Comment on “Toward Myanmar's New Stage of Development: Transition from Military Rule to the Market”


Correspondence: Ikuko Okamoto, Institute of Developing Economies-JETRO, 3-2-2 Wakaba, Mihama-Ku Chiba, Chiba 261-8545, Japan. Email:

Before March 2011, there was barely anyone who had foreseen the drastic political and economic reforms that we find now in Myanmar, and there was widespread skepticism that any fundamental changes would happen. However, by the end of 2012, the political and economic reform efforts of the new government come to gain certain credence both inside and outside the country. It seems that Myanmar finally stands at the start line to push forward the reforms on a grand scale to accelerate economic growth. In this regard, it is very critical to understand Myanmar's economic path in the past decades, where the economy stands at present, and what are the challenges to be tackled.

Mieno (2013) provides an informative analysis of these three aspects. Reviewing Myanmar's economic performance under the military regime in the past two decades, Mieno rightly points out three major features of the economy. The first feature is that macroeconomic instability has been the major impediment for the country's development. The instability was caused by the halfway nature of the reforms, particularly the failure to overcome a huge public sector financial deficit, which made the government maintain the multiple foreign exchange system and monetize the deficit. The second feature is the growth of the private sector, mainly in service and primary exports, despite the unfavorable macroeconomic conditions, and internal and external policy constraints. The third feature is the significant impact of the surge in natural gas exports since the early 2000s, which have improved the balance of payments and helped Myanmar regain macroeconomic stability to some extent. This provided very favorable conditions for the new government to launch its reforms. Mieno argues the challenges drawn from here are that managing macroeconomic stability gets first priority, while at the same time promoting the private sector, and managing the risks of depending solely on the natural gas exports. As a new challenge, Mieno adds the risks of foreign direct investment (FDI), which is expected to expand in the coming years to increase vulnerabilities.

While Mieno (2013) is successful in placing the challenges in their historical context, it would be more valuable if he elaborated more about the economic reforms being undertaken, including the agenda and goals that the government has for the short and midterms. Thein Sein's government differs from the previous regime whose economic policies had been rarely spelled out in advance; Thein Sein's government has attempted to deliver an economic plan1 containing the following key items: (i) a need to increase per capita gross domestic product (GDP) and alleviate poverty; (ii) for this purpose, industrialization is a priority; (iii) for this industrialization, FDI needs to be attracted; and (iv) in order to attract FDI, some obstacles need to be removed, and proper infrastructure needs to be put in place. As part of the 5-year economic plan (2011/2012–2015/2016), the government has set itself the targets of achieving an average GDP growth rate of 7.7%, and an increase in the share of manufacturing in GDP from 26.0% to 32.1%, and a reduction in the share of agriculture from 36.4% to 29.2% by the end of fiscal year 2015/2016.

In order to achieve these goals, the challenges that Mieno points out will be critical. However, the following points are also to be emphasized.

Mieno argues that the signs of the Dutch disease arising from natural gas export are still not obvious. However, it seems that the kyat, which has been appreciating since around 2006, has already been a bottleneck for exports of primary products, such as pulses and beans, rice, and fishery products. That was the reason why private business groups have lobbied for reductions in the export tax, which was finally eliminated in April 2012. In the case of rice, as exports are stagnating because the price of Myanmar's rice is uncompetitive in the international market, the rice economy has been suffering. Therefore, the negative impact of natural gas exports on other exports might have already come to surface.

The second point is, as is often pointed out, the deficiency of the basic infrastructure required for industrialization or attracting FDI. With the initiation of official economic assistance, improvements in this area are expected to come. The question will be whether the speed and coverage of these improvements will be sufficient in order to allow the country's economy to take off.

The last point is the labor issue. The existence of abundant cheap labor is said to be Myanmar's advantage in attracting FDI. Nevertheless, the viability of this proposition needs to be carefully checked and monitored. Even before substantial FDI pours in, there are signs of wage increases in some sectors and even some labor disputes. A large numbers of young Myanmar workers continue to seek employment in Thailand and Malaysia. Since industrialization normally implies the absorption of rural labor by the manufacturing sector, improvements in agricultural productivity are required in order to keep this sector viable. Needless to say, this is closely related to achieving one of the goals, that is, poverty alleviation, given that 70% of the population is still living in rural areas in Myanmar.


  1. 1

    This is based on the various speeches by President Thein Sein made during 2011 and 2012.