Speech

Building the Future of Myanmar—an Address to the Yangon Institute of Economics

December 7, 2013

As Prepared for Delivery

Good afternoon—min-galaba! It is a great pleasure to come to the Yangon Institute of Economics. Let me thank the rector, Dr. Khin Naing Oo, for her gracious words of welcome. I would also like to acknowledge our moderator today, the illustrious Dr. Zaw Oo.

Myanmar today stands at the portal of a new world, a world brimming with promise, potential, and prosperity. It is undergoing a great awakening, a great opening to the world and all that it has to offer.

As your Indian neighbor, Jawaharlal Nehru once said in the context of his own country: “A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance.”

Such a moment has come for Myanmar as it takes its rightful place in the beating heart of Asia, the most dynamic and innovative hub of the global economy. Myanmar is writing the next chapter of the Asian story—a great epic that has seen more than half a billion people forge the tools of opportunity from the chains of poverty in a remarkably short period of time.

As a true daughter of Asia, Myanmar has also come a long way in a short period. It has already gained the macroeconomic stability that forms the basis of economic liftoff. For sure, it is still fragile, and needs stronger institutional underpinning, but the groundwork has been laid.

This comes from the recent reforms undertaken by the government: adopting a managed floating exchange rate; establishing a functional foreign exchange market; removing exchange restrictions; and starting the process of liberalizing bank lending.

We can already see the payoff—growth of over 6 percent in the last fiscal year and rising toward 7 percent this year.

The next step is to build on these gains and take the path of sustained, strong, and inclusive growth—to lower poverty and lift the prospects of everyone in Myanmar.

I believe this path has three key dimensions—invest in the future, include all people in development, and integrate further into the broader regional economy. Invest, include, integrate. Let me talk about each of these points in turn.

1. Investing in the future

I will begin with investing in the future.

As Myanmar opens up and expands, it needs the structural foundations of a modern economy. This is an urgent priority. Three-quarters of the population have no access to electricity. Road density is only a fifth of the ASEAN average and almost half of existing roads are not passable during monsoon season. Telephone density is less than 10 percent, and only 1 percent of the population uses the internet.

Clearly, too many people are not yet equipped for the economy of tomorrow. I know it is a major priority for the government.

We should also not forget about agriculture, which accounts for over a third of GDP and over half of all employment. More than that, over two-thirds of the population depends on the land for their livelihood. So it is important to raise the productivity of agriculture—to boost the income of famers and all who depend on them. This calls for policies like seed development and increasing competition among rice traders.

Investing in the future also means investing in the people of Myanmar—in their health and education. Right now, spending on healthcare is only 1.5 percent of GDP, and spending on education is only 1.7 percent of GDP. Both are the lowest in ASEAN.

Sustained development depends on a healthy population. As it stands, the safety net is too weak to protect the population from the crippling effects of ill health and the potentially ruinous costs of healthcare. About 87 percent of overall health spending in Myanmar comes out of pocket—the highest in Southeast Asia.

Development also depends on education, which is the only sure stepping stone to a brighter future. As the Myanmar proverb puts it, “education is a pot of gold nobody can steal”.

While most children are enrolled in primary school, just more than half enroll in secondary school. Achievement rates are also low, with a dropout rates in primary school as high as 25 percent. Myanmar could step up its efforts in this area—including in vocational training to match the skills people have with the skills the economy needs.

Investing in these areas will require expanding the reach of taxation, so that everybody contributes fairly to the development of Myanmar. Right now, tax revenue comes to only 6 percent of GDP, one of the lowest ratios in the world, so there is scope for improvement. This entails a small sacrifice today for a much greater reward for society tomorrow.

2. Including all in development

Let me now turn to my second area—including all in the development of Myanmar, making sure all of Myanmar’s people ride the wave of prosperity together.

Economic policy should always have a preference for the poor—not just because it is good ethics, but because it is good economics too. With rampant poverty, people are too caught up in their daily struggles to fully develop their potential and contribute to society. It becomes hard to get finance, to get skills—and even just to get by.

We know that inequality is bad for sustained economic growth—the kind of growth Myanmar needs. Inequality makes countries more vulnerable to economic shocks and reduces the trust that is the lifeblood of a civil market economy.

Remember, inclusive growth is an Asian legacy. The first wave of economic dynamism—led by Japan and the Asian tigers—showed that strong growth could go hand-in-hand with low, and sometimes falling, inequality. This provides a roadmap for countries like Myanmar.

For sure, Myanmar is making progress. Poverty fell from 32 percent in 2005 to 26 percent in 2010. Yet this is still high, especially in rural areas and in certain geographical regions.

Including everyone in economic progress also has a strong gender component. I just spoke about this at the Myanmar Women’s Forum.

The evidence here is clear: when women do better, the economy does better. We have done some work on this at the IMF, showing that if women participated in labor markets to the same extent as men, the gains could be substantial. For example, per capita income could rise by 23 percent in South Asia, and by 15 percent in East Asia and the Pacific.

In Myanmar, the participation rate for women in the labor force is 54 percent, 28 percentage points behind men. Even so, about two-thirds of women work in Myanmar, with many concentrated in the informal sector—stuck in unskilled work with unstable earnings. Only 18 percent of adult women have attended secondary school or higher, making it harder for them to rise up.

Clearly, there is some room for improvement here. Some even say that the best way to reduce poverty in developing countries like Myanmar is to empower women—because they in turn are more likely to nurture and nourish the next generation.

As the famous Myanmar proverb puts it, “It is the mother’s hands that push the cradle that builds the future of the world”.

I know that Myanmar is blessed with an abundance of female talent from all walks of life. They are ready to contribute and ready to lead.

I have just met many of these remarkable women at the Myanmar Women’s Forum, which I left feeling both encouraged and inspired.

I am also inspired by the millions of women who toil under the sun each day, holding their heads high in the face of every adversity, saving and sacrificing so that their children can enjoy a better life. They are the backbone of Myanmar, and they are the future of Myanmar.

One final point: inclusion is fundamentally tied to fairness. Every single person should be given the chance to succeed in life—not just those with the right connections.

Myanmar’s first wave of growth, about a century ago, was driven by a few commodities in the hands of a few people. This kind of growth can work for a while, but it is unlikely to last. Lasting growth depends on a level playing field—underpinned by the principles of openness, transparency, and accountability.

3. Integrating into the regional economy

Let me now turn to my third area—integrating further into the regional economy.

As you know so well, integration is the Asian way. Asia has always looked outwards and sought its fortunes in the wider world. Its openness has been essential to its success.

Myanmar’s integration into the wider Asian economy comes at an auspicious time. Like never before, Asia is on the march. Already the most dynamic hub of the global economy, developing Asia could, by some estimates, account for half of global GDP by 2050. It will also be the nerve center of the global middle class, which is rising in record numbers.

This is your world, your economy, your destiny.

This new global economy will be more interconnected than ever before. We can see it today. Even the tiniest ripple can reverberate across the globe—often at high speeds, in unpredictable ways, with uncertain outcomes. Just look at how the global financial crisis played out.

This makes openness and cooperation even more essential than ever. Since our fortunes are bound together, we must work together to rise up together.

As the famous Myanmar proverb puts it, “islands rely on reeds, just as reeds rely on islands”.

Myanmar has already shown its commitment to openness and cooperation—including by chairing ASEAN and preparing to host the South East Asian Games.

The ASEAN Economic Community, expected to come on line in 2015, will take integration to a whole new level—offering limitless possibilities to a rising country like Myanmar.

For Myanmar is blessed with huge advantages. It is home to 60 million people who are ready to join a single ASEAN family. With almost a third of its people under the age of 14, it possesses an abundance of dynamism and youthful energy. It is the largest country in mainland Southeast Asia, second in size only to Indonesia within ASEAN. It enjoys bountiful natural resources and an enviable geographical location, sitting at the intersection between India and China, two of the global economic centers of gravity.

With ASEAN integration, Myanmar can make the most of these advantages. Half of its exports go to ASEAN countries. It will now have easier access to larger markets. It will be able to entice larger levels of foreign investment.

It will also be able to diversify. Right now, most growth is coming from extractive industries—with gas alone accounting for a third of export revenues.

Myanmar has great potential in so many different areas, such as telecommunications, manufacturing, garments, and banking. It has also great potential for tourism—it is one of the most enchantingly beautiful countries in the world, home to some of its most hospitable people.

Greater financial integration can also help Myanmar. A key priority is the widening and deepening of the financial sector, so that it can better support the productive economy and get credit to where it is most needed. Right now, credit is only 10 percent of GDP—one of the lowest ratios in the world. Two out of every three poor people do not have access to credit.

Financial integration will help Myanmar’s infant financial sector harness the skills and savings of its neighboring countries. In turn, this will help finance the businesses that will provide the jobs and economic security that the people of Myanmar need.

All in all, deeper integration can illuminate Myanmar’s path, and this light will remain undimmed in the long years ahead.

Conclusion

Let me conclude by noting that the Yangon Institute of Economics is the premier center for economics and business training in all of Myanmar.

You are some of the most talented people in the country. That means you have a great responsibility—to lift up the economic potential of the country and your fellow citizens.

Rest assured, you will not stand alone. Myanmar will not stand alone. It is a longstanding member of the global community. It has been a member of the IMF since 1952. I assure you that the IMF will always stand with you.

We will stand with you through our policy advice, drawing on the collective wisdom of the global community.

We will stand with you through our technical assistance and training, to help the people of Myanmar strengthen their capacity and build the strong institutions needed to sustain a vibrant economy in the years to come. We will be with you as you build the secure foundations of strong and inclusive growth.

I can assure you of this: we are with you for the long haul. We will be here to serve you, to help you, to partner with you, as you step up to seize the inheritance that is rightfully yours.

For Myanmar is truly a golden land with a golden future.

Thank you very much—che-zu tin-ba-deh!