Written by Mekong Institute  

Myanmar is emerging from decades of military rule, central planning and economic isolation as it implements political and economic reforms and, as a result, faces fewer international sanctions. The country has great potential for rapid development due to its vast natural resources, abundant labour force and geostrategic location

Capitalizing on these assets to achieve its goal requires well-implemented regulatory and institutional reform. To assist in these efforts, ESCAP and OECD conducted a multi-dimensional policy review of Myanmar from

the end of 2012 in coordination with the Government of Myanmar.2 During the policy review, the lack of information on the business conditions on the ground was found to be a serious impediment to the development of appropriate polices. To address this issue, ESCAP and OECD carried out a business survey jointly with the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

The survey provides a rich dataset of more than 3 000 frms in all sectors and geographic regions to help in understanding the characteristics of frms on the ground, their business environment and the challenges they face. This publication explores the survey results in depth, in order to develop policies that address these challenges and promote private sector development in Myanmar.
The survey results are discussed from various key perspectives of businesses in order to identify effective policy prescriptions. They include the business environment, market conditions, innovation, human resources, access to fnance, productivity, corruption, agribusiness and food industries, which are briefy summarized below.

1. Business Environment  

The development of an enabling business environment is crucial to the promotion of growth, productivity, employment and well-being. Although the country has instituted various reforms since the early 1990s the regulatory and policy framework remains fragmented. Permission from parallel line ministries is often required and coordination is reportedly lacking. This has led to the growth of a large informal sector, which makes conditions very diffcult for small and medium-sized enterprises (SMEs). The survey results have revealed wide-spread dissatisfaction with several aspects of the business environment. Corruption, access to skilled labour, technology and access to land are most frequently cited as very severe obstacles faced by businesses in Myanmar. Access to fnance is also found to be a major obstacle, especially by SMEs. Although infrastructure such as access to electricity and water supplies are not rated as severe obstacles overall, they are more severe in some geographical regions. The Government of Myanmar will therefore need to streamline administrative procedures for obtaining registration, licences and permits perhaps by providing a “single-window” service, which will also reduce the opportunities of irregularities. Infrastructure must not only be improved but also distributed equitably throughout the nation with a specifc industrial zone development plan. Specialized assistance should be provided to entrepreneurs and SMEs in addressing issues such as access to fnance and bureaucracy.

2. Market Conditons

As the country opens its borders and prepares for regional integration, it must be ready to face opportunities as well as challenges. Enhanced trade could bring huge benefts to the economy but frms will also face stiff competition.The survey shows that frms still have more localized concerns, as they do not fnd issues such as foreign competition and international sanctions to be very severe obstacles. Firms are also ambivalent with regard to the launch of the ASEAN Economic Community (AEC).The Government must spread awareness of the potential benefts and challenges of regional integration. Improving productivity, quality and management is crucial to being able to compete globally. Access to foreign investors and trade fnance will be very useful for SMEs.

3. Innovation

Innovation is widely regarded as a key element in quickening the pace of development and growth in any country. For example, the use of transformative technologies such as the Internet has been shown to have dramatic effects on gross domestic product (GDP) growth in many developing countries. As frms in Myanmar become exposed to global competition, it will be increasingly important for them to develop innovative products or services as well as utilize technology more effectively. However, investment in research and development (R&D) remains low in Myanmar and the country has performed poorly in international rankings of innovation capabilities. Firms reported in the survey that they considered innovation to be important, yet few in fact spend much money on it. Firms do not appear to be using intellectual property (IP) protection as much as they should with many reportedly relying on trust between staff members to safeguard their innovations. These issues could be addressed by subsidizing expenditure on R&D, streamlining patent applications, disseminating information on the benefts of IP protection and improving enforcement of IP.

4. Human resources

A modern economy requires a workforce that is well-skilled. Myanmar currently spends less than its peers on education and has fewer tertiary graduates. The quality of education is also of concern. The survey helps in identifying areas where skills are lacking. Technical and professional skills are needed in the manufacturing and services sectors. Computer and ICT skills are required by micro- and small-sized frms. Larger frms require more communication and interpersonal skills.Although Myanmar provides relatively favourable business environment to women, their participation in the business sector can be further enhanced with well-designed public interventions. Such actions may particularly focus on the skill development of women entrepreneurs and managers.Addressing these challenges requires increased funding to the tertiary sector together with greater accountability and quality assessments. Vocational training institutes, public administration and management schools and e-education programmes could be developed in association with the private sector.

5. Access to finance

The fnancial sector has long been tightly controlled and overly regulated. The types of fnancing instruments available to private enterprises are limited with unreasonably high costs. Many turn to informal money lenders instead. The Government has attempted reforms but the pace has been slow as it is a diffcult task.More than half of the survey respondents reported that fnancing options were inadequate. Stringent collateral requirements, complicated application procedures, small loan sizes and high interest rates are reportedly the biggest fnancing obstacles. Informal lenders provide loans at very high interest rates and require greater trust while accepting a wider range of collateral.The Government must complete the reform process by reducing regulation and allowing banks more fexibility. While the local fnancial sector is upgrading rapidly, the Government must foster their institutional capacity by providing various technical and fnancial assistance. Foreign banks should be allowed to operate in the country to encourage competition. Informal lenders should be integrated into the formal system; SMEs should have access to subsidized loans.

6. Productivity

After decades of being sheltered from global competition, productivity remains low in Myanmar. The economy is still dominated by agriculture, which is still a low-productivity sector. Productivity in other sectors is also low by international standards. Improving productivity is crucial to achieving rapid growth. The survey shows that smaller frms tend to have a higher level of productivity (measured as gross revenue per worker) compared with larger frms. Hotels and restaurants report a much higher proft margin, on average, compared with that of frms in other sectors. Many of the policies discussed above will also have an impact on productivity. Access to skilled labour, fnance, innovation and technology will lead to dramatic improvements in productivity. Further interventions at SOEs (and former SOEs) that encourage the adoption of modern managerial and production techniques and practices will also be useful in improving productivity.

7. Corruption

Corruption remains one of the most signifcant challenges facing Myanmar. The Government has attempted reforms through a new Anti-Corruption Law and Anti-Corruption Commission; however, the country is still ranked 156 out of 175 in Transparency International’s Corruption Perception Index 2014. Corruption was most frequently cited as a very severe obstacle by the frms surveyed. Bribery is reportedly more common among larger frms as well as frms in the extractive industries sector. Firms that pay bribes, particularly younger frms, do so because they fnd red tape to be a more severe obstacle compared to frms that do not, suggesting that red tape may be used as a way of extracting bribes. Although regulatory and legal approaches are important, the root causes of corruption must be addressed. Excessive regulation across the board must be reduced; administrative processes streamlined; accountability of public offcials enhanced; and transparency improved.

8. Agribusiness and food industries

The agribusiness and food industries are a key strategic sector in Myanmar’s socio-economic development, having long played an important role within the nation’s economy. The sector has several unique characteristics. They are dominant industries in rural areas while contributing to the economy through exports of agro-products; thus, the sector is the key to equitable and inclusive development in Myanmar. The average age of frms in this sector is older than those in other sectors, thus confrming its status as a traditional industry of Myanmar. Whereas the sizes of frms in the sector are relatively bigger than frms in other sectors, the agribusiness and food industries appear to make less proft than that earned by businesses in other sectors. The sector relies on informal lenders who are available in rural areas. Some special interventions in this sector may be appropriate for enhancing its exporting contribution as well as rural development.


Myanmar faces several challenges in its transition to a modern economy. The information in this publication provides the much-needed perspective of businesses on the ground in Myanmar, the conditions they experience and the obstacles they face. The policy suggestions contained herein, if implemented, will address these obstacles and help to create an enabling environment that will allow frms to fourish and will promote growth, employment and development in general.

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