IF WE trace back the history of the Mekong region, it will tell us that
half a century ago Myanmar was known as the "Pearl of Asia"'. At that
time, the country was one of the region's leading economies, with per capita
income more than twice that of Thailand.
However, while most other
regional economies have skyrocketed since then, Myanmar has languished. Today,
it has the lowest gross domestic product (GDP) per capita in Southeast Asia.
After a prolonged period of
stagnation, Myanmar has come out from isolation. What it needs to do is to
catch up swiftly. To take advantage of its potential, it will have to: (1) keep
inflation low, below 6%, (2) ensure more sustainable budgets, (3) boost
savings, (4) develop human capital skill, (5) invest heavily in infrastructure,
(6) modernise its financial sector, (7) emphasise job creation, and (8)
continuously reform its foreign exchange regime.
Immense by its vast potential to
follow Asia's fast-growing economies, the economy now has the ability to expand
at 7% to 8%. It can happen if it continues on the path of across-the-board
reforms initiated earlier this year. If the reforms are true, one will be able
to see Myanmar become a middle-income nation, and possibly more than triple its
per capita income by 2030.
For reforms to be successful, the
policymakers will have to address three major challenges — cordial relations
with and among its neighbours, weathering the global crisis and navigating the
region's role as a proxy for US and Chinese designs.
In order to flourish, Myanmar
must work together with its neighbours, who can offer complementary competitive
advantages. For instance, Thailand has banking expertise and sophisticated
markets. Myanmar has substantial stores of petroleum, natural gas and copper.
Meanwhile, Laos has considerable
hydropower know-how. As for Vietnam and Cambodia, they boast young and growing
populations. China's Yunnan province offers labour and a pathway to the world's
fastest-growing major economy.
Meanwhile, the ongoing European
debt crisis has its merits and demerits. On the positive note, the Mekong
region is more insulated from global turmoil. But the setback is that the
global issues will see less money for development projects in Myanmar. Also, it
is a question mark on China, which plays a crucial role in the Mekong region,
especially with Chinese economic slowdown.
To the US, the Mekong region is a
miniature of China-US relationship. In December 2011, just about the time US
Secretary of State Hillary Clinton became the highest-ranking US official to
visit Myanmar in a half century, Myanmar leaders endorsed a 10-year plan:
tighter integration, more open trade and market-oriented financial policies,
better use of natural resources, improved infrastructure, increased tourism,
and poverty reduction.
The US' focus on Asia has
frightened China, which sees the Mekong region as its birthright. Access to
natural resources is almost secondary. The bigger issue is who holds sway over
Asia a decade from now.
Also, with both the US and China
jockeying for advantage, it actually crafts greater advantage to the Mekong
nations. They can play against US-China by seeking investment, security
assurances and free-trade agreements.
However, one enduring feature is
distrust. Asean's 10 members are seeking sovereignty more than the European
Union. But they have vastly different takes on financial openness, press
freedom and human rights. Cooperation is often in short supply as one nation
undercuts another for short-term gain. It appears that the bilateral trade
agreements are much easier to negotiate than regional ones. If Asean
integration is seen with caution, than the Mekong sub-region will be skeptical.
To sum up, for the potential
challenges, Myanmar's rebirth is a fresh start for the Mekong region. The
process will not be smooth. Also, it will not necessarily go as planned. But
when a promising economic area with an American-size population joins hands,
the potential can only grow. In all their efforts, while acknowledging that the
economic growth is an effective tool to reduce poverty, it has become less
equitable in many fast-growing regional economies in recent decades. Hence, it
is vital for the policymakers to ensure that its poorest and most vulnerable
share the benefits of the growing economic prosperity. Such inclusiveness will
enhance and help maintain growth by strengthening social cohesion and
contributing to human capital development.
Anthony Dass
Anthony Dass is chief economist at MIDF Amanah Investment Bank Bhd
Business & Investment Opportunities
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