IMF Survey : Myanmar Takes Wide-Ranging Steps Toward Economic Reform
February 28, 2013
- Set up more market-based economy to attract investments, promote sustainable growth, says top IMF economist
- International community helping to promote institution- and capacity-building
- Caution over excessive foreign aid
Myanmar is right to be taking steps to reduce its reliance on informal and segmented markets, and build a comprehensive framework to ensure resources are directed to sectors with the greatest need, a top IMF economist told a seminar in Washington DC.
MYANMAR JOINS GLOBAL ECONOMY
The head of the Asia and Pacific Department for the IMF, Anoop Singh, said it was essential that the country continued with its plans to build the formal sector of its economy to achieve the broad-based growth it desires.
“What Myanmar is trying to do is to implement economic and other reforms to integrate and unify markets, so that activities are not in segmented, parallel, or shadow markets,” said Singh.
Taking stock of rapid change
Singh was speaking at a gathering, organized by the Brookings Institution and the International Monetary Fund, set up to take stock of the rapid and dramatic changes which have taken place in the Southeast Asian country over the last two years.
In the economic sphere, reforms have focused on building the institutions needed to run a modern market-based economy. They include reform of the exchange rate system, increased budget transparency, the passage of investment, agricultural and land laws, and a draft law for the creation of a newly autonomous central bank.
Myanmar has been heavily reliant on informal markets for decades, and this has prevented resources from being directed to areas where they were most needed, particularly agriculture.
“Today, about two-thirds of the population depend on agriculture, on the rural sector—a sector where there is clear need for investment and better integration with the rest of the economy,” said Singh. “The focus of the efforts is to ensure that resources … go to sectors that are needed for inclusive and broad based growth,” he said.
Concentrate on institution- and capacity-building
Priscilla Clapp, formerly U.S. Chief of Mission in Myanmar, said that over 50 years of military rule had left Myanmar with very weak institutions and capacity, and that the country’s people needed to concentrate much of their efforts in this area.
“They desperately need the kinds of institutions which will support a sustainable democracy,” said Clapp, who called on the international community to help them by demonstrating best practices, and experiences from other places in the world.
But she warned that “it’s going to be a long haul, it’s going to take probably two or three generations to get this in proper working order.”
Frances Zwenig, president of the US-ASEAN Business Council Institute, also called on potential investors to have a long-term perspective.
“There are no quick hits, no easy in-and-outs. It is still whom you know. Due diligence is the coin of the realm,” said Zwenig, who added that Myanmar’s ability to assimilate and apply new practices to commercial ends—its “absorptive capacity”—was still very limited.
“Everything will go slowly for a variety of reasons,” she warned, “but mind you, that is probably a good thing,” said Zwenig, who added that the goal for the country should be to pursue greater transparency and accountability.
Foreign aid: too much, too soon?
There was a warning from Lex Rieffel of the Brookings Institution, and author of a forthcoming study on foreign aid to Myanmar entitled “Too Much, Too Soon?” that the country was at risk of being targeted for more foreign aid than it could absorb.
“We have seen other countries where there has been a tsunami of aid, and that has created certain problems,” said Rieffel, who paraphrased a fellow aid expert who said “donors bring an awful lot of chaos.”
But Rieffel commended the government of Myanmar which, he said, was doing well in developing a national framework to guide donor activity, and also manage donors.
Clapp added that despite the immense challenges confronting Myanmar, and the time it would likely take for reforms to be adopted, the authorities “had taken many of the right steps by just pulling the military out of governance.”