Transitional Economy of Myanmar: Present Status, Developmental Divide, and Future Prospects

Abstract

I. Introduction Countries undertaking economic reform measures to transform their economies from centrally directed command economies to market-oriented systems came to be referred as transitional economies. The rationale and inspiration for economic reform movements is provided not only by the failure of formerly centrally planned economies (CPEs) to generate growth and sustain development, but also by the success of market-oriented East Asian countries--the newly industrializing economies (NIEs) of Hong Kong, South Korea, Singapore and Taiwan--as well as the next-tier miracles of East and Southeast Asia --Indonesia, Malaysia, and Thailand. The reform process started in Myanmar and Vietnam in the late 1980s, and a little later in Cambodia and Laos. (1) While undertaking economic reforms, first, Vietnam became a member of ASEAN in 1995. Then, Myanmar, along with Laos, became a member of ASEAN in 1997. (2) Cambodia was the last of the so-called CLMV countries to become a member of ASEAN in 1999 to complete ASEAN-10. Ever since then, ASEAN came to be viewed as consisting of two tiers: the more developed ASEAN-6, that is, the founding member nations (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) plus Brunei; and the less developed CLMV countries. This paper will assess the present status of the Myanmar economy in the context of ASEAN developmental divide, and consider its future prospects. The questions, which will be addressed in this paper, are: What institutional and economic reforms, thus far, have been implemented? What have they achieved so far? What are the structural constraints to growth in Myanmar? What are the key issues that still need to be addressed? For a Myanmar citizen, or any citizen in ASEAN member country, these are not merely matters of academic interest. These are matters, which will not only determine the fate of Myanmar, but also the progress of ASEAN Economic Community (AEC). The AEC, it may be recalled, is envisioned to create a single market and a production base characterized by free flow of goods, services, investment, capital and skilled labour by 2020. II. Present Status of the Economy II.1 Economic Growth One of the key indicators of economic performance is the rate at which the economy grows or annual growth of the gross domestic product (GDP). (3) Annual growth of GDP in recent years is shown side by side with the plan targets of the Second Five-Year Short-Term Plan (1996-97 to 2000-2001) and Third Five-Year Short-Term Plan (2001-2002 to 2005-2006) in Table 1. It is worthy of note, that up to 1997-98, estimates of yearly GDP growth rates by international organizations such as ADB, IMF, UNESCAP, and EIU were the same as official estimates by the Government of Myanmar (GOM). Indeed, few doubted that Myanmar's economy was doing well. The high growth rates of over 7 per cent per year achieved during the Four-Year Plan period (1992-93 to 1995-96) were accepted by most as there were plausible reasons behind the achievement. As Myat Thein among others had pointed out, the good performance was made possible by a number of factors; such as private sector development (and especially the tremendous increase in the production and exports of pulses and beans), strong growth in the agricultural sector mainly due to the introduction of double cropping of rice with pump irrigation under summer paddy, a sizeable inflow of FDI following the introduction of Foreign Investment Law, growth of the nascent tourism industry, and a mini-construction sector boom. In other words, the above may be considered as the engines of growth (Myat Thein 2004). According to official data in the third column of Table l, Myanmar has been consistently posting double-digit GDP growth rates since 1999-2000. Unlike in the past, however, the problem with these double-digit GDP growth rates is that few believes them; and more importantly, ordinary Myanmar citizens have little to show for them by way of improvements in their standard of living. …