JP regularly travels to Myanmar. Among his many contacts there are many senior government officials with whom he is able to share experience and insights. He will speak to Net Impact about the unique social setting for Myanmar business, offering a broad context to help members understand and anticipate fast-paced developments there.

1. Myanmar-Magic or Miscue
Dr Jean-Pierre A. Verbiest
Sasin Centre for Sustainability
Management, 19 July 2012
1

2. Introduction
Myanmar: twice size Viet Nam; ¼ larger
Thailand;
Population : 61.2 Million, slow growth
(around 1 %)
Central location in Asia
But low GDP per capita $854 in 2012 but was
$350 in 2007. In PPP terms $1,394 in 2012.
GDP per capita one of lowest in Asia.
Cambodia was $931. Thailand $5,850

3. Introduction
Four political/development phases:
Parliamentary democracy with mixed economy
(1948-1962)
Socialist military rule with extreme state control
(1962-1988)
Military with market orientation (1988-1997)
Military with market orientation and strong state
intervention (1997-2010)
New phase in 2011: Reforms and return to
international community

4. Introduction
2008 New constitution/2010 Elections/2011
President policy statement
Very explicit and strong change message: Market
based economy; monopolies, pricing collusion,
nationalizations, demonetization not allowed.
Improvements in people’s living conditions the
priority.
Path breaking statements: Difficult and time
consuming concrete actions and reform process
mainly due to institutional capacity (staff,
institutions, legal) 4

5. Introduction
Magic ?
Miscue ?
Definitely NOT MISCUE !
But NOT MAGIC !
JUST HARD WORK AND POLITICAL COURAGE
PRIVATE SECTOR DOMESTIC AND FOREIGN NEED
TO GIVE RIGHT SUPPORT THRU RESPONSIBLE
BEHAVIOR.
5

6. SWOT - Strength
Abundant natural resources (agriculture, gas,
oil, minerals, precious stones)
Less population pressure on land (Land-
population ratio is relatively high.)
Half of arable land area fallow
Abundant trainable labor force with basic
education
Well connected to major Asian market: ASEAN,
China and India

7. SWOT – Strength (Cont.)
Strategic location: Geopolitical importance for
regional connectivity as the tri-junction of
East Asia, Southeast Asia and South Asia
Benefit of late comer in development: can
leapfrog
Significant foreign exchange reserves

8. SWOT – Weakness
Macroeconomic instability associated with a
number of policy inconsistencies and weak
institutions
Low saving and investment rates
Lack of implementing capacity and governance
issue
Underdeveloped banking and financial system
High dependence on natural resource extraction
and agriculture sector

9. SWOT – Weakness (Cont.)
Poor infrastructure, institutional and business
environment
High poverty, low HDI, low income and high
outmigration rate
Lack of comprehensive approaches and
appropriate funding to human capital formation
Absence of accurate and reliable economic data
to provide exact diagnostics of the economy

10. SWOT – Opportunity
Regional hub for multimodal transportation and
a potential supply route bypassing the Malacca
Strait
Sole land-bridge between two giant economies;
China and India
High potential to be a ‘food basket’ and ‘energy
source’ for Asia
Huge industrial potential for FDI from ASEAN
and global supply chains

11. SWOT – Threat
Resource Curse: lack of balancing economic
growth and environmental sustainability
Danger of Dutch disease
Social and Spatial inequality
Increase in corruption
Political instability and ethnic insurgency
International pressures and economic sanctions
Strong influence of China

12. Growth Potential to 2030
Baseline: 7.5-9% GDP to 2030; Per capita GDP
growth: 7-8.4% :
High scenario: Higher than 10 %
Low: 5-6 %
At Baseline: GDP in 2030 around $4000,
Middle income country. GDP per capita higher
than Indonesia today, higher than Thailand in
2005).
12

13. Key Challenges
I. Strengthening Institutions and Governance
Systems
II. Strengthening macroeconomic
management and reforms
III. Diversifying and developing the
agricultural sector
13

14. Key Challenges
IV. Fostering human capital
V. Diversifying economic sectors and build an
industrial base
VI. Developing economic infrastructure
14

15. Institutions and
Governance
Major capacity constraints in all areas
“Core economic institutions” need immediate
strengthening: MOF, CBM, Ministry of Planning
and Development, plus all line ministries: IFIs
can help in this but will take time.
New institutions to be created: Board of
investment, environmental protection agency,
Social impact assessment/protection agency.
Major legal overhaul required.
15

16. Governance Indicators
Table 4.2 Governance Indicators
Political Stability and
Government Regulatory Quality Voice and
Economies Absence of Violence Rule of Law Index
Effectiveness Index Index Accountability Index
Index
Rank Point Est. Rank Point Est. Rank Point Est. Rank Point Est. Rank Point Est.
Brunei Darussalam 75.2 0.87 95.3 1.35 82.9 1.11 72.2 0.79 27.5 -0.79
Cambodia 25.7 -0.74 25 -0.63 39 -0.37 16 -1.05 23.7 -0.88
Indonesia 46.7 -0.21 24.1 -0.64 42.9 -0.28 34.4 -0.56 47.9 -0.05
Lao PDR 14.8 -1.03 43.9 0 14.3 -1.05 18.4 -0.94 4.3 -1.71
Malaysia 79.5 0.99 46.7 0.07 60 0.33 65.1 0.55 31.3 -0.53
Myanmar 1 -1.85 6.6 -1.72 1 -2.31 3.8 -1.52 0.5 -2.17
Philippines 50 -0.14 10.8 -1.42 52.4 0.02 35.4 -0.53 45 -0.12
Singapore 100 2.19 90.1 1.15 100 1.84 92.5 1.61 34.6 -0.4
Thailand 59.5 0.15 14.6 -1.11 61.9 0.37 50.9 -0.13 34.1 -0.4
Viet Nam 46.2 -0.26 51.4 0.19 31 -0.56 41.5 -0.43 7.6 -1.52
Note : The 2009 index included a total of 213 countries ranked on a continuos scale from 0 to 100. Higher ranks correpond to a better performance of the country. Point estimate values are measured in
units ranging from about -2.5 to 2.5 following a normal distribution. Higher point estimate values correspond to better governance outcomes.
Source: Kaufmann, Daniel, Aart Kraay and Massimo Mastruzzi (2010). "The Worldwide Governance Indicators: Methodology and Analytical Issues". World
Bank Policy Research available at http://info.worldbank.org/governance/wgi/index.asp

17. Human Development Index
2010 country rankings
 ASEAN has achieved
remarkable progress in
human development, but
progress has been uneven
across ASEAN member
countries
 CLMV countries remain at
the bottom of HDI rankings
17

18. Governance Indicators
(World Bank Data)
2009 point estimates
Voice and Accountability Index Rule of Law Index
18

19. Institutions and
Governance
Weak capacity of public sector needs to be supported
by responsible and self regulating private sector.
This will not come naturally but “good” players will
gain
Role of civil society (SEE LATER)
19

20. Institutions and
Governance
Major reforms have started already: New
CBM law, FDI law, SEZ regulation, FOREX law,
FDI promotion agency, Environment
protection agency, etc. Most of these laws are
in final stages in national assembly.
A lot of other legal work on-going mostly
without external assistance
20

21. Macroeconomic
Management
Fiscal policy and monetary policy need to be
aligned
Exchange rate unification was precondition
for any economic reform and done on 1 April.
Full unification will happen once interbank
markets function and restrictions on FOREX
access for imports is lifted (new FOREX law).
11 private banks already given foreign
exchange dealers authorization.
21

22. Macroeconomic
Management
Lifting of sanctions are essential for
macroeconomic management and success of
reforms. E.g. Myanmar private banks cannot
have overseas correspondent banks, no
SWIFT, no access to FOREX. Only SO Banks can
operate (limited) with the outside.
Macroeconomic stability (inflation, exchange
rate, etc) is essential but not easy in context
of strong growth and inflows from natural
resources exports (Dutch disease). 22

23. Agriculture
Sector which as in Viet Nam can jumpstart
economy
Huge potential (rice, beans, rubber, sugar,
coffee, etc)
Half arable land fallow; abundant water;
diverse climate
Will give highest returns in short term
including in terms of poverty reduction
23

24. Agriculture
Large potential in fisheries and sustainable
forestry
Country needs technology to raise
productivity in all agricultural areas
Rapid diversification possible
Huge potential for agro-industry and for FDI in
the sector
24

25. Human Capital
Huge neglect and demand
Still amazing good capacity at senior level and
selected fields (engineers)
Need combine public and private sector but
good regulations: Capacity MOE !
Import education is an option
This is key for Myanmar to accelerate
development.
25

26. Diversify and Build
Industrial Base
Essential to avoid Dutch disease
Cannot be a dual economy based on extractive
resources and agriculture.
Myanmar will benefit from “third” wave FDI
relocations from East Asia. Also relocations
within ASEAN.
Huge potential but need appropriate climate:
macroeconomic stability, deregulation and
infrastructure; set up industrial zones.
26

27. Diversify and Build
Industrial Base
Labor intensive and natural resources related
industries and services will initially be most
attractive [garments and textiles, agro-
industries (fisheries and food processing),
furniture, construction industries, tourism
related industries, gems and jewelry)
Infrastructure development (ports, airports,
urban development (Yangon rail)
27

28. Diversify and Build
Industrial Base
Heavier industries related to oil and gas and
mining (fertilizer, petrochemical, etc)
Power sector development (IPP, hydro –but
need careful environmental and social impact
assessment, complicated by ethnic issues
28

29. Economic Infrastructure
Myanmar is at center of East Asia, only ASEAN
country with borders with China and India.
It has a unique position no other ASEAN
country possesses
Major investment in power, infrastructure
(roads and ports), telecommunications and
urban infrastructure needed
Good connectivity will benefit Myanmar
hugely, and also make ASEAN very different.
Myanmar will be a key “shaper” of how 29

30. Looking Forward: Miscue?
No !
Political will is there both from most former
regime members and opposition
Reached a point of no return domestically and
internationally.
But challenges and tasks ahead are
formidable
But still some strong fundamentals from
colonial period
30

31. Looking Forward: Miscue?
Compared to Viet Nam’s situation in 1986-
1993: World has changed and become much
more globalized.
Information technology revolution has
occurred and makes communications and
information available nearly everywhere in
real time.
This has changed the context of development
for Myanmar
31

32. Looking Forward: Magic ?
NO ! Just hard work and political
determination ahead.
Myanmar is country with enormous potential
in terms of resources and its people.
History of country suggests last 3 decades
only a parenthesis in a long remarkable
history. Myanmar will take back its rightful
historical place
32

33. Looking Forward: Magic ?
Faced with formidable challenges of
globalization, regionalization (ASEAN) and
economic and political reforms at home,
Myanmar’s public sector institutions
weakened by years of underfunding and weak
staffing, will need strong backing from a
responsible private sector.
From its history, country will take strong lead
in its socio-economic development, and will
not be “imposed” by “outside”. 33

34. Looking Forward: Magic ?
Successful reform and development will
depend on a strong public-private sector
partnership.
Successful FDI will have to be “responsible”
FDI.
Successful domestic investors/business
people are responsible investors (Fertilizers)
34

35. Looking Forward: Magic ?
Great opportunity for Myanmar: Strong civil
society.
Because of isolation and development
partners’ engagement with NGOs and civil
society only, Myanmar has a stronger civil
society than any other country had when
undertaking major economic reforms(Viet
Nam, China, etc)
35

36. Looking Forward: Magic?
With political reforms and free
communication, civil society has become very
powerful.
Facebook, Tweeter, etc extensively used by
civil society groups all over the country
(Rakhine state, Dawei, etc)
Government and investors will face strong
scrutiny on environmental and social issue
36

37. Looking Forward: Magic?
Dawei coal fire power plant, Northern
Ayawadee dam, Chinese port and pipeline
construction in Rakhine state all under close
scrutiny.
Good thing although it will keep FDI under
high scrutiny. Investors need to factor in those
limits and be responsible investors
37

38. Looking Forward: Magic?
Because of failure of state to provide public
goods, infrastructure and social services
(Health and education) and because of strong
Buddhist culture, private Myanmar sector
often very much involved in CSR programs.
Remarkable development.
38

39. Looking Forward: Magic?
For instance, Myanmar Awba Group, largest
producer and importer of fertilizers, works
with farmers and local communities to build
small infrastructure, schools and organize
farmers groups to better utilize fertilizers and
not overuse! Remarkable.
Many examples of this type.
Foreign investors who relate well to their
communities will gain a lot.
39

40. Thank YOU
JP Verbiest
jpverbiest@hotmail.com
jpverbiest@gmail.com
jp@westindochina.com
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