Myanmar

This chapter considers briefly three other policy areas contained in the Policy Framework for Investment (PFI): corporate governance of state economic enterprises, trade policy and human resource development.

The transformation of Myanmar from decades of isolation mirrors, on a smaller scale, the dramatic changes in Eastern and Central Europe in the 1990s, as well as the opening of both China and Viet Nam. The challenges for Myanmar in simultaneously engineering a political and economic transition are enormous. Reformers in the Myanmar government have laid out their ideas in the Framework for Economic and Social Reform, including budgetary and tax reforms; monetary and financial sector reforms; liberalisation of trade and investment; food security and agricultural growth; land issues; and improvements in infrastructure availability and quality.

This chapter discusses trends in foreign investment in Myanmar and assesses the scope for future growth and diversification of FDI inflows. It considers the role of sanctions in impeding investments in the past and looks at how investors have reacted to the two reform periods, both after 1988 and since 2011.

As part of a process to develop a sound, broad-based business climate, investment promotion and facilitation can help attract new investors and retain existing ones, especially in smaller, more remote markets or those countries with a recent history of macroeconomic and political instability. Effective investment promotion highlights profitable investment opportunities, by identifying local partners and by providing a positive image of the economy. Promotion should not be seen as a substitute for more general policy reforms or try to camouflage underlying weaknesses in the investment climate. This chapter analyses Myanmar’s efforts to promote its private sector, in particular through investment promotion and facilitation measures. It also addresses the role of special economic zones, SMEs and investment linkages in the country’s overall private sector development strategy.

After years of economic isolation, the government of Myanmar has initiated a wide range of reforms to open its economy to foreign trade and investment. As set out in the Framework for Economic and Social Reform, the reform programme includes: budgetary and tax reforms; monetary and financial sector reforms; liberalisation of trade and investment; food security and agricultural growth; land issues; and improvements in infrastructure availability and quality. The country stands to benefit from greater global and regional economic integration, with its rich natural resources base, young labour force and strategic geographic location between India and China.

This chapter examines the challenges for advancing private sector participation in infrastructure in Myanmar. It looks into the challenge of infrastructure access and financing in the country, as well the prospects for infrastructure investments following Myanmar’s transition to a more open economy. The chapter also reviews recent and announced reforms and the remaining obstacles for creating an institutional and regulatory environment suitable for private participation in infrastructure. These issues and other sector-specific issues are then discussed for three key infrastructure sectors: transport, telecommunications and electricity. Green infrastructure is addressed throughout the chapter and in balance with Myanmar’s need to build infrastructure assets for growth.

This chapter explores the question of how Myanmar can make its tax system more efficient at mobilising revenue, while creating a business-friendly regime conducive to investment and growth. It looks at the bottlenecks within its current tax system, especially its tax incentives regime, and at how the efficiency of the system could be improved.

This chapter examines the quality of investment policies in Myanmar and the level of legal protection granted to investors in the country’s regulatory framework for investment. It covers the admission, regulation and protection of foreign direct investment in Myanmar and ascertains whether the principle of non-discrimination features in investment laws. It also looks into the expropriation regime, the existing framework for protecting intellectual property rights and the conditions imposed upon foreign investors when accessing land. The adjudication of commercial and investment disputes as well the country’s investment treaty practice are two other building blocks of a sound and protective investment policy framework that are also addressed.

Myanmar stands at a crossroads. After decades of economic isolation, the government is launching an ambitious agenda to strengthen the economy, tackle poverty and promote sustainable and equitable growth. These comprehensive reform efforts are being followed closely by the international community, including by international investors.

While the Emerging Asian region has positioned itself well to weather short-term economic volatility, it is imperative to ensure that the new growth and development strategies of countries in the region do lead to sustainable growth over the longer term. To this end, there must be structural policy reforms to ensure sustained and robust productivity growth, the cornerstone of every nation’s economic growth and competitiveness. The reforms should also target upgrading of economic activities to ensure that the region’s economies can remain competitive participants in global value chains in the face of changing domestic and external conditions.

Myanmar boasts numerous assets including fertile land that is rich in minerals and hydrocarbons, forests and hydro-resources, and a relatively young population. By coupling these assets with its favourable geo-strategic location in a dynamic region, Myanmar can establish a multi-pronged strategy for sustained, rapid growth and development based on agriculture, resource extraction, manufacturing and services. Yet time is of the essence: Myanmar’s now comparatively young population will start ageing in the next two decades. If the momentum for development created by the country’s opening and internal peace process is not seized, Myanmar could get old before it gets rich.

Transitions are complex phenomena which require astute policy making backed up by unwavering political will. The progress made in Myanmar since the start of its transition process in 2011 has been remarkable, particularly given the country’s unique challenge of a “triple transition”. In the political sphere, the country has moved from military rule to multi-party democracy; economic reforms aim to transform a largely centrally planned economy to a market-based one; and finally, negotiated ceasefires in the on-going peace process have halted several of the prolonged conflicts in the country’s border areas.

The following chapter provides an overview of the development opportunities and challenges facing Myanmar, framed in terms of the four capital stocks – physical, human, institutional and social – which underpin development. The discussion begins with an assessment of Myanmar’s assets, notably its fertile land, natural resources, rich cultural heritage, abundant labour and strategic geographical location. It then examines the key challenges the country faces to ignite growth that is both sustainable and equitable and looks at factors determining the longterm potential of the economy, such as demographics. The chapter closes with an analysis of well-being in Myanmar, drawing on the OECD How’s Life? framework, and compares indicators of well-being for Myanmar over time and in relation to other countries in the region or at similar levels of economic development.

Economic growth is just one facet of development. Policy makers are focused on ensuring that their country’s development path is sustainable and that the lives of citizens improve, which calls for the need to reconcile economic, social and environmental objectives.

The following chapter examines the policy challenges facing Myanmar in achieving growth that is more inclusive and which provides more equitable opportunities than it has in the past. The first section examines Myanmar’s recent growth performance in order to highlight which groups in society have benefited and which have been excluded, looking at levels of poverty and inequality and sources of growth. The discussion then turns to people’s access to public services and goods, looking at differences in access between poor and non-poor households, between rural and urban areas, across different states and regions, and along gender lines. Equality between ethnic groups is also discussed in the context of building a multi-ethnic state. The chapter ends by assessing the state of trust in Myanmar’s institutions, looking primarily at trust in public institutions, and suggesting ways to build this component of social capital.