A middle class may be welling up in Myanmar
Just last month I made my first visit to Myanmar,
a place Rudyard Kipling referred to as "quite unlike any land you know
about". While decades of isolation have helped this century-old
observation hold true, on arrival in July I was immediately struck by
the vibrancy and a palpable sense of change in the air.
If Myanmar stays true to these reforms — and I
was impressed by the resolve of many officials I met last month — the
country should become a middle-income nation and could more than triple
per capita income by 2030.
Half a century ago, Myanmar was the pearl of
Asia, one of the region's leading economies with a per capita income
more than twice that of its neighbor, Thailand. While most other
regional economies have skyrocketed since that time, Myanmar has
languished and today has Southeast Asia's lowest per capita GDP.
After decades of stagnation, Myanmar has an
enormous amount of catching up to do on almost every imaginable front.
The recent experiences of Asia's fast-growing economies are instructive.
For Myanmar to effectively capitalize on its potential, the country
will need to maintain low inflation — under 6 percent — and better
ensure sustainable budgets.
It will also need to encourage greater
savings, dramatically bolster the skills of its people, invest heavily
in infrastructure, modernize its financial sector, foster job creation
and continue with its reform of the foreign exchange regime. No small
order, to be sure, but Myanmar's neighbors have shown dramatic economic
transformations are possible in relatively short amounts of time if
reforms remain on track.
Nearly everyone I spoke with in July
emphasized that maintaining social stability will be crucial as Myanmar
embarks on this new course. While economic growth has been the most
effective tool for reducing poverty in Asia, it has become less
equitable in many fast-growing regional economies in recent decades.
As the economy grows it will be essential for
the country to ensure that its poorest and most vulnerable share the
benefits of Myanmar's growing prosperity. Such inclusiveness will
enhance and help maintain growth by strengthening social cohesion and
contributing to human capital development.
Investment in education, health care and
other social services is fundamental for building Myanmar's human
capital. Today, one in four primary school children never move on to
middle school, limiting their prospects as the country's next generation
of workers.
Encouragingly, the government has already
increased its social sector spending, with the country's nominal
education budget doubling for 2012-2013. It is crucial that this trend
continue.
More opportunities also need to be created
for people living in rural areas, where 84 percent of the country's poor
reside. The nongovernment organizations I met last month highlighted
that rural isolation is exacerbated by poor access to electricity, water
and transportation.
Only one in four people have electricity
access, and the country's core road network is limited. Bringing rural
communities into the fold and providing them with better transportation,
electricity and telecommunications will give Myanmar's poorest a better
chance at grasping the opportunities that recent economic reforms can
bring.
Myanmar's economic potential is immense given
its rich endowments and geographic advantages. To maximize this
potential, however, the business people I met with stressed the need for
more freedom to create jobs and innovate. A further reduction of
government ownership and control over certain economic sectors will help
level the playing field, spurring competition and bolstering
investment.
This is particularly important, as Myanmar is
uniquely positioned to tap into Asia's growing economic strength and
prosperity. Better connectivity with other South and Southeast Asian
nations will also unleash incredible opportunities for trade and
commerce.
With the region's consumption expected to
reach $32 trillion by 2030, accounting for 43 percent of the global
total, Myanmar's affluent neighbors offer vast new markets for a country
with abundant natural assets, agricultural resources and low-cost
manufacturing potential.
Integration with global and regional markets
will also help promote accountability, transparency and respect for the
rule of law, fostering an enabling environment for business and foreign
investment as the nation finds its place in the Asian Century.
Myanmar's growth will not come without risks,
and it is important for the country not to repeat the mistakes of other
resource-rich developing nations — allowing resource revenues to
exacerbate inflation and impact international competitiveness through
effects on exchange rates — a vicious cycle that can hinder the
country's development in other productive sectors.
Sound macroeconomic management, economic
diversification, greater transparency, the development of capable
institutions and a strong political commitment to equitably distributing
benefits will all be needed to ensure Myanmar avoids the "resource
curse."
While Kipling's sentiment may still be
accurate, there is much Myanmar can learn from its neighbors — lessons
that could make the country Asia's next rising star.
There will be countless challenges along the
way, but if the country makes the right moves at the right times and
maintains its strong commitment to reforms, a more prosperous future
undoubtedly awaits Myanmar's people.
Stephen P. Groff is the Asian Development Bank's vice president for East Asia, Southeast Asia and the Pacific.