Burma’s has one of the highest cost of starting a business in the world, but it is on the cusp of significant gains if reforms continue, the International Monetary Fund (IMF) said in a wide ranging consultation report released this week.
An IMF staff assessment team spent January in Burma gathering data and talking with key officials, in order to prepare an extensive analysis of the country’s prospects.
The report can be obtained through the IMF at http://www.imf.org/external/pubs/ft/scr/2012/cr12104.pdf
The report said: “Myanmar could become the next economic frontier in Asia if, with appropriate reforms, it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies, to its advantage. Delivering on these expectations is already under way.”
The IMF said the economic outlook is positive.
Real GDP growth is projected at 5 ½ percent in FY2011/12 and at 6 percent in FY2012/13 driven by commodity exports and higher investment, supported by robust credit growth and improved business confidence. Inflation, projected at 4.2 percent for FY2011/12, is expected to pick up to 5.8 percent in FY2012/13 as the recent drop in food prices phases out.
It cited a number of “key obstacles” that must be put in line with international standards, such as the deposit-to-capital ratio, onerous collateral requirements, administratively set interest rates, and segmented banking activities.
These controls and the exchange restrictions lead to a large unregulated “shadow financial system.”
Also, “the regulatory treatment of state banks and private banks is uneven, bank governance is poor, and banking supervision does not follow the Basel Core Principles.”
In addition, there is no unified national electronic payments and settlement system, although plans are under way to develop the financial infrastructure.
The IMF cited an obstacle of “narrow-bases growth,” relying largely on energy and agriculture.
“Agricultural development is suppressed by poor access to credit, lack of private land ownership, and inadequate infrastructure and inputs. The energy sector has surpassed agriculture as the main source of export revenues. However, its growth dividend is limited, as it is exclusively under state control and is largely isolated from the domestic economy.”
Among the area's economies, Burma has an advantage of lower wages, but ‘the manufacturing sector remains stifled by poor infrastructure, inadequate know-how, and extensive administrative constraints.
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