By Khwima Nthara,
World Bank Senior Country Economist for Myanmar
Presented at the New Zealand Thai/Thai Swedish Chambers
(First) Networking Event, Bangkok, March 28th, 2013
Context
 Myanmar is on a triple transition path, from:
Authoritarian military system to democratic
governance,
Centrally-directed economy to market-oriented one,
and
60 years of conflict to peace in border areas.
 The three transitions are inter-related
 Focus of this presentation is on economic reforms:
progress to date, challenges faced, and outlook
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Context (Cont’d)
 These reforms are being carried out in stages:
First wave of reforms focused on political reforms
and national reconciliation – reaching cease fire
agreements with rebel groups , integrating Aung
San Suu Kyi and her party into main stream
politics, releasing political prisoners, easing
media restrictions e.t.c.
Second wave of reforms announced in June 2012
focused on developing the economy
Third wave, announced in January 2013, focuses
on combating corruption and improving public
sector performance by cutting red tape
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Our Understanding of What the Government is doing in
the Area of Economic Reforms
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Objectives of the economic reforms
 Ultimately, the reforms are aimed at ensuring that Myanmar
attains its full development potential, especially as trade,
investment, and ODA opportunities expand with the easing of
international sanctions
 By accelerating private sector led growth
 By ensuring that such growth is broadly shared, and hence leads
to improved living standards for the majority of people:
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Through increased employment opportunities (both self and wage
employment)
Through improved public services
 The Government believes (rightly so) that success in economic
reforms will help bolster the peace process and other political
reforms
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What framework has been guiding these
reforms?
 Initially they were being implemented without
a structured framework. The need for reform in
certain areas was seen as obvious, necessary,
and urgent (e.g. exchange rate policy)
 The Government has now prepared a
“Framework for Economic and Social Reform”
which provides coherence to the reforms and
which will serve as a guide for future reforms
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What is currently informing the specific design
of the reforms?
 The design of reforms has to date been
informed by the following:
 Recommendations
from advisors within
Government
 Recommendations stemming from
consultations with other stakeholders (civil
society, private sector)
 Recommendations from parliament
 Recommendations from donor supported
studies and technical assistance programs
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What has been the scope of these reforms
so far?
1. Scope based on underlying principles
 Some seek to transform Myanmar from a centrally planned economy
to a more market-based economy e.g. introduction of a more liberal
exchange rate regime
 Others seek to transform Myanmar from a practice-based way of
doing things to a more rule-based, systematic approach e.g.
introduction of rules governing deficit financing
2. Scope in terms of form (nature) of reforms
 Some involve changes in the institutional and policy platform
(framework) involving more entrenched changes to laws, policies,
regulations, and organizational structures e.g. enactment of Foreign
Direct Investment Law
 Others involve changes in implementation strategies, approaches,
and methods - i.e. changes in processes and procedures regarding
how things are actually done in practice in the context of a given policy
and institutional framework e.g. piloting of an automatic licensing
system for selected imports
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What has been the scope of these reforms
so far? (Cont’d)
3. Scope by thematic areas
 changes for ensuring macroeconomic stability involving
changes in fiscal policies, monetary policies, exchange rate
policies, and the organization of the financial sector e.g.
reducing the dependency of State Economic Enterprises on
the budget
 changes for improving public financial management
involving changes to the budgeting system, including
preparation, approval, execution, monitoring, accounting,
reporting, and external oversight e.g. publication of the
annual budget law
 changes for improving the investment climate involving
new and more attractive investment incentives and removal
of barriers to increased foreign and domestic investment e.g.
relaxation of certain restrictions on access to foreign exchange
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What have been some notable Economic Reforms to
date?
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Reforms for ensuring macroeconomic stability
 Introduced a managed float system
 Enacted the Foreign Exchange Management Law
 Increased the number of authorized forex dealer licenses &
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issued them to the private sector for the first time
Announced the phasing out of Foreign Exchange Certificates
Drafted the Central Bank of Myanmar law that will among other
things, provide greater operational autonomy to the CBM
New organizational structure of the CBM was approved by the
Cabinet in July 2012
New Financial Institutions Law being drafted
Reduced the dependency of State Economic Enterprises on the
budget (only 28 percent of raw materials were funded through
the budget last year)
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Reforms for improving public financial
management
 Due to law tax revenue effort, Government has
undertaken measures to simplify tax policies
and administration e.g.
rationalized commercial tax on most goods and
services to 5% and reduced the number of
different tax rates applied
Increased the number of services subject to
commercial tax
 Improved transparency of tax policy and
administration through publication of tax
information
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Reforms for improving public financial
management (Cont’d)
 Planning to introduce a VAT
 Introduced a more inclusive budget by allowing states and regions to
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prepare their own budgets
Budget allocations are increasingly being aligned to development
priorities e.g. allocation to education was doubled last year while the
allocation to health was quadrupled. Spending on defense remains
high but slowly declining
Budget was published in the local newspapers for the first time last
year
Deliberations on the budget in Parliament are now being broadcast on
national television
Myanmar has embarked on the path towards joining the Extractive
Industries Transparency Initiative (EITI)
Authorities are now planning to put in place a PFM Reform Action Plan
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Reforms for improving the investment climate
 Several measures have been undertaken to
improve access to finance:
Microfinance Business Law has been passed
A Microfinance Supervisory agency has
been established
More than 80 microfinance licenses have
been issued
The CBM has allowed commercial banks to
accept new forms of collateral
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Reforms for improving the investment climate
(Cont’d)
 Measures have also been undertaken to
improve the financial sector policy
framework and infrastructure to facilitate
business transactions:
 Myanmar Payments Union was established to develop
the network for retail payments (e.g. through use of
credit cards)
 The CBM has allowed commercial banks to offer more
financial products including hire purchase, foreign
exchange services, and insurance services
 CBM is now allowing more banks to open.
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Reforms for improving the investment climate
(Cont’d)
 Measures are underway to break state
monopoly over the telecommunications
industry. Licenses will be issued to private
service providers soon
 Prices of sim cards have been drastically
reduced
 New Foreign Investment Law and Special
Economic Zones Law has been established
 Progress on Dawei Port is slow but the
Government of Myanmar remains committed
to the project
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Reforms for improving the investment climate
(Cont’d)
 A second Company Registration Office has
been opened in Yangon to ease congestion
on the Nay Pyi Taw Office. There are plans
to open a third office in Mandalay
 Period for renewal of business license has
been extended from 2 years to 3 years
 There are plans to further streamline
procedures for company registration &
introduce a one-stop-shop
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Reforms for improving the investment climate
(Cont’d)
 Abolished the “export first” policy on access
to foreign exchange for importers
 Piloted with automatic licenses for imports
and exports, then abolished licenses for 166
import products and 152 export products
from March 1st, 2013, but by April 1st, all
import and export products will be allowed
without license.
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Challenges faced so far
 Capacity deficiencies
 Daunting task of translating laws into practice
 The Government is doing too much too quickly
 Donors, corporate sector, politicians, and other high profile visitors
taking too much of the Government’s time
 Continued use of manual systems
 Lack of exposure to international good/best practices
 The elephant in the room is not yet asleep
 Skeptical international community & lingering sanctions – it seems too
much is being expected of Myanmar
 Uncertainty over life after 2015
 Poor state of backbone infrastructure & key service industries
 Power
 Telecommunications
 Banking services
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Outlook
 The sustainability of the reforms will depend on the
following:
 How soon and the extent to which the majority of ordinary
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people are positively impacted by the reforms
The extent to which the Government is able to handle
religious conflicts without needing the military
The extent to which the military feels less threatened by the
impact of the reforms
The extent to which the military, particularly the lower ranks,
benefits from the reforms
The extent to which the reforms will be institutionalized
Continued goodwill and support from the international
community
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Outlook (Cont’d)
 So far, the outlook seems positive, on balance,
for the following reasons:
 Anecdotal evidence indicates that most ordinary people are
appreciating the positive benefits of reforms:
 Small and large scale businesses are booming due to increased
demand from significantly high levels of visitors to Myanmar
 Although prices of certain goods and services have gone up (e.g.
rentals in Yangon, transport fares), inflation is generally lower
 Consumers are enjoying a wider choice of commodities, especially
due to the liberalization of car importation.
 No signs of witch hunting and revenge from both sides of the political
divide (ruling party as well as opposition)
 There are no indications of the military being overtly excluded from
participating in the benefits of economic reforms
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Outlook (Cont’d)
 So far, the outlook seems positive, on
balance, for the following reasons:
 There is a big rush to promulgate new laws, which will ensure
that changes are institutionalized
 In spite of lingering sanctions and skepticism in some quarters,
goodwill from the international community and commitment
for reforms to work remain high
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Outlook (Cont’d)
 The international community needs to
recognize that implementing reforms in
Myanmar will require a lot of tact, patience,
and appreciation of the political economy
 So far, the Government seems to be doing
things right
 If Myanmar continues on this path, it is
likely to be the next frontier market in the
East Asian Region
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Thank You!
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