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Economy of Myanmar

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History

Classical era

Burma has been the main trade route between China and India since 100 BC. The Mon Kingdom of lower Burma served as an important trading centre in the Bay of Bengal. The majority of the population was involved in rice production and other forms of agriculture. Burma used silver as the trade currency. All land was nominally owned by the Burmese monarch. Exports, along with oil wells, gem mining and teak production were controlled by the monarch. Burma was vitally involved in the Indian Ocean trade. Logged teak was a prized export that was used in European shipbuilding because of its durability, and became the focal point of Burmese exports from the 1700s to the 1800s.

Under the monarchy, the economy of Myanmar had been based on communal redistribution known in Myanmar as Dāna. The state set the prices of the most important commodities. Agrarian self-sufficiency was vital, while trade was only of secondary importance.

British Burma (1885–1948)

Under the British administration, the people of Burma were at the bottom of the social hierarchy, with Europeans at the top, Indians, Chinese, and Christianized minorities in the middle, and Buddhist Burmese at the bottom. Integrated into the world economy by force, economic growth in Burma was driven by the extractive industries and cash crop agriculture, and the country had the second-highest GDP per capita in Southeast Asia. However, much of the wealth was concentrated in the hands of Europeans. The country became the world's largest exporter of rice, mainly to European markets, while other colonies like India suffered mass starvation. The British followed the ideologies of Social Darwinism and the free market, and opened up the country to a large-scale immigration with Rangoon exceeding New York City as the greatest immigration port in the world in the 1920s. Historian Thant Myint-U states, "This was out of a total population of only 13 million; it was equivalent to the United Kingdom today taking 2 million people a year." By then, in most of the largest cities in Burma, Rangoon, Akyab, Bassein and Moulmein, the Indian immigrants formed a majority of the population. The Burmese under British rule felt helpless, and reacted with a "racism that combined feelings of superiority and fear".

Crude oil production, an indigenous industry of Yenangyaung, was taken over by the British and put under Burmah Oil monopoly. British Burma began exporting crude oil in 1853. It produced 75% of the world's teak. The wealth was however, mainly concentrated in the hands of Europeans. In the 1930s, agricultural production fell dramatically as international rice prices declined and did not recover for several decades.

During the Japanese invasion of Burma in World War II, the British followed a scorched earth policy. They destroyed the major government buildings, oil wells, and mines for tungsten, tin, lead and silver to keep them from the Japanese. Myanmar was bombed extensively by the Allies. After independence, the country was in ruins, with its major infrastructure destroyed. With the loss of India, Burma lost relevance and obtained independence from the British. After a parliamentary government was formed in 1948, Prime Minister U Nu embarked upon a policy of nationalisation, and the state was declared the owner of all land. The government tried to implement an eight-year plan, partly financed by injecting money into the economy, which caused some inflation.

Post-independence and under U Nu and Ne Win (1948–1988)

After a parliamentary government was formed in 1948, Prime Minister U Nu embarked upon a policy of nationalisation. He attempted to make Burma a welfare state by adopting central planning measures. By the 1950s, rice exports had decreased by two-thirds and mineral exports by over 96%. Plans were implemented in setting up light consumer industries by private sector. The 1962 Burmese coup d'état was followed by an economic scheme called the Burmese Way to Socialism, a plan to nationalise all industries, with the exception of agriculture. The catastrophic program turned Burma into one of the world's most impoverished countries. Burma was classified as a least developed country by the United Nations in 1987.

Rule of the generals (1988–2011)

After 1988, the regime retreated from a command economy. It permitted modest expansion of the private sector, allowed some foreign investment, and received much needed foreign exchange. Than Shwe advocated for some deregulation economic policies, despite his relaxation of some restrictions on Burma's economy, his economic policies have been often criticized as ill-planned. Shwe relaxed some state control over the economy, and was a supporter of Burma's participation in the Association of South East Asian Nations (ASEAN). He also oversaw a large crackdown on corruption, which saw the sackings of a number of cabinet ministers and regional commanders in 1997. Shwe advocated for Crony capitalism. The economy was rated in 2009 as the least free in Asia (tied with North Korea). All basic market institutions are suppressed. Private enterprises were often co-owned or indirectly owned by state. The corruption watchdog organisation Transparency International in its 2007 Corruption Perceptions Index released on 26 September 2007 ranked Burma the most corrupt country in the world, tied with Somalia.

The national currency is the kyat. Burma currently has a dual exchange rate system similar to Cuba. The market rate was around two hundred times below the government-set rate in 2006. In 2011, the Burmese government enlisted the aid of the International Monetary Fund to evaluate options to reform the current exchange rate system, to stabilise the domestic foreign exchange trading market and reduce economic distortions. The dual exchange rate system allows for the government and state-owned enterprises to divert funds and revenues, while also giving the government more control over the local economy and making it possible to temporarily subdue inflation.

Inflation averaged 30.1% between 2005 and 2007. In April 2007, the National League for Democracy organised a two-day workshop on the economy. The workshop concluded that skyrocketing inflation was impeding economic growth. "Basic commodity prices have increased from 30% to 60% since the military regime promoted a pay rise for government workers in April 2006," said Soe Win, the moderator of the workshop. "Inflation is also correlated with corruption." Myint Thein, an NLD spokesperson, added: "Inflation is the critical source of the current economic crisis."

In recent years, China and India have attempted to strengthen ties with Myanmar for mutual benefit. The European Union and some nations, including the United States and Canada, imposed investment and trade sanctions on Burma. The United States banned all imports from Burma, though this restriction was lifted. Foreign investment comes primarily from China, Singapore, South Korea, India, and Thailand.

Economic liberalisation (2011–2019)

In 2011, when the new President Thein Sein's government came to power, Burma embarked on a major policy of reforms, including anti-corruption, currency exchange rate regulation, foreign investment laws and taxation. Foreign investments increased from US$300 million in 2009–10 to a US$20 billion in 2010–11 by about 6567%. Large inflow of capital results in stronger Burmese currency, kyat by about 25%. In response, the government relaxed import restrictions and abolished export taxes. Despite current currency problems, the Burmese economy is expected to grow by about 8.8% in 2011. After the completion of 58-billion dollar Dawei deep seaport, Burma is expected be at the hub of trade connecting Southeast Asia and the South China Sea, via the Andaman Sea, to the Indian Ocean receiving goods from countries in the Middle East, Europe and Africa, and spurring growth in the ASEAN region.

In 2012, the Asian Development Bank formally began re-engaging with the country, to finance infrastructure and development projects in the country. The $512 million loan is the first issued by the ADB to Myanmar in 30 years and will target banking services, ultimately leading to other major investments in road, energy, irrigation and education projects.

In March 2012, a draft foreign investment law emerged, the first in more than 2 decades. This law oversees the unprecedented liberalisation of the economy. It, for example, stipulates that foreigners no longer require a local partner to start a business in the country and can legally lease land. The draft law also stipulates that Burmese citizens must constitute at least 25% of the firm's skilled workforce, and with subsequent training, up to 50–75%.

On 28 January 2013, the government of Myanmar announced deals with international lenders to cancel or refinance nearly $6 billion of its debt, almost 60 per cent of what it owes to foreign lenders. Japan wrote off US$3 Billion, nations in the group of Paris Club wrote off US$2.2 Billion and Norway wrote off US$534 Million.

Myanmar's inward foreign direct investment has steadily increased since its reform. The country approved US$4.4 billion worth of investment projects between January and November 2014.

According to one report released on 30 May 2013, by the McKinsey Global Institute, Burma's future looks bright, with its economy expected to quadruple by 2030 if it invests in more high-tech industries. This however does assume that other factors (such as drug trade, the continuing war of the government with specific ethnic groups, etc.) do not interfere.

As of October 2017, less than 10% of Myanmar's population has a bank account. As of 2016–17 approximately 98 percent of the population has smartphones and mobile money schemes are being implemented without the use of banks similar to African countries.

Economic crisis (2020–present)

On April 30, 2021, the United Nations Development Programme published a report indicating that the COVID-19 pandemic and the 2021 Myanmar coup d'état in February 2021 could reverse economic gains made over the last sixteen years. Myanmar's economy has been in economic crisis since the coup d’état in 2021.

Since at least 2022, Myanmar is undergoing an ailing economy; the ruling military junta plans to shore up the worsening state of its balance of payments. When the kyat fell by a third of its pre-coup value, the central bank then sold $600 million worth of foreign reserves (10% of the entire country's total) to prop up the kyat. By April 2022, reserves dwindled, foreign investment fell and remittances plummeted. This led the junta to impose capital controls and import restrictions which led to shortages of diabetes and cancer medicines.

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