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1(I) "MYANMAR: WILL FOREVER FLOW
- Subject: 1(I) "MYANMAR: WILL FOREVER FLOW
- From: darnott@xxxxxxxxxxx
- Date: Sat, 18 Nov 1995 22:49:00
MYANMAR: WILL FOREVER FLOW THE AYEYARWADY? [PART I]
by Khin Maung Kyi
INTRODUCTION
When Myanmar (then known as Burma) attained its independence in
1948, international agencies identified it as one of the most
promising regional candidates for economic take-off. Its modern
technical and university education system, high rate of literacy,
well-trained civil service and a cadre of educated middle class,
basic infrastructure, and a well-run legal system were considered
as good ingredients for Myanmar's expected take-off. In the
1950s, Myanmar's gross domestic product (GDP) was growing
consistently at an annual average rate of over 4 per cent, in
contrast with the chequered performance of its neighbours. In the
early 1960s, the country was poised for labour-intensive
industrialization with a number of textile and consumer product
firms manufacturing export-quality goods. Then came the
/putsch/[1] and the socialist revolution, followed by stagnation
and decline. Twenty-six years passed before Myanmar finally
erupted and the change to market economy was forcibly brought in.
Myanmar is now in the throes of the struggle for modernization
and change. With the military still holding on to the reins of
power on the one hand and the contending democratic opposition
and the ethnic groups with diverse claims and interests on the
other, Myanmar has not come out of its pains of growing up, to
meet the challenges of the outside world.
This paper will review significant developments and changes
in 1993 and re-examine the complex of situations influencing its
sluggish economic performance and the equally slow rate of
political transformation. Myanmar's problems and prospects for
long-term development and modernization are also analysed.
THE ECONOMY IN GRIDLOCK
Performance of the Economy in the Year 1992/93
While most of the wearisome indicators such as budget deficit,
money supply, inflation, adverse balance of trade remain on the
rising trend, improvement in the rate of GDP growth provides a
ray of hope for a possible arrest of the downward slide of the
economy.
The provisional growth rate of GDP in 1992/93 over the
previous year 1991/92 was 10.9 per cent, a marked improvement
over the average growth rate of 1.5 per cent over the previous
four years. As shown in Table 1, this growth rate of 10.9 per
cent principally comes from 15 per cent growth in agriculture,
13.7 per cent growth in industry, and 10 per cent growth in
trade, all forming a large percentage of the total makeup of GDP.
The expansion of the total acreage of paddy, especially summer
paddy, accounts for the growth in agriculture. The revenues of
state economic organizations rose by 30 per cent, probably
through the realignment of prices and also through some increment
in output. The increase in trade by 10.3 per cent is probably the
ultimate result of improvement in agricultural production, which
generates all other activities in chain. The sustainability of
this rate of growth is very doubtful since the growth rate is
calculated on a very low base year and other fundamentals have
not changed. Furthermore, these are provisional figures for
1992/93 and the practice of scaling down previous figures in the
final estimates has been very common in the past. In addition,
unless there is sustained growth in the coming few years it
cannot be presumed that it is a break from the stagnant past.
Potential foreign investors exploring possibilities have
increased and deals have been struck on hotel, oil and gas
projects. But long-term industrial investments are not
forthcoming yet. The total amount of foreign investment promised
or initialled in 1992/93, according to provisional figures,
amounted to US$900 million, compared with the US$4,076 million
received by the compatriot socialist market economy of Vietnam in
1993. In Myanmar, the largest foreign investor happened to be its
immediate neighbour, Thailand, with 19.3 per cent of total
foreign direct investment in Myanmar.
TABLE 1
Myanmar: Growth Rates of the Economy and Its Sectors
(In percentages)
___________________________________________________________
1980 1982 1984 1986 1988 1989 1990 1991 1992
Sector -82* -84* -86* -88* -89 -90 -91 -92 -93
_________________________________________________________________
GDP 7.2 5.0 4.4 -2.6 -11.4 3.7 2.8 -1.0 10.0
Goods 8.8 5.4 4.1 -2.9 -13.3 6.5 2.6 -1.9 13.2
Agri-
culture 10.7 5.9 2.8 -3.0 -13.2 5.2 2.0 -3.9 15.2
Forestry 3.8 1.0 5.5 -4.3 -1.6 28.4 8.3 -2.6 5.9
Manufac-
turing 7.5 4.3 5.2 -5.0 -15.9 11.3 0.1 -4.1 13.7
Construc-
tion 11.6 5.6 5.4 -5.1 -23.4 32.7 35.8 17.1 3.8
Services 7.1 5.2 5.2 3.1 -3.3 -7.5 4.2 4.4 3.7
Trade 3.4 3.8 4.2 -6.5 -12.o 5.3 2.4 -2.6 10.3
_________________________________________________________________
* Average rate for two years
Source: "Reports to the Pyi Thu Hluttaw" and "Review of the
Financial Economic and Social Indicators"
________________________________________________________________
It should be noted that the US$900 million only represents
the total amount signed in the contracts or the memorandums of
agreement and does not indicate the actual amount of inflow to
date or the level of activities being carried out. The largest
foreign investments fall in the areas of extraction of natural
resources, such as gas exploration, timber extraction, selling of
fishing rights, and also of development of the tourist industry
such as the construction of hotels.
The construction boom in urban areas is quite noticeable.
Some of the up-country cities on the border trade route show
marked signs of prosperity. Mandalay's city business centre is
largely taken over by the Overseas Chinese and Chinese
immigrants. Monywa, linked to the Indian border trade, is
thriving on trade with India. Varieties of cheap consumer goods
are swamping the market, while teak, timber, and agricultural
produce are being moved across the border to China.
The productivity of various sectors of the economy remains
stagnant. The state industrial sector is facing the possibility
of a slow and lingering death with the shortage of raw materials,
spare parts, managerial know-how, and fresh capital. Small
industries are springing up but are very localized, facing stiff
competition from cheap consumer goods from China.
The basic fundamentals have not changed. As illustrated in
Table 2, the best achievements in 1993 do not reach the level of
1985/86, the best year before the social upheaval in 1988. The
reported increase in rice production still needs to be carefully
looked into, as export figures for rice for the year did not
improve and yet the price of rice has gone up to 80 kyat per pyi,
much higher than the level in 1991. A recent market report
indicates that Chinese rice is being imported and sold in
Mandalay and other parts of the upcountry. More surprisingly, it
_________________________________________________________________
TABLE 2
Myanmar: Important Indicators, 1985/86 and 1992/93
(At constant prices)
_________________________________________________________________
Indicator 1985/86 1992/93
_________________________________________________________________
In million kyat
GDP 55,989.3 55,170.1
Agricultural output 22,243.5 21,541.6
Social and administrative services 5,561.4 4,973.1
Consumption 49,531.9 44,264.7
Investment 8,649.5 9,549.5
In kyat
GDP per capita 1,509.0 1,303.0
Consumption per capita 1,298.0 1,046.0
Investment per capita 233.0 226.0
Net output per worker 3,701.0 3,350.0
_________________________________________________________________
Source: "Review of the Financial Economic and Social Indicators"
________________________________________________________________
is also reported that rice imported from Bangladesh is sold in
border towns in Arakan state.
The prices of basic consumer goods are still rising. In
spite of the 25 per cent increase in salaries in the early part
of 1992, the urban wage or salary earners are being increasingly
squeezed. The unintended consequence of the rapid rate of
inflation is that moonlighting by government employees has become
very common. Worse still, for government officials who provide
services or grant permits to the public, asking for or taking
payments for services rendered in their normal course of duty is
done with nonchalance and impunity.
It is likely that the seeming prosperity of certain
commercial sections of the community is taking place at the
expense of the lower stratum. As the total productivity of the
economy does not improve, trade takes the form of exporting some
of the food items such as fish, prawn, beans and pulses, which
the average or low-income earners consume as a mainstay in their
diet. In its stead, non-essential consumer items such as
electronic and luxury goods, which the wealthier section of the
population can afford, are imported. This deliberate policy of
deficit spending and the resultant price increases falls heavily
on lower-income groups, whose daily essentials have been rising
steeply in price in the last five years. Unless productivity can
be increased, this disparity between the commercialized group and
the great majority of both urban and rural income groups will
widen.
Comparative Performance in the Last Five Years
The switch to market economy, practically, began in 1989, an
aftermath of social unrest in 1988, and this new experience will
have passed the first five years by the end of 1993. It is
appropriate at this juncture to review the performance of these
five years and draw the likely trends to the future.
During the five-year period, the military leadership, the
State Law and Order Restoration Council (SLORC), have tried hard
to improve the economic lot of the people. Though these efforts
were at times characterized by political expediency, short-term
perspective, and half-way measures, the departure from the
socialist economic past is unmistakable and the commitment to
market economy is irrevocable. The following are the main thrusts
of economic activities the new Myanmar Government has pursued
during the past five years.
1. Opening up of the economy to the international
market, through legalization of private enterprise,
encouragement of foreign investments, and introduction
of foreign investment law.
2. The construction of infrastructure projects
especially roads, bridges, and schools. Also, the
reconstruction and renovation of historical monuments.
3. Very recently, a drive for agricultural productivity
through the encouragement of second or summer cropping.
However, the actual performance in respect of the total
economy is, to say the least, discouraging though a slight ray of
hope appeared in the year 1992/93. The following are the results
of the five years under the new economic management.
The aggregate performance of the economy and its various
sectors hardly moved. The average GDP growth rate for the five
years including the best year of 1992/93 during this period
remains as a sluggish 1 per cent per year. Sector-wise, the
average growth rates of the agriculture, forestry, and
manufacturing sectors stand at 1.06 per cent, 7.68 per cent, and
1.02 per cent, respectively, indicating that forestry was the
only industry with a higher growth rate, possibly because of the
larger number of concessions granted and the higher level of
exploitation.
Construction showed a growth rate of 12.2 per cent for the
period. This is due partly to the government's emphasis on the
construction of roads, bridges, schools, and some other
infrastructure projects but principally to the growth of private-
sector construction activities quite visible in urban areas such
as Yangon, Mandalay, and some large trading towns.
The services sector and the trade sector show abysmal growth
rates of 0.3 per cent and 0.7 per cent, respectively. These
observations are made on the basis of Table 1, which also show
the growth rates of early years of this decade in two-year
averages. Unmistakably, growth in all sectors has been declining,
with 1992/93 being the only exception. When compared with the
average yearly growth rates for the previous decade (Table 3),
the last decade, 1981-90, showed a real decline in performance.
Table 4 shows the financial indicators of Myanmar from the
years 1986/87 to 1992/93. It clearly illustrates the effects of
the fiscal and monetary practices of the government. The budget
deficits have been rapidly climbing since 1987/88 though the
percentage increases have declined in the last two years, 1991/
92 and 1992/93. Currency in circulation, on the other hand, has
increased very steeply, at the annual average rate of 45.4 per
cent almost consistently in the last five years, from 1988/89 to
1992/93.
In absolute terms the total amount of budget deficit over the
last five years, from 1988/89 to 1992/93, was 55.6 billion kyat,
principally covered by the increase in the currency in
circulation, that is, 40.7 billion kyat. The shortfall was
probably financed by bank loans or other financial instruments.
_________________________________________________________________
TABLE 3
Myanmar: Average Growth Rates
(Base year = 1985)
_________________________________________________________________
Sector 1971-80 1981-90 1993/93
_________________________________________________________________
GDP 4.7 -0.1 1.00
Agriculture 4.5 -0.3 1.06
Industry 5.8 -0.2 1.02
Services 4.6 0.2 0.30
_________________________________________________________________
Source: Calculation based on "Reports to the Pyi Thy Hluttaw" and
"Review of the Financial Economic and Social Indicators".
_________________________________________________________________
TABLE 4
Myanmar: Annual Rate of Change in
Percentage of Financial and
Performance Indices. 1987/88 to 1992/93
_________________________________________________________________
Total Budget Money Consumer Exports
Year Deficit Supply Price Index
_________________________________________________________________
1987/88 54.5 -44.9 -13.2 -33.1
1988/89 82.5 49.9 16.8 30.5
1989/90 23.3 55.6 27.2 29.7
1990/91 24.2 45.9 17.6 4.0
1991/92 15.0 34.9 32.3 -1.0
1992/93 2.7 40.7 21.9 13.0
________________________________________________________________
Since under the new financial management system, state-owned
enterprises could borrow money from banks independent of
budgetary allocations, the inflationary pressure is greater than
increases in money supply suggest.
The consumer price index (CPI) in Yangon, a measure of
inflationary pressure, is rising at an average rate of 21.4 per
cent per year. This should be considered a conservative figure,
not reflective of actual happenings at the average consumer's
level. It should be noted that the CPI may include the subsidized
prices of rice distributed to government servants. The price of
rice, an important indicator of basic prices in Myanmar, has
increased by 6.8 times between 1987 and 1992. In fact, during
October 1993 th price of rice went up to 80 kyat per pyi, 17.5
times the price in 1987. On the whole, prices of other
commodities such as beans and pulses, and groundnut oil, the
other staple items of the Myanmar diet, had increased
approximately 2.6 to 3.2 times between 1987 and 1992. (See also
Table 5)
The huge increase in the price of rice almost created a
problem of crisis proportions. Rice is a staple food for the
great majority of the people. It also forms a basic raw material
to food-producing industries such as animal feed and fish-
breeding industries. Recent press reports indicate that the
_________________________________________________________________
TABLE 5
Yangon: Prices of Selected Consumer Goods
(In kyat per viss)
________________________________________________________________
Commodity 1985 1987 1989 1990 1991 1992
_________________________________________________________________
Rice ngasein* 4.5 4.55 19.42 11.16 15.91 31.13
Rice emahta* 4.87 5.38 21.00 13.96 17.90 32.99
Gram (split) 12.30 11.21 28.77 36.49 38.60 35.89
Pegyi 7.80 11.50 22.20 26.56 34.79 35.38
Sadawpe 14.82 20.50 34.03 38.32 55.51 58.88
Groundnut oil 42.86 65.00 59.89 75.88 146.56 172.00
Sesame oil 41.69 62.00 56.90 67.74 137.62 159.12
________________________________________________________________
* Rice is measured in pyi (small basket)
Source: "Reports to the Pyi Thu Hluttaw" and "Reviews of the
Financial Economic and Social Indicators"
_______________________________________________________________
government has been paying serious attention to this problem.
Another important set of indicators is the balance of trade
and the quantum of exports during this period. The balance of
trade shows increasing deficits throughout the five-year period,
with an average deficit of 22.4 billion kyat in the last three
years, from 1990/91 to 1992/93. In spite of various efforts to
promote exports through the encouragement of private enterprise,
exports remained stagnant at about the 2.9 billion kyat level
from 1989/90 to 1991/92. Except for forest products, hardwood,
beans and pulses, the quantum of exports in other items did not
change appreciably. The rice export is limited to a fraction of
what had been achieved in the past. Rice export in 1992/93
amounted to 207.7 thousand metric tons, not reaching even the
level of ex- port in 1987/88, that is, 303.3 thousand metric
tons.
Table 6 illustrates the state of agricultural production
during the five-year period under the present government. The
table compares sown acreage and yields of all the important crops
between the years 1986/87 and 1992/93. It should be noted that
although 1992/93 was the best year in agricultural performance
during this period, yields for all crops except one single crop,
/Pedesein/ (a variety of beans), have declined compared with the
year 1986. All other years between the two landmark years, not
shown here, have consistently declined throughout this period.
TABLE 6
Myanmar: Comparative Sown Acreage and Yield of Main
Agricultural
Crops.
1986/87 to 1992/93
_________________________________________________________________
Sown Acreage Yield*
(thousand acres) (per acre)
_______________ __________
Crop Basket 1986/87 1992/93 1986/87 1992/93
Size
_________________________________________________________________
Paddy 46lb 11,968 12,603 58.72 57.10
Wheat 72lb 293 341 21.44 12.95
Maize 55lb 442 369 29.10 24.36
Sorgham 62lb 545 496 16.43 11.36
Matpe 72lb 237 518 13.98 11.17
Pedesein 72lb 143 443 7.48 8.12
Butter Bean 69lb 159 92 18.60 14.18
Soya bean 71lb 78 93 11.03 10.29
Gram 69lb 498 451 11.32 9.94
Pesingon 72lb 64 71 10.09 7.76
Groundnut 25lb 1,394 1,251 37.15 32.33
Sesamum 54lb 2,848 3,422 4.12 4.07
Sunflower 32lb 615 477 30.28 20.35
Cotton viss 471 426 123.49 111.94
Jute viss 126 137 278.64 202.35
_______________________________________________________________
* Cotton and Jute yields are measured in viss per acre. The rest
are in basket per acre. Equivalent pounds per basket are shown
for each crop.
Source: "Reports to the Pyi Thu Hluttaw" and "Reviews of the
Financial Economic and Social Indicators"
_________________________________________________________________
Between the two periods. the sown acreage in paddy and other
crops has increased by 5.3 per cent and 11.8 per cent
respectively. Since the sown acreage approximately indicates the
response or interest shown by the farmers to economic stimuli for
a particular crop, the higher rate of increase in sown acreage in
crops other than rice suggests more responsiveness to non-rice
farm products. Another interesting observation is that the
proportions of sown acreage among various crops other than rice
have changed, which again should be taken as a response to the
expectations of market price. The sown acreage in /Matpe/,
/Pedesein/, and /Pesingon/ have substantially increased. /Matpe/
and /Pedesein/ are major export items among beans and pulses and
/Pesingon/ too is an export item probably sold overland to India.
On the other hand, one redeeming factor is the rise by 6.1 per
cent in the paddy output in 1992/93 over the level of 1986/87.
This again was mainly due to the increase in acreage since the
yield in 1992/93 is still lower than that in 1986/87. Changes in
the output of other crops are likewise due to the shift in
acreage rather than change in productivity.
On the whole, in spite of some improvement in the year
1992/93, agricultural production is considered as declining or to
say the least, as stagnant. This condition could be partially
explained by the fact that the quantum of important inputs such
as fertilizers and other agricultural inputs made available to
farmers has also declined. The total amount of fertilizer
utilized for all crops in 1986/87 was 381,000 tons while in
1992/93 this amount declined to 116,000 tons. The decline in
supply of inputs has been consistent throughout this period.
Other inputs such as agricultural loans, have increased in kyat
amounts but the rate of inflation would have nullified the
effects of these increases.
Though these factors contributed to the decline or the
stagnant conditions of agriculture, the more fundamental problem
is that Myanmar's agriculture, within the existing technology and
available land, seems to have reached the production plateau.
Modern biotechnology has not become part of agricultural
research. Seed development and plant breeding is far behind
countries such as Thailand. How much of high-yielding seeds
distributed are pure enough to be effective is not known. The
irrigation ratio, that is the ratio of net sown area to irrigated
area, has remained at 12.5 per cent for the last twenty years.
Support facilities such as efficient marketing, ready supply of
inputs, market information, access to loans and credit are still
limited though the market economy has begun to make some inroads.
All these indicators suggest that production and exports
have not responded to market forces as effectively as expected.
No substantial change in production, productivity, or surplus for
export have taken place in agriculture. The external trade that
takes place is confined only to limited amounts of available
surplus. It is common knowledge these days that some foreign
businessmen go to Myanmar with high hopes of procuring abundant
agricultural produce, only to learn to their disappointment that
the local businessmen cannot supply the quantity required or
conform to the quality standards specified. Moreover, the
available surplus cannot be procured, graded, or shipped in time.
Quality control is lacking or non-existent. Transport and storage
facilities are inadequate. The lack of infrastructure and support
is another stumbling block responsible for the slow growth of the
export sector.
Problems and Prospects for Future Development
Five years is a reasonable length of time to put in place the
basic social framework for facilitating the functioning of a
market economy. This has not been achieved in Myanmar over the
last five years. Investment laws, rather hurriedly passed in the
early stage, were followed by the formation of a few private
banks and state-sponsored joint-venture corporations but
long-term foreign direct investment in manufacturing or
agribusiness areas has not come in. Institutional development
measures such as the establishment of a civil service with a fair
degree of efficiency and responsiveness, the legal administration
system to dispense impartial justice, and development and
training of manpower for the next phase of growth were neglected
or sidelined. Some roads were built and school buildings
constructed, but they were relatively inconsequential in the
context of a major need for overhauling and drastic upgrading of
the existing system.
Out of the total construction budget of the central
government for the last four years, 62.7 per cent was spent on
constructing buildings including schools, offices, industrial
buildings, dwellings, and so forth. New road construction and
renovation and improvement took up 21 per cent and 7.9 per cent,
respectively. However, the average physical miles of new roads
constructed per year in the last five years amounted to only 103
miles while the average miles of new roads constructed per year
since 1961/62 was 603 miles.
With regard to measures to stabilize the functioning of the
economy such as the introduction of prudent fiscal and monetary
management, performance is woefully short of what is required. On
the whole the development of infrastructure and reconstruction of
institutions are yet to begin earnestly.
However, Myanmar investment laws and other government rules
provide a reasonably attractive package for foreign investors. It
is not the lack of incentives but the absence of a basic price
mechanism and a social framework that most likely dissuades
foreign investors from coming in.
Myanmar's entry to the market was very cautious and hesitant,
almost to the point of ineffectuality. Holding on to the highly
unrealistic exchange rate of 6 kyat to one U.S. dollar undermines
other efforts the government is pursuing to introduce market
economy. Importers would have to buy back whatever is available
in the market to export so that they can get hard currency. The
foreign exchange certificate recently introduced to facilitate
the currency market is a poor substitute as it is costly,
cumbersome, and still serves only those who bring in dollars for
spending in Myanmar. There is no market for those who wish to buy
dollars with kyat for transfers abroad. The repatriation of
capital, interest, and dividends are possible only with the
permission of the authorities. Under the present exchange rate,
any deal that does not earn direct dollar revenue will be very
unprofitable in terms of foreign currency. The capital brought in
is undervalued at the official exchange rate while profits made
will not be allowed to be repatriated at the same official
exchange rate. Under this restriction. a potential investor will
be discouraged from going into a venture involving a large amount
of fixed capital. If a sizeable portion of the product is sold
locally it would he more difficult to get the profits out of the
country. Only short-term extraction of natural resources such as
timber extractions, sea or coastal fishing, or procurement of
local produce for export will be favoured.
Apart from exchange control, other controls on the market are
still operative. The farmers, particularly rice farmers, have to
surrender part of their produce at the very low fixed price. In
fact farmers are still subsidizing the urbanized or government
employees. Any significant rise in prices in the open market will
invite intervention or chastising from high military officials.
The local commanders still have the liberty to control the
movement of goods in and out of the regions. The control of
foreign trade or border trade has been quite extensive. With
frequent changes in rules and restrictions and numerous rules to
follow, opportunities for corruption are many, resulting in high
transaction cost for business.
Another feature that would impede further development of the
economy is the government's emphasis on short-term results or
expediency in almost all its endeavours. Most important measures
taken by the government seem to be quick fixes to relieve some
pressing problems at hand. The foreign investment law was
introduced rather hurriedly with an overriding desire to help
improve the precarious imbalance of foreign exchange. The
long-term importance of technological transfer was not recognized
and the relevant conditions to that effect were not laid down in
the law. In addition, how foreign investments would fit into the
long-term industrial development was unclear as there was no
clear vision for future development.
The whole pattern of government expenditure suggests that
these expenditures are made to address some immediate need to
avoid political discontent rather than to increase the productive
level of the nation. Increasing wages and benefits, without an
increase in productivity, just to pacify the disquiet of a
certain section of the people or to reward some group to secure
their loyalty only leads to sharing the existing stock of goods
at the expense of the majority. The construction of roads and
bridges has long-term benefits but it can be counter-productive
if used as a pork barrel for a certain constituency. Border trade
was introduced to alleviate the extreme circumstances created by
economic isolation from other countries. The terms of trade are
unfavourable to Myanmar both ways because it lacks a bargaining
position. There is nothing wrong with the logic of cross-border
trade as long as the trade takes place in a competitive setting,
with such prerequisites as decontrol of foreign exchange, foreign
trade banking, and proper trading facilities including quality
control.
Timber concessions and the selling of fishing rights are
glaring examples of short-term thinking without regard to long-
term consequences. How much over-exploitation the concession
owners have done cannot be estimated yet. According to Myanmar's
trade statistics in 1991/92, approximately 481.3 thousand metric
tons of timber was exported. But the real amount may be
considerably higher. It should also be noted that Thai deep-sea
fishing has always been so efficient and ruthless that by the
late 1970s fishing resources were nearly exhausted in the Gulf of
Thailand itself. The environmental damage and resource depletion
that may have been done by Myanmar's concessions is not known
yet.
A major weakness is that the government does not seem to have
a conception as to how the economy will merge with markets of the
region and the world. Although it is supposed to be only a
caretaker or a transitional government, the fact remains that it
has stayed in power for five years and intends to have a major
role in the future. Hence there is no good reason for the lack of
longer-term economic thinking. On the other hand, it is possible
that, weary of the socialist planning of the past, the military
leadership takes it that the market economy is a form of a
/laissez-faire/, a hands-off or a free-for-all policy. But this
would be erroneous. All East Asian economies that have developed
through the market system have had the calculated and enlightened
hand of the government. The economies are developed through the
build-up of selective industries that are able to compete in the
international market.
The policy of allowing remote regions of the country to be
linked with neighbouring economies could have both positive and
negative consequences. Unless these regional developments are
tied up with the core development of Myanmar's economy, and these
regions themselves establish their own competitive advantage
consonant with their own potentials and in conjunction with the
pattern of development of the whole of Myanmar, these regions
will unwittingly become the hinterland of other countries instead
of developing as full partners in regional growth.
Another major problem that will slow down the long-term
growth of the economy is the depletion of trained and educated
manpower and the deterioration of the educational system. The
Myanmar leaders still seem to place much store on the supposedly
rich natural resources of the country. However, with the
population having increased to 50 million in the 1990s from 16
million in 1940, the man-resource ratio has declined. Even with
some introduction of modern technology and some improvement in
production since the 1940s, the level of rice production now
barely meets the needs of the population. Moreover it should be
realized that countries gain competitive advantage not through
the richness of natural resources, but through the development of
technology and the skills of their work-force. All countries that
have developed rapidly in the last two decades followed the route
of technological development and the upliftment of skills. The
need for skilled manpower will become more pressing as future
industries become more and more technology-based and skill-
intensive. The idea of inviting labour-intensive industries to be
relocated in labour-abundant countries is a tempting option for
countries in the early stage of development. This option is a
fleeting one since these industries are moving to more labour-
abundant countries as the original host countries reach a certain
level of development and labour become more expensive. The
training of skilled technicians and engineers takes a long time
to bring about results, and so far the government has paid scant
attention to this need.
The last, though not the least, will be the political
stability of the country. Ultimately private investors and donors
from international agencies will come forward only if a conducive
and stable political climate prevails. The seeming quietness or
the acquiescence under extreme social and physical control
should not be equated with stability under normal circumstances.
End of Part I