Implications of Growth and Development

An overview of the Myanmar economy

SWOT analysis of the Myanmar Economy

Myanmar’s HDI value is 0.498

Economic Drivers

Agriculture

The development of agriculture is a main pillar of Myanmar’s growth strategies. It is natural for the Myanmar government to prioritize agriculture as a source of economic growth, since it accounts for 36% of GDP and employs a majority of labor force, and generates nearly 30% of exports according to 2010 figures. Although the agricultural share and employment usually decline as an economy grows, it is not a sunset industry. Methods exist for increasing agriculture’s value added other than the growth of labor and land inputs. According to Myanmar’s report on agriculture, the key strategy is to enhance three productivity measures: labor, land and total productivity.

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Successive governments have attempted to reclaim new agricultural land and the military government (1988-2011) has successfully increased the news sown area for the last two decades. Cultivable waste other than fallows remains at about 8% of national territory. Thus, further reclamation of cultivable wasteland in Myanmar is possible.

Agricultural labor productivity in Myanmar is USD 301/person, the lowest among South Asian countries. Focusing on rice production which is Myanmar’s most important crop, farmers have less elaborate irrigation facilities as compared to its rivals like Vietnam.

The need of the hour is mechanization which is a way to improve labor productivity. It can also enhance total agricultural productivity by adopting a new method of acquiring quality seeds, farm management, and improvement in post-harvest system, processing, and marketing to provide high-quality agricultural products.

Since agriculture is not rice dominated today, Myanmar could diversify crops according market demand. Its targets call for moving along the value chain of production from farming to higher value added activities such as R and D and after production activities like services, distribution and marketing.

Although it does not seem like the agricultural sector will be absorbing more labor force in the long term.

Mining

Myanmar is rich in natural resources. 90% of the world’s rubies come from Myanmar. The country is also known for producing sapphires. While this is a sector which can be banked upon, inhuman working conditions in quarries and the government’s control on the trade by means of direct ownership of mines hinders major countries from importing gems from Myanmar. A complete ban has been encouraged by the Human Rights Watch as all the profits are directly hoarded by the ruling government.

This lack of interest by the parties in power result in the continuation of the deplorable conditions of workers at the mines resulting in zero exports. While there is a chance here to earn a fair amount of profit for the economy, the rulers choose not to concern themselves with the development of the working conditions causing unwanted loss for the economy.

Health

The government spends 2% of its GDP on healthcare facilities. 2% is a significant amount as compared to the actual GDP that this economy earns. The health standards are stable but not accelerating in terms of quality and the ability to cater to a large population. Despite adequate funds, this economy is faced with a string of healthcare problems which can be explained by two factors. Insufficient no. of doctors owning to lack of education and the fast spreading epidemic of a variety of diseases.

Low purchasing power explains the inaccessibility to basic nutrition and food by yet a large population thus increasing the load on the healthcare infrastructure.

The incidence of major infectious diseases takes a toll on the health levels ultimately affecting the profession of the person. If the number of patients is large, poor and low medical facilities do not suffice.

Myanmar suffers from epidemics such as :-

Food or waterborne diseases: Bacterial and Protozoal diarrhoea, Hepatitis A, and Typhoid fever Vector borne diseases: Dengue fever, Malaria, and Japanese encephalitis Water contact disease: Leptospirosis Animal contact disease: Rabies

Myanmar does not have highly specialized medical institutions or even sufficient no. of clinics to cater to the large no. of diseased.

The Burmese Minstry of health recognizes HIV as a disease of concern.

Education

The above figures indicate a lot many factors to consider. There seems to be almost no gender disparity in terms of literacy. And in order to sustain oneself in a developing economy, the ability to read or write overpowers the level of education attained.

As observed, the enrolment ratios decline from primary to secondary to post secondary. This suggests that there is no strong inclination of being academically sound. This can be owed to the fact that Myanmar is an agrarian economy which employs almost 60% of its population thus indicating that all drop outs are getting absorbed in the labour force. This is a good sign as then the unemployment rate remains an all time low. But in order to progress into a developed economy, the sectoral employment should tend towards the tertiary sector and not the primary sector like in the case of Myanmar.

It is also upto the government to promote the importance of education. On the contrary, in Myanmar, owing to the military regime which was standing for a very long time treated education for civilians as relatively unimportant. It was only concerned with the development of military universities.

The effects of this approach can be seen even today with the low enrollment rates.

According to the Bertelsmann Stiftung Transformation Index report of 2012, since the government does not provide enough money to the schools, and the schools charge children many fees, many parents in rural areas cannot afford to send their children to school beyond the primary level. Although 85% of children attend primary school, over 40% do not go on to middle school (UNDP, 2010). The quality of higher-level education has also declined, especially since the government began encouraging university students to take distance-learning courses.

Employment on the secondary and the tertiary sector is to a large extent dependent on school and high school education. The Secondary enrollment rate is 54.28% which is not very remarkable as this means fewer people will enter business and management and other vocations like medicine.

The funds allocated for education spending are 0.8% of Myanmar’s GDP in 2013. It has decreased compared to 2009 when it was about 1% of GDP. Throughout all years however, the military budget continues to remain above 20% which is a clear indicator of the fact that the long standing regime has complete control and dominance over how the government in power decides to allocate its funds.

Military medical and engineering universities have been established so that the military will have properly trained doctors and engineers.

The military has hardly expressed any interest in investing in Research and Development. It almost never heeds to or approaches any technocrat for advice with regard to policy-making. Thus everything undertaken is military oriented and favourable to the army divisions on all accounts.

In recent years however, the no. of private school allowed to open has increased and trends show that the elite class have enrolled their children in private schools due to the poor quality of public schools.

Class structures and Gender Disparity

In Myanmar, the gender gap in power has been reinforced and perpetuated by the long history of militarization. Top offices are reserved for the military. Active military service does not admit women. They are also thus effectively excluded from political participation. Ethnic minorities are also excluded to a very large extent. Women have also been ineligible for the employment opportunities, access to educational facilities, chance to enter the business world, participating in joint ventures created by the military status.

Pre 1962, there was a small elite concentrated in government administration, party bureaucracy and the military on the one hand, while the peasants, small traders, business and hired laborers were on the other hand. In between the two now, is a very small group of middle-class people and skilled workers.

Accordingly, the primary problem is Myanmar’s class structure which appears to be in a state of extensive flowing. The need of bridging the gap between the elites and the rest of the population and facilitate communication could be achieved by a more institutionalized differentiation of the sub-elite strata. The ‘non congruent’ status groups could be capable of serving as intermediaries between the elites and the more sophisticated, differentiated population.

Living Standards

70% of Myanmar’s population yet lives in the rural areas. The rate of urbanization is barely 2.49%.

According to reports, the trend of expenditure across is households is, 70% on food and the rest on healthcare and education. The rate of savings is low thus the rate of investments is also low.

Despite Myanmar being a large producer of rice, it comes as a surprise that more than 5 million people are living under the food poverty line. (The Food and Agricultural Organization, 2009)

Access to clean drinking water and a considerably moderate rate of sanitation facilities cannot suffice the development path of an economy. The area tapped by electricity does not cover even half the inhabited land. Since the factories and industrial places cannot operate without electricity, it is safe to assume that the number of household covered in this 47% is going to be far less.

Banking, Foreign Borrowings, Exports

According to the Heritage Foundation’s 2011 Economic Freedom index, Myanmar is one of the world’s 10 most repressive economies. In 2003, the rice market was officially liberalised but the government has maintained significant interventions and restrictions in terms of permissible cultivation areas, production, transportation, export policy, and choice of crops.

Currency convertibility is difficult in Myanmar according to the IMF report. The official exchange rate has been fixed at approximately six kyat per U.S. dollar, while since 2009, the real market exchange rate has been around 1000 kyat. In the domestic market, since market leaders are in accordance with the military and a handful of cronies, there is no market contestability at the level of large enterprises. Although the environment for middle-sized businesses shows better market contestability, market entry barriers for companies are still huge.

Myanmar has been a World Trade Organization (WTO) member since 1995, foreign trade has not been liberalized in reality, because of its extensively controlled economy. The country is the least open to trade among its Southeast Asian neighbours. Myanmar also has a large informal trade in arms, narcotics and forest products.

The banking system are dominated by state owned banks and the government has complete control over the central bank. There is no proper capital market although the number of private banks is more than a dozen. Myanmar is unable to establish a stock market, and has no real market for bonds.

Although banks in Myanmar operate under formal regulations, but with hardly any supervision and enforcement. The banking system is not transparent.

The central bank has not enforced a consistent and effective inflation control policy, or an appropriate foreign exchange policy. Since the Central banks is completely controlled by the government, it has imposed arbitrary policies such as printing money to solve budget deficits, leading to fluctuating inflation rates. The government has also made arbitrary decisions such as to increase salaries sharply and remove subsidies.

Myanmar lacks consistent and sound fiscal and debt policies to support macroeconomic stability. Instead, its arbitrary fiscal and debt policies are motivated primarily by political concerns.

Private Property

In Myanmar, there is no effective protection of property rights, including intellectual property rights. According to the 2008 constitution, the state ultimately owns all the land and natural resources, although it permits some exercise of private property rights. This means that citizens can own land, but that the state can confiscate the property if it so desires. In fact, most ordinary people do not have legal title to their land and other property. The state has confiscated many private plots for government projects, including the establishment of military camps and businesses, without providing compensation.

To attract foreign investment, special economic zone laws include protection for foreign investors, but these are still conditional to the extent that they may not contradict existing laws. This gives leeway for the state to intervene. A wave of privatization of state assets and enterprises was performed suddenly in 2009 – 2010, and was not done in accordance with market principles. The process was neither transparent nor competitive, since the government sold the assets very quietly and quickly to a handful of enterprises with close military ties.

Myanmar has no official social safety nets, and poverty is widespread. However, family members, friends and religious organizations have traditionally provided a social safety-net function, especially in terms of helping with food, clothing and accommodation, although widespread poverty and the paucity of job opportunities in the country has weakened this over time. As a result, tens of thousands of young and middle-aged Myanmar have travelled to bordering countries including Thailand, Malaysia, China and India to work as migrant labourers. Based on statistics from reports, many send remittances back to their family members, a factor increasingly becoming a primary source of financial support for those left inside the country. However, the amount of remittances seems to have gone down in 2009 in the wake of the global economic slowdown, during which some migrant workers lost their jobs and went back home.

Political factors which lead to migrants leaving their state of origin for other countries are the risk of persecution, suppression of rights, human rights abuses, political and/or ethnic oppression, internal violence and/or armed conflict are considered political factors.

Those deemed as political migrants are often considered refugees. Economic factors include the following:

International labour migration movements triggered by economic factors such as poverty and

Economic underdevelopment in countries of origin and the existence of considerable discrepancies in standards of living and wages between these countries and receiving

Many Burmese migrants quote economic hardship and an oppressive taxation system as reasons for migration.