Myanmar - Economy
The World Bank warned that Myanmar's economy was expected to contract by a staggering 10 percent in 2021. And the United Nations (UN)'s Development Program said the combined effects of the coronavirus pandemic and the military coup could see nearly half of the Myanmarese population living in poverty by 2022. Myanmar’s economy is estimated to have grown by 1.7 percent in FY19/20, a pronounced slowdown from growth of 6.8 percent in FY18/19. The pandemic and associated containment measures have had both demand- and supply-side effects, weakening consumption and investment, and disrupting businesses’ operations and the supply of labor and inputs. Activity in the manufacturing, retail, travel and leisure and recreational sectors contracted. Other services using internet-based platforms were better able to weather the impact of mobility restrictions.
Myanmar is a nation in transition, seeking to break with a past marred by authoritarian rule, economic mismanagement, and multiple conflicts that persist today, driven by social exclusion and predatory natural resource extraction. The country’s opening, in 2011, and the first democratic elections, in 2015, marked critical turning points for Myanmar, generating a wave of optimism. Unification of exchange rates, initial liberalization of product and factor markets, integration into regional markets, and modernization of economic and financial institutions and systems resulted in rapid economic growth (above 7 percent per year) and measurable improvements in social welfare since 2011. Poverty almost halved, falling from 48 percent to 25 percent between 2005 and 2017. Reform momentum slowed after 2016 as a newly elected civilian government grappled with defining its economic vision and managing the public administration to implement policies and programs. Most recently, the Government adopted an ambitious Myanmar Sustainable Development Plan, reinvigorated its economic reform agenda, and has gradually begun to tackle the more difficult second-generation reforms needed to sustain the economic transition. The second democratic national elections are scheduled for November 2020. Prior to the COVID-19 pandemic, economic growth in Myanmar was projected to pick up to 6.3 percent in FY2019/20 and 6.4 percent in FY2020/21. Myanmar's jade industry is worth more than $30 billion annually, totaling nearly half of the country's gross domestic product, according to a report released October 23, 2015 by an international group investigating misuse of resource wealth. “It's the best estimate that's available, so far,” said analyst Juman Kubba of London-based Global Witness. “What we actually want, though, is to get more information into the public domain so that more reliable figures can come out. There's no doubt that this is the most valuable industry in the country.”
Global Witness' estimate, if accurate, would put the secretive jade industry at a value 10 times that of the illicit and more notorious opium poppy trade. The report alleges that most of the jade trade is linked to ex-junta bosses – including former military ruler General Than Shwe – and current figures in the powerful military, with little money ending up in government coffers.
On the subject of economic development, the new government is exerting great efforts for the development of entire economic structure. Fiscal, financial, trade and investment policies are now under review and the new government of President U Thein Sein has stated that is is prepared to introduce any type of reform for the benefit of the State and the people. The government is updating the existing Foreign Investment law, and also in a process of drafting a competition policy that will be in conformity with the market economic policy.
Furthermore, with the aim of simplifying the procedure of issuance of Export-Import licenses for foreign trade, licenses are issued within two days from application. On the other hand, Union Commodity Price Stabilization Committee has been formed and with the efforts of the committee, inflation rate has been steadily decreasing from 8.27 per cent in April, to 8.15 per cent in May and 7.82 per cent in June 2011. Regarding the financial sector, Department of Internal Revenue is in process of reviewing, amending, supplementing or cancelling the laws concerning income tax, commercial tax, stamp act and office tax act. Similarly, for the promotion of rural development and poverty alleviation, it is also promulgating the micro-financing law and before such law come into existence, the provisional order will be issued to enable implementation of micro-financing projects on trial basis.
In the same token, starting from July 2011, pension salaries of retired service personnel who are drawing pension based on the old pay scales have been increased to bring into line with the pension salaries of current pay scale. This enables the total of 815,633 retired civil servants, including the Tatmadaw service personnel, to enjoying the pension salary increase. The pensions raise enables retired service personnel who had been drawing the lowest pension salary rate of Kyat 750 to now receive pension salary of Kyat 20,000. The pensioner who has been receiving the mid level rate of Kyats 1,375 will now receive pension salary of Kyats 32,000. Similarly, the pension of a high ranking officer will increase from Kyats 2,500 to Kyats 110,000.
According to the all-round survey report of the living condition of household, jointly conducted by the Ministry of National Planning and Economic Development and the United Nations Development Programme (UNDP), the rate of poverty in Myanmar had declined from 32 per cent to 26 per cent. In order to meet the Millennium Development Goals, Myanmar is now targeting to lower the poverty rate to 16 per cent by 2014-15. To this end, Myanmar held a national-level workshop on poverty alleviation and rural development in May 2011 and is commencing the implementation of development projects. The action plan for the poverty alleviation and rural development has been designated covering the period of July 2011 to 31 December 2015.
Burma is a resource-rich country with a strong agricultural base. It has vast hardwood timber, natural gas, and fishery reserves and is a leading source of gems and jade. Tourist potential remains underdeveloped because of weak infrastructure and Burma's international image, which has been damaged by the regime's human rights abuses and political oppression. Due to Burma's poor human rights record, the United States imposes an array of economic and travel sanctions, including bans on the importation of Burmese products into the U.S. and the export of financial services from the United States to Burma. Australia, Canada, and the EU also impose economic sanctions on the Burmese regime.
Despite Burma's growing GDP, the regime's mismanagement of the economy has created a downward economic spiral for the people of Burma. The state remains heavily and inefficiently involved in most parts of the economy, infrastructure has deteriorated, and rule of law does not exist. The majority of Burmese citizens lead a subsistence-level existence with minimal opportunity for economic improvement. Inflation, though relatively low in 2009, increased in 2010 and shows signs of remaining higher in 2011.
The military's commercial entities play a major role in the economy. The limited moves to a market economy, begun in 1990, have been accompanied by a significant rise in crony capitalism. A handful of individuals loyal to the regime benefit from policies that promote monopoly and privilege. State-controlled activity predominates in energy, heavy industry, and the rice trade. The state embarked on a campaign to privatize state-owned enterprises and properties in late 2009 and continued to sell off assets throughout 2010 and into 2011. By all credible accounts most buyers of these privatized assets have been those closely connected to the regime: crony businessmen, the military's for-profit business arms, and proxies acting on behalf of military families.
Burma remains a primarily agricultural economy with 50% of GDP derived from agriculture, livestock and fisheries, and forestry. Burma's rice exports hit a near-record high in 2009, but experienced a more than 50% drop in 2010 due to drought, delayed monsoon rains, and a government desire to carefully control domestic rice prices. Manufacturing/industry constitutes only 15% of recorded economic activity, and state industries continue to play a large role in that sector. Trade and services constitute 35% of GDP.
A wave of foreign investors pulled out of Burma beginning in 1997 due to the increasingly unfriendly business environment and political pressure, some in the form of sanctions, from Western governments, consumers, and shareholders. However, successive waves of new investment from regional neighbors, predominately China, has increased in recent years and is very difficult to quantify accurately. The government conserves foreign exchange by limiting imports and promoting exports. Published estimates of Burma's foreign trade (particularly regarding imports) are greatly understated because of the large volume of off-book, black-market, illicit, and unrecorded border trade. In the near term, growth will continue to be constrained by government mismanagement and minimal investment. Government economic statistics are often unavailable and unreliable. According to official figures, GDP growth has been over 10% annually since FY 1999-2000. However, the true rate is likely lower; the Economist Intelligence Unit estimated that the growth rate in 2010 was 3.1% and predicted 3.2% growth in 2011. Burma's economic growth has been driven by its natural gas exports, which account for over half of Burma's export receipts and foreign direct investment.
Natural gas exports will increase significantly once production begins from the offshore Shwe and Shwephyu Fields, estimated to hold 5.7-10 trillion cubic feet of natural gas. Much of the gas from these fields will flow to China's Yunnan Province via a pipeline currently under construction by a consortium of Burmese and foreign partners, with an estimated completion date of 2014. A second roughly parallel pipeline will carry Middle East- and Africa-origin crude oil offloaded by tankers at a port in Rakhine State. Corporations based in China, India, South Korea, Thailand, Russia, Australia, France, and Malaysia have interests in the exploration and development of several offshore and onshore blocks. One U.S. corporation continues to maintain its interests in the energy sector, with an investment that predates U.S. sanctions.
Burma remains the world's second-largest producer of illicit opium--amounting to 5% of the world's total, according to a 2009 UN Office on Drugs and Crime (UNODC) report. Annual production of opium has been estimated at less than 15% of mid-1990 peak levels. Cultivation rose for 3 years following a steady decline through 2006, but yields fell during that period. Burma is a major source of amphetamine-type stimulants in Asia. Although the Burmese Government has expanded its counternarcotics measures in recent years, production and trafficking of narcotics remain major issues. The Burmese Government has actively pursued mid-level and independent traffickers, but it remains reluctant to investigate, arrest, and prosecute high-level international traffickers associated with ethnic ceasefire groups.
Under the constitution the state owns all land; however, the law allows for registration and sale of private land ownership rights. Authorities and private-sector organizations perpetrated land grabs during the year, and restitution for past land grabs was very limited.
The 2016 land use policy emphasizes the recognition, protection, and registration of legitimate land tenure rights of smallholders, communities, ethnic nationalities, women, and other vulnerable groups. It also includes the recognition, protection, and ultimate registration of customary tenure rights, which previously were not legally recognized. The law allows the government to declare land unused and assign it to foreign investors or designate it for other uses. There is no provision for judicial review of land ownership or confiscation decisions under either law; administrative bodies subject to political control by the national government make final decisions on land use and registration.
Civil society groups raised concerns the laws do not recognize rights in traditional collective land ownership and shifting cultivation systems, which are particularly prevalent in areas inhabited by ethnic minority groups. Acquisition of privately owned land by the government remained governed by the 1894 Land Acquisition Act, which provides for compensation when the government acquires land for a public purpose. Civil society groups criticized the lack of safeguards in the law to provide payment of fair market compensation.
Researchers had concerns that land laws, including the Farmland Law and the Vacant, Fallow, and Virgin Land Law, facilitate land confiscation without providing adequate procedural protections. Parallel legal frameworks and traditional forms of land tenure in areas controlled by ethnic groups in Kachin, Mon, Kayin, and Shan States may not have formal legal recognition under the land laws.
Parliament’s Land Acquisition Investigation Commission did not have legal authority to implement and enforce recommendations in its 2013 report to return thousands of acres of confiscated but unused land or provide compensation to farmers from whom the government took the land, and media sources reported little progress in returning confiscated lands. The law requires land be returned if not used productively within four years, but civil society groups reported land taken by the military was left unused for much longer periods.
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