OECD Development Pathways Multi-dimensional Review of Myanmar VOLUME IN-DEPTH ANALYSIS AND RECOMMENDATIONS OECD Development Pathways Multi-dimensional Review of Myanmar Volume In-depth Analysis and Recommendations This work is published under the responsibility of the Secretary-General of the OECD The opinions expressed and arguments employed herein not necessarily reflect the official views of OECD member countries or those of the United Nations This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area Please cite this publication as: OECD (2014), Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations, OECD Development Pathways, OECD Publishing http://dx.doi.org/10.1787/9789264220577-en ISBN 978-92-64-22056-0 (print) ISBN 978-92-64-22057-7 (PDF) Series: OECD Development Pathways ISSN 2308-734X (print) ISSN 2308-7358 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law Photo credits: Cover design by the OECD Development Centre based on images © Kstudija, Kozoriz Yuriy, Seita, Robert Adrian Hillman, SoleilC, PILart/Shutterstock.com Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm © OECD 2014 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given All requests for public or commercial use and translation rights should be submitted to rights@oecd.org Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre franỗais dexploitation du droit de copie (CFC) at contact@cfcopies.com Foreword Foreword I n 2013 the OECD launched the first Multi-dimensional Country Review (MDCR), a new series that looks at economic development along the lines of inclusive growth, i.e growth that is also equitable and sustainable and that improves the overall well-being of citizens The series aims to identify key constraints to broad-based development, and to formulate appropriate policy recommendations to address these constraints, including sectoral as well as cross-cutting issues The Republic of the Union of Myanmar is the first country to engage in such an MDCR The first phase – a broad diagnostic assessment across a wide range of topics – was completed in July 2013 with the publication of a first report The second phase was conducted in 2013-14 and the current report presents its conclusions and policy recommendations The two reports are closely linked with each other, and were undertaken during a phase of fast-paced changes in Myanmar, which has embarked on a new path of openness and development since 2011 The first phase diagnostic report evaluated the state of development in Myanmar across a wide range of topics, including natural resources and environmental conditions, human and physical capital accumulation, and various dimensions of institutions It highlighted some favourable pre-conditions, such as endowments in natural resources and the country’s important geostrategic location in Asia, but also identified challenges The economy is – as yet – dominated by the agricultural sector which contributes 34% to GDP and provides employment for around 60% of the population In order to generate productivity gains and higher incomes for the population, transformation towards a modern economy will be essential The second chapter of the present report thus looks at the constraints and potential for modernisation of the agriculture, manufacturing and services sectors The first report also devoted an important section to the accumulation of human capital, finding that literacy rates and very basic education are moderately good but that issues in education in general, especially in secondary and vocational training, could become a crucial bottleneck for development in many respects Hence, the present report’s third chapter focuses on education and skills, presenting evidence of constraints (notably for the private sector) as well as formulating policy recommendations and priorities to improve educational outcomes The first report also noted that “access to finance has been one of the most critical issues faced by private enterprises in Myanmar for many years”, giving evidence of many instances of financial constraints The present report takes a broader perspective and analyses multiple sources of financing, including external inflows such as official development assistance and foreign direct investments, as well as domestic financing from government revenues It also highlights the broader constraints to financial markets development and develops policy recommendations to mitigate constraints The first report identified the “lack of institutional and social capital” as the key constraint to Myanmar’s development Given that institutions are inherently cross-cutting and multi-dimensional, no single chapter could adequately capture their relevance and importance Instead, each of the three chapters of the present report devotes important sections to the analysis of institutional constraints, notably regarding agricultural and private sector constraints and the business environment, educational policies and institutions, as well as financial market regulations and supervision Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 Foreword Overall, the report finds that the demand for reform is immense Myanmar will need to upgrade its agricultural sector, manage structural transformation towards the secondary and tertiary sector, reform and upgrade the educational system, especially with regard to vocational training, and improve management of financial resources – all in a manner that ensures sectoral and regional balance The country has embarked on the path of reform with a breath-taking pace and is making impressive progress in many domains Nevertheless, it will be crucial to sustain this drive in order to establish institutions that are conducive to development outcomes and to improve the conditions for development and well-being of its citizens To this end, the third and final phase of the Multi-dimensional Country Review will support Myanmar’s reform efforts through the development of a coherent and balanced vision of modernisation, and guidance on sequencing and implementation of the key policy recommendations developed in the present report Building on a participative process combined with further analysis and evidence, the third phase will conclude in 2015 with a final report Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 Acknowledgements Acknowledgements W ork on this in-depth phase of the Multi-dimensional Review of Myanmar was a collaborative effort carried out jointly by the OECD’s Development Centre and the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) with the support of Myanmar’s Ministry of National Planning and Economic Development The team was led by Margit Molnar, Head of Competitiveness and Structural Analysis Unit and Jan Rieländer, Head of Multi-dimensional Country Reviews, under the direction of Mario Pezzini, Director of the OECD Development Centre and Carl Dahlman, Head of Global Research, OECD Development Centre The report was drafted by Margit Molnar, Masato Abe, Martha Baxter, Derek Carnegie, Linda Fulponi, Charles Pigott, Koon Hui Tee, Alexa Tiemann and Edouard Turkisch Significant inputs were provided by David Abonyi and Gordon Israel, statistical assistance by Vararat Atisophon, and administrative support by Myriam Andrieux and Pranee Suriyan Charles Pigott edited the publication and the OECD Development Centre’s publication team, in particular Gemma Nellies, turned the draft into a publication The cover was designed by Aida Buendia The authors are grateful to Naylin Oo (UN ESCAP) for his invaluable support in facilitating their work in Myanmar The report also benefited from insightful comments by Ken Ash (OECD Trade and Agriculture Department), Simon Field (OECD Directorate for Education and Skills), Andrzej Kwiecinski (OECD Trade and Agriculture Directorate), Javier Lopez Gonzalez (OECD Trade and Agriculture Directorate), Shingo Kimura (OECD Trade and Agriculture Directorate), Anthony O’Sullivan (OECD Global Relations Secretariat), and participants of the seminar to discuss the preliminary results in Nay Pyi Taw on July 2014 In particular, the following ministries and agencies provided useful support during the production of the report: the President’s Office, the Central Bank of Myanmar, the Ministry of Agriculture and Irrigation, the Ministry of Border Affairs, the Ministry of Commerce, the Ministry of Construction, the Ministry of Co-operatives, the Ministry of Education, the Ministry of Environmental Conservation and Forestry, the Ministry of Finance, the Ministry of Home Affairs, the Ministry of Hotels and Tourism, the Ministry of Immigration and Population, the Ministry of Industry, the Ministry of Labour, Employment and Social Security, the Ministry of Livestock, Fisheries and Rural Development, the Ministry of National Planning and Economic Development, the Ministry of Rail Transportation, the Ministry of Religious Affairs, the Ministry of Science and Technology, the Ministry of Social Welfare, Relief and Resettlement Useful information and guidance was also provided by major government advisory bodies including the National Economic and Social Advisory Council, in particular its chairman, U Tin Htut Oo; U Tin Maung Than from the Myanmar Development Resources Institute (MDRI) and U Sein Hla Bo, Director at the Centre for Economic and Social Development of MDRI; the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), especially its President, U Win Aung; Myanmar industry, trade and producer associations; the Myanma Agricultural Development Bank, Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 Acknowledgements the Myanma Economic Bank, commercial banks and other private sector organisations, as well as bilateral, multi-lateral, academic and civil society organisations This report drew heavily on the findings of the Myanmar Business Survey 2014 which was a joint undertaking between the OECD, UMFCCI and UN ESCAP The authors would like to thank the team at UMFCCI, in particular U Win Aung, President, U Zaw Min Win, Vice President, U Aung Khin Myint, Executive Director of the Myanmar Business Survey project and U Sai Aung Mane, Project Manager The survey was supported financially by the Government of Japan, The Asia Foundation, UMFCCI and UNIDO and the launch event was supported by Hanns Seidel Foundation The in-depth phase of the review was made possible thanks to financial support from the OECD Secretary General’s Central Priority Funds and the Swiss Federal Department of Foreign Affairs Embassy in Myanmar Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 Table of contents Table of contents Acronyms and abbreviations 11 Executive summary 15 Chapter Assessment and recommendations 19 Structural transformation towards a modern economy: Upgrading agriculture, manufacturing and services 21 Accumulation of human capital and addressing skills gaps 31 Mobilising the external and internal financial resources for development 38 Note 44 References 44 Chapter Structural transformation towards a modern economy: Upgrading agriculture, manufacturing and services 47 Key findings 48 Modernising the agricultural sector 49 Developing the manufacturing sector 72 Seizing opportunities in the services sector 92 Conclusion 96 Notes 97 References 100 Annex 2.A1. Tables and charts on agricultural sector 105 Annex 2.A2. Measures on standardisation 109 Annex 2.A3. Findings from Myanmar business survey 111 Chapter Filling the skills gap in Myanmar 113 Key findings 114 Developing relevant skills in Myanmar 115 Activating skills supply 128 Putting skills to effective use 132 Strengthening the policy framework for the skills system 138 Conclusion 141 Notes 142 References 143 Chapter Providing the financial resources to support development 147 Key findings 148 Mobilising funds for investments into development 149 The challenge of managing development assistance 151 The promising outlook for foreign direct investments 157 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 Table of contents Making more effective use of remittances for development 163 Mobilising government revenues for development 167 Transforming the financial system to support Myanmar’s development 190 Conclusion 215 Notes 216 References 218 Further reading 222 Annex 4.A1. Technical notes on growth projections for Myanmar 225 Annex 4.A2. Supplementary information on aid and aid management in Myanmar 227 Annex 4.A3. Myanmar’s budget cycle 229 Annex 4.A4. Structure of Myanmar’s financial system 230 Tables 2.1 Output of rice has grown more slowly than that of other crops 50 2.2 The reform process began its second phase in 2011, in the post-socialist era 78 2.3 Industrial zones serve SME manufacturers 82 2.A1.1 Estimated share of rural households without land 105 2.A1.2 Area harvested of main agricultural commodities, in thousands of acres 105 2.A1.3 Annual production of main agricultural commodities, in thousands of tonnes 106 2.A1.4 Projected import demand 2014-2023 (average growth in % per annum) 107 2.A1.5 Agriculture producers’ associations interviewed 107 2.A1.6 Main sector constraints identified by Myanmar’s trade associations 108 2.A3.1 Details of manufacturer samples for the OECD-UNESCAP-UMFCII Survey 111 3.1 Enrolment rates fall off after the primary level 117 3.2 Skills gaps are a serious constraint to firms in Myanmar 123 4.1 Assessment of investment needs in Myanmar until 2035, based on two scenarios 150 4.2 Official remittance amounts 164 4.3 Composition of government revenues 167 4.4 Comparison of key tax rates 174 4.5 Costs of paying taxes 176 4.6 Tax arrears 178 4.7 Deviation of expenditure outcomes from initial budget estimate 181 4.8 Split of budget between central and state/region level in Myanmar, FY 2012/13 187 4.9 Sub-national share of government revenues and expenditure 188 4.10 Financial regulatory/supervisory bodies 196 4.11 Comparative bank prudential regulations 198 4.12 Collateral use in other Asian countries 199 4.13 Financing needs for the rural economy 209 4.14 Microfinance providers 210 4.A2.1 Sectoral Working Groups 227 4.A2.2 Commitments (in millions of USD) by sector 2011-12 228 4.A4.1 Structure of the Myanmar Banking System 231 4.A4.2 Financial products in Myanmar 232 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 4. Providing the financial resources to support development New Crossroads Asia (2013), Banking on Myanmar, Volume 5, May, www.newcrossroadsasia.com/researchitem/myanmar-all-that-matters/free/banking-on-myanmar/ Nyunt, Z.K (2013), Excise Taxation in Myanmar, PowerPoint presentation, August OECD (2014), OECD Investment Policy Reviews: Myanmar 2014, OECD Publishing, Paris, http://dx.doi org/10.1787/9789264206441-en OECD (2013a), Creditor Reporting System (database), http://stats.oecd.org/Index.aspx?datasetcode=CRS1 OECD (2013b), Multi-dimensional Review of Myanmar: Volume Initial Assessment, OECD Development Pathways, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264202085-en OECD (2013c), Southeast Asian Economic Outlook 2013: With Perspectives on China and India, OECD Publishing, Paris, http://dx.doi.org/10.1787/saeo-2013-en OECD (2013d), OECD Economic Surveys: China 2013, OECD Publishing, Paris, http://dx.doi.org/10.1787/eco_ surveys-chn-2013-en OECD (2012), Southeast Asian Economic Outlook 2011/12, OECD Publishing, Paris, http://dx.doi org/10.1787/9789264166882-en OECD (2010), Tax Policy Reform and Economic Growth, OECD Tax Policy Studies, No 20, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264091085-en OECD (2009), “Implementing the Aid Effectiveness Agenda”, Managing Aid: Practices of DAC Member Countries, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264062689-9-en OECD (2005), Corporate Governance of State-Owned Enterprises: A Survey of OECD Countries, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264009431-10-en OECD, UMFCCI and UNESCAP (2014), Myanmar Business Survey, www.unescap.org/sites/default/files/MBS_ Questionnaire_Interactive_310114.pdf Pessino, C and R Fenochietto (2010), “Determining countries’ tax effort”, Hacienda Pública spola/ Revista de Economía Pública, 195-(4/2010): 65-87, November 2010, www.ief.es/documentos/ recursos/publicaciones/revistas/hac_pub/195_3.pdf Preece, R (2012), “Excise taxation of key commodities: A comparative analysis ahead of the ASEAN economic community in 2015”, World Customs Journal, Volume 6, No 1, May Price Waterhouse Cooper (PWC) (2012), Myanmar Business Guide, August Republic of the Union of Myanmar (2011), Microfinance Law, November Revenue Watch (2013), Myanmar’s Performance on the Resource Governance Index www.revenuewatch.org/ countries/asia-pacific/myanmar/overview Rieffel, L and J Fox (2013), Too much too soon? The Dilemma of Foreign Aid to Myanmar/Burma, Nathan Associates Inc., Virginia Seibel, H.D (2007), Reforming Agricultural Development Banks (AgDBs), University of Cologne Development Research Centre Shah, A (2004), Fiscal Federalism in Developing and Transition Economies: Progress, Problems, and the Promise, World Bank Policy Research Paper 3282, April Turnell, S (2009), Recapitalising Burma’s Rural Credit System, Paper Presented to the Myanmar/Burma Update Conference Australian National University 17-18 August 2009 Turnell, S., A Vicary and W Bradford (2008), “Migrant worker remittances and Burma: An economic analysis of survey results”, Dictatorship, Disorder and Decline in Myanmar, pp. 63-86 UNCTAD (2013), Foreign Direct Investment Statistics (database) http://unctadstat.unctad.org/wds/ ReportFolders/reportFolders.aspx UNICEF (2013), Towards more Child-focused Social Investments: Snapshot of Social Sector Public Budget Allocations and Spending in Myanmar, www.unicef.org/eapro/Social_Sector_Public_Budget_Allocations_ and_Spending_in_Myanmar_.pdf United Nations (2013), National Accounts Main Aggregates Database, http://unstats.un.org/unsd/snaama/ resQuery.asp United Nations Development Programme (UNDP) and Myanmar Microfinance Business Supervisory Committee (MBSC) (2013), Emerging Microfinance Sector in Myanmar: Regional Lessons on Selected issues, Proceedings of a Workshop held in Nay Pyi Taw, 9-10 May, 2013 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 221 4. Providing the financial resources to support development United States Geological Survey (USGS) (2012), Assessment of Undiscovered Oil and Gas Resources of the Central Burma Basin and the Irrawaddy–Andaman and Indo-Burman Geologic Provinces, Myanmar, Fact Sheet 2012-3107, August 2012 VDB/Loi (2012), Myanmar Tax Update Part I: Myanmar’s 2012 Tax Reform, accessed at www.vdb-loi.com/ mlw/myanmar-tax-update-part-one-myanmars-2012-tax-reform-2/ (June) Vogel, R.C (2006), “From agricultural credit to rural finance: In search of a new paradigm”, in M.B Lamberte, R.C Vogel, R.T Moyes and N.A Fernando (eds.), Beyond Microfinance: Building Inclusive Financial Markets in Central Asia, Asian Development Bank Walsh, J.P and J Yu (2010), “Determinants of foreign direct investment: A sectoral and institutional approach”, IMF Working Papers, pp. 1-27 Webber, D (2007), “Integrating current and development budgets: A four-dimensional process”, OECD Journal on Budgeting, Volume 7, No World Bank (2014), Intergovernmental decentralization/fiscal.htm Fiscal Relations, http://www1.worldbank.org/publicsector/ World Bank (2013a) World Development Indicators (database), http://databank.worldbank.org/data/ home.aspx World Bank (2013b), Remittance Prices Worldwide, No 8, December, World Bank, Washington, DC World Bank (2013c), Myanmar Economic Monitor, World Bank, Washington, DC, October World Bank (2013d), Beyond the Annual Budget: Global Experiences with Medium-Term Expenditure Frameworks, World Bank, Washington, DC World Bank (2013e), “Fiscal decentralisation indicators for the year 2009”, http://www1.worldbank.org/ publicsector/decentralization/fiscalindicators.htm World Bank (2013f) Global Financial Development Database, http://econ.worldbank.org/WBSITE/EXTERNAL/ EXTDEC/EXTGLOBALFINREPORT/0,,contentMDK:23492070~pagePK:64168182~piPK:64168060~theSite PK:8816097,00.html World Bank (2013g), Enterprise Surveys (database), www.enterprisesurveys.org World Bank (2012a), Bank Regulation and Supervision Survey (database), http://econ.worldbank.org/WBSITE/ EXTERNAL/EXTDEC/EXTGLOBALFINREPORT/0,,contentMDK:23267421~pagePK:64168182~piPK:64168 060~theSitePK:8816097,00.html World Bank (2012b), Republic of the Union of Myanmar: Public Finance Management Performance Report, World Bank, Washington DC, May World Bank (2011), Migration and Remittances Factbook 2011, World Bank, Washington, DC World Bank (2005), Meeting Development Challenges: Renewed Approaches to Rural Finance, May, www.ruralfinance.org/fileadmin/templates/rflc/documents/1124790789977_WBank_Meeting_ Development_Challenges.pdf World Bank and International Finance Corporation (World Bank/IFC) (2013), Doing Business Survey 2014 World Health Organization (2011), WHO Global Health Expenditure Atlas, http://apps.who.int/nha/ atlasfinal.pdf Further reading Arakan Oil Watch (2012), Burma’s Resource Curse: The case for revenue transparency in the oil and gas sector, March CARAM Asia (2010), Remittances: Impact on Migrant Workers Quality of Life, www.burmalibrary.org/docs11/ CARAM-Remittances_Report-Burma_extract.pdf Chantavanich, S and P Vungsiriphisal (2012), “Myanmar migrants to Thailand: Economic analysis and implications to Myanmar development”, Economic Reforms in Myanmar: Pathways and Prospects, edited by Hank Lim and Yasuhiro Yamada, BRC Research Report No 10, Bangkok Research Center, IDE_JETRO, Bangkok, Thailand Charltons (2014), Myanmar Highlights Issue, Newsletter, 29 January 222 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 4. Providing the financial resources to support development China Daily (2013), Myanmar-China gas pipeline starts to deliver gas to China, http://usa.chinadaily.com.cn/ business/2013-07/28/content_16844673.htm Dezan S and Associates (2013), “The 2014 Asia tax comparator”, Asia Briefing, Issue 6, NovemberDecember Government of Myanmar (2013), The Central Bank of Myanmar Law, Pyidaungsu Hlattaw Law No 16/2013, Translation by Polasti Wint and Partners Hpaw, N.E (2013), “Banking and financial reforms in Myanmar”, PowerPoint Presentation for conference on US Myanmar Trade and Investment Relations: The Path Forward Conference February Jampaklay, A and S Kittisuksathi (2009), Migrant Workers’ Remittances: Cambodia, Lao PDR and Myanmar, International Labour Organization Kyaw, A (2008), Financing Small and Medium Enterprises in Myanmar, JETRO-Institute of Developing Economies Working Paper 148, April McKinsey Global Institute (2013), Myanmar’s Moment: Unique Opportunities, Major Challenges Mohopatra, S., D Ratha and A Silwal (2010), Migration and Remittances Factbook 2011, World Bank, New York City, November OECD (2002), “Challenges to China’s banking industry”, in China in the World Economy: The Domestic Policy Challenges, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264196278-en Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 223 4. Providing the financial resources to support development Annex 4.A1 Technical notes on growth projections for Myanmar In order to assess the future investment needs of Myanmar until 2035, two scenarios have been used These scenarios define a target in terms of capital stock per capita for Myanmar in 2035, or assumed trends in ICOR for Myanmar until 2035: ●● In both scenarios, GDP growth rates are assumed to be constant over 2012-35 Three annual GDP growth rates are successively assumed: 6.5%, 7.5% and 8.5% To convert data in kyats to US dollars (in constant 2005 prices), the informal exchange rate is used for 2005 Population forecasts are based on the medium variant of the UN projections until 2050 The depreciation rate of capital is assumed to be 4% ●● In the first scenario, Myanmar is assumed to attain a per-capita GDP level in 2035 equal in real terms to that of China in 2003 if its GDP grows at a 6.5% annual rate and a per-capita GDP equal to that of China in 2005 and 2007, respectively, if at an annual GDP growth rate of 7.5% and 8.5%, respectively UN population forecasts are used for the projections Investment needs corresponding to each assumed GDP growth rate are calculated based on the assumption of a constant ICOR and that Myanmar will attain a per-capita capital stock in 2035 equal to that of China in 2003, 2005 and 2007, respectively Finally, the annual investment share that would lead to this catching-up in capital stock per capita in 2035 is calculated by assuming that investment share would linearly increase from current levels (around 14.9% in 2011) to the needed higher levels in 2035 ●● The second scenario makes the same assumptions about GDP growth but Myanmar’s ICOR is expected to linearly increase, from 1.2 in 2004 to 4.5 in 2035 Based on the three growth assumptions, the investment shares that are compatible with the assumed growth patterns and evolution in ICOR are calculated By construction, investment as a percentage of GDP increases linearly until 2035 In order to assess the consistency with scenario 1, the capital stock per capita in Myanmar in 2035 is then determined, as well as the year when China first reached this level of capital stock per capita The main results of the two scenarios are as follows (see also table in the main text): ●● Based on the GDP growth assumption of 6.5% per year until 2035, Myanmar would have to progressively boost its investment share of GDP to levels which are comparable with the level in many Southeast Asian economies, to between 29% and 37% In this case, Myanmar may reach the GDP per capita and the capital stock per capita that China had at the beginning of the 2000s Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 225 4. Providing the financial resources to support development ●● Based on the GDP growth assumption of 7.5% per year until 2035, Myanmar would have to progressively boost the investment share to higher levels than in many Southeast Asian economies, to between 34% and 40% In this case, Myanmar would reach the GDP per capita and the capital stock per capita that China had in the mid-2000s ●● Based on the GDP growth assumption of 8.5% per year until 2035, Myanmar would have to boost its investment share to levels which are closer to those of China, and significantly higher than in many Southeast Asian economies, to between 38% and 43% In this case, Myanmar would reach the GDP per capita and the capital stock per capita that China had in 2007 ●● Regarding the consistency between the two scenarios, with the assumption that the ICOR will reach 4.5 in 2035, scenario appears to be consistent with scenario for each of the three growth assumptions Indeed, the year when China reached the level of capital stock per capita attained in the scenario by Myanmar in 2035 is close to the year when China reached the GDP per capita that Myanmar would reach in 2035 in scenario 1: ❖❖ with the annual GDP growth assumption of 6.5%, the calculated year in the scenario 2 is 2001 (compared with 2003 in the Scenario 1); ❖❖ with the annual GDP growth assumption of 7.5%, the calculated year in the scenario 2 is 2004 (compared with 2005 in the Scenario 1); ❖❖ with the annual GDP growth assumption of 8.5%, the calculated year in the scenario 2 is 2007 (the same as in the Scenario 1) ●● Sensitivity analyses of the results were done, including a higher depreciation rate of capital (up to 8%), as well as, for scenario 2, an ICOR in 2035 that would reach rather than 4.5 Doubling the depreciation rate from 4% to 8% does not change estimates under scenario but in scenario 1 raises the investment share by around to percentage points If the ICOR reaches in 2035, rather than 4.5, results remain unaffected under the scenario For scenario 2, the investment shares needed to sustain growth are somewhat lower (by around 3-4%) At the same time, Myanmar’s capital stock per capita would reach lower levels than if the ICOR reached 4.5 in 2035 226 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 4. Providing the financial resources to support development Annex 4.A2 Supplementary information on aid and aid management in Myanmar Table 4.A2.1 Sectoral Working Groups Sector Working Group Government of Myanmar Lead Lead donors Education Ministry of Education UNICEF Australia Cultural conservation Ministry of Culture UNESCO Italy USAID Agriculture and rural development Ministry of Agriculture and Irrigation FAO Environmental conservation Ministry of Environment Conservation and Forestry UN-HABITAT Norway Employment opportunity Ministry of Labour, Employment and Social Security ILO Germany Electric power Ministry of Electricity ADB JICA/Japan Health and water supply Ministry of Health WHO USAID Communication and information technology Ministry of Communications and Information Technology WB TBD Transportation Ministry of Transportation ADB JICA/Japan 10 Social protection and disaster risk reduction Ministry of Social Welfare and Relief and Resettlement UNICEF TBD 11 Public administration and reform process President’s Office UNDP EU 11.1 Public financial management (subgroup) Ministry of Finance WB JICA/Japan 12 Gender equality and women’s empowerment Ministry of Social Welfare and Relief and Resettlement UNFPA France 13 Media Ministry of Information UNESCO France 14 Hotels and tourism Ministry of Hotel and Tourism ADB TBD 15 Statistical quality development Ministry of National Planning and Economic Development UNFPA EU 16 Trade Ministry of Commerce WB EU Informal Working Groups 17 Financial sector TA Central Bank of Myanmar TBD TBD 18 Water resources management TBD WB Netherlands Sources: Ministry of National Planning and Economic Development (MNPED) (2014), Guide to International Assistance in Myanmar; Kudo (2013), Foreign Aid Management of GOM, Presentation given on December 2013, Ministry of National Planning and Economic Development Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 227 4. Providing the financial resources to support development Table 4.A2.2 Commitments (in millions of USD) by sector 2011-12 Disbursements 2011 Sector name I.1.a Education, level unspecified I.1.b Basic education I.1.c Secondary education I.1.d Post-secondary education I.2.a Health, general Share Disbursements 2012 Share 4.72 1.23% 2.17 0.42% 22.24 5.79% 44.31 8.59% 2.88 0.75% 4.68 0.91% 11.07 2.88% 12.97 2.52% 4.98 1.29% 2.58 0.50% I.2.b Basic health 44.72 11.63% 101.11 19.60% I.3 Population pol./Progr and reproductive health 32.70 8.50% 57.18 11.09% 4.23 1.10% 8.50 1.65% 31.46 8.18% 53.09 10.29% I.4 Water supply and sanitation I.5.a Government and civil society-general I.5.b Conflict, peace and security 4.44 1.15% 8.88 1.72% I.6 Other social infrastructure and services 8.77 2.28% 10.44 2.02% II.1 Transport and storage 1.44 0.37% 3.99 0.77% II.2 Communications 2.97 0.77% 4.02 0.78% II.3 Energy 0.02 0.01% 1.56 0.30% II.4 Banking and financial services 8.66 2.25% 4.61 0.89% II.5 Business and other services III.1.a Agriculture 0.01 0.00% 0.23 0.05% 63.96 16.63% 15.36 2.98% III.1.b Forestry 3.17 0.82% 2.09 0.41% III.1.c Fishing 0.96 0.25% 0.74 0.14% III.2.a Industry 1.57 0.41% 1.17 0.23% III.2.b Mineral resources and mining 0.02 0.01% 0.03 0.01% III.2.c Construction III.3.a Trade policies and regulations 1.13 0.00% 0.05 0.01% 0.29% 1.67 0.32% III.3.b Tourism 0.02 0.00% 0.30 0.06% IV.1 General environment protection 1.83 0.48% 2.04 0.39% IV.2 Other multisector 13.48 3.51% 17.04 3.30% VI.2 Dev food aid/Food security ass 18.90 4.92% 19.00 3.68% 0.00% 20.05 3.89% VII Action relating to debt 2.91 0.76% 2.63 0.51% VIII.1 Emergency response 16.51% VI.3 Other commodity ass 78.93 20.53% 85.18 VIII.2 Reconstruction relief and rehabilitation 8.37 2.18% 17.48 3.39% VIII.3 Disaster prevention and preparedness 1.83 0.48% 6.81 1.32% Administrative costs of donors 0.40 0.10% 0.50 0.10% Refugees in donor countries 0.35 0.09% 0.39 0.08% IX Unallocated / unspecified Total 1.39 384.52 0.36% 2.98 515.82 0.58% Source: OECD (2014), Creditor Reporting System (database), http://dx.doi.org/10.1787/dev-data-en 228 Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 4. Providing the financial resources to support development Annex 4.A3 Myanmar’s budget cycle Union States/Regions Preparation by line ministries, SAOs and SOEs of projected Preparation by state/region departments and organisations of proposed revenues and expenditures for the upcoming fiscal year and budgets and submission to state/region BD Calendar year: -1 September submission of their proposals to BD-MOF for compilation October MOF and MNPED receive the compiled Union and state/region State/region BD submits compiled state/region budget proposal to state/ budgets; review and consult with line departments on revisions; region finance minister and to Union BD-MOF submit draft Union budget to Union finance minister November December Review of draft Union and state/region budgets by Union Review of state/region budgets by state/region finance ministers and Ministers of Finance and of MNPED; followed by review by executive offices; followed by submission for review to the state/region Union Vice President parliament; followed by submission to the Vice-President Financial Commission reviews proposed Union and state/region Vice-President forwards state/region budget proposals to the Financial budgets and submits them with recommendations for final Commission review to the Office of the Union President and the Offices of the Chief Minister of the state/region governments; Union budget and law submitted to Union Parliament Calendar year: January-March Union Parliament debate and revision; followed by final passage State/region draft budget submitted by Chief Minister to state/region around end-March parliament for review, revision and final passage April-July Execution of budget Execution of budget July Report to Union Parliament by OAG August Preparations begin for revised budget for current fiscal year Source: Provided by the Ministry of Finance Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 229 4. Providing the financial resources to support development Annex 4.A4 Structure of Myanmar’s financial system Type of institutions Number of entities Assets (billion kyats)** State-owned banks 222 Private and semigovernment banks 19 126 Other financial institutions Security and Printing Works Myanmar Microfinance Supervisory Enterprise (former Myanmar Small Loan Enterprise) Regulatory and supervisory authority Description Myanmar Foreign Trade Bank Myanmar Economic Bank Myanmar Investment and Commercial Bank (to be renamed to Small and Medium Industrial Development Bank) Myanmar Agriculture and Rural Development Bank Central Bank of Myanmar and respective line ministries Private commercial banks Central Bank of Myanmar Myanmar Orient Leasing Company Ltd Ministry of Finance and Ministry of Defence (for security and printing works) Myanmar Insurance Myanmar Securities Exchange Centre Company Co., Ltd Insurance Business Supervisory Board, Ministry of Finance Representative offices of foreign banks 28 Foreign banks mainly from SouthEast and North-East Asia Central Bank of Myanmar Micro finance projects 755 95 Microfinance institutions (MFIs) Ministry of Finance, Ministry of Co-operatives and Ministry of Agriculture and Irrigation Informal and semi-formal sector Co-operatives NGOs (e.g PACT) Specialised agricultural development companies Village revolving funds Community based organisations 230 Legal framework Central Bank of Myanmar Law (1990); Financial Institutions of Myanmar Law (1990); Saving Bank Law (1992); Myanmar Companies Act (1914) (*); Myanmar Agricultural and Rural Development Law (1990) Central Bank of Myanmar Law (1990); Financial Institutions of Myanmar Law (1990); Saving Bank Law (1992); Myanmar Companies Act (1914) (8) Central Bank of Myanmar Law (1990); Financial Institutions of Myanmar Law (1990); Myanmar Insurance Law (1993); Microfinance Law (2011); Microfinance Notification and Directives (2011); Myanmar Companies Act (1914) (*) Central Bank of Myanmar Law (1990); Financial Institutions of Myanmar Law (1990); Myanmar Companies Act (1914) (*) Microfinance Law (2011); Microfinance Notification and Directives (2011); Myanmar Agricultural and Rural Development Law (1990); Co-operative Society Law (1992); Law relating to Forming of Organisations – NGO Law (1988); Myanmar Companies Act (1914) (*) Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 4. Providing the financial resources to support development Type of institutions Number of entities Assets (billion kyats)** Other licensed financial institutions Informal financial outlets Regulatory and supervisory authority Description Pawn shops Myanmar small loans enterprise and local authorities Moneylenders; Hundis Legal framework Notes: *The subsection of the Myanmar Companies Act (1914) covers the provision of bankruptcy; thus, the banking and financial sector has to rely on this law for the cases of loan defaults caused by insolvency ** Assets at end FY 2012/13 (31 March 2012) Sources: PWC (2012), Myanmar Business Guide, August; Pricewaterhouse/Coopers LLP, Singapore, www.pwc.com/sg/en/assets/document/ myanmar_business_guide.pdf; Aung and Khin (2011), “Small and medium enterprises in Myanmar”, a presentation at the Asia–Pacific Financial Inclusion Forum, Tokyo, Japan, 6-8 September, Ministry of Finance and Revenue, Government of Myanmar; and Duflos et al (2013), Microfinance in Myanmar: Sector Assessment, January, International Financial Corporation, World Bank, Washington, DC Table 4.A4.1 Structure of the Myanmar banking system Figures for 31 March 2013 unless otherwise indicated Number of offices/ branches Total assets (MMK billion) Share of banking (31 March 2012) system assets Main owner Main activities and remarks State-owned banks n.a 3 226 38.6 Myanma Economic Bank (MEB)1 324 4 532 54.3 State Deposit-taking and commercial lending; provision of working capital loans to SMEs; rural finance; govt functions of treasury mgt and currency services Myanmar Foreign Trade Bank n.a n.a n.a State Foreign exchange transactions Myanmar Agricultural Development Bank1 206 989 11.8 State Deposit-taking and commercial lending; policy lending to rural farmers Myanmar Investment and Commercial Bank n.a n.a n.a State Private and semigovernment banks 485 5 126 61.4 Kanbawza Bank Ltd 122 1 774 21.2 26 733 8.8 Myawaddy Bank Ltd.2 KBZ Group Union of Myanmar Economic Holdings* Co-operative Bank Ltd 47 563 6.7 Ministry of Co-operatives Myanmar Apex Bank Ltd 20 276 3.3 Eden Group of construction companies Myanma Global Treasure Bank2, 60 397 4.8 Ministry of Livestock and Fisheries Ayeyarwaddy Bank Ltd 32 197 2.4 Max Myanmar Group Asia Green Development Bank Ltd 28 209 2.5 HTOO Company Group Innwa Bank Ltd.2 33 245 2.9 Myanmar Economic Corporation* United Amara Bank Ltd 14 n.a 3.24 IGE Company Group 2.84 Ministry of Border Areas Rural Development Bank Ltd.2 Small and Medium Industrial Development Bank Ltd.2 11 118 1.4 Myanmar Oriental Bank Ltd 17 n.a 2.24 25 shareholders with Kyi Kyi Than major sharehold Yoma Bank Ltd 50 n.a 2.24 FMI Group Ministry of Industry Multi-dimensional Review of Myanmar: Volume In-depth Analysis and Recommendations © OECD 2014 SME lending to industry, based in part on subsidised loans from MEB Commercial banking since reinstatement of full licence in 2012 231 4. Providing the financial resources to support development Table 4.A4.1 Structure of the Myanmar banking system (cont.) Number of offices/ branches Total assets (MMK billion) Share of banking (31 March 2012) system assets n.a 1.74 Public Limited Company n.a 1.04 Ministry of Commerce First Private Bank Ltd Myanmar Citizens Bank Ltd Main owner 12 n.a 1.04 MGS Beverages Co Ltd Yangon City Bank Ltd.2 n.a 0.64 Yangon City Development Committee Yadanabon Bank Ltd.2 n.a 0.14 Mandalay City Government Authority Asian Yangon Bank Ltd n.a 0.14 U Myo Paing Tun Foundation Bank Ltd Main activities and remarks * Affiliated with Ministry of Defence 31 March 2013 for MEB; October 2013 for MADB Semi-government bank Formerly named Myanma Livestock and Fisheries Bank Figures for FY 2012 from Foerch, Thein and Waldschmidt (2013) Sources: CBM (2012), Annual Report 2011-2012; Foerch, Thein and Waldschmidt (2013), “Myanmar’s financial system: A challenging environment for banks”, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), November; Myanma Economic Bank; Myanmar Agriculture Bank; staff estimates Table 4.A4.2 Financial products in Myanmar Product/instrument Term Interest rate (%) Fees Conditions Banks Current deposits – MMK Demand Current deposits – Foreign currency Demand Time deposits 3, 6, 9, 12 months 8.5, 9.0, 9.5, 10 Lending rate year 13 maximum Treasury bill months Treasury bonds years 8.75 years years Savings deposits Minimum balance 1000K maximum Minimum balance of 1000K 1% service charge; 1% commitment fee Loan amount < [ ] of discounted market value (about 20%) of collateral; acceptable collateral: land and buildings; machinery; goods; gold; bank deposits; govt securities Capital market Agricultural loans (to farmers) (MADB) Paddy loans [up to year] Equipment loans 8.00 Land collateral; group guarantee 8.50 Equipment Microfinance institutions Savings rate 1.25/month Lending rate 2.5/month Insurance products Types of insurances Authorised for all insurers Life-individual, fire, fidelity, life-group Motor vehicle, snake-bite, cash-in-safe, cash-in-transit Reserved to Myanmar 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regional commissions of the United Nations ECLAC was founded in 1948 for the purpose of contributing to the economic development of Latin America and the Caribbean, coordinating actions to promote that development and reinforcing economic ties among the region’s countries and with other nations of the world Over the years, the institution's in-depth analysis of the region has taken the form of two main lines of action: socioeconomic and environmental research and the provision of technical cooperation to Governments The Commission's ongoing concern for growth, technical progress, social justice, democracy and environmental protection has characterized the integral approach towards sustainable development that now forms part of the legacy of its rich intellectual tradition The 33 countries of Latin America and the Caribbean are member States of ECLAC, together with the United States, Canada, and several European and Asian countries that have historical, economic or cultural ties with the region The Commission thus has a total of 44 member States In addition, 12 non-independent Caribbean territories hold the status of associate members OECD PUBLISHING, PUBLISHING, 2, 2, rue rue André-Pascal, André-Pascal, 75775 75775 PARIS PARIS CEDEX CEDEX 16 16 OECD (41 2014 1P) ISBN000-00-00-00000-0 978-92-64-22056-0–––2014 2014 (00 0000 0007 P) ISBN ISBN 978-92-64-00000-0 2014 (00 2013 00 00 P) OECD Development Pathways Multi-dimensional Review of Myanmar VOLUME IN-DEPTH ANALYSIS AND RECOMMENDATIONS OECD Development Pathways is a new series that helps developing countries to identify and overcome binding constraints to more equitable and sustainable growth The Development Pathways are based on Multi-Dimensional Country Reviews, which take into account policy interactions and the country-specific policy environment through three phases The first phase comprises an initial assessment of the binding constraints to development The second phase involves an in-depth analysis of the main issues resulting in detailed policy recommendations The third phase is designed to support government’s efforts in developing strategies and implementing policy recommendations Contents Chapter Assessment and recommendations Chapter Structural transformation towards a modern economy: Upgrading agriculture, manufacturing and services Chapter Filling the skills gap in Myanmar Chapter Providing the financial resources to support development www.oecd.org/dev/mdcr.htm Consult this publication on line at http://dx.doi.org/10.1787/9789264220577-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases Visit www.oecd-ilibrary.org for more information ISBN 978-92-64-22056-0 41 2014 07 P ... in 20 15 with a final report Multi- dimensional Review of Myanmar: Volume In- depth Analysis and Recommendations © OECD 20 14 17 Multi- dimensional Review of Myanmar Volume In- depth Analysis and Recommendations. .. Multi- dimensional Review of Myanmar: Volume In- depth Analysis and Recommendations © OECD 20 14 Multi- dimensional Review of Myanmar Volume In- depth Analysis and Recommendations © OECD 20 14 Executive... banks could be instrumental in meeting financial needs for 22 Multi- dimensional Review of Myanmar: Volume In- depth Analysis and Recommendations © OECD 20 14 1. Assessment and recommendations