The government’s efforts to reform the long-dormant economy and tackle endemic poverty through 2011 and 2012 have failed to reach the intended targets, sources said last week.
Since the new government took power in March 2011, the government has swiftly liberalised the economy by cutting red tape for import/export businesses, allowed domestic banks to open automatic teller machines and partner with foreign lenders to offer international transfers, opened the car and cooking oil import markets, enacted an amended foreign investment law and repeatedly invited foreign investment.
At the same time, it has strengthened democratic principles and allowed its people to voice opposition to major projects such as the Myitsone dam in Kachin State and more recently the Letpadaung copper mine in Monywa, in Sagaing Region.
The international community has taken note, as witnessed by United States President Barack Obama visiting the country on November 19, and the gradual easing of economic sanctions through 2012. Huge American companies, such as General Electric, PepsiCo and Coca-Cola, have responded to the easing of sanctions by entering the country in search of profits.
In late 2012, to a casual observer it might appear that the changes have been rapid and vast. But economic experts within the country say many of the alterations have only been on paper, and have not affected the majority, especially the farmers living in rural areas who make up most of the population.
Local economists say the government spent considerable effort and time in 2012 fighting corruption and a lack of transparency, increasing the accountability of bureaucrats, reducing cronyism and fighting illegal trade.
Emphasis has also been placed on fixing hardware problems though commissioning better transportation systems, telecommunication networks and improving electricity distribution. In these efforts the government has sought, and been provided, technical assistance from international institutions.
However, the increased international attention on Myanmar’s economy has also had strongly negative impacts on the tourism and property sectors, local economists and experts said this year.
Rental rates for hotel rooms, as well as prime residential and office spaces, have skyrocketed, catapulting Yangon to 35th on international ratings agency Mercer’s cost of living for expats index, released in June 2012.
In April, the Central Bank of Myanmar finally axed its pegged rate for the national currency and replaced it with a manage floatation set via daily currency auctions with private banks. The move saw the much-ridiculed K6-to-the-dollar exchange rate replaced by a market rate, which was K845 last week. The floatation is part of a broader plan being implemented with advice provided by the International Monetary Fund (IMF) to unify the different exchange rates available in the country, which the fund previously estimated to number more than 15.
Foreign economists said Myanmar’s economy cannot realistically grow further until its banking sector is modernised, and for that to happen the Central Bank needs to be made independent. Additionally, private banks must boost their loan and capital portfolios to extend more credit to businesses and farmers.
Dr Sean Turnell, an associate professor of economics at Australia’s Macquarie University, said Myanmar’s economy will have grown in 2012 at slightly higher rate than previous years, with energy, precious stones, and resource exports the primary drivers. He added that tourism will also have contributed a significant boost over past years.
But Dr Turnell said the effects of the economic reforms will be slight.