Navigating the Economic Reform Process

Myanmar’s political transition and economic reconstruction are intimately entwined. Achieving either depends on achieving both.¹

Introduction

The speed and extent of economic and political developments in Myanmar since March 2011 have surprised many observers of the country. The rate with which change is seemingly being embraced in the country contrasts markedly with the more cautious and incremental approaches taken in most other transitional economies of Asia, such as neighbouring China, Laos and Vietnam. This in turn has generated a great deal of excitement about Myanmar’s immediate future, and the expectations of many stakeholders have become lofty as a result. For foreign investors, Myanmar is the last major “frontier” market in South and Southeast Asia, and poses an enticing business prospect in a number of ways. For the international development community, Myanmar is clearly in need of considerable technical and financial assistance, and the country will almost certainly be the recipient of significant aid inflows in the years ahead. And most importantly, for the Myanmar people themselves, the end of international isolation and improved prospects for internal peace provide an opportunity for the economy, and particularly their own incomes, to get a much-needed boost.

But delivering on all those expectations is not going to be an easy task, notably within the context of the fast-approaching 2015 elections’ time horizon, but also beyond that date. A number of hurdles, including the institutional and human capacity constraints that currently afflict Myanmar, necessitate that a development “road map” is designed and adopted that can deliver inclusive and sustainable growth, and which is feasible in its scope. Experience from other transitional countries shows that implementing and adhering to such a “road map” is rarely an easy task, and that delays and disappointments are virtually inevitable. There will always be different, yet legitimate, views on what the policy priorities are, as well as the optimal pace and depth of change. In addition, entrenched and powerful lobbies can have interests that are not aligned with economic reform, and seek to thwart some key components, particularly when it comes to business liberalization efforts and the opening up of the market to free and fair competition. Thus, Myanmar’s future long-term economic growth prospects are potentially good, but are certainly not “a given”, and thus expectations have to be tempered with some degree of healthy realism about the numerous challenges that lie ahead.

The first wave of economic reform efforts in transitional economies often consist of “low hanging fruit”: initiatives that can be relatively easily attained, and deliver some immediate, tangible and wide-ranging benefits. That in turn can instill policy confidence, and hopefully encourage most stakeholders to see the merits of change and so “buy into” the long-term reform process. Crucially, this includes key actors within the domestic business community. While the country’s policy-makers and its development partners may set much of the reform agenda, it is the corporate community that ultimately has to deliver the jobs and output growth that will determine the country’s economic prospects. Even relatively small enterprises have expertise and core competencies that can be harnessed to good effect, and without them, economic growth can neither be inclusive nor sustainable in the long run. But large firms too, including foreign multinationals, also have key roles to play as engines of growth and sources of larger-scale, skilled and semi-skilled employment.

But for the business community to play such a role, it needs a conducive enabling environment and a relatively stable macro-economic platform on which to operate. An adequate array of public and private support and services needs to be in place, spanning power and utilities, hard infrastructure (such as ports and roads), soft infrastructure (such as laws and implementing regulations), access to financial products and services, a fair tax and trade regime, robust land and property protection laws, and so the list goes on. This list can be quite intimidating, and cannot be addressed by a country like Myanmar all at once, as if with the wave of a magic wand. Even if the international donor community had all the...