Fundamentals of Myanmar's Macroeconomy: A Political Economy Perspective

• Published date: 01 June 2011
• Author: Sean TURNELL
• Date: 01 June 2011
• DOI: http://doi.org/10.1111/j.1748-3131.2011.01190.x

Fundamentals of Myanmar’s Macroeconomy:

A Political Economy Perspective

Sean TURNELL†

Macquarie University

The serial underperformer of the region, Myanmar’s economy is largely without the institutions and

qualities necessary to achieve genuine economic growth. This paper explores the fundamentals of

Myanmar’s economy, from a perspective that emphasizes policy and institutional failure as the

principal determinants of the country’s present circumstances. The paper explores Myanmar’s

economy in a multifaceted way,examining concerns over economic growth, public finances, mon-

etary and financial policies, corruption, and international trade. Notwithstanding the change in the

form of Myanmar’s governing institutions following the elections of November 2010, the paper

concludes pessimistically as to the likelihood of meaningful economic reform in the foreseeable

future.

Key words: Burma, economic growth, informal economy, international trade, monetary and

fiscal policy, Myanmar

JEL codes: O53, O17, O11, O16

1. Introduction

Myanmar’s economy in 2011 is largely without the institutions and attributes necessary to

achieve transformational growth. The product of a political economy environment that

could be best described as being in “delayed transition,” genuine economic progress in

Myanmar is not likely anytime soon. Elections for a new parliament for Myanmar under

a new constitution were held in November2010, and in February 2011, a new government

was formed in their wake. On the basis of the makeup of this new government, however,

little but superficial changes to the country’s policy apparatus are likely in the short-term.1

The purpose of this paper is to explore the fundamentals of Myanmar’s macro-

economy,from a political economy perspective. Such a perspective allows an appropriate

focus upon Myanmar’s state apparatus – by far the dominant and intrusive actor in the

economy – whose policies over nearly five decades have been the primary determinant of

the country’s present circumstances.aepr_1190136..153

The argument briefly outlined here is organized below according to a sequence of

concerns, beginning with a critique of Myanmar’s economic growth, followed by an

examination of the country’s fiscal situation, monetary and financial policies, and inter-

national trade and investment. Along the way, various topical issues and concerns are

explored, as well as more foundational matters.

†Correspondence: Sean Turnell,Economics Depar tment, Macquarie University,Sydney, NSW 2109,

Australia. Email: sean.turnell@mq.edu.au

doi: 10.1111/j.1748-3131.2011.01190.x Asian Economic Policy Review (2011) 6, 136–153

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research

136

Finally,an important qualification must be acknowledged in what follows with respect

to data. Myanmar’s official economic statistics areunreliable, incomplete, often internally

contradictory, and subject tosudden rev ision.Accordingly, in all the tables below, care has

been taken in assembling data that logic and a reasonable knowledge of Myanmar’s

political economy allows to be plausible.Such care is most necessary with that limited data

made public by the Myanmar Central Statistical Organisation (MCSO), but it is likewise

exercised with respect to other sources. Where specific data remains problematic, it is

highlighted in the text.

2. Economic Growth

For more than a decade, Myanmar’s military regime (currently self-styled as the “State

Peace and Development Council”[SPD C]) has claimed annualdouble-dig it growth rates

in the country’s gross domestic product (GDP). Such claims are without foundation, and

are unsupported by various proxy measures of economic progress. Among the most

important of these proxies is energy use. To simplify not unreasonably, economies that

enjoy strong growth overwhelmingly require more or less equally strong growth in their

consumption of energy. This is especially the case with respect to petroleum products and

electricity – the increased use of which is a sine qua non of a genuinely growing economy,

and in which automation, communication systems, and all the other accoutrements of

economic development become increasingly important.

Table 1 below, accordingly, might be regarded as something of an articulate “numeri-

cal critique” of the SPDC’s economic growth claims – juxtaposing their annual GDP

assertions against their own data on annual changes in petroleum and electricity con-

sumption in Myanmar:

Of course, the above data do not imply that (aggregate) GDP growth has not been

taking place in Myanmar over recentyears, but that it has at least been greatly exaggerated

by the SPDC. In all likelihood, Myanmar’s economy has been growing at an average of

Tab le 1 SPDC GDP g rowth claims/energy consumption

Year

Claimed GDP

Growth rate

(% per annum)

Change in petroleum

consumption

(% per annum)

Change in electricity

consumption

(% per annum)

2004/2005 13.6 -9.5 0.2

2005/2006 13.6 2.2 11.4

2006/2007 13.1 12.0 0.0

2007/2008 11.9 -0.1 0.1

2008/2009 10.1 -17.0 5.9

Source: Asian Development Bank (ADB, 2010),Myanmar Central Statistical Organisation

(MCSO, 2009), International Monetary Fund (IMF, 2010). GDP. Gross domestic product.

Sean Turnell Fundamentals of Myanmar’s Macroeconomy

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research 137