Despite its huge economic potential in key industries like energy and agriculture, Myanmar’s development will be a “generational process” and the country will take decades to catch up to other more successful Southeast Asian economies, said Steve Groff, a vice-president at the Asian Development Bank.
“Even if we saw growth rates of 6-7 percent every year, it would take 30 years for Myanmar to get to where Thailand is,” said Groff, who is responsible for the bank’s operations in Southeast Asia, East Asia and the Pacific, in a phone interview.
Returning recently from a four-day visit to Myanmar, Groff said that while he is optimistic and encouraged by the government’s “committed and serious” attitude towards the country’s reform process, major challenges still remain on the path to development, including inadequate infrastructure and weak public institutions. These, he added, need to be strengthened before foreign investors and private stakeholders are able to confidently invest in the fledgling market.
The ADB is one of several international financial institutions that is returning to Myanmar after cutting off loans to the country many years ago as Western leaders sought to weaken the country’s repressive military junta. The US and other Western governments have begun easing sanctions against Myanmar this year, after a new, nominally-civilian government took power in Myanmar in 2011 and began lifting media restraints, releasing political prisoners and modernising the economy, among other reforms.
Washington has also agreed to let lenders such as the ADB and the World Bank restart some operations in the country. But Myanmar must still pay or restructure billions of dollars in unpaid debts to the ADB and other institutions before they will be able to launch major new lending efforts. The ADB said earlier this year that Myanmar owes the bank approximately $497 million in debt.
Groff’s visit was the first by a top ADB official since 1988, when the country’s then-junta crushed a pro-democracy movement. It also comes as the ADB wraps up a set of “initial sector assessments” of the country aimed at improving the bank’s understanding of the economy as it contemplates when to restart lending there.
According to the assessments, urban services in Myanmar are “frequently below acceptable levels” without proper drainage, sewerage or adequate waste management.
Transportation remains limited with a road density of two kilometers per 1,000 people, compared to an average across Southeast Asia of 11 kilometers per 1,000 people. Indonesia and Thailand have about 250 and 370 vehicles per 1,000 people, respectively, but in Myanmar the average is just 18.
Myanmar “is not as urbanised as any country in Asean – there needs to be an upgrading of services on the part of investors and the private sector, but they are going to need certainty that the government will carry its weight too,” said Groff.
Investors may primarily be attracted by Myanmar’s huge energy sector and infrastructural opportunities, but according to the ADB’s report, agriculture will continue to remain one of the most important sectors in the medium-term, since it makes up 40 percent of the country’s gross domestic product.
Though Myanmar’s constraints and opportunities are unique after so many years of military rule, the ADB said the country could learn from the experiences of Cambodia, Vietnam or Laos in moving away from a centrally-planned system towards an economy and political system that is more representative. While centrally-planned economies can be attractive to donors and investors, Groff said they should push for a more “representative approach” in Myanmar’s economic transformation.
“[Myanmar] needs to make sure that the government and its people are in the drivers’ seat when it comes to development,” he said. -By Shibani Mahtani