The Myanmar Economy
Konosuke Odaka Editor The Myanmar Economy Its Past, Present and Prospects
Editor Konosuke Odaka Hitotsubashi University Tokyo, Japan ISBN 978-4-431-55734-0 DOI 10.1007/978-4-431-55735-7 ISBN 978-4-431-55735-7 (ebook) Library of Congress Control Number: 2015951620 Springer Tokyo Heidelberg New York Dordrecht London JICA Research Institute 2016 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer Japan KK is part of Springer Science+Business Media (www.springer.com)
Foreword I welcome the publication of this book, which fills a huge void in the knowledge on Myanmar. With its potentials and challenges, this populous Southeast Asian country has attracted a lot of attention and activity, particularly from foreign investors and international development agencies. There has also been an increase in information about the country. However, comprehensive analysis of the fundamental structure of this hitherto-isolated country s economy and its historical background is still very scarce. Myanmar (Burma) under the British Administration in the early twentieth century was one of the wealthiest in Southeast Asia. However, decades of political turmoil, misguided policies, and the seclusion from the rest of the world have together turned the country into one of the most impoverished in the ASEAN, with the lowest per capita income in the region and deplorable social indicators. Since its policy change in 2011, the country has embarked on a new journey a journey towards political reform and economic development. Hopes are high, given its abundant resources including agriculture, forestry, and fisheries and a highly educated labour force and its potential as a market with a population of about 80 million. Many challenges, however, continue to confront Myanmar: poverty, lack of administrative and institutional capacity, poor business environment, and the list goes on. I am sure that this book will be useful to the leaders and people of Myanmar as well as to those who are supporting them. To grow into a country of abundance which it deserves to be Myanmar needs to be led wisely with strategic and realistic development plans with support from international partners; such collective efforts should in turn be based on an accurate, comprehensive, and systematic understanding of the country s economy. I am convinced that this book can be one of the important sources of such a body of knowledge. I also rejoice at this publication because my agency [Japan International Cooperation Agency (JICA)] has been involved in the process leading up to it. Even during the period of international sanction, Japan continued its cooperation with the country, largely out of humanitarian considerations. One such activity was an intellectual partnership project conducted through JICA from 2000 to 2003. Entitled v
vi Foreword Myanmar Japan Cooperation Programme for Economic Structural Adjustment of Myanmar, this policy dialogue exercise involved members of academia and highranking government officials of the two countries, just like other similar projects for Vietnam (1995 2000) and Laos (2000 2004). Following the submission of the programme s final report to Myanmar s prime minister in 2004, its objective was judged worthwhile to be pursued further, and a small research group was organised at the JICA Research Institute from 2008 to 2010 to follow up the subject. This volume represents a report of this intellectual endeavour, and I am very pleased that it is now available worldwide in book form. Japan International Cooperation Agency (JICA) Tokyo, Japan Akihiko Tanaka
Preface A new light is emerging in the Myanmar economy. Whether or not the economy will progress towards sustained growth greatly depends on how its past structure is transformed and adapted to the new international economic environment. For this purpose, a new road map for market development needs to be drawn and executed, with support both from inside and outside of the country. As the country has shied away from open contact with the outside world for most of the second half of the twentieth century, neither the international community nor the citizens of Myanmar themselves have been sufficiently informed about the reality of the country s economic conditions. It is essential, under the circumstances, that the public be given accurate information as to the basic tasks required of the economy, where difficulties may lie, and how to overcome them in order to achieve the objective of sustained improvement in economic welfare. This volume aims to fill the gap in understanding these issues with the hope of assisting concerned citizens to formulate a basic policy agenda for the nation. The book s originality, if any, lies in its analyses of Myanmar s economic structures, which seek to identify the socio-economic and historical reasons that have yielded the current conditions in the Myanmar economy. Moreover, these analyses were carried out with the conviction that such knowledge is essential to formulating a policy road map for raising the economic welfare of the nation. The book is composed of eight chapters and consists essentially of three parts: (1) two chapters (Chaps. 1 and 2 ) that review past literature; (2) five empirical studies that utilise information collected and analysed by the authors since the end of the twentieth century, which is the result of field surveys and innumerable dialogues with Myanmar citizens, both public and private, in addition to intensive desk studies; and (3) a brief summary and conclusion. Throughout the volume an effort has been made to interpret the outcomes of the studies in light of the nation s economic history, as historical experiences constitute an important socio-political condition in which market development occurs. The second part of the book, mentioned above, lays out the essential ingredients for drawing a road map for realising the above-mentioned objective. Specifically, it vii
viii Preface focuses on the issues of financial development, physical social capital, agrarian development, indigenous modern manufactures, and economic relations with China. A brief explanation may be in order here to explain why the five topics have been selected. When modern economic development began in Myanmar (then called Burma) after its independence, the basic guiding economic principle was chosen to be that of state planning and was later renamed the Burmese way to socialism. The country s political leaders at the time chose this as a natural testament of their exposure to anti-capitalist ideologies (such as Fabian socialism) in their youth, when they earnestly sought ways and means to assert their country s post-colonial independence. The planned way of managing the economy through the late 1980s, however, did not quite fulfil original expectations. First of all, its quantity-oriented mindset weighed the role of prices too lightly, leading it to ignore the importance of monetary policy. It is almost imperative to rectify the lingering memory of follies committed by past macro monetary policies (e.g. demonetisation, slow and inadequate action at the time of bank crush, etc.), which may have abetted distrust in the government s economic policies. Furthermore, although in its colonial days Myanmar had earned the title of the top rice exporter in the world, the government s agrarian policy-making, with little concern for proper pricing, failed to improve the efficiency of the country s rice production. On the industrialisation side, its production enterprises, which were in principle state-controlled, tended to be excessively capital- intensive and inefficient due partly to overcapacity and underutilisation and did not create large enough employment opportunities. In addition, as the regime s inward-looking economic policies resulted in a chronic shortage of foreign exchange, the country faced difficulties importing the materials, parts, and components highly essential to manufacturing. These economic policies also made it hard to construct and/or to maintain the sufficient number of electricity-generating stations required for industrialisation. In 1988, the ruling military junta, who had taken over the socialistic regime, replaced planning with the market principle. However, when the junta was determined to stay in power despite having lost the 1990 general election, international sanctions were imposed on the country and were further strengthened after 2004. These sanctions had the effect of limiting Myanmar s international transactions to a minimum and led the country to seek to establish closer ties with China. Following the 2010 general election, a new administration was duly established in 2011. The social and international environment of the country changed drastically, as international sanctions were gradually lifted and the market principle could finally be put into practice. It would still take some time, however, before the remnants of the planned economy disappear and the rules of the market assume the full extent of their effects. Economic development purports to achieve and maintain a reasonable rate of improvement in the standard of living or national income per capita, with little or low rates of inflation. In the early phases of industrialisation, the most important areas for policy consideration are the proper provision of (a) physical social over-
Preface ix head capital and the building of social frameworks for market development, particularly in areas of rulemaking and regulatory devices, and of (b) financial development. It is also essential to mobilise national savings for capital formation and to supply a healthy, motivated labour force (entrepreneurs, administrators, engineers, and production workers). In addition, the choice of industry, as well as that of technology, should be in line with the medium- and long-term comparative advantages of the nation, with due consideration being paid to environmentally friendly resource endowment. Concurrently, there should be a place for public policy to play its role, such as assisting the private sector to overcome information asymmetry, to improve its productive efficiency, and to protect against unforeseeable business risks. In carrying out this grand task in the age of globalised economic transactions, Myanmar should be able to weave a unique growth strategy. This could best be achieved by taking note of past incidents of failures in economic growth throughout the world and by skilfully inviting the now plentiful international financial sources to assist the national economy to stand on its own feet without resorting to an overly aggressive strategy for industrialisation as was once adopted by some latecomers to development, such as Japan. Tokyo, Japan December 2014 Konosuke Odaka
Acknowledgements At one time or another since the end of the twentieth century, the authors of this volume have been directly or indirectly involved in intellectual partnership programmes between the governments of Myanmar and Japan. Perhaps for this reason the writing style of the volume is characterised by a sense of identification with the country and with its people. The origin of the research, on the basis of which this volume is formed, goes back to 1999 and is closely related to the above-mentioned partnerships. The project has continued more or less without interruption since then, always in close association with the Japan International Cooperation Agency (JICA). However, the project to write this book would not have begun without the strong push from Mr. Takahiro Sasaki, who was director of the JICA Myanmar Office in the years 2003 2005. In keeping with Mr. Sasaki s vision to fulfil this project, the JICA Research Institute provided financial assistance during the fiscal years 2008 2011, while Dr. Haruyuki Shimada acted as its coordinator. A report of the project, entitled as Issues and Challenges for Economic Development in Myanmar, was published in Japanese in 2012 with the title Myanmar keizai no atarashii hikari (New Lights of the Myanmar Economy) by Keiso Shobo Publishing Co., Ltd., Tokyo. This volume is a wholly revised, new version of the report, the contents having been updated and rewritten with the exception of the introductory chapter. In executing this study, the authors were guided and assisted by an innumerable number of generously minded persons too many to list here. I would merely confine myself to expressing the authors special thanks for the heartfelt encouragement offered from time to time by Retired General David Abel, Dr. Khin San Yee, Professor Myat Thein, U Than Lwin, and U Tin Htut Oo. The members of the JICA Myanmar Office have repeatedly gone out of their way to arrange research trips, factory visits, professional interviews, discussion meetings with government officers and/or the members of business communities, and much more. Without their efficient and effective assistance, the execution of the research would simply not have been possible. Special thanks go to Professor Hal Hill of the Australian National University for making helpful suggestions and xi
xii Acknowledgements encouraging me to proceed with editing this volume. I also thank Ms. Aiko Aikawa and Mr. Yasuhiko Sato of the JICA Research Institute, who have been instrumental in carrying out the highly complicated process of preparing, editing, and formatting the manuscript and getting in touch with the publisher. Last, but by no means least, I express my appreciation for the favourable comments given by the reviewers on the final version of our manuscripts. These manuscripts are now ready to go to press and to become part of social science volumes from a great publisher. All the authors of this volume join me in sending our best wishes to the citizens of Myanmar, who are engaged in the highly promising and honourable task of building a unique welfare economy. May I close this note by stating that the views and interpretations expressed in this volume are those of the authors and do not necessarily represent those of the organisations or the persons mentioned above.
Contents 1 A New Light to Shine? Historical Legacies and Prospects for Myanmar s Economy... 1 Konosuke Odaka 2 Remnants of the Colonial Period and Economic Policies of Post-Independence: Through the Study of Hla Myint... 29 Asuka Mizuno 3 Growth Structure and Macroeconomy Under Twenty Years of Junta Regime in Myanmar... 51 Fumiharu Mieno and Koji Kubo 4 Physical Social Overhead Capital (SOC)... 79 Konosuke Odaka 5 Agriculture and Rural Development Strategy in Myanmar: With a Focus on the Rice Sector... 97 Koichi Fujita 6 Sustainable Farming Systems in Myanmar: The Implications of Findings from Field Surveys in the 2000s... 131 Masahiko Matsuda 7 Post-colonial Industrialisation in Myanmar... 155 Toshihiro Kudo and Konosuke Odaka 8 Economic Relations Between Myanmar and China... 195 Atsuko Mizuno 9 Summary and Conclusion: Capitalistic Development a là Myanmar... 225 Konosuke Odaka Index... 235 xiii
Contributors Koichi Fujita Division of Economic and Political Dynamics, Center for Southeast Asian Studies, Kyoto University, Kyoto, Japan Koji Kubo Bangkok Research Center, Institute of Developing Economies-Japan External Trade Organization (IDE-JETRO), Bangkok, Thailand Toshihiro Kudo National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan Masahiko Matsuda College of International Relations, Ritsumeikan University, Kyoto, Japan Fumiharu Mieno Division of Economic and Political Dynamics, Center for Southeast Asian Studies, Kyoto University, Kyoto, Japan Asuka Mizuno Faculty of Economics, Asia University, Tokyo, Japan Atsuko Mizuno Department of International Economy and Business, Faculty of Economics, Kyushu University, Fukuoka, Japan Konosuke Odaka Institute of Economic Research, Hitotsubashi University, Tokyo, Japan Hosei University, Tokyo, Japan Professional association is as of January 2015. xv