economic zones (SEZs).

The reform agenda was eventually formalized in the "Framework for Economic and Social Reforms" (FESR) launched in 2013. The FESR was meant to be a "reform bridge" linking current programmes to the government's twenty-year national development plan. It identified priority sectors and potential "quick wins" and served as a reference in developing sectoral and regional plans. It was also envisaged to be a "guide" for development cooperation with international partners (GOM 2014).

With the removal of Western sanctions (except for the United States, which suspended most of them), debt annulment by some debtor countries (Zaw-Aung 2014), surging official development assistance (ODA) and re-engagement by international financial institutions (IFIs) such as the World Bank and the Asia Development Bank (ADB), Myanmar has shed its economic isolation and is poised to exploit ample opportunities offered by the international economy. Recently, Myanmar, with its rich natural resources and virtually untapped market, has become the favoured emerging market for the international business community.

However, despite the current upbeat mood of foreign traders and investors, Myanmar's economic transition is not going to be a smooth and easy journey as there are many structural and other problems inherited from decades of mismanagement and neglect. Problems of inadequate infrastructure (especially telecommunications, transport, and energy), low productivity, rent-seeking, inefficient state enterprises, human resource shortfalls, poor fiscal governance, regional budgetary disparities and an outdated mindset among both public and private sector personnel are just a few examples among the manifold economic obstacles in the path to success. Moreover, socio-political challenges in the form of resource-sharing with ethnic communities, communal and sectarian violence, ethnic armed conflict, labour disputes and public dissent (often leading to demonstrations) over a slew of issues (particularly environment, land acquisition and compensation) also add to the business risk for potential investors (Dapice and Nguyen 2013; Tin 2014, pp. 25-28; Engvall and Linn 2014, pp. 160-72).

II. Research and Analysis to Support Reforms

The government of President Thein Sein, probably driven by the desire to establish performance legitimacy by quickly achieving high GDP growth and structural change, has been instituting economic reforms even before a systematic and comprehensive framework was formulated. …

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