Socio-Economic Development of Myanmar T Upendranadh Choragudi
he advent of the democratically elected government
led by Daw Aung San Suu Kyi as State Counselor has accompanied by an all-round positive expectations as global investors are anticipating an economic policy environment that demonstrates stability and predictability. This needs to be seen in contrast with the previous era. A dismal performance in terms of index of economic freedom wherein Myanmar remains (even in 2016) in the cohort of the most repressed countries. Pro-market, liberal economic outlook appears to be the cornerstone of Myanmars new economic policy vision which vows to be people centric. A brief 12 point economic policy document, released last month, is a pointer towards a delicate balance that the government needs to undertake in order to ensure inclusive economic growth and development of its people, though it said very little to nothing on welfare and poverty reduction! Apart from infrastructure, agriculture, industrialisation and job creation seem to be the engines for economic growth. To what extent these translate into improved human conditions remains an open question, unless the growth and redistribution go hand in hand. Be that as it may, for the millions of poor and ordinary citizens living in rural areas (over 70% of the population), challenges of poverty, secured livelihoods, assured basic needs and reduced vulnerability to natural hazards are critical. They would expect government to provide succor. How would the
20 mizzima WEEKLY
Photos: Hong Sar/Mizzima
government be able to respond?
What are the policy instruments and programmes that are needed? How and where to find resources for expanding basic services? How to prioritize and identify quick wins? These and many more questions need to be addressed. It appears that the government is taking cautious and well calibrated steps in order to balance, consolidate and manage the transition and expectations. This is in contrast to the anticipation of the global community to have bold and urgent steps. A strong political will to improve the living conditions of the masses is reflected in the NLD party manifesto. And the same has been echoed at various public consultations by high ranking party functionaries and government ministers. With the passing of first 100 days agenda, this is the time for taking stock and setting out realistic and workable propositions of action. At recently held policy
August 18, 2016
dialogues on these themes several
scholars have put forward appraisals and a set of recommendations for people centric socio-economic development. For enhancing the socio-economic conditions of people living in rural areas, an obvious entry point would be improving agriculture and allied sectors. The twin-engines of economic growth and job creation would be through agriculture productivity and development of allied industries (including agro-processing). This would lead to structural transformation in terms of contribution to the GDP and employment. Here, the policy choices are whether to go in the direction of developing high-value corporate agriculture and agri-food sector or supporting small holder cultivation and improving the productivity and market access so that peasant agriculture be revitalized. Improving small holder agri-
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culture and sustainable and climate
resilience agriculture would involve a series of measures that include diversification, using appropriate technology for productivity growth, input and credit support, extension services (with R&D support) and creating market access so that incomes for small farmers would grow, which in turn would lead to effective demand in rural areas. Another related and critical question is whether Myanmar remains rice focused agriculture or a food basket that has its diversity. The policy choices thus involve a judicious mix of promotion of family oriented small holder agriculture and agri-food value chains involving organized private sector. The central message is that public and private investment in agriculture needs to be boosted up in order to enhance productivity and rural incomes. Structural transformation in agriculture occurs through enhanced production, productivity and through its linkages to agro based industrialization. Peoples welfare, in terms of investments in basic human development sectors like education, health, water and sanitation, housing and social welfare measures need resources. While the market oriented economic principles may not give pre-eminent position for these sectors, a government that adheres to a people-centric approach needs to necessarily play a central role in enhancing its investments. This is critical for improving human capabilities that would in turn be critical for the private sector to grow as they depend on the workforce that comes out to serve the economy. Viewed from this vintage, several studies point out Myanmar needs to invest much more in education, health and social welfare measures. Social security coverage in Myanamar is abysmally low and this is one area that requires concerted effort in order to enhance the well-being of people. The large informal sector, precarious workers, low skill levels of people, and lack of basic social security are impediments for economic growth. Resource mobilization thus becomes critical and herein comes the role of taxation and fair tax policies. Domestic resource mobilization for economic development and poverty reduction forms a clarion call with respect to Myanmars quest for an economy that propels itself into a higher growth path and human
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development. Overhauling the tax
system in all its nuances would not only enhance domestic resource mobilization, it would also lead to improved investor confidence and investment climate. These twin objectives would be met if Myanmar embarks on a progressive tax system that ensures a fair, transparent and predictable system. Improving tax administration, arresting leakages, fair and transparent policies of corporate taxation and rationalization of concessions and tax rebates are some of the fine print reforms needed in order to enhance tax revenues. The potential, as studies point out, is huge in terms of domestic resource mobilization. Measures to arrest corporate tax avoidance and evasion are to be in place. The current tax GDP ratio is around 5% which is far below the potential. Improving the share of direct taxes is to be definitely a goal so also is rationalizing avoidable tax incentives, concessions. Using tax policies for the benefit of self-reliant domestic manufacturing would in fact be a more prudent economic policy instead of relying on foreign direct investment and export oriented sectors.
August 18, 2016
At a recently conducted policy
dialogue, speakers pointed out the need for productive spending, public investment and prudent public expenditure management. These are critical for fiscal consolidation expanding public spending on basic services. Prudent expenditure management would also involve changing the mind-set of the bureaucracy, arresting leakages and effective project monitoring. Decentralisation and fiscal devolution are longhaul reforms needed to achieve this, which are predicated on the political decision making in terms of federalism and devolution of powers to the lower tiers of governance. Myanmars socio-economic development critically hinges on the political dialogue in terms lasting peace and stability. Creative use of economic and social policy instruments for creating an enabling environment for long term peace and stability of the union depends on the state-craft in terms of developing a policy framework that is built on the principles of fairness and meets the aspirations as well as resource endowments of the various states and regions.