ASEAN KEY DESTINATIONS
Deciphering the Economic Policy Statement of the Myanmar Government - Some random reflections
The economic policy statement by the government of Myanmar released on the 29July 2016, has all the right ingredients to take the country forward to the next level in terms of reaching the goal of a middle income developing country. It is heartening to see that the government has been able to put together in a relatively short time a blueprint for a self-reliant economic strategy. It may also receive a thumbs-up from the global investors as well.
The next steps in implementing this short 12-point policy document is to unpack each of the areas of policy articulation and positioning them with clear and detailed strategy and operational directives that would enable actual implementation of the policy. This would mean examining the existing laws, regulations and provisions in relation to each of the focus areas and creating needed legal, legislative and administrative measures so that the policy is translated into action. This in itself is a huge task and the government needs to address it in a coordinated fashion as economic policy has several intersectional aspects with other sectors.The sooner the detailed strategies and action plans are formulated and disseminated into the public domain the more helpful this will be for all especially for the government as well as private sector players to identify their own priorities.
This brief note is aimed at catalyzing the process of understanding the policy pronouncements in the context of Myanmar’s socio economic priorities as it heralds a new beginning with the democratic government.
There are few pointers in this economic policy statement which indicate Myanmar’s future direction in terms of human and social development. It hinges on an economic model that is led by market oriented economy with the private sector as an engine for growth; with government’s role in directing some sectors of the economy. For example, acknowledging the forthcoming integration of Myanmar’s economy with that of the ASEAN would mean that a significant policy calibration is needed to become a competitive economy. Strengthening the human resource base, skill levels of workers, harnessing resource potential and comparative advantage of Myanmar vis-a-visthe rest of the countries of the region becomes important. This requires more facilitative government intervention as the private sector (and foreign investment) alone would not be able to meet this challenge. Similarly harmonizing national policies with overall global practices of intellectual property rights is needed to incentivize innovation and adaptation of high-tech and advanced technology-oriented industries. Similarly financial sector reforms need to be advocated with a view to build robust systems of regulation, oversight and standards that would ensure stability as well as adhere to international norms of transparency, disclosure and accountability.
There are other significant pronouncements that need to be analysed at this juncture so that formulation of detailed directives in relation to implementation of policies can be achieved. While policy is generally perceived as a long-term goal statement, operationalization involves steps for short, medium and long-term objectives and actions.
A well balanced agriculture and industrial growth is fundamental to structural transformation of the economy. It is important that Myanmar economic policy aims to achieve it. However sequencing in policy thrust becomes critical. Given the pre-ponderous dependency on agriculture by large sections of the people, it would be important to reform and modernize the agriculture sector and develop forward linkages with industry so that aggregate demand for industrial goods would be met with rising rural incomes. Such a policy direction would involve strengthening the agriculture in terms of productivity, land tenure security, activation of input markets including expanding credit and finance for agriculture. Thrust towards investments in agro-based industries and allied industries would also be contingent upon agriculture growth. Further transition to light manufacturing and capital goods sectors is to be contemplated subsequently. Such a well thought through process and sequencing is critical for achieving structural transformation.
The economic policy statement acknowledges the need for creating an environment that would lead to equal development of all regions and states. This is significant for peace, national unity and reconciliation. Addressing regional disparities in development and creating policies for equitable growth involves identification of reasons for backwardness, promotional measures to propel growth of agriculture, industrialization and employment in those areas. An approach to regional development would also require adoption of fairness and equity based resource transfers in terms of tax revenues from union government to states/regions for their development. All this is significant for Myanmar as there are pronounced disparities across states/regions in terms of infrastructure improvement, presence of modern industries, human resource capacities, etc. Most of the peripheral regions/states which have abundant natural resources are to be developed in terms of physical infrastructure, industrialization, employment and human development in order to improve the living conditions of people.
Another feature that requires urgent attention in terms of reform is tax policies. With regard to tax reforms, which is critical for raising resources for public investment, efforts are needed in terms of streamlining not only the rates but more importantly policy stability and predictability is needed in order to build confidence of the investors. Such measures would involve simplifying the system, improving capacities of the administration and finally compliance culture. Addressing tax incentives, measures to address tax avoidance and evasion are to be in place so that revenue leakages can be plugged. Since Myanmar has a tax GDP ratio of less than 5%, there is tremendous scope for enhancing revenues. Unless such revenues are harnessed, there would be very little scope for public investments that would give long term dividends and address regional inequalities. Short term quick wins need to be identified in this area.
Improving the health of state-owned enterprises and their contribution to the economy is another area that requires policy intervention which has been articulated in the policy statement. Rules and procedures and a fair and transparent approach to public sector reform are necessary. Arbitrary and ad-hoc measures in addressing public sector enterprises would not only create distrust, but would deprive people of a level playing field and vitiates the investment climate of the country.
Given the importance of small and medium enterprises in the economy, the policy document rightly identifies the need for further promotional measures. This is significant as this sector creates the largest employment and meets the domestic demand in a significant way. Supportive measures for strengthening this sector requires a coordinated effort in facilitating administrative (licensing) systems to set up or close SMEs, labour market reforms, market access, credit support, investment and tax incentives as well as measures to formalize informal sector enterprises so that they would be able to enter into formal sectors of the economy.
Use of technology and harnessing the potential of digital revolution is one of the significant positive steps in the economic policy. This would not only ease the cost of transactions there by enhancing efficiency it would greatly advance transparency and accountability and remove to a greater extent arbitrariness and ad-hoc decision making.
Finally, when it comes to the impact of economic policy on social and human development, one would have anticipated a clear overall direction and implications on welfare and the well-being of people (and poverty reduction efforts) as economic growth and its ‘trickle down’ effects has not been successful in advancing human and social development in most developing countries.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below