Myanmar: Asia's next growth story?
Stephen Groff considers the steps to take and the pitfalls to avoid
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 I was struck by the vibrancy and a palpable sense of change in the air.
The country's immense potential is reflected in the Asian Development Bank's most recent analysis, which shows Myanmar has the potential to follow Asia's fast-growing economies and expand at 7-8per cent if it continues on the path of across-the-board reforms initiated this year. The country should become a middle-income nation, and could 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 neighbour, Thailand. While most other regional economies have skyrocketed since that time, Myanmar has languished, and today it has Southeast Asia's lowest per capita gross domestic product.
After decades of stagnation, Myanmar has an enormous amount of catching up to do. The recent experiences of Asia's fast-growing economies are instructive. For Myanmar to effectively capitalise on its potential, the country will need to maintain low inflation - under 6per cent - and better ensure sustainable budgets. It will also need to encourage greater savings, dramatically bolster the skills of its people, invest heavily in infrastructure, modernise 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 neighbours have shown dramatic economic transformations are possible in relatively short amounts of time if reforms remain on track.
Nearly everyone I spoke to in July emphasised that maintaining social stability will be crucial. 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.
As the economy grows, it will be essential for the country to ensure that its poorest and most vulnerable share the benefits of its 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. More opportunities also need to be created for people living in rural areas, where 84per cent of the poor reside.
Myanmar's economic potential is immense, given its rich endowments and geographic advantages. To maximise this potential, however, businesspeople I met 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.
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 unleash incredible opportunities for trade and commerce. 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.
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 affect international competitiveness through effects on the exchange rates. 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 neighbours - lessons that could make the country Asia's next rising star.
