Myanmar has long been considered one of the last frontiers of Asia. Despite being abundant in labor and rich in resources, Myanmar has not been able to achieve economic development for a long time. A military-backed civilian government took office in 2011, and last year pushed forward political and economic reforms at a rate that has surprised many both in and outside the country. Myanmar’s reforms offer long-overdue opportunities for the country’s economic development through liberalization and re-integration into the world economy. This report aims to provide a better understanding of the country’s potential for development from two perspectives. The first half of the analysis focuses on the relationship between Myanmar’s socio-cultural factors and development. The second half examines recent reforms in politics, economy and international relations.
Myanmar’s socio-cultural landscape has had a profound effect on policy. A wide range of religious and traditional elements motivated aspects of earlier economic policies. The subsequent Socialist period, whose arrival was partly triggered by religiously motivated policies of the previous administration, saw the stagnation and isolation of the once-prosperous economy. The prominent place given to Buddhism in conjunction with the country’s ethnic diversity have led to security issues and human rights problems, and for several decades, armed conflict between the central government and ethnic minorities have seriously undermined economic development of the country.
On the other hand, Myanmar's traditional culture also holds great potential for economic development by creating favorable conditions for investment in human capital. Myanmar has higher literacy rates than other countries with comparable levels of economic development and the country is known for high levels of achievement motivation. Myanmar’s institutionalized religions, where Theravada Buddhism holds a prominent place but also with large congregations of Christians and Muslims among ethnic minorities, contributed to human capital accumulation through cultural norms that emphasize learning and institutional support through monastic schools. Nonetheless, it is equally true that Myanmar has serious limitations in human resources outside basic literacy rates, due to low public investment in education. Yet the country’s cultural potential suggests that once aggressive investment and institutional reforms are in place, Myanmar's human capital could increase rather rapidly.
Political and economic reforms initiated by the newly formed civilian government show encouraging signs of society-wide change. It should be remembered that when the new government took office in early 2011, expectations of substantial change were modest because the military still maintained tight control over the political process. Yet subsequent actions by the government included substantive measures that include the meeting between Aung San Suu Sukyi and President Thein Sein, restoration of the NLD as a political party, release of political prisoners, and legalization of street protests. On the other hand, peace negotiations with armed ethnic groups appear face complex hurdles. Several minority armed groups have resisted the government demand for their integration into the government-controlled Border Defense Forces. More fundamentally, the government and ethnic minorities disagree sharply over center-periphery relationships including the level of autonomy for minority states.
The government is gradually introducing market liberalization and promoting private economic activities. Special economic zone law has been introduced and foreign investment law is being revised while the Myanmar Investment Committee gained renewed government support and has been regrouped. To pave the way for foreign exchange reform, the Myanmar government invited a delegation from the IMF for technical assistance. Private banks were allowed to handle currency exchange transactions for the first time since the military coup in 1962. The Myanmar government already privatized state firms in control of natural gas and oil in 2010. A significant number of SOEs under the ownership of 15 government ministries and entities are also expected to be on sale.
The reforms in Myanmar have proceeded at a time when the United States is trying to respond more directly to China’s growing influence in Southeast Asia. Myanmar’s political and economic liberalization can lead to gradual easing of economic sanctions imposed by Western governments, and the West can and will further encourage reforms through easing of sanctions. Myanmar appears to be willing to take advantage of its geostrategic location with respect to the US-China rivalry in the Asia-Pacific region, finally seeking to end its heavy economic and military dependence on China.
The opening of Myanmar’s economy offers considerable investment opportunities for Korea and its importance is only heightened under current global recession. The implications that can be drawn from the current report are as follows. First, it is imperative to understand that the socio-cultural environment of Myanmar will produce complex effects, with mixed results for development potential of the country. The emphasis on Buddhism in a country with high levels of ethnic diversity poses challenges for peace and nation-building, which is a prerequisite for economic development. Yet another aspect of Buddhism and deep religiosity of ethnic groups helped create cultural norms and institutions conducive to human capital accumulation. Second, Korea needs to fully utilize its advantage in credibility over other countries when Myanmar opens up for international economic cooperation. For Myanmar, Korea can make a successful case that it has no geopolitical agenda like the US, China or India. Unlike Japan, Korea has no historical baggage with respect to Myanmar from colonial rule or wars. Korea should design its economic cooperation strategy with Myanmar based on such understanding of Myanmar’s domestic politics and international relations in addition to technical knowledge of development processes.