Publications

Written by Mekong Institute

Myanmar  is  emerging  from  decades  of  military  rule,  central  planning  and  economic  isolation  as  it implements political  and  economic  reforms  and,  as  a  result,  faces  fewer  international  sanctions.  The country  has  great potential for rapid development due to its vast natural resources, abundant labour force and geostrategic location

Capitalizing  on  these  assets  to  achieve  its  goal  requires  well-implemented  regulatory  and  institutional reform. To  assist  in  these  efforts,  ESCAP  and  OECD  conducted  a  multi-dimensional  policy  review  of Myanmar  from

 the  end  of  2012  in  coordination  with  the  Government  of  Myanmar.2  During  the  policy  review,  the  lack  of information  on  the  business  conditions  on  the  ground  was  found  to  be  a  serious  impediment  to  the  development of  appropriate  polices.  To  address  this  issue,  ESCAP  and  OECD  carried  out  a  business  survey  jointly  with the  Union  of  Myanmar  Federation  of  Chambers  of  Commerce  and  Industry  (UMFCCI).

 The  survey  results  are  discussed  from  various  key  perspectives  of  businesses  in  order  to  identify  effective policy  prescriptions.  They  include  the  business  environment,  market  conditions,  innovation,  human  resources, access  to  fnance,  productivity,  corruption,  agribusiness  and  food  industries,  which  are  briefy  summarized  below. 

1. Business  Environment 

The  development  of  an  enabling  business  environment  is  crucial  to  the  promotion  of  growth,  productivity, employment  and  well-being.  Although  the  country  has  instituted  various  reforms  since  the  early  1990s  the regulatory  and  policy  framework  remains  fragmented.  Permission  from  parallel  line  ministries  is  often  required and  coordination  is  reportedly  lacking.  This  has  led  to  the  growth  of  a  large  informal  sector,  which  makes conditions  very  diffcult  for  small  and  medium-sized  enterprises  (SMEs).  The  survey  results  have  revealed  wide-spread  dissatisfaction  with  several  aspects  of  the  business  environment. Corruption,  access  to  skilled  labour,  technology  and  access  to  land  are  most  frequently  cited  as  very  severe obstacles  faced  by  businesses  in  Myanmar.  Access  to  fnance  is  also  found  to  be  a  major  obstacle,  especially by  SMEs.  Although  infrastructure  such  as  access  to  electricity  and  water  supplies  are  not  rated  as  severe obstacles  overall,  they  are  more  severe  in  some  geographical  regions. The Government of Myanmar will therefore need to streamline administrative procedures for obtaining registration, licences  and  permits  perhaps  by  providing  a  “single-window”  service,  which  will  also  reduce  the  opportunities of  irregularities.  Infrastructure  must  not  only  be  improved  but  also  distributed  equitably  throughout  the  nation with  a  specifc  industrial  zone  development  plan.  Specialized  assistance  should  be  provided  to  entrepreneurs and  SMEs  in  addressing  issues  such  as  access  to  fnance  and  bureaucracy.

2. Market Conditons

As  the  country  opens  its  borders  and  prepares  for  regional  integration,  it  must  be  ready  to  face  opportunities  as  well as  challenges.  Enhanced  trade  could  bring  huge  benefts  to  the  economy  but  frms  will  also  face  stiff  competition.The  survey  shows  that  frms  still  have  more  localized  concerns,  as  they  do  not  fnd  issues  such  as  foreign competition  and  international  sanctions  to  be  very  severe  obstacles.  Firms  are  also  ambivalent  with  regard  to the  launch  of  the  ASEAN  Economic  Community  (AEC).The  Government  must  spread  awareness  of  the  potential  benefts  and  challenges  of  regional  integration. Improving  productivity,  quality  and  management  is  crucial  to  being  able  to  compete  globally.  Access  to  foreign investors  and  trade  fnance  will  be  very  useful  for  SMEs.

3. Innovation

Innovation  is  widely  regarded  as  a  key  element  in  quickening  the  pace  of  development  and  growth  in  any country.  For  example,  the  use  of  transformative  technologies  such  as  the  Internet  has  been  shown  to  have dramatic  effects  on  gross  domestic  product  (GDP)  growth  in  many  developing  countries. As  frms  in  Myanmar  become  exposed  to  global  competition,  it  will  be  increasingly  important  for  them  to develop  innovative  products  or  services  as  well  as  utilize  technology  more  effectively.  However,  investment  in research  and  development  (R&D)  remains  low  in  Myanmar  and  the  country  has  performed  poorly  in  international rankings  of  innovation  capabilities. Firms  reported  in  the  survey  that  they  considered  innovation  to  be  important,  yet  few  in  fact  spend  much money  on  it.  Firms  do  not  appear  to  be  using  intellectual  property  (IP)  protection  as  much  as  they  should  with many  reportedly  relying  on  trust  between  staff  members  to  safeguard  their  innovations.  These  issues  could be  addressed  by  subsidizing  expenditure  on  R&D,  streamlining  patent  applications,  disseminating  information on  the  benefts  of  IP  protection  and  improving  enforcement  of  IP.

4. Human  resources

A  modern  economy  requires  a  workforce  that  is  well-skilled.  Myanmar  currently  spends  less  than  its  peers on  education  and  has  fewer  tertiary  graduates.  The  quality  of  education  is  also  of  concern. The  survey  helps  in  identifying  areas  where  skills  are  lacking.  Technical  and  professional  skills  are  needed in  the  manufacturing  and  services  sectors.  Computer  and  ICT  skills  are  required  by  micro-  and  small-sized frms.  Larger  frms  require  more  communication  and  interpersonal  skills.Although  Myanmar  provides  relatively  favourable  business  environment  to  women,  their  participation  in  the business  sector  can  be  further  enhanced  with  well-designed  public  interventions.  Such  actions  may  particularly focus  on  the  skill  development  of  women  entrepreneurs  and  managers.Addressing  these  challenges  requires  increased  funding  to  the  tertiary  sector  together  with  greater  accountability and  quality  assessments.  Vocational  training  institutes,  public  administration  and  management  schools  and e-education  programmes  could  be  developed  in  association  with  the  private  sector.

5. Access to finance

The  fnancial  sector  has  long  been  tightly  controlled  and  overly  regulated.  The  types  of  fnancing  instruments available  to  private  enterprises  are  limited  with  unreasonably  high  costs.  Many  turn  to  informal  money  lenders instead.  The  Government  has  attempted  reforms  but  the  pace  has  been  slow  as  it  is  a  diffcult  task.More  than  half  of  the  survey  respondents  reported  that  fnancing  options  were  inadequate.  Stringent  collateral requirements,  complicated  application  procedures,  small  loan  sizes  and  high  interest  rates  are  reportedly  the biggest  fnancing  obstacles.  Informal  lenders  provide  loans  at  very  high  interest  rates  and  require  greater  trust while  accepting  a  wider  range  of  collateral.The  Government  must  complete  the  reform  process  by  reducing  regulation  and  allowing  banks  more  fexibility. While  the  local  fnancial  sector  is  upgrading  rapidly,  the  Government  must  foster  their  institutional  capacity by  providing  various  technical  and  fnancial  assistance.  Foreign  banks  should  be  allowed  to  operate  in  the country  to  encourage  competition.  Informal  lenders  should  be  integrated  into  the  formal  system;  SMEs  should have  access  to  subsidized  loans. 

6. Productivity

After  decades  of  being  sheltered  from  global  competition,  productivity  remains  low  in  Myanmar.  The  economy is  still  dominated  by  agriculture,  which  is  still  a  low-productivity  sector.  Productivity  in  other  sectors  is  also  low by  international  standards.  Improving  productivity  is  crucial  to  achieving  rapid  growth. The  survey  shows  that  smaller  frms  tend  to  have  a  higher  level  of  productivity  (measured  as  gross  revenue per  worker)  compared  with  larger  frms.  Hotels  and  restaurants  report  a  much  higher  proft  margin,  on  average, compared  with  that  of  frms  in  other  sectors. Many  of  the  policies  discussed  above  will  also  have  an  impact  on  productivity.  Access  to  skilled  labour, fnance,  innovation  and  technology  will  lead  to  dramatic  improvements  in  productivity.  Further  interventions  at SOEs  (and  former  SOEs)  that  encourage  the  adoption  of  modern  managerial  and  production  techniques  and practices  will  also  be  useful  in  improving  productivity. 

7. Corruption

Corruption  remains  one  of  the  most  signifcant  challenges  facing  Myanmar.  The  Government  has  attempted reforms  through  a  new  Anti-Corruption  Law  and  Anti-Corruption  Commission;  however,  the  country  is  still ranked  156  out  of  175  in  Transparency  International’s  Corruption  Perception  Index  2014. Corruption  was  most  frequently  cited  as  a  very  severe  obstacle  by  the  frms  surveyed.  Bribery  is  reportedly more  common  among  larger  frms  as  well  as  frms  in  the  extractive  industries  sector.  Firms  that  pay  bribes, particularly  younger  frms,  do  so  because  they  fnd  red  tape  to  be  a  more  severe  obstacle  compared  to  frms that  do  not,  suggesting  that  red  tape  may  be  used  as  a  way  of  extracting  bribes. Although  regulatory  and  legal  approaches  are  important,  the  root  causes  of  corruption  must  be  addressed. Excessive  regulation  across  the  board  must  be  reduced;  administrative  processes  streamlined;  accountability of  public  offcials  enhanced;  and  transparency  improved. 

8. Agribusiness  and  food  industries 

The  agribusiness  and  food  industries  are  a  key  strategic  sector  in  Myanmar’s  socio-economic  development, having  long  played  an  important  role  within  the  nation’s  economy.  The  sector  has  several  unique  characteristics. They  are  dominant  industries  in  rural  areas  while  contributing  to  the  economy  through  exports  of  agro-products; thus,  the  sector  is  the  key  to  equitable  and  inclusive  development  in  Myanmar.  The  average  age  of  frms  in this  sector  is  older  than  those  in  other  sectors,  thus  confrming  its  status  as  a  traditional  industry  of  Myanmar. Whereas  the  sizes  of  frms  in  the  sector  are  relatively  bigger  than  frms  in  other  sectors,  the  agribusiness and  food  industries  appear  to  make  less  proft  than  that  earned  by  businesses  in  other  sectors.  The  sector relies  on  informal  lenders  who  are  available  in  rural  areas.  Some  special  interventions  in  this  sector  may  be appropriate  for  enhancing  its  exporting  contribution  as  well  as  rural  development. 

Conclusion

Myanmar  faces  several  challenges  in  its  transition  to  a  modern  economy.  The  information  in  this  publication provides  the  much-needed  perspective  of  businesses  on  the  ground  in  Myanmar,  the  conditions  they  experience and  the  obstacles  they  face.  The  policy  suggestions  contained  herein,  if  implemented,  will  address  these obstacles  and  help  to  create  an  enabling  environment  that  will  allow  frms  to  fourish  and  will  promote  growth, employment  and  development  in  general.

Written by Mekong Institute

The  country  of  Cambodia  attracts foreign investment in  land,  and  China  ranks  at  the  top of the  investors.  China  is the  largest  foreign  investor  in  Cambodia  and  is  one  of  the  leading investors  in  natural  resources,  energy,  infrastructure,  construction,  agriculture,  tourism,  and telecommunications.  One  of  the  biggest  impacts  of  China‘s  investment  projects  is resettlement  schemes  which  remain  highly  controversial.  Based  on  the  literature,  five  key determinants:  1)  public  participation,  2)  pre-planning,  3)  resettlement  policy,  4)  adequate compensation,  and  5)  legislation,  have  been  identified  that  determine  the success  of  the preparation and operation of resettlement schemes. 

The aim of this study is to uncover whether the resettlement schemes for the large-scale land leases to the Union Development Group Co., Ltd (UDG) have been successful and to identify the underlying causes. Specifically, the study examined the five determinants contributing to the  success  of  resettlement  schemes  and  provided  policy  implications.  In-depth  interviews, focus  group  discussions,  and  case  study  were  conducted  with  the  communities affected  by resettlement;  key  informant  interviews  were  conducted  with  local  authorities  at  the  village, commune,  and  district  levels,  government  ministries,  and  concerned  local  and  international non-governmental organizations (NGOs).

The results of the study show that there was no public consultation prior to relocation, and the affected households had very limited information about the UDG‘s investment project in their communities.  While  information  about  the  project  was  shared  a  number  of  times  through dissemination  meetings  in  the  communities, the families  who lived  in  the  leased  areas  were not fully informed and did not give free prior and informed consent. They were also excluded from  the  development  of  the  resettlement  schemes,  including  in  the  pre-planning  and displacement  processes.  Since  Cambodia  does  not  have  a  national policy  and  legal framework  covering  resettlement  and  compensation,  there  is  no  national  standard. Resettlement and compensation of UDG is based on decisions taken by the government and the company involved. 

The  practice  of  compensation  of  UDG  in  Cambodia  is  inconsistent  and  irregular.  The  five determinants of resettlement did not fully function in terms of the formulation and execution of the resettlement schemes for the UDG project. As a consequence, the resettlement schemes for this project were unsuccessful. Hence, national policy on resettlement  and compensation should  consider  establishing and  the  participation  of  local  communities and  concerned stakeholders should be involved appropriately.