CHAPTER 1. Business environment programmes (OECD, 2013). Since a transformed economy will require a workforce with new skills, educational institutions must be able to adapt to the changing needs of the labour market. This would require additional information from firms to identify skills that are in short supply and which can then be used to guide policy and planning.
with the onset of global competition (Abe and Dutta, 2014). The country currently performs poorly in international rankings of innovation capabilities. In 2014, the Global Innovation Index, which uses 81 indicators across a range of seven themes10 to analyse innovation, found that Myanmar ranked 140 out of 143 countries (Cornell University, Institut Européen d’Administration des Affaires and World Intellectual Property Organization, 2014). This puts the country at a competitive disadvantage.
5. Access to finance Access to finance remains one of the most crucial issues facing businesses in Myanmar (OECD, 2013 and 2015). The banking sector is characterized by strict regulation, cumbersome loan procedures, high interest rates and tight collateral requirements (OECD, 2013). Short-term loans for less than one year at a fixed interest rate dominate in the banking sector as the major and often sole financing instrument available to private enterprises. The Government is actively considering policies to extend financing especially to entrepreneurs and SMEs. The Small and Medium Industrial Development Bank, for example, plans to offer three-year loans and a lower interest rate of 8.5 per cent compared to the standard 13 per cent (Abe and Dutta, 2014).
Entrepreneurs and SMEs drive innovation in many countries because they are more flexible and able to adapt to market conditions (Abe and others, 2012). However, they also face many challenges particularly in accessing knowledge, skilled labour, finance and IP protection (Abe and Dutta, 2014). These issues will also need to be addressed in Myanmar in order to release the potential of its private sector.
4. Human resources At the most basic level innovation requires a welldeveloped education system to produce highly-skilled individuals. In 2010, however, only 5 per cent of Myanmar’s workforce had completed tertiary education and only 15 per cent had completed secondary education. This figure is low even when compared with other developing countries in the region. Almost 30 per cent of workers in Thailand and Viet Nam have completed secondary education with the figure rising to 60 per cent for workers in China and Malaysia (MGI, 2013).
The Government is also considering allowing commercial banks to extend long-term loans and use a wider range of collateral instruments (Abe and Dutta, 2014). However, it remains to be seen whether these policies translate into better access to credit for firms. The Government is also looking to increase sources of capital by allowing foreign banks to operate. Up until recently foreign financial institutions were not allowed to operate commercially in the country. This has changed recently with the Government granting nine foreign banks licences to operate as part of its reform programme (Wall Street Journal, 2014). However, these foreign banks will be limited to servicing foreign companies and dealing in foreign currencies, and they will not be able to operate retail banking locally (Wall Street Journal, 2014).
Following the decades-long trend after the student demonstration in 1988, public expenditure on education in Myanmar has also remained low with the country spending only 0.8 per cent of GDP in 2011 (OECD, 2013). Moreover, funds are concentrated on primary education, which consumes more than half the education budget, leaving 24 per cent and 19 per cent for the secondary and tertiary levels, respectively (OECD, 2013). In contrast, countries such as India and Malaysia spend a third of their budgets on primary education, leaving one third each for the secondary and tertiary levels (OECD, 2013).
6. Productivity While Myanmar’s economy has grown at an average of 4.7 per cent per year during the past 20 years, this has been mainly driven by population growth rather than increases in productivity (MGI, 2013). As a result, growth in Myanmar was much lower than the average of 6 per cent recorded by its Asian neighbours.11 Relatively low rates of growth and productivity have left the country with low levels of GDP per capita.
However, additional funding alone will not be sufficient as the quality of education is of equal concern. The Government has instituted reforms such as enhanced teacher training and qualification requirements as well as a revamped curriculum and assessment 7