Connect with us
//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js (adsbygoogle = window.adsbygoogle || []).push({});

Asean

Myanmar: getting economic reform on track

Published

on

Author: Peter Drysdale, Editor, East Asia Forum

After decades of struggle to overcome political repression and deprivation, Myanmar appears on the way to democracy.

This achievement is little short of miraculous, a testament to the courage of opposition leader Aung San Suu Kyi and her followers as well as to the tenacity and faith of the people of Myanmar in the possibility of its deliverance. For now, reversal of the progress in Myanmar seems unlikely, given what the military leadership now have riding on it, nationally and internationally (as it assumes the chair of ASEAN in 2014), but how bumpy the road ahead is will depend much, if not crucially, on whether political reform can be entrenched through the prosperity that only economic reform can bring.

The good news is that the process of economic reform has begun. As Vikram Nehru notes in this week’s lead essay, the day of the opposition’s landslide election victory also saw the first foreign exchange auction in Rangoon, establishing a more realistic exchange for the kyat against the US dollar (a slide from the old official rate of 8.5 kyat to a market rate of 818 kyat to the dollar). Getting a realistic price on the currency is the first big step in getting economic incentives and disciplines right in the Myanmar economy.

Reform of the foreign exchange regime is only the very first step. For it to work there will need to be an independent central bank. A raft of trade and other regulations will need to be lifted to make effective the relationship between the prices of goods and services in local currency and those purchasable in international markets using foreign currencies. Myanmar has access to international advice, through the IMF, the World Bank, the Asian Development Bank and the United Nations, in implementing economic reform, but ultimately success will depend on calibrating the implementation of economic reform to domestic political and economic circumstances. Much of the country is desperately poor and there will need to be immediate pay-off from reform to underpin confidence that change will generate higher living standards and reduce poverty. Success will build a constituency for further change. Reforms will be key to unleashing the binding constraints that have held back economic growth.

Nehru identifies five reform priorities.

The first is to establish financially viable government, able to fund essential economic, civil and security infrastructure transparently through the national budget. Only then will the people of Myanmar escape the tyranny of being held hostage to the whims of arbitrary extra-legal power. This will allow the state to achieve two critical objectives: it will increase certainty by financing local government and military organisations properly and transparently through the budget; and financial viability will also help provide resources (from internal and external sources) to build much-needed infrastructure, such as ports and rural roads, to facilitate non-gas production and exports (rice, pulses, beans and labour-intensive manufactures in particular). Myanmar is fortunate that the prospects of increased exports of gas (now fetching their real value in international currency) will dramatically increase the net earnings of the state-owned Myanmar Oil and Gas Enterprise. Mobilising these earnings for national development is the first critical challenge.

The second priority, according to Nehru, is to allow increased space for economic activity by private entrepreneurs that is free from state or military patronage — and to give banks increased freedom to lend to them (especially in agriculture). ‘Formal laws governing economic activity either don’t exist or aren’t followed’. And actions by the government currently tend to discourage private initiative because they are random and unpredictable. Farmers are restricted in their choice of crops, and rice production is subject to a levy. Investment and increased production depends upon ensuring that the property rights of private investors are respected and protected.

Third, the government needs to eliminate a whole range of restrictions on imports and exports and promote foreign direct investment. Doing so will eliminate the supply bottlenecks that are throttling economic activity and jumpstart non-oil and gas export production. Unless these restrictions are lifted the market-based exchange rate won’t be able to do its job.

A fourth priority is to develop Myanmar’s natural resources — especially natural gas, hydropower, timber and gems — without falling prey to macroeconomic risks or incurring local environmental and social problems. In Myanmar, where the bulk of the country’s natural resources are located in ethnic minority regions that have been seeking autonomy from the centre for decades, getting this right is particularly important. Without adequate safeguards, these regions could see their natural resources depleted rapidly with little long-term development to show for it.

Finally, the government will need to work with the international community to assist in clearing debt owed to the Asian Development Bank and World Bank so that Myanmar can once again tap these institutions for concessional resources. Neither the international banks nor bilateral lenders can take on more debt without a repayment plan. Japan is the biggest creditor (with about US$4 billion in outstanding debt); among multilaterals, the Asian Development Bank and the World Bank, together, are owed in excess of US$750 million.

These are daunting challenges. But, as Nehru concludes, Myanmar’s strategic location and its natural resource wealth give it advantages few countries have. And its place within ASEAN gives it every prospect of coming in from the political and economic cold more quickly than Vietnam was able to after the bitter war with America, not to mention North Korea should it come to make the choice for economic change.

Peter Drysdale is Editor of the East Asia Forum.

  1. Myanmar’s five economic priorities
  2. Reforms and reconciliation in Myanmar
  3. Myanmar: getting down to business

See the original post here:
Myanmar: getting economic reform on track

Asean

ASEAN weathering the COVID-19 typhoon

Published

on

Vietnam's Prime Minister Nguyen Xuan Phuc addresses a special video conference with leaders of the Association of Southeast Asian Nations (ASEAN), on the coronavirus disease (COVID-19), in Hanoi 14 April, 2020 (Photo:Reuters/Manan Vatsyayana).

Author: Sandra Seno-Alday, Sydney University

The roughly 20 typhoons that hit Southeast Asia each year pale in comparison to the impact on the region of COVID-19 — a storm of a very different sort striking not just Southeast Asia but the world.

 

Just how badly is the COVID-19 typhoon thrashing the region? And what might the post-crisis recovery and reconstruction look like? To answer these questions, it is necessary to investigate the strengths and vulnerabilities of Southeast Asia’s pre-COVID-19 economic infrastructure.

Understanding the structure of the region’s economic house requires going back to 1967, when Southeast Asian countries decided to pledge friendship to one another under the ASEAN framework. While other integrated regions such as NAFTA and the European Union have aggressively broken down trade barriers and significantly boosted intra-regional trade, ASEAN regional economic integration has chugged along slower.

Southeast Asian countries have not viewed trade between each other as a top priority. The trade agreements in the region have been forged around suggestions for ASEAN countries to lower tariffs on intra-regional trade to within a certain range and across limited industries. This has lowered but not eliminated barriers to intra-regional trade. Consequently, a relatively significant share of Southeast Asian trade is with countries outside the region. This active extra-regional engagement has resulted in ASEAN countries’ successful integration into global value chain networks.

A historically outward-facing region, in 2010 around 75 per cent of Southeast Asian commodity imports and exports came from countries outside of ASEAN. This share of extra-regional trade nudged closer to 80 per cent in 2018. This indicates that ASEAN’s global value chain network embeddedness has deepened over time.

Around 40 per cent of ASEAN’s extra-regional trade is with the rest of Asia. From 2010 to 2018 Southeast Asian countries forged major trade relationships with four Asian countries: China, Japan, South Korea and India. Outside Asia, the United States is the region’s major trading partner. ASEAN’s trade focus on Asia’s largest markets is not surprising. Countries tend to establish trade relationships with large, geographically close, and culturally similar markets.

Fostering deep relationships with a few large markets, however, is a double-edged sword. While it has allowed ASEAN to benefit from integration in global value chains, it has also resulted in increased vulnerability to the shocks affecting its network connections.

ASEAN’s participation in global value chains has allowed it to transition from a net regional importer in 1990 to a net regional exporter in 2018. But the region’s deep embeddedness in a small and tightly-coupled network cluster of extra-regional global value chain partners has exposed it to disruption to any and all of its external partners. By contrast, ASEAN’s intra-regional trade network structure is much more loosely-coupled: a consequence of persistent intra-regional trade barriers and thus lower intra-regional trade intensity.

In the pre-COVID-19 period, ASEAN built for itself an economic house held up by just five extra-regional markets, while doing less to expand and diversify its intra-regional trade network. The data shows that ASEAN trade became increasingly concentrated in these few external markets between 2010 and 2018.

This dependence on a handful of markets does not bode well for risk and crisis management. All of the region’s major trading partners have been significantly affected by COVID-19 and this in turn is blowing the ASEAN economic house down.

What are the ways forward? The immediate task at hand is to get a better picture of the region’s position in global value chain networks and to get on top of managing its network risk exposure. Already there are red flags around the region’s food security arising from its position in food value chains. It is critical to look for ways to introduce flexibility into existing supply chains for greater agility in responding to crises.

It is also an opportune time for ASEAN to harness the technology transfer gains of global value chain participation and invest in innovation-driven diversification of products and markets. The region’s embeddedness in global value chain networks certainly places it in a strong position to readily access large export markets not just in Asia but also Europe and the Americas.

Over the longer term, ASEAN is faced with the question of whether it should seriously look…

Source link

Continue Reading

Markets

Tiger Trade Launches SGX Trading, Meeting Demand from Asian Investors

Access to the Singapore Exchange (SGX) adds to Tiger Brokers’ current menu of stock exchanges, such as the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (NASDAQ), the world’s two largest stock exchanges, as well as the Hong Kong Stock Exchange (HKEX).

Published

on

SINGAPORE (ACN Newswire) – Tiger Trade, a one-stop mobile and online trading application by Tiger Brokers, has launched access to the Singapore Exchange (SGX).

(more…)
Continue Reading

Asean

Can Asia maintain growth with an ever ageing population ?

To boost productivity in the future, Asian governments will have to implement well-targeted structural reforms today.

Published

on

Asia has been the world champion of economic growth for decades, and this year will be no exception. According to the latest International Monetary Fund Regional Economic Outlook(REO), the Asia-Pacific region’s GDP is projected to increase by 5.5% in 2017 and 5.4% in 2018. (more…)

Continue Reading