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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 overall purpose of the research is to document and assess the information collected that can give us an indication of the LED framework, policies and practices and, most importantly to understand the needs for capacity development for a more inclusive and equitable growth of Greater Mekong Sub-region (GMS) with the goal in contributing to rapid local economic development and inclusive growth along East-West Economic Corridor (EWEC)of the GMS.

The research work is being conducted through desk review of available sources of information. Interviews of LED and related stakeholders were being conducted to obtain their perceptions on LED framework, policies and practices. In order to obtain the current LED results, a Compass Workshop was conducted with relevant stakeholders from the government departments, private enterprises, and NGOs which are contributing to the local economic development.

To assess LED capacities among officials involved in Kayin Sate LED process, an institutional analysis and LED Actor Mapping was conducted using individual interviews and the Compass Workshop. In assessing current knowledge, skill, and attitude of LED officials individual analysis and a CDNA Survey was conducted. In order to identify capacity needs of these officials internal assessment was also conducted.

After receiving the Training on LED Research Framework and Methodology which was conducted at Mekong Institute from January 14 to 18, the National Consultant developed research work plan and the activities involved desk review, conduct of individual interviews as per research matrix, CDNA Survey and Compass Workshop in Hpa-an, capital of Kayin State, Myanmar. Work began on 20 January 2014 and ended on 19 March 2014.

After years of conflict the economy of Kayin State has been very weak, particularly the agriculture sector, and there is a severe lack of motivation in the agriculture sector. In addition to the problems of conflict, the State has been encountering frequent floods in the rainy season and scarcity of water for its agriculture in the dry season.

Maize has market potential for farmers and there is high demand for the product from animal feed factories in Thailand. Other crops such as green gram, sesame and groundnut could easily find market if quality product and value change devel opment is assured.

About 93 percent of respondents in the CDNA survey say they are involved in LED processes with 60 percent in the implementation process and 50 percent in the sensitization process. The majority of those who are directly involved are government officials.

Fiscal decentralization has improved things better as local government is able to have some opportunity of making decision and things move faster, and grassroots community benefit from such progress. However, decision making power final responsibility is still with the national level authority. There is a relevant national LED strategy and programs for sub-national territories. But sub national level needs both financial and technical support from the national level. Government departments at state level like DOA, Department of Trade Promotion, especially Chief Minister's office, Myanmar banks, and other organizations like KSD, NGO, INGO, CCI are the institutional drivers. It is found that local stakeholders shared vision, understanding and participation in development of LED.

This is done through discussions and sharing experiences and information in weekly and monthly meetings. Stakeholders have been sensitized and awareness has already been raised. Thus local stakeholders take ownership of the LED process, as they initiated the activities themselves and implemented the activities themselves.

The private sector is taking increasing role and initiative in LED (e.g. it is involved in the set up of industrial zone and infrastructure development). But some feel that members of the private sector are working on individual basis, and needs to be more mobilized and organized to participate in LED.

Currently there are initiatives to improve local tourisms in Kayin State. Value factors include better services for tourists through hotel services, transportation services, guide services, entertainment services and so forth. However, Kayin State still lacks the technology to refine its goods and value chain development, hence needs further greater efforts and external help.

There are attempts to do LED in an eco-friendly way. For example, when a company is to enter into an agreement with the State Government, it needs to do the social and environmental impact assessment. Only after the clearance is received, the State Government would let the companies to work in the local area.

There are measures taken for local people to be sensitized in order to increase participation. For local officials and those who are direct stakeholders, the Chief Minister exhorted them to participate in LED initiatives in official meetings, and for the public the CM in his rounds of field visits to townships and villages informed the people about the importance of people participation in LED activities. For both the government officials and the people a committee called Planning and Implementation Committee lead the sensitization initiatives. LED activities design includes agriculture, livestock, fisheries, trade promotion, and infrastructure development including capacity development. The focus area is griculture.

Under the leadership of the CM's office, relevant stakeholders come together to work together. At its annual planning sessions or at appointed meetings LED stakeholders come together to discuss their respective plan and how they could find synergies between LED activities. LED actors, specifically among the government officials do have to some extent understanding of LED. Non - government LED actors could have a lesser understanding.

It is generally perceived that there is no gender discrimination issue in Myanmar society, It is however necessary to improve LED actors' capacity on mainstreaming gender to keep abreast of the changing world and gender issues.

Major difficulties and constraints that affect the results of LED mentioned include 1) Peace an d stability, 2) Shortage of manual labour , 3) Shortage of agricultural inputs, 4) Lack of technology know-how, 5) Lack of investment, 6) Inadequate infrastructure (transportation, communication, electricity services), 7) Loan takers unable to repay loans, 8) Unstable agricultural harvest prices, 9) Poor land quality, 10) Due to more income gained as migrant workers, people do not want to work in local areas and in traditional livelihoods such as agriculture and livestock.

Appropriate measures for controlling floods in the rainy season and provision of adequate water for crops cultivation in summer should be developed and addressed by the government with the assistance of external help. There is an urgent need to improve its infrastructure if local economic development is to be achieved.

State Parliamentarians should lobby for further fiscal decentralization so as local government will be able to have increased opportunity of decision-making. Kayin State has a considerable natural resources and a potential for improving its economy through agricultural, livestock and trade promotions.

If State level actors have increased decision making power in LED, and its resources in both skill and financial are adequate, then it could perform effectively and efficiently in its LED initiative processes. The State Government should enlarge its institutional drivers outside its sphere of authority to include members from non-government organization for increased participation and inclusiveness in LED initiative process.

Untimely rains and floods in rainy season are the main constraints and difficulties in maize farming. Appropriate measures for controlling floods in the rainy season and provision of adequate water for crops cultivation in summer should be developed and addressed by the State Government with the assistance of external help.

Additionally, Local KED actors need to constantly upgrade their understanding of their economic reality and of LED through the cooperation with international capacity building organizations.

To spur the increasing role of private sector in LED process, the government needs to devise the strategy to mobilize them as well as to enable them to be better organized in LED participation process. Kayin State LED stakeholders should continue to cooperate with other states and regions to increase its effectiveness and impact. Myanmar has now opened up for cooperation with the outside world, and both the Myanmar Government and the international organizations should take this opportunity to work together for a ‘Win Win' approach thereby advancing the development of Myanmar, particularly the Kayin State which is recognized for having immeasurable potential economic growth in the near future.

Written by Mekong Institute

The main purpose of this study is to provide an update of the NSEC logistics study conducted in 2008. It will be based on empirical data gathered in the field and aims to assess the capacity of key stakeholders involved to transform the NSEC from a transport corridor into an economic corridor. The goal is to propose policy recommendations to bridge the human capacity gap in order to attain this target.

Written by Mekong Institute

Labor migration is considered to be one way to reach the goal of poverty reduction and economic development by the Vietnamese Government. The Government has been trying to expand its overseas labor market. However, Vietnamese migration to the countries in the Greater Mekong Subregion has receives less attention from policymakers. Many Vietnamese migrants cross the border with countries in the region illegally for working purposes. This spontaneous migration process has implications for the socio-economic development of the origin as well as the destination country.

This research was conducted in two poor communes in Thua Thien Hue province, Vietnam where the number of migrants travelling to Lao PDR for work is the highest in the country. Focusing on spontaneous migration to countries along the East West Economic Corridor (EWEC), the field survey was administered to 250 migrants and state officials. The study results show the economic potential and social challenges of spontaneous migration from Vietnam to other countries in the EWEC. Easy transportation to EWEC countries, fast and cheap official document processing at the border and the availability of jobs at the destination are identified as the potentials of labor migration. The study also explores the role of social networks in supporting this process. It considers the social links with the origin and destination country and between the migrants and those who stay behind. Social networks are seen as providing protection and security for migrants at their destination. However, migrant workers have to face numerous challenges during their migration, including difficulties in accessing social welfare in their destination country, being abused, exploited and becoming illegal workers due to the lack of legal documents. The research finds that spontaneous migration to EWEC countries is a survival strategy for the poor in Thua Thien Hue province. Therefore the study suggests that in
developing a national poverty reduction strategy policy makers and development aid agencies should pay more attention to the spontaneous migration of the poor.

Keywords: Economic potentials, Social challenges, Livelihoods, Social network

Written by Mekong Institute

Along with other GMS countries Lao PDR has adopted land and forest policies aimed at reducing poverty. In 1996, the Government of Lao PDR (GoL) officially adopted a nationwide program on land use planning and land allocation (LUP/LA). The aim of the program was to provide villagers with access to additional land resources as well as at safeguarding the nations forest areas. The LUP/LA program has now been drastically decreased due to budget constraints after having been implemented to varying degrees in most parts of the country. Implementation of LUP/LA varied throughout the country, but studies on the impacts have shown that several of the expected results have not been achieved. It is reported that in general, LUP/LA has been beneficial in the delineation of village boundaries and resource use zones, has helped to reduce land conflicts and improve forest protection. On the other hand, land allocation has led to a reduction in agricultural and forest areas available for use by households living in upland areas. In many cases this has resulted in decreased yields and insecure livelihoods.

"Reassessment of the land-forest allocation programme is needed, particularly as it is applied to upland areas where shifting cultivation is widespread; there are shorter fallow periods and population pressures because of declining yields and the hardship experienced in some upland areas." (Lao PDR NGPES).

This study confirmed most of the impacts identified in previous surveys.

The GoL's strategy for the development of remote areas has been to push for "economic integration."This has translated into a policy of swidden agriculture eradication, which is commonly understood to be an important way to develop the uplands. Following the GoL line, swidden is focused on producing a diversity of crops for subsistence which keeps ethnic minorities poor, especially where fallow cycles have been reduced. Thus, the villagers have to be taught how to farm like lowland Lao farmers - to focus on a narrow range of crops in order to produce a surplus which will generate cash, increase market linkages and decrease poverty. Recognizing that many upland areas are unsuitable for paddy cultivation, and given the remoteness of so many upland minority villages, thousands of villages have been resettled - often with disastrous consequences due to the lack of support during the actual move, lack of basic infrastructure in the new villages and difficulties faced by the communities in adapting to new environments, diseases and agricultural practices. Its not surprising, then that the figures from many studies conducted in Laos show an increase in all poverty indicators, including decreased food production and increased mortality rates in new villages.

In recent years, Laos has experienced an increase in demand for its main national resource, the countrys land. Huge areas of land have been conceded to foreign investors, mainly to Chinese and Vietnamese rubber plantations. These land concessions have put further pressure on upland minorities by increasing land scarcity and reducing forest areas which are vital to these minorities livelihoods. Furthermore, there lands
has often been conceded to the foreign investors - sometimes without any or with too little compensation - leaving villagers as day laborers on their own land with no alternatives means of livelihood.

This study seeks to contribute to a better understanding of how institutional arrangements governing ethnic minorities rights to access and control over land and forest areas impacts on their livelihoods, based on a field study in 5 ethnic minority villages in the Sekong province.

Keywords: Land Policy, Land Rights, Land Concessions, Land Titles, Lao PDR