Unlocking Myanmar’s potential

Unlocking Myanmar’s potential

By Cyn-Young Park

Economic and political transition is never an easy process for any country and it will be no different for Asia’s fast awakening tiger, Myanmar.

Economic and political transition is never an easy process for any country and it will be no different for Asia’s fast awakening tiger, Myanmar. 
 
I have just returned from a trip to the country where my team launched a new report “Myanmar: Unlocking the Potential”. If our previous report “Myanmar in Transition” was an appraisal of the country’s opportunities and challenges in transitioning to a modern industrial economy, this one is about “how to” seize the opportunities and manage the challenges. 
 
Chances are Myanmar will tumble and fumble through numerous challenges as it moves forward but ultimately this natural process will make the reforms truly the country’s own. Fortunately, there are many lessons to draw from past reform experiences across dynamic Asia —either successful or unsuccessful, which may offer some useful insights for Myanmar’s own path. Three important lessons immediately come to my mind.
 
First, maintain economic, social, and political stability. Macroeconomic and financial stability is an essential foundation for any successful reform process. Many also view governance issues, such as policy instability and corruption, as among the most serious obstacles to business activity and economic progress in Myanmar. The World Economic Forum’s 2013 Global Competitiveness Survey cites governance problems as the top obstacle to the country’s economic growth and development. It is equally important to remember that, ultimately, the success of the reforms will depend on the country’s ability to secure political commitment and public support during the transition. This can be achieved by making social inclusion and balanced regional development central to the reform agenda—in particular ensuring equitable participation of ethnic minorities in the growth and development process. 
 
Second, invest for the future, particularly in human capital and infrastructure. Large infrastructure gaps in Myanmar require immediate policy attention with substantial investments needed to improve transport networks; to provide adequate, reliable, and affordable power; and to build basic information and communication technology. Past neglect and underinvestment in education has also left a huge void in Myanmar’s skilled work force. Along with short-term measures to upgrade skills and enhance vocational training for growing business needs, a comprehensive reform of the education sector at all levels is needed to support higher medium- and long-term growth.
 
Third, stay open and connected. Abundant natural resources have been a main source of growth, driving exports and investment in Myanmar. But unlocking the country’s future growth potential will depend on how it broadens its industrial base and develops value-added linkages to regional and global production networks—which will require strategic industrial policy and planning. Myanmar has taken significant policy steps to support rapid industrialization, by establishing special economic zones and to attract foreign direct investment (FDI) in areas of strategic importance. It has also moved to promote labor intensive manufacturing with the goal of integrating into regional production networks and climbing up global value chains. Much progress has been also made to improve the overall investment climate by removing unnecessary hurdles to business and trade; by providing legal foundations for foreign investment; by improving essential public services; and by addressing governance and corruption issues. But much more needs to be done. 
 
Building on the earlier reform momentum, the second wave of reforms should focus on strengthening the private sector’s capacity to unleash the full potential of trade and FDI. Such measures will require further improvements to the regulatory environment; investments in physical and social infrastructure; building up human capital with particular attention to upgrading the skills of the young; and strengthening and developing the banking sector and financial markets.
 
In particular, the government needs to coordinate and calibrate its policies for business incentives, and to ensure clear property rights, and harmonious labor relations, in order to draw more FDI into key sectors needed to spearhead long-term growth.