Discussion on Southeast Asian Economy--Myanmar

Southeast Asian Economy (Myanmar)

As the second largest country in terms of land size in Southeast Asia, Myanmar borders five nations and is endowed with rich natural resources----minerals, oil and gas, forestry, water and marine resources. With its accession to ASEAN in 1997, Myanmar has achieved remarkable economic and political progresses ever since, and it is now facing new development opportunities due to the establishment of its new government in 2011.
1. National Objectives
The national objectives of Myanmar can be presented from both political and economic perspectives.
The political objective of Myanmar is to further promote political reforms as well as the reconciliation between local ethnic armed groups and central government troops in order to maintain a stable environment for social and economic development. ①With the establishment of Myanmar’s new government on Mar. 31, 2011, a number of new political policies have been initiated, such as the liberation of political prisoners and the registration of opposing political parties and leaders. In accordance with its political reforms, some of the previous international sanctions have been recently relaxed by international community, which is regarded as a signal to encourage a further progress on Myanmar’s political reform. ②After Myanmar’s independence from the British government in 1948, continuous conflicts between local ethnic armed groups and central government troops remain a severe problem, which hinders national stability and restricts regional development as well. The government of Myanmar maintains the policy of reconciliation with ethnic groups since 1988 and has achieved successes in 40 cases by early 2011. After the inauguration of the new government, a statement was released to further promote reconciliation with ethnic armed groups in August, 2011.
The economic objective of Myanmar is to revitalize its economy and deepen economic reforms towards market-oriented economy. Myanmar began to take transformation from planned economy to market economy in 1998, but due to its excessive restrictions in national market, limited openness to the outside world as well as economic sanctions imposed by Western economies, the economic development in Myanmar has progressed slowly. After entry into ASEAN in 1997, the economic development of Myanmar began to accelerate. To achieve its economic objective, the new government initiates a package of economic policies, including reform of the dual exchange rate system, reduction of recurrent large fiscal deficit, privatization of state-own business, transformation and upgrade of FDI, establishment and development of financial markets, enhancement of infrastructure construction and etc.
2. Developmental Challenges
In accordance with its national conditions and objectives, there are many developmental challenges for Myanmar, such as reform on land property, expansion of financial services, construction of infrastructure and social security system. Among all these challenges ahead, the main challenges are to maintain stable macro economic and social environment and to change the dual exchange rate system.
First, the new government of Myanmar has taken position of the former military government for less than 15 months and has initiated a package of new policies aiming to improve overall economic and social environment. With the new market-oriented economic strategies as well as national political reforms taken by the new government, Myanmar has made some improvement in both economic and political conditions and gains good comments both domestically and internationally. As a new-born government, Myanmar is short of capacity and experience but at the same time willing and being expected to take unprecedented reforms in various aspects of the country. Therefore, how to maintain stable macro economic and social environment along with all relevant reforms is a top challenge of the new government.
Second, the dual exchange rate system which lasted for over 40 years has brought severe negative influences to the overall economy of Myanmar, resulting in a great disparity of nearly 100 times difference between exchange rates in official and black markets. From April 1, 2012, Myanmar begins to apply with managed floating exchange rate system, which is designed to provide a transparent and stable business environment to stimulate import and FDI from outside. However, with the new exchange rate system, some industries tend to lose profits; for instance, farmers may gain less from export on agricultural products and state-owned enterprises may lose their previous monopoly positions. Hence, the government of Myanmar needs to take steps to balance the outcomes of changing its dual exchange rate system.
3. Approach to ASEAN Integration
As an outcome by the joint efforts from both sides, Myanmar’s accession to ASEAN was undoubtedly an important step towards ASEAN integration. Due to Myanmar’s special political structure and situation, Myanmar was once isolated and imposed with sanctions by some western countries, especially the United States and the European Union. George W. Bush, former US President even once denounced the government of Myanmar as one of the “brutal regimes” in the world. Therefore, when discussing about Myanmar’s entry into ASEAN, the whole organization was facing strong objection and pressure from the US and other western countries. However, taking ASEAN’s completeness and unity into consideration, Myanmar’s participation is necessary and unavoidable for the organization’s overall development and in July, 1997, Myanmar got its full membership to ASEAN.
After its accession to ASEAN, Myanmar managed to make great progresses in economic development, with its annual GDP growth rate increasing from 6.4% (from 1993 to 1998) to 12.1% (from 1999 to 2010)1, while 90% of its total foreign trade attributed to Asian nations and districts. As a new member to the ASEAN community, Myanmar together with Cambodia, Laos and Vietnam (collectively known as CLMV countries) are involved in the ‘Initiative for ASEAN Integration’ (IAI) program, which provides a Work Plan with 48 projects to ‘ensure dynamic and sustained growth of the sub region and prosperity of the peoples’2. Moreover, Myanmar progressively takes political reforms these years and has played an active role towards its integration to ASEAN. In December, 2011, Myanmar successfully organized the 4th Great Mekong Sub region (GMS) Summit and has been accepted as the host of Southeast Asian Games in 2013 as well as the chair of ASEAN Summit in 2014.
Unlike other ASEAN members, Myanmar is set on a different development track because of its unique political environment. With a political evolvement from the former military government to the present new-born civil government, Myanmar itself strives to pursue for a market-oriented economy and at the same time Myanmar is progressively accepted by the international community, which have relaxed some previous sanctions and tend to recover their relationships with this country. In this sense, Myanmar obtains the attention from the whole world, which will definitely bring more opportunities as well as challenges for its future development.
4. Future of ASEAN Integration
Established in 1967, ASEAN serves as one of the most successful organizations among developing countries, contributing greatly to regional harmony and prosperity. With respect to internal diversity of its member nations, ASEAN is reluctant to establish a strong supranational structure but put more emphasis on regional economic cooperation and growth. The economic exchange among ASEAN members has evolved from only merchandise trade to the areas of services, investment and labor. In recent years, as a regional entity, ASEAN has also developed the “10+3” cooperation format with its Northeast Asian neighbors----the People’s Republic of China, the Republic of Korea and Japan and broadened its economic cooperation on macroeconomic and financial issues. Moreover, to deepen and further promote ASEAN integration, during the ASEAN Summit in November, 2007, ASEAN leaders adopted the ASEAN Economic Blueprint, aiming to create an ASEAN Economic Community (AEC) by 2015 to build ASEAN more competitive with a single market and production base.
However, as for the future of ASEAN integration, there still exist some structural problems. On one hand, comparing with the European Union (EU) which shares a common macroeconomic policy regime among its members, ASEAN has been still in the early stage of becoming a formal economic entity towards its regional integration, while each member maintains its own separate and variable trade regime3. On the other hand, due to its principle of non-interference in the domestic affairs of its members, ASEAN also runs the risk of being a diplomatic talk shop, which highlights more on issuing declarations and action plans but with less capacity on implementation.
With the establishment of its new government in 2011, Myanmar has taken several political and economic reforms and has shown more active progresses towards its integration to ASEAN as well as the international community. As a response to it, ASEAN continues to encourage Myanmar to further promote its domestic reforms and keep providing generous assistance and support; the international community also shows its concern and friendly moves to Myanmar, with some state leaders of western countries visiting Myanmar consecutively and expressing their willingness to recover the relationships with the new government in the previous few months. It is can be inferred that Myanmar is witnessing an unprecedented opportunity to stimulate national development and integrate to ASEAN as well as the international community.
In conclusion, as a regional entity pursuing harmony and development in Southeast Asia, ASEAN has gained some remarkable successes but still lags behind some other regional organizations (such as EU) due to its structural problems and economic and political disparity among its ten member nations. As for Myanmar, with its current political and economic conditions, it is more-than-ever ready and willing to make integration into ASEAN.

Other References
1. The official website of the Economic and Commercial Counsellor’s Office of the Embassy of PRC in Myanmar, http://mm.mofcom.gov.cn/index.shtml
2. The official website of the Economic and Commercial Section of the Consulate General of PRC in Mandalay, http://mandalay2.mofcom.gov.cn/index.shtml
3. Maria Socorro Gochoco-Bautista and Eli M. Remolona, No. 300, January 2012: Going Regional: How to Deepen ASEAN’s Financial Markets
4. Asian Development Bank: Asian Development Outlook 2012: Confronting Rising Inequality in Asia
5. Asian Development Bank: Annual Report 1997
6. Asian Development Bank: Annual Report 2011

References: 1. The official website of the Economic and Commercial Counsellor’s Office of the Embassy of PRC in Myanmar, http://mm.mofcom.gov.cn/index.shtml 2. The official website of the Economic and Commercial Section of the Consulate General of PRC in Mandalay, http://mandalay2.mofcom.gov.cn/index.shtml 3. Maria Socorro Gochoco-Bautista and Eli M. Remolona, No. 300, January 2012: Going Regional: How to Deepen ASEAN’s Financial Markets 4. Asian Development Bank: Asian Development Outlook 2012: Confronting Rising Inequality in Asia 5. Asian Development Bank: Annual Report 1997 6. Asian Development Bank: Annual Report 2011