Challenges and Opportunities Myanmar Faces in the Progressive Pace of Development, with Relation to AFTA

Introduction
With the total area of 676,552km2 and approximately 48 million populations, estimated in 2008, Myanmar officially acknowledged as Union of Myanmar, the republic in Southeast Asia, which share the border on the west with Bangladesh, on the northwest by India, on the northeast by Yunnan Province, China, and on the east by Laos and Thailand. The longest land border is communal with People’s Republic of China. Burma is known to the world as the nationally official name until 1989; the country’s name was the officially changed by the military government that reigned in
1988. Rangoon is the commercial capital and the largest city, and the administrative capital is Naypyidaw. Concerning with relationship of Myanmar and the largest local organization, ASEAN, Myanmar was stamped with its admission to join as one member state of ASEAN community in 1997. Considered the resource both natural and human capacities, Myanmar, the late-emerged country in the region, anticipated its advantages stemming from joining in ASEAN. Following the participation in the
ASEAN community and with the establishment of AFTA agreement signed on 28
January 1992 in Singapore, Myanmar oversights its opportunities in development through the link of commercial trading which allows the free flow of trade, labor and information. However, although the precise advantages retrieved from the ASEAN membership is seen from its current stance, Myanmar also faces with mixed challenges and opportunities in the whole progressive pace of development, particularly with the relation in AFTA.
This research is designed with some objectives. By looking at the present situation and in the near future situation of Myanmar economic and trading; it is very necessary to considered about it. And we want to find out and analyze on the

1

Myanmar economic and trading whether it is the right time or not for Myanmar to implement AFTA policies in 2015. And this research will become a document the
ASEAN mock protocol on May 26, 2012.
This topic’s goals are focused on two main points, and these are the challenges and benefits to Myanmar to implement AFTA’s policies, in which the details of those points will be discussed in the text body. And we will look into the internal economic, and trading of Myanmar.
In this part, we will guide about the historical background of the research; this topic is raised specifically for Myanmar and its economic development. Comparing to other member states of ASEAN, Myanmar can be considered as the young member who just started to bring development to the nation in the first step while the other have reached many stages and some events become developed countries. Since the development pace is left behind, through plan of improvement needs to be implemented for the sake of bringing true and rapid improvement to the country’s main sector such as political, economy and human right, etc. To start with, the first stage of development in Myanmar stemmed mainly from its relation with ASEAN through AFTA. Moreover, this research is conducted because will use it as document to join the ASEAN Mock protocol. These are the reasons leading to the research on this paper. Eventually, in AFTA, although some opportunities are set to be of advantages to Myanmar, still there some more challenges to be concerned about. In the next part, we show the situation of economic and trading in Myanmar.

2

Economic and trading in Myanmar
Myanmar is the latest economic development in the world because it was suffering and isolated from the world, especially the United State of America and the
European Union put the economic sanction. It is the pressure for Myanmar in the recently past time which was the obstacle for the economic development. Myanmar has good condition in geography and it is a gift from the nature. Myanmar has a lot of natural resources, such oil, gas min etc. The economic development of Myanmar is depending on the economic cooperation with China, India and ASEAN members. The plan stressed infrastructural development, with particular emphasis on agriculture, construction, and energy production. After Myanmar became the member ASEAN in
1997 and had signed the ASEAN Free Trade Agreement, Myanmar could develop her nation. Moreover, Myanmar can develop the economy by the cooperation with
ASEAN members through economic relation or ASEAN Economic Forum. Notably,
Myanmar has changed the new face in the regional and internal stage by reforming the political system. The reforming of political system has provided good outcome for
Myanmar, particularly economic development. From the reforming of political system at the end of 2011 till present, the image of economic development has changed, especially the United State of America and Western countries eased economic sanction. The reforming of political system from military to civil government in
Myanmar, it is the good opportunity for Myanmar to develop the country because the international communities are interested in Myanmar. Myanmar can find the development partner internally and externally to attract investors to invest in.
Historically, most of Myanmar’s export-import trade was with ASEAN countries. In
1999, more than 80 percent of the country’s export-import trade with ASEAN nations, including Japan, Singapore, Malaysia and China are its major trading partners. The

3

country’s exports are mostly agricultural products. They include pulses and bean, teak, prawns, rubber, rice and other agricultural products. Besides that, the industry sector is the main potential in economic development as well.
After ASEAN Free Trade Area has been activated in Myanmar, foreign products will flow into the domestic product with lower prices. In this situation, the local manufactures have to make their products ready to compete with imported goods inters of markets and quality. If not, the local productions will face loses. Therefore, they need preparation for this situation 1.

The industry is geared largely to the processing of agriculture, mineral and forest products. More than halt of Myanmar industrial production is accounted for by public sector. The principle of industrial products is cement, steel, bricks, tiles, fertilizer and processed foods which are the main domestic products for exportation to the regional and external markets. One more thing of economic development in
Myanmar is that, natural resources, such as oil and gas. Myanmar Oil and Gas
Enterprise (MOGE) are responsible for oil and gas exploitation. The natural resource in Myanmar is the main part of economic development because it attracts more foreign investment to invest in. Moreover, Myanmar can develop the economy by tourism as well. The tourism in Myanmar is the main potential to reduce the poverty by increasing the tourists to come and visit in Myanmar. The government has encouraged the tourism sector by serving direct airline flights and also operates domestic and foreign airline flights within the country. Furthermore, financial institutions play a central role in a country 's economic development. Financial institutions resolve the problems that emerge from the fact that there are information asymmetries between contracting parties in credit markets. According to this literature, it is difficult for lenders individually to identify the quality and performance of borrowers. Financial institutions, however, have special skills and economies of scale in gathering this
1

Myanmar entrepreneurs to be ready for the challenges of AFTA: http://www.eversion.newseleven.com/index

4

information. As such, they are better able to identify promising investment opportunities.
Economy wide, financial institutions bring about an improved allocates efficiency of capital and improved economic growth. Myanmar today is trying to develop the country by reforming the political system to change the new faces.
According to the image of economy in Myanmar, it can strengthen itself for competition in region. Myanmar had contracted with ASEAN Free Trade Agreement since it became the member of ASEAN in 1997. Myanmar has reformed the political system from military to civilian government which is opened the door for the world in democracy and economic development. It can attract the world to be interested in and come to invest in. Myanmar has a lot of main potential in economic development, such as agriculture, industry, natural resources and so on. These are very important for the competition in the region and in the international community. If we talk about AFTA, it is an agreement among ASEAN member states which is to facilitate in economic cooperation and it will be reached in 2015 in free flow of products for non-tariff barrier among ASEAN region. The opportunity of Myanmar is trying to strengthen the quality and quantity of domestic products to compete with the other ASEA members. Myanmar can develop its economy by integration economy in ASEAN region and it will result the development in the society by upgrade living standard of people, poverty reduction, increase employment rate, boost business confident. Meanwhile, the image of growth,
Myanmar cannot escape from some challenges also. Myanmar can face the problems, such as infrastructure, laws and regulations in investment and especially in Myanmar is ready or not ready for competition. If not ready, Myanmar will be a market for the
ASEAN members to export their product and Myanmar will be a customer for ASEAN members’ products, so this is the big problem for Myanmar. As we know about the economic and trading in Myanmar as above mention. In the next part, we will discuss

5

about the benefits and challenges of AFTA in general way by looking to general

aspect.

The benefits and challenges of AFTA in general way
Benefits
Of course, being a member of AFTA, its members have gained fruitful benefits notably in many fields especially in economic aspect. Generally, AFTA, which is an international convention, has adopted many principles to increase and facilitate the flows of free market and free trade in the region. The first and the most important thing from AFTA is that an AFTA benefit to its member’s government is about low tariff or non-tariff. When they (AFTA’s members) want to produce services or products, those countries can import manufacturing or raw material from other countries that are also the member of AFTA, the tariff would be low, so when the tariff of raw materials are low, the price of outputs are also low. Furthermore, under
AFTA, the six founding fathers of ASEAN such as Malaysia, Indonesia, Singapore,
Philippines, Brunei and Thailand, have cut tariffs on nearly 8.000 items 2. And for the other members, Cambodia, Laos, Myanmar and Vietnam (CLMV) will have further period to make the tariffs cuts. Then the local people (their citizens) can buy those products with the cheap price. This can help people to reduce their expenditure on those things and they can save money to fill other needed of their living, so it will help to reduce poverty. Moreover, in the near future, in the year of 2015, the elimination of tariffs should result in product price reductions throughout ASEAN. It means the tariffs of goods or output among regional states will no longer charge. It is a sign for its members to attract investor to invest in their own country in order to
2

Benefits from ASEAN Free Trade Area (AFTA) Tariff cuts: http://www.business-inasia.com/asia_freetrade.html. Retrieved 28/04/2012

6

export those outputs into the regional market to compete with other countries as well as the international market. Another one is about good relationship among AFTA’s members. Good relationship and communication are very important for each country in AFTA, as a Khmer proverb said that “having friends better than enemies”. Having great relationship with each other, we, the members of AFTA can help out when there have emergency cases or when needed, such as natural disaster, or any other. All the members of AFTA can provide the technical assistance or aid for the other countries to develop their countries or environmental protections as well. Another thing is that, becoming a member of AFTA, technologies might be provided. Being in the same community, the high-tech countries (the rich) sometimes can provide the poor some of the technologies. The rich might send the professionals to come in the poor and train some new latest technologies. That should be good for the poor to learn more about the world technologies, where the technologies have been improving.
Additionally, the government of each country in AFTA can also encourage higher market competition. It means their citizens may have more concentration on local production, and produce more products to fulfill the demand of free market of the other countries, both regional and international market. Moreover, AFTA also helps the exportation and investment sectors that will generate higher potential in the long term economic relationship among the region and international. Becoming a member of AFTA, its members can earn lots of advantages that can decrease some problems that they are facing and have faced such as poverty or illiteracy. Even though it cannot fulfill the living standard of their citizens, at least it can provide jobs to those people even they do not have high education.

7

Challenges
At the same time as there are many advantages of being a member of AFTA, they also face some challenges. The economy of each country sometimes meets some kinds of the big problems in adjusting to the requirement of AFTA. All the members especially Myanmar as well as the CLMV need to implement the framework agreement on Common Effective Preferential Tariff (CEPT) for the AFTA. Mostly those challenges may occur in only in the poor countries. Some kinds of the challenges that the members of AFTA may meet are the following:

1. Income reducing
Some of the members of AFTA are less developing countries. And majority of their governmental income rely on the tariff revenues. So, the tax collection is very important for such developing countries, the government as well as the whole citizens.
Yet, after becoming a member of ATFA, its members will loss all the benefits that come from the paying tax. It becomes free trade area for all the members, so when they import their products to the other members, they take low tax and will reduce not to take tax in the near future (5-0%). And by 2015, import tariffs will fall to zero for most of the products in AFT in agricultural goods, such as onion, garlic, tea, sugar, rice, soybeans, palm oil, and some of the other farm products. It also includes the industrial products, for example motorcycle; iron and steel, plastics, machinery and mechanical equipment and other products such as, chemicals and prepared foodstuffs, paper, cement, ceramics and glass etc.

2. Human resources
Human resource means the person who can produce food or products and response to the markets. For example, in the agricultural field, the ones who can receive the result of 5 tons per hectare, we call them “human resource”. Lacking of

8

human resources happens mostly in less developed and developing countries such as
Cambodia, Laos, Myanmar and Vietnam (CLMV). Some are still lacking of technical experts for improving the effectiveness and participation in AFTA. And also, they do not have enough technical experts to support to all the sectors of exportation products.
It means there will have some of the problems (low quality and quantity) to competition other countries.
Aung San Suu Kyi, leading lady of Burma’s lady of Burma’s democracy movement, is treading carefully as she embark on a series of visits around the country, the
October. 3

Regarding to this above mention, we can see that human resources and democracy in Myanmar is still a big problem to confront other countries after adopt
AFTA as a whole in ASEAN region. Generally, Myanmar is one of the poorest counties among ASEAN members like Cambodia; however, the government of
Myanmar does not care how this county is going, unlike, their own power. Even though EU countries and as well as ASEAN members tried to persuade Myanmar to turn their face to democracy which make this country developed faster, still the government of Myanmar tried harder to strengthen their power without caring about the people. Since all the power was hold by the government, human right was not practiced in this county, but full of corruption. For instance, the case of Mrs Suu Kyi, she cannot call for justice and peace for people when power was only decided by the government. The situation of Mrs Suu Kyi nowadays proves to the world that people in Myanmar cannot live with happiness, but under control from the government. They live without justice and no one dares to do anything which effects to the government, but stay claim with pain. People in Myanmar still live in painful, if human rights still are not practiced in this country. The suffering still takes place if the way of thinking about is not changed from the government of Myanmar. One country can move to a
3

BY SIMON TISDALL, Thaksin Party wins election, Cambodia Daily, Monday, July 04, 2012; p-1

9

better way depends on the leader of the county. If one leader in one country thinks just only one own benefit and as well as their own power, that leader cannot bring peace for the people, but people will live under pressure from the leader such as the case in Myanmar. The government of Myanmar does not even understand how their own people live and suffer when they live without care and rights from their own leader. It is not too late if Myanmar changes their leadership and turns to the full democracy; a huge development will happen to this country and as well as its citizens as an aggregate. The EU and ASEAN members still welcome and help Myanmar if the government changes their perception.

3. Infrastructures
Infrastructures are the basics physical and organizational structures needed for the operation of a society or enterprise, the services and facilities are necessary for the economy. Infrastructures facilitate push the flows of products, services and the distribution of the finished products to the markets and also to the social services such as schools, hospitals and so on. Infrastructures also refer to the roads including land roads, waterways and also airways.
Now, CLMV are in the process of developing countries that some of the infrastructures are under the construction and some of the others still have some problems with the technical skills. Some of them do not reach the standard yet; they are small and feel not comfortable for transportations. Roads are built for transportation, how comes that they are not convenient. It is very hard for the import and export the products from one to the others countries in the region as well as the international communities. In the next part we will discuss about the benefits and challenges for Myanmar to implement the AFTA.

10

Opportunities and Challenges of AFTA to Myanmar
Opportunities
Myanmar was under central planned economy since 1962 and still continued as the Junta Government from 1989-2011 which was led by the commanders.
Fortunately, Myanmar has made a significant difference and a historic milestone.
Myanmar now is pacing to democratization, good governance, fundamental freedom, human rights respect, and rule of law. In this regard, Myanmar had invited all
ASEAN member states to send election observers to the 1st April by-elections.
ASEAN member states had presented its observers in which Cambodia who had led the ASEAN observer to show transparent, free, and fair election and also good support for Government of Myanmar. Looking back to the past in 2008, Myanmar was also the one who influenced by economic crisis, and now Myanmar has been improving itself by continually implementing the roadmap for an ASEAN
Community (2009-2015), Initiative for ASEAN Integration (IAI) Strategic
Framework, and also firmly cooperation within ASEAN Family (ASEAN member states), dialogue partners, and external parties. In order to achieve the common challenges and realize the collective goal of ASEAN member states by 2015, being a parting of its, Myanmar has gradually reformed the political aspect by renew fair election, release political prisons, and promote fundamental freedom. In this regard,
Myanmar has adopted many laws, policies, measures, and mechanism to assist the free flow of goods, services, capital, investment, labor, and expert crossing the borders without tariffs. The following are the further expectation opportunities of
Myanmar to join AFTA. She will get greater investment links within the region, secure access to larger ASEAN markets, and increased attractiveness to Foreign
Direct Investment (FDI). And interference and competition of Myanmar economic

11

will be better. She will develop economic in the short-to medium-term. Further,
AFTA is not a zero-sum game that tariff rates and NTBs are reduced under the CEPT scheme; Myanmar will be able to export higher levels of agricultural goods to the
ASEAN-6. Foreign investment will be also confident in Myanmar positively influenced by good reputation of ASEAN-6 host countries. Moreover, the members in
ASEAN will support reform in Myanmar by providing assistance and potentially locking in their current programs, promote continuation of the reform process, and providing support against some vested interests. Furthermore, membership in
ASEAN/AFTA can contribute towards easier access to world markets for Myanmar and assist in trade negotiations. Also, ASEAN-6 can provide relevant economic development and policy advice. The coordination of economic policies among the
ASEAN-10, in export processing, can expand both intra-and extra-ASEAN trade; and enlargement may encourage sub-regional cooperation, particularly the Greater
Mekong Sub-region initiative, in which Myanmar is a member
As the result of these changes, Myanmar has drawn attentions to the international community and has been welcomed by all ASEAN member states regarding this newly situation. More importantly, eminent persons, famous individuals, and representative of western countries started visiting Myanmar one by one which is created good atmosphere for the next pace in order to lift the economic sanction and also attract more foreign direct investment. Within this progression including national resources, cheap labor force, and political stability will definitely enrich the economic grow faster. Fortunately, Myanmar is in the good position of geography due to India is west and China is north of Myanmar in which both countries are dialogue partner of ASEAN to stabilize the economic growth of
Myanmar.

12

Challenges
Before realizing the ASEAN Community by 2015 which is opened for free trade, Myanmar also faces with some challenges. Myanmar nowadays is just in the beginning of democratization. Myanmar still remains in poor records in the
International stage, Human Rights Watch, and other major human rights organizations. In this sense, the consideration of lifting the economic sanction will still stay and hard if there is no changing and willing to reform politically. The situation of human rights in Myanmar has consequently resulted in flows of refugees to neighboring countries, thus creating many problems. In the report of General
Assembly of United Nations issued in December 1993 mentioned that the continued violations of human rights in Myanmar, as reported by the Special Rapporteur, in particular summary and arbitrary executions, torture, forced labor, abuse of women, and restrictions on the imposition of oppressive measures directed in particular at ethnic and religious minorities. International community had urged the Junta government of Myanmar to take all appropriate measures to allow all citizens to participate freely in the political process in accordance with the principle of Universal
Declaration on Human Rights and to accelerate the process of transition to democracy, in particular through the transfer of power to the elected representatives.
Based on The United Nations General Assembly has repeatedly called on the
Myanmar Military Junta to respect human rights and in November 2009 the General
Assembly adopted a resolution "strongly condemning the ongoing systematic violations of human rights and fundamental freedoms" 4 and calling on the Burmese
Military Regime "to take urgent measures to put an end to violations of international
4

Resolution adopted by the General Assembly of UN, Forty-eight session, agenda item 114 ©,
A/RES?48/150

13

human rights and humanitarian law."

5

Therefore, Myanmar now has to recover its

new face on the international stage on the human rights respect and fundamental freedom in order to make the international community lifting the economic sanction, but it is not an easy task to do because it is a kind of process which is needed time to deal with, as well as needed a strong commitment to reform politically. Myanmar also needs to concentrate on the legal systematic preparation on the migrated workers before it integrated into ASEAN Free Trade Area. Furthermore, human resources in
Myanmar are limited both quantity and equality. Most people still stay in the deep root of poverty. Somehow, they lack of opportunity to access to education which is the serious issue that Myanmar 's government is going to solve. There are more likely to be more challenges than opportunities for Myanmar to meet the criteria of AFTA if they are not thoroughly prepared. What this country has to do is to participate in the regional production networks, to expand and upgrade its production capacity and distribution networks, and to maximize benefits and minimize losses in transit trade.
So, there are much works and urgent measures are needed in order to prepare for its integration with AEC. Further Challenges to Myanmar Accession to ASEAN/AFTA are as the following. Fear that Myanmar will once again become a mere supplier of raw materials as it was in the colonial period. And there are many projects underway or planned to enhance ASEAN economic cooperation which should benefit Myanmar.
Inefficient state-owned enterprises will have to complete with ASEAN in the manufacturing sector. Its small-scale enterprises in the private sector are facing a shortage of raw materials, power supply, capital and spare parts. Next, Liberalization of finance, banking, trade and agriculture can this issue of tough competition be over.
Myanmar inclusion in ASEAN has also been an obstacle to economic and political
5

Resolution adopted by the General Assembly of UN, Forty-eight session, agenda item 114 ©,
A/RES?48/150

14

cooperation with EU (EU postponed ASEM - ASEAN Europe Meeting and many development projects are delayed due to EU sanctions against Myanmar. EU has also scrapped GSP benefits on Myanmar’s agriculture and industrial exports to EU and denies entry visa to senior government official from Myanmar; in the open ceremony for ASEAN Economic Minsters Retreat in Yangon on May 2000, secretary-1 of ruling SPDC,Lt-General Khin Nyunt said “Myanmar will never become an obstacle or hindrance to ASEAN”
Therefore, Government of Myanmar is committed to more economic reforms and will “carefully ascertain what is in her best interests in order to take advantage of flexibilities” accorded under AFTA regulations, the country will lose out in this competition world. The positive effect of Myanmar joining ASEAN will depend on the country’s further economic liberalization as well as an improved political climate.

Conclusion
In brief, Myanmar is ready to the step toward implementation on AFTA policies in the next 2015, and the proverb "One community, one destiny" should be applied. Even though Myanmar was also influenced about economic crisis, and now
Myanmar has improved itself by cooperation with other countries mainly regional countries (ASEAN nation) and other ASEAN 's partners. And AFTA policies shall be the right time to be implemented by Myanmar because of economic stability.
Myanmar has tried to develop itself in order to fit the condition and also step into the
AFTA 2015 which all goods are flowed freely without tariffs. To achieve this point,
Myanmar cannot do it alone; unlike, it does need help from other countries. As
Myanmar is full of peace, national resources, labor force, and stability, so it is a good environment for investors to invest in Myanmar. Myanmar 's location also makes easy for transportation. One more thing, because of Myanmar is the developing countries,
15

so human resources, technologies, and aids are needed to push Myanmar 's economy up toward. Myanmar hopes that Myanmar will absorb more investments both regional and international stage into Myanmar 's territory. Eventually, Myanmar is going to maintain its political stability and try to promote national 's economy in order to join in
AFTA 2015 and also well prepared to be the ASEAN chairman in 2014. Anyway, there are some challenges as well to Myanmar from AFTA 2015. The important thing is about the imbalance of development and condition; human resources in Myanmar are limited both quantity and equality. Most people still stay in the deep root of poverty. Somehow, they lack of opportunity to access to education which is the serious issue that Myanmar 's government is going to solve. In addition, Myanmar lacks of technologies and other facility. For example, Myanmar people do agriculture by using traditional method which is low productivities and high risk. Clean water and electricity are not very expended especially in the rural area which far from the city.
In short, the concern point of Myanmar is that in 2015 which all products are flowed freely without tariffs, it means all ASEAN nations will be try to compete for markets, and then the weak one will lose its national benefits because its labor force is low, and the amount of export is limited. And in order to successfully implement follow with many benefit to Myanmar as an aggregate, both macro and micro sector- the whole society and the individual people in Myanmar. Otherwise, it will become destructive if Myanmar cannot follow and catch the benefits from AFTA. And the important point is that Myanmar has to build up their internal capacity like human resources, investment, productivity, and ability to compete for regional and international free market. 16

References:
1) BY SIMON TISDALL, Thaksin Party wins election, Cambodia Daily, Monday,
July 04, 2012
2) Opening Remark by H.E.Senior General Than Shwe, Prime Minister of
Myanmar AT THE SIXTH ASEAN SUMMIT HANOI, 15 DECEMBER 1998: http://www.aseansec.org/8740.htm 3) Opening Remark by H.E. Joseph Ejercito Estrada, President of The Republic of the Philippine During the Opening Ceremony of the 6th ASEAN Summit, 15
December 1998, Hanoi: http://www.aseansec.org/13025.htm
4) Resolution adopted by the General Assembly of UN, Forty-eight session, agenda item 114 ©, A/RES?48/150
5) Resolution adopted by the General Assembly of UN, Forty-eight session, agenda item 114 ©, A/RES?48/150
6) Myanmar entrepreneurs to be ready for the challenges of AFTA: http://www.eversion.news-eleven.com/index 17

References: 1) BY SIMON TISDALL, Thaksin Party wins election, Cambodia Daily, Monday, July 04, 2012