15 June 2012: Myanmar, being one of the world’s smallest recipients of international assistance for many years, is a country with immense potential. With tremendous resources; a burgeoning workforce, fertile soils, energy, minerals, and fishery products; Myanmar has the potential not only to regain its status as the “rice bowl” of the region but to position itself to become one of the most productive countries in the region and part of the “Asian tigers.” After being largely isolated from the world for more than 50 years, Myanmar is now starting to open up and reforms are being introduced at a rapid pace. Unprecedented transparency has been introduced into the budgetary process and licensing restrictions in a number of key areas have been loosened. The Government has unified its complicated exchange-rate system and is adopting very liberal investment laws and regulations.
These reforms constitute a real opportunity for more permanent change – an opportunity for the international community to help move the development agenda for Myanmar forward. They also provide an important opportunity for Myanmar to integrate effectively into the regional community and to contribute to the region’s economic dynamism and vitality. However, the reforms also face tremendous challenges and resistance. In particular, Myanmar lacks the capacity to integrate quickly and match the productive capacities of most of its neighbors. The private sector could play a major role in this regard.
Some of the priority areas identified are employment and income security; increased investment; human resources development and capacity enhancement; rural infrastructure development; and more supportive and enabling macroeconomic framework. The Government has acknowledged the challenges such as a shortage of capacity. The Government has also recognized the role of the private sector, investment promotion, and technical innovation in contributing to national development and inclusive growth. In particular, there is an urgent need for employment generation without gender discrimination. For that purpose, the promotion of entrepreneurship and enabling environment for the private sector as well as an expansion of physical and social infrastructure are crucial.
Enhancing capacities and promoting investment for SMEs
The main driving forces behind the economy in Myanmar are SMEs, which account for more than 90 percent of the enterprises. The government’s focus in the near term, therefore, is to attract investments in SMEs, as a base is needed before larger-scale industries can develop. Therefore, it is imperative to develop the local economy based on a growing and middle class, particularly in rural areas and strengthened SMEs in Myanmar. However, in pursuing development too quickly, it risks falling in the same traps as many other developing countries before it in triggering unsustainable development and a run on its natural resources, widening income gaps, and leaving millions behind. Nevertheless, being a latecomer, Myanmar has the opportunity to draw on some of the lessons of its neighbors and fellow LDCs and pursue an inclusive and sustainable development path.
It is well-known that SMEs contribute to employment, exports, innovation, and cultivating an entrepreneurial mentality. They also often serve as social safety nets in particular when the public sector is downsized and public enterprises and privatized. The adoption of responsible business practices should go hand in hand with the development of an entrepreneurial spirit and mentality in any country.
Foreign Director Investment (FDI) makes an important contribution to countries’ economic integration. Myanmar needs FDI as it constitutes capital, knowledge, technology, and access to markets in a convenient package. FDI is particularly needed in priority development areas related to infrastructures such as transport, energy, and telecommunications. It is also important to develop the agricultural sector. There is always a risk of a race to the bottom in attempts to attract FDI through incentives as Myanmar often lack other determinants required for FDI. FDI is not a panacea for development but can make an important contribution to development in the right environment. Therefore, an environment has to be created in which FDI can thrive while at the same time the government needs to ensure that FDI actually contributes to inclusive and sustainable development.
Facilitating the transfer of improved and environmentally sound modern technologies
The Government has been making efforts to enhance the economic management skills of both public and private sectors and to harness modern technologies in telecommunication and production that in line with changing international economic systems. This issue is of particular concern for the agricultural and ICT sectors, which are in dire need of capacity building and modernization, in particular through the adoption and utilization of modern agricultural machinery and communication technologies and forging effective linkages with supply/value chains.
The development of the ICT sector and the promotion of technology transfer are other important aspects of strengthening national and regional connectivity. The Internet allows businesses, including farmers, to access world markets at relatively little cost. However, in Myanmar, access to the Internet, in particular broadband, remains underdeveloped. Given Myanmar’s geographical location as the heartland of Asia and the bridge between South and Southeast Asia, a state-of-the-art national network that is linked up with intraregional and interregional cable networks would play a strategic role in the overall effectiveness of the telecommunications connectivity. The demand for telecommunication services is expected to rise exponentially in the region. Inevitably, this will lead to demand for increased bandwidth for which more land-linking optical fiber networks will be needed. As a strategic sector of development, the development of Myanmar’s people-centered national infrastructure network and transfer of modern technologies can accelerate closure of the digital and knowledge gaps within the country and provide important land-linking connectivity among its neighboring and other countries.