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A Fresh Start for Myanmar's Economy

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A Fresh Start for Myanmar's Economy The country's military, which formerly ruled Myanmar, nevertheless remains a strong force within the country. For example, it still holds over a quarter of all seats in par- liament, as stipulated by the constitution, and appoints a deputy for the President and the Ministers of Home Affairs, Border Affairs A fresh start for Myanmar's and Defence in the new Cabinet. Aside from economy this, the military is an important economic player in the country with its own compa- nies and vested interests, for example in 26.07.2016 the raw materials sector. Given these cir- cumstances, the success of the new gov- Author: Dr. Detlef Rehn, freelance econom- ernment is largely dependent on whether or ics journalist not it will be able to make compromises with the military on important political and "Historical transition" is a term frequently economic issues (N. Eschborn, "'Auf Man- used in Western media to describe the dela hoffen, auf Thaksin vorbereiten' - My- change in government that took place in anmars politische Zukunft?" ["Hope for spring 2016 in Myanmar. Indeed, the Mandela, prepare for Thaksin – Myanmar's peaceful transition of political power to a political future?"], Country Report, Konrad- non-military government has historical sig- Adenauer-Stiftung, 4th March 2016, nificance. The transition was made possible www.kas.de/myanmar). by the first largely free elections for 25 years, which saw Aung San Suu Kyi's party, Expectations for the NLD and its party the National League for Democracy (NLD), leader are extremely high following the new win the vote in an overwhelming victory on majority vote; the challenges the party the 8th November 2015. The party now has must overcome, however, are also great a clear majority in the new parliament (In- ("Testing Times: Ten challenges for the ternational Crisis Group, "The Myanmar NLD government", Myanmar Times, 31st Elections: Results and Implications", Asia March 2016, www.mmtimes.com). As Suu Briefing No. 147, 9th December 2015, Kyi has stated, the primary goal is to solve www.crisisgroup.org). This enabled Suu Kyi ethnic conflicts and establish peace in the to elect one of her long-time confidants, country ("Aung San Suu Kyi: building peace Htin Kyaw, as the President of Myanmar on will be NLD party's priority in government", 15th March 2016. There is also a historical The Guardian, 4th January 2016, dimension to this aspect of the election, www.theguardian.com). However, the other given than Htin Kyaw is the first head of problems the party face are by no means state to not come from a military back- less complex. Although the economy has ground for over 50 years. Htin Kyaw took gathered significant momentum since up his position in office on 1st April 2016, around 2011, Myanmar continues to be a and at the same time, the newly appointed "poorhouse" in Asia, facing problems such NLD government began their work. Suu Kyi as low income, corruption and overexploita- is both Minister of Foreign Affairs and State tion of natural resources. Its health services Counsellor for Myanmar, which effectively and infrastructure are also in a poor state. makes her head of government. 1 "Straightforward" macroeconomic analyses from the World Bank or the Asian Devel- Furthermore, the NLD government now has opment bank (ADB) on the situation and the opportunity to build upon a range of the economic prospects of the country political and economic reforms that the sometimes give the impression that Myan- former military President Thein Sein initially mar is a "normal" developing country with introduced in 2011/2012. He had two aims: "normal" difficulties. This impression has to Firstly, he wanted to do something about be put into perspective. The change of gov- the army's bad reputation and mitigate the ernment is only the beginning; many struc- considerable domestic political tensions tures still need to be established and solv- which had emerged as a result of repres- ing the country's problems will take a great sion and poverty and which had led to ma- deal of time ("Analyzing the Direction of jor demonstrations against military rule. Economic Policy in a NLD-Governed Myan- Secondly, he wanted to establish better mar: Conversation with Dr. Sean Turnell, relations with the West in order to put an Associate Professor, Dept. Of Economics, end to Myanmar's many years of isolation Macquarie University and Economic Advisor, (T. Kudo, "One Year of Myanmar's Thein National League for Democracy", KWR Spe- Sein's Government: Background and Out- cial Report, 23rd December 2015, look of Reforms", IDE-Jetro, 7th May 2012, http://kwrintl.com/library/2015/). It still www.ide.go.jp). remains to be seen whether the people of Myanmar, full of hopes for the fast estab- Although the measures put into place by lishment of peace and better standards of Thein Sein were just the first steps, they living (and rightly so), will accord Suu Kyi still had considerable success. Perhaps and the NLD this time. For the great victors most significantly, the sanctions imposed of the election, the uphill struggle is over on the military junta by western countries but they still have many challenges to face in previous years were gradually lifted, in the long term. suspended, or in the case of the USA, at least loosened. New laws and regulations to The starting conditions for the new benefit the economy led to more and more government countries investing in Myanmar. In the most important city of Yangon, new sky- In principle, the preconditions for economic scraper complexes began to spring up and development that the government are fac- tourism became an important source of ing are not bad (ADB, "Myanmar in Transi- foreign income. tion, Ch. III: Strengths, Constraints, Op- portunities and Risks", August 2012, Against this background, gross domestic www.adb.org). For example, the country is product (GDP) has grown on average at a in an extremely advantageous location rate of almost 7.5 per cent since 2011 (ADB, strategically speaking and is rich in natural "Asian Development Outlook: Asia's Poten- resources such as natural gas, water, wood tial Growth", March 2016, Statistical Ap- and mineral resources including precious pendix, p. 276). This was significantly high- stones, gold, copper and coal. It also has a er than in previous years, when the econo- young population. More than 28 per cent of my had grown by only 5 to 5.5 per cent the 50 million inhabitants of the country are according to estimates by international or- under 15 years old and over 13 million ganisations (ADB, "Myanmar in Transition", people, or 40 per cent of the working popu- loc. cit.). lation, are under 30. 2 It became apparent that the economy had (World Bank, Indicators, "Life expectancy become more robust in the fiscal year of at birth, total (years)", 2015-2016 (1st April 2015 to 31st March http://data.worldbank.org). Myanmar spent 2016). Despite the fact that Myanmar was only 20 US dollars per capita on health in affected by natural catastrophes that 2014, while in Cambodia, 61 dollars were caused a large amount of damage in the spent. Per capita income only amounted to agricultural sector, and although economic approximately 1200 dollars in 2014 despite slowdown in China had a negative effect on growth in recent years; throughout the foreign trade and investments, GDP rose by whole of South-East Asia, only Cambodia's 7.2 per cent in comparison to the previous income was less. Even though Myanmar year. This was the best result of all the has made some progress in the fight Asian nations, although the country's rela- against poverty, approximately a quarter of tively low starting point must also be taken the population still has to get by on 1.25 into consideration. Vigorous building activi- US dollars per day (figures for 2010; ADB, ty, investment in infrastructure, production "Myanmar in Transition", loc. cit.). One of clothing and tourism were all factors in quarter of the population is also cut off this increase (ADB, "Asian Development from the electricity network. In general, the Outlook 2016: Asia's Potential Growth", quality of infrastructure is also very low: In Myanmar country report, March 2016, the "Global Competitiveness Report 2015- www.adb.org). Exports, on the other hand, 2016" by the World Economic Forum, My- did not provide a particularly big boost to anmar was in 134th place out of the 140 the economy due to Myanmar's heavy de- countries listed in this category pendency on China. (www3.weforum.org). One exception is the mobile telephone network, which has been Approved foreign direct investments (FDIs) developing at a rapid pace since 2013 increased by 18.4 per cent to almost 9.5 thanks to the market opening up to foreign billion US dollars in the fiscal year of 2015- suppliers ("Myanmar mobile leaps along", 2016, thanks to a very strong final quarter Myanmar Times, 1st April 2016, in comparison to the previous year (Direc- www.mmtimes.com). torate of Investment and Company Admin- istration, "Yearly approved amount of for- Another cause for concern is the mining eign investment (by sector)", sector: Many of the country's mineral re- www.dica.gov.mm). Almost half of this sources are located in areas predominantly came from the oil and gas sector. Other inhabited by ethnic minorities. Most of the key sectors were transport and communica- people living in these areas are employed in tion, as well as manufacture and real estate. the agricultural sector. According to experts, In terms of investment by country, Singa- more employment in the mining sector pore and China were the most active, could boost the income of farming house- though it is not known exactly how much holds.
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