Economic Outlook Myanmar

At the present time, political movements in Myanmar are still vulnerable to any changes as is the economic situation, which is marred by uncertainty, since economic growth was vigorously affected by political uncertainty. After World War II, two dominant economic systems were adopted by countries around the world and they both confronted each other based on their different geopolitical point of view and the beliefs of their state leaders. These economic systems are known as the capitalist economic system and the socialist economic system respectively. For instance, most countries from Western Europe and Northern America have used a capitalist economic system with the mass production of industrial products. However, Eastern Europe countries and Asian countries including Myanmar were inclined to adopt the socialist economic system and mainly relied on the agriculture sector.

When there was rapid industrialization during the 1960s and 1980s, imbalanced development of world trade led to unfavorable economic power sharing among world countries and finally it became a source of world-wide economic crisis. Therefore ideological changes of governments converged again towards a new economic system called the mixed economic system, meaning regulated government intervention in a free market system.

In practice, all world economic history after that period accounts for countries trying to spur economic development through implementing reforms in their economies by using different strategies. Basically, economists said that there were two kinds of reforms called gradual reform and shock therapy reform. There was a debate at that time regarding these two distinct ideologies. Governments either chose to reform economic or political systems first. Every country should chose their own way to reform based on the specific context and most pressing needs.

As a developing country, Myanmar must strive for economic development under the current condition of political instability. However, now with a more relaxed political environment, there are boundless options which the Myanmar Government can take in order to instigate economic reform. According to the speech of Myanmar’s new president, his government desires to change the current undernourished status of economy. Consequently, national workshops for economic development and poverty reduction were held at Naypyidaw and attended by persons from both private and public sectors.

This provided a rare opportunity for Myanmar national scholars who have immigrated abroad to foreign countries to return and attend such workshops and to play a role in future cooperation for economic reforms by working in tandem with the government. It was a rare chance in Myanmar, which has been virtually impossible in the past 2 decades. However, we still have a way to go at the start of the lengthy reform process, before we can comment for sure on the effectiveness of the reforms.

For many years to come, Myanmar will have to carry out rapid economic development especially in economically neglected areas such as ethnic areas in Upper and Lower Myanmar, where there is poor infrastructure. The greatest barriers in these areas are threats or challenges in state building such as domestic insurgencies, political instability, unfamiliar practices and procedures, a heavily deteriorated natural environment and human resource constraints due to years of economic paralysis. In the short term, it is not possible yet to solve all of those problems in Myanmar and it is assumed that the economic system in Myanmar is closer to a mixed economic system as in most world countries. This is because some fundamental characteristics of a mixed economic system are found in Myanmar such as a free flow of commodities in markets with some occasional regulation of government. If we look at the Myanmar economy, the largest sector is the agricultural sector which is the main driver of the economy currently. However, the service sector and industrial sectors were second and third largest sectors in Myanmar, while those sectors tend to be the major sectors in developed countries. Therefore, on the one hand, Myanmar still over depends on the agricultural sector and other natural resources which should be strictly managed to achieve long run sustainability. However, on the other hand, economic policies and regulations in Myanmar are still weak and in need of reform. Therefore, there are considerable constraints such as difficulties collecting economic data, an unfair and imbalanced revenue and tax system, constraints for foreign investments, hardships establishing business enterprises and a domestic economy which is vulnerable to changes in international trade. In addition, economic sanctions from international communities were also affecting the slow economic development of Myanmar.

In conclusion, the Myanmar government must strive for radical changes in the economy and try to bring together internationally acceptable political changes at the same time. Therefore, the following points should be prioritized in Myanmar for economic development.

1. Fair and reliable income distribution system
2. Effective and efficient resource allocation
3. Improve foreign trade and investment
4. Reform in the monetary and banking sectors
5. Developing an adequate economic infrastructure
6. Create a transparent and fair environment for economic competition

Increasing Rural Income Opportunities

In the Dry Zone, Myanmar, people have been relying on agriculture as their main income source. Bearing in mind that rural income of these people is heavily affected by variation in agriculture depending on labor availability, crop prices, productive yield, affordability to invest and favorable climatic conditions. One inefficient Top down government policy obligates rural communities to grow certain crops. Such practices ignore free markets and the agency of farmers, disincentivising them and increasing their risk. Such examples include forced cultivation of BT cotton in the Delta. In retaliation farmers boiled the seeds rendering them infertile and then grew what they wanted saying the government had provided them with bad seeds. Due to the many uncertainties regarding agriculture including climatic uncertainty and fluctuating costs of inputs, effective institutions both public and from civil society have a role to play to ensure the provision of credit to farmers.

The most prevalent idea to increase the income opportunities of rural families is the accumulation of local financial capital. This means that external capital inflows can be merged with savings of rural households to increase the amount of capital available to those families. These families that can access credit can borrow money from accumulated capital and invest in turn in profitable family businesses at a low rate of interest which is then paid back.

By and large, most rural families are unable to save and their accessibility to financial credit is also very limited. Therefore, two approaches have emerged for rural financing activities which are microfinance and micro credit schemes with a basic concept of a revolving system and low interest repayments with an extendable lending amount to borrowers. If these initiatives are able to function well, local economic growth can be supported by achieving increased local employment, per capita income and greater consumption. Therefore with the help of clearly established rules and regulations between community and supporting organizations capital accumulation can be encouraged. This local economic growth should be sustainable and fit within growth trends at a regional and national basis.

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