9/9)WORLD_BANK:POLICIES FOR SUSTAIN

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/* Posted 20 Apr 11:00am 1998 by drunoo@xxxxxxxxxxxx(Dr U Ne Oo) in
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/* -------------" Policies for Economic Reform 9/9 "------------ */

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MYANMAR: POLICIES FOR SUSTAINING ECONOMIC REFORM (9/9)

WORLD BANK Report No. 14062-BA, October 16, 1995.

F. CONCLUSION

50. The Government's ongoing economic reform program has changed
many factes of the Myanma economy. To achieve the goals of expanding
exports, encouraging agriculture, and promoting private-sector and
foreign participation in economic activity, several new laws and
regulations have been instituted. However, this report concludes
that the pace economic growth is still not rapid enough to
compensate for the economic stagnation of the preceding quarter
century, and its sustainability is uncertain. The current reform
efforts are, therefore, unlikely to push the Myanma economy to a
higher growth path on which the bulk of the population would enjoy
substantially better living standards.

51. For a sustained growth response to emerge, this report concludes
that economic reforms need to be deepened and extended in several
policy areas. The most urgent need is to restore macroeconomic
stability so as to establish the basis for sustained growth. In this
context, the report's central recommendation is for a nominal
devaluation of the official exchange rate. Adjusting the exchange
rate is essential to tackling the unsustainably large macroeconomic
imbalances with regard to the fiscal deficit and the current account
gap. These distortions in macroeconomic policies, particularly the
overvalued exchange rate and the deep cuts in non-military public
expenditures, also have adverse distributional impacts. Unless they
are addressed, it will be impossible to reduce poverty and achieve
social development. Substantial gains in economic efficiency would
also result if the ban on private-sector exports of paddy and rice
were eliminated, and the scope of government paddy procurement were
reduced. Reforming these paddy policies would also help reduce
poverty and enhance equity because they imply large income transfers
from the rural poor to the urban elites (including military).
Regarding private sector participation, SEs still enjoy significant
advantages in their access to key inputs and, thus, are also favored
by foreign investors in establishing joint ventures. Hence, steps to
establish a 'level playing field' between SEs and domestic private
businesses should be a priority. Finally, if the role of the SE
sector in the economy and its adverse fiscal impact are to be
reduced, reforms would need to go further or be reoriented in
several areas, including price liberalization, managerial and
financial autonomy, and privatization.

TABLE 1: SUMMARY OF POLICY RECOMMENDATIONS

POLICY ACTIONS                          GOALS
--------------                          -----
A. Immediate and short-term actions;
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
*Adjust official nominal exchange       * Restore macroeconomic
 rate to unify with parallel rate         stability
                                        * Improve profitability of
                                          export production
                                        * Reduce subsidies to SEs
                                          and elites
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Raise interest rates to               * Maintain macroeconomic
   positive real levels                   stability
                                        * Enhance and improve credit
                                          allocation  to private
                                          sector
                                        * Reduce subsidies to SEs
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Eliminate government-specified        * Improve access of
  imports for private sector              exporters to imported
                                          inputs
                                        * Raise farm incomes
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Remove all remaining government       * Improve incentives for
  controls (official and unofficial)      agricultural production
  on cropping choice and access of
  farmers to credit and irrigation
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Clarify urban land ownership and      * Improve private-sector
  use rights                              access to land infrastruc-
                                          ture services
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Liberalize output and input           * Enable enterprise-level
  prices of SEs                           reforms within SE sector
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Clarify the role of SEs               * Enable the privatization,
                                          closure and restructuring
                                          of SEs
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Privatize small and medium SEs        * Establish credibility of
  without detailed valuation studies      SE reforms
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
B. MEDIUM TERM ACTIONS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Establish legal basis for private     * Enhance productivity
  ownership and leasing of                growth in agriculture
  agricultural land
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Reduce nominal tariffs and            * Reduce anti export bias
  rationalize tariff structure
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Broaden dialogue with private         * Encourage private-sector
  sector and expand provision of          expansion
  support services to private
  sector
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Develop and implement strategy        * Reduce state ownership
  to divest large SEs
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Implement measures to increase        * Restructure the SE sector
  autonomy and enhance accountability
  of SEs to be retained
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Identify and eliminate regulatory     * Accelerate growth of
  barriers to private sector              private businesses
  development
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(THE EXECUTIVE SUMMARY FROM THE REPORT BY WORLD BANK
"MYANMAR:POLICIES FOR SUSTAINING ECONOMIC REFORM" oCT 16, 1995.)
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