The Government must complete the reform process by reducing regulation and allowing banks more flexibility. While the local financial sector is upgrading rapidly, the Government must foster their institutional capacity by providing various technical and financial assistance. Foreign banks should be allowed to operate in the country to encourage competition. Informal lenders should be integrated into the formal system; SMEs should have access to subsidized loans.
6. Productivity After decades of being sheltered from global competition, productivity remains low in Myanmar. The economy is still dominated by agriculture, which is still a low-productivity sector. Productivity in other sectors is also low by international standards. Improving productivity is crucial to achieving rapid growth. The survey shows that smaller firms tend to have a higher level of productivity (measured as gross revenue per worker) compared with larger firms. Hotels and restaurants report a much higher profit margin, on average, compared with that of firms in other sectors. Many of the policies discussed above will also have an impact on productivity. Access to skilled labour, finance, innovation and technology will lead to dramatic improvements in productivity. Further interventions at SOEs (and former SOEs) that encourage the adoption of modern managerial and production techniques and practices will also be useful in improving productivity.
7. Corruption Corruption remains one of the most significant challenges facing Myanmar. The Government has attempted reforms through a new Anti-Corruption Law and Anti-Corruption Commission; however, the country is still ranked 156 out of 175 in Transparency International’s Corruption Perception Index 2014. Corruption was most frequently cited as a very severe obstacle by the firms surveyed. Bribery is reportedly more common among larger firms as well as firms in the extractive industries sector. Firms that pay bribes, particularly younger firms, do so because they find red tape to be a more severe obstacle compared to firms that do not, suggesting that red tape may be used as a way of extracting bribes. Although regulatory and legal approaches are important, the root causes of corruption must be addressed. Excessive regulation across the board must be reduced; administrative processes streamlined; accountability of public officials enhanced; and transparency improved.
8. Agribusiness and food industries The agribusiness and food industries are a key strategic sector in Myanmar’s socio-economic development, having long played an important role within the nation’s economy. The sector has several unique characteristics. They are dominant industries in rural areas while contributing to the economy through exports of agro-products; thus, the sector is the key to equitable and inclusive development in Myanmar. The average age of firms in this sector is older than those in other sectors, thus confirming its status as a traditional industry of Myanmar. Whereas the sizes of firms in the sector are relatively bigger than firms in other sectors, the agribusiness and food industries appear to make less profit than that earned by businesses in other sectors. The sector relies on informal lenders who are available in rural areas. Some special interventions in this sector may be appropriate for enhancing its exporting contribution as well as rural development.
Conclusion Myanmar faces several challenges in its transition to a modern economy. The information in this publication provides the much-needed perspective of businesses on the ground in Myanmar, the conditions they experience and the obstacles they face. The policy suggestions contained herein, if implemented, will address these obstacles and help to create an enabling environment that will allow firms to flourish and will promote growth, employment and development in general. x