Inclusive Development in Myanmar: Learning from Neighbours. Thangavel Palanivel UNDP Regional Bureau for Asia-Pacific

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1 Inclusive Development in Myanmar: Learning from Neighbours Thangavel Palanivel UNDP Regional Bureau for Asia-Pacific

2 Outline Myanmar vis-à-vis its neighbours Economic reforms in selected Asian countries Salient features and lessons for Myanmar

3 Myanmar s progress on human development is more rapid compared to its neighbours (low base effect); but its HDI value (0.48) is still low

4 Myanmar s HDI ranking improved in recent years, but it is still low ranking out of 187 countries (2011) Source: UNDP HDR 2011 HDI ranking Malaysia 61 China 101 Thailand 103 Philippines 112 Indonesia 124 Viet Nam 128 India 134 Lao PDR 138 Cambodia 139 Bangladesh 146 Myanmar 149

5 Myanmar s adult literacy rate is relatively high (over 90%), but quality of education remains a concern; Children spent less than four years in the school - lowest in Asia

6 Despite similar levels in the 1960s, the per capita income of China, Malaysia, and Thailand pulled ahead more than five times Non-income HDI seems to drive the progress of HDI in Myanmar

7 Poverty declined significantly in Myanmar during , but one third of population continues to face multidimensional deprivations

8 Myanmar s social sector expenditure as % of GDP is lowest in the region; its historical legacy has contributed to its non-income HDI values

9 An Overview of Economic Reforms in Selected Asian Countries

10 GDP Growth at the Time of Economic Reforms in Selected Asian countries China, Vietnam and Laos initiated their reforms in a stable economic environment India and Cambodia initiated their economic in a unstable environment (due to economic crisis) Starting year Period GDP Growth CPR VIE LAO IND CMB

11 Conditions before the economic reforms Motivation has generally been to improve the socio-economic development Poverty Incidence is very high at the onset of economic reform $1.25 a day $2.00 a day China Vietnam IND Lao External trade (as % of GDP) is not only low, but trade balance is also high during Pre- Reform period Exports Imports balance CPR VIE LAO IND CMB

12 China s reforms in stages The first stage from 1978 to 1984: Reforms started in the countryside with the introduction of the household responsibility system and liberalization of agricultural prices and markets. The second stage from 1984 to 2000: privatization and contracting out of much state-owned industry, the lifting of price controls and protectionist policies and unification of exchange rate with managed floating system. The third stage from 2000 to 2005: China accessed into the WTO in 2001China became member of WTO in 2001 The fourth stage from 2005 to now: improving social protection and reforming banking sector This illustrated Chinese gradualism in the transition.

13 India s Reforms Initial reforms focused on reducing fiscal deficit Trade reforms - removal of quantitative restrictions along with rationalization of the tariff structure Exchange rate reforms- unification of rates and shift to a market determined exchange rate; large depreciation Financial sector reforms - entry of new private and foreign banks; operational autonomy to banks (interest rates largely deregulated) Industry - State monopoly abolished in virtually all sectors

14 Viet Nam s Reforms Doi Moi or renovation started in 1986 Like China, early reform focused on agriculture; farm prices deregulated, and farm subsides eliminated During , a major devaluation and unification of exchange rates; the elimination of direct budget subsidies to state owned enterprises (SOEs); a sharp reduction in monetary and credit growth; the reduction of the number of SOEs; and a widening of the "open door" policy Bilateral Trade Agreements signed including with the US in 2001; WTO accession in 2007

15 Key features and lessons learned

16 Key Features Reforms in Asia have been Gradual" rather than "big bang as in Europe and Central Asia Experimental and incremental Focusing on outward orientation - trade & exchange Fostering high levels of savings, plus public and private investment

17 Lessons Learned High growth can cause inequalities; ensuring inclusiveness through policy is essential Agricultural reforms can create pro-reform constituencies in nonagricultural sectors Presence of an external anchor can assist domestic reforms e.g., ASEAN Free Trade, WTO Trade and FDI are important; can facilitate technology and knowledge transfer Protect people during transitions Sequencing of reforms is critical Pragmatic leadership is vital