OVER just three years, Myanmar has introduced ambitious reforms that have put it on track to become a modern economy. Against a backdrop of ongoing political challenges, it remains an extraordinary and hopeful moment. But bigger challenges lie ahead. To avoid backtracking — and realise its full potential — Myanmar needs to accelerate reform momentum.
Further reforms must focus on providing more people with better chances to grasp economic opportunities — and soon. Undue delays risk losing the momentum that is central to successful reform. The key challenge on this front is job creation. Proper jobs and learning opportunities, especially for youth, are critical, not just for sustained growth, development, and social stability, but also for the public support needed to drive reform forward. Growth is imperative for a country with per capita income of about US$900 (RM2,945) — making it one of the poorest countries in Asia, along with Afghanistan, Bangladesh and Nepal. Myanmar’s growth remains narrowly based, driven by exports of natural resources, mostly gas and mining products, construction and tourism.
Time is of the essence for Myanmar. Its window of opportunity is narrowing rapidly.
Market forces unleashed by reform are already presenting challenges. Faster growth and an influx of foreign investment are fuelling inflation, jeopardising macroeconomic stability.
With the financial market still underdeveloped, large capital flows and increased private sector investment put strong upward pressure on prices of real estate and services. This could strengthen the currency, which would reduce export competitiveness. Meanwhile, rising property and service prices could depress foreign investment in other productive sectors, such as manufacturing.
Galvanising reform is essential to build the institutional and market capacity to manage these forces.
FIRST, priority should be to exploit clear opportunities for targeted investment in agricultural infrastructure, institutions and innovation to spur rapid productivity growth. This will immediately benefit those who depend on agriculture for income and food security, and also contribute to high and inclusive growth. After all, agriculture accounts for 30 per cent of Myanmar’s gross domestic product and more than 50 per cent of employment. With relatively abundant land, water and labour, coupled with proximity to the world’s fastest growing markets for food, Myanmar has comparative advantages in this area.
SECOND, there is great scope for Myanmar to implement policies to improve its business environment. Much progress has been made on removing barriers to business and promoting an investment-friendly climate, but much more needs to be done. The latest World Economic Forum’s Global Competitiveness Report ranks Myanmar 139th out of 148 countries in the Global Competitiveness Index and 141st in infrastructure.