Shankar Acharya: Myanmar's economy - some glimpses
Sixty years ago, Myanmar (then Burma) was one of the economically better off countries in Asia, with abundant and valuable resources of forests, gems and minerals, major exports of rice from the fertile Irrawaddy delta and an average income higher than nearly all Asian nations other than Japan. Today, after 50 years of military rule, with the first 25 under General Ne Win’s “Burmese way of socialism", the relative rankings seem to have changed dramatically, with Myanmar having one of the lowest average incomes among Asian countries. How did this happen? What was the trajectory of growth and development that led to this unfortunate reversal of fortune? The truth is that we know very little.
If you go to the Asian Development Bank (ADB) website’s country “Fact Sheet" on Myanmar, you can learn that around 2010, the population was 60 million growing at a relatively low 1.3 per cent per year, adult literacy was a high 92 per cent, urbanisation a middling 34 per cent and the poverty ratio (according to some undefined national poverty line) was 26 per cent. Interestingly, the Fact Sheet does not report a number for per capita national income. For that you have to dig deeper in the brief chapter on Myanmar in the ADB’s recent (April 2012) Asian Development Outlook. That reports a number of $715 for 2011, lower than for Bangladesh and Cambodia, about half Vietnam’s and a little less than half India’s. Indeed, given that India’s per capita gross national product is more than double Myanmar’s, it is interesting that the latter’s urbanisation is a bit higher, poverty ratio lower and adult literacy much better. But beware the data, especially Myanmar’s.
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The most recent economic assessment of Myanmar by an international institution is the International Monetary Fund’s (IMF’s) 2011 Article IV Consultation report, completed in March 2012 and placed on the IMF website last month. The team that prepared the report included members from the World Bank and the ADB. A striking feature of the report is the massive downward adjustment to the double-digit official GDP growth data carried out by the IMF team. This revision apparently has the government’s concurrence as reported in the IMF report. The overestimation in official growth data is apparently due to excessive reliance on public sector indicators in an economy where 90 per cent of economic activity occurs in the private sector. It is one of many serous data gaps in Myanmar which bedevil both historical and concurrent assessments of economic performance.
The pervasive data problem is colourfully described in a recent (March 2012) public speech by Dr U Myint, the leading economic advisor to President Thein Sein and head of the Myanmar Development Research Institute. Dr Myint likens the challenge of successful economic and social development to an automobile race, in which quality of the car proxies for sound economic policies. He paints Myanmar’s past economic policies as an outdated car with a faulty instrument panel: “going back to the car again, it may be desirable to begin by fixing the dials, gauges and meters on the instrument panel that are not functioning properly. The speedometer looks particularly suspicious. We know from experience that a car of this vintage cannot be speeding along at the rate the speedometer seems to be showing. If it does, there is a danger of the engine overheating. Unfortunately, the thermostat has broken down so there is no device to warn us of this danger. In the meantime ... the gas tank is empty and the car is running on its emergency fuel reserve. To add to our woes, the mileage indicator got stuck several years ago. So although we are aware the car is in motion, we are unsure of the direction it is heading, have no clear idea of the distance that has been covered, and are mostly in the dark as regards the miles we have to go ... to reach the finish line. This is not a good situation for any participant in a race. Hence, fixing the dials and gauges and improving the quality and availability of our statistical indicators, data and information seems like one area that deserves priority attention at the present time."
|MYANMAR: SELECTED ECONOMIC INDICATORS|
|Real GDP growth, official (%)||12.0||10.3||10.6||10.4||-||-|
|Real GDP growth, IMF (%)||5.5||3.6||5.1||5.3||5.5||6.0|
|Consumer prices inflation (%)||32.9||22.5||8.2||8.2||4.2||5.8|
|Public sector deficit (% of GDP)||3.8||2.4||4.8||6.0||5.5||4.6|
|Current account balance (% of GDP)||0.4||-2.9||-2.7||-0.8||-2.7||-4.4|
|Foreign exchange reserves (months of total imports)||6.6||6.3||7.9||8.9||9.4||9.7|
|Exchange rate (parallel market, kyat/$)||1,110||992||1,004||861||810*|| |
|*As of January, 2012 Source: IMF Article IV Consultation Report, May, 2012. See www.imf.org|
There could hardly be a more persuasive plea for improving vastly the database for undertaking sound social and economic policies.
Unfortunately, policy-making cannot await the long overdue improvement of data systems. Fortunately, the initiatives in economic policy over the past year by the new civilian government seem to be broadly in the right direction. They include the moves towards a unified and broadly market-determined exchange rate (in April); presentation of a budget to Parliament, which uses higher revenues from gas sales to target a reduction of the public sector deficit; increased budget allocations for education and health and a lower one for military spending; enhanced authority to the central bank; and welcoming of foreign investment in energy and hydropower.
These moves are welcome but only a beginning. Significantly greater resources have to be deployed for public education and health. The nascent manufacturing sector needs to be nurtured through supportive policies so that it grows to be a major job-generating sector in future. There is substantial potential as low-skill manufacturing activities relocate from China and other higher-wage East Asian neighbours. Agriculture and rural development require broad-based support from infrastructure, credit and other inputs as well as far-reaching reforms of land tenure.
In the meantime, Myanmar will have to contend with managing an inward capital surge in search of her rich resources, with western nations having lifted various economic sanctions. The exchange rate has already appreciated significantly to the detriment of rice exports and could hurt tourism, which has enormous job-creating potential.
After several decades of sub-par performance Myanmar has resumed the long journey of broad-based, economic and social development. That in itself is very welcome.
The author is Honorary Professor at Icrier and former Chief Economic Adviser to the Government of India.
These views are personal