Myanmar - Economic development

The major aim of Myanmar's government has been to rehabilitate, modernize, and diversify an economy that was extensively disrupted by World War II and that failed to develop from the 1940s through the 1960s. To this end, all foreign companies, all banks, the entire transport system, all foreign and much domestic trade, and all the main branches of industry have been nationalized. Some nationalized industries initially showed declines in output, while others were hard pressed to hold their own. By 1974, the government had no choice but to modify some of its more rigidly Socialist economic policies. Economic development proceeded slowly under the four-year plan for 1974–78 and the 1978–82 development program, which was allocated 60% more funding than its predecessor and which achieved an annual growth rate exceeding 6%. The four-year plan for 1982–86, costing an estimated $5 billion, set an average annual growth target of 6.2%. The plan stressed infrastructural development, with particular emphasis on agriculture, construction, and energy production. The four-year plan for 1986–90 encouraged foreign investment. Since 1990, private investment has been encouraged as the government attempts to revitalize the economy. As of January 2001, the value of approved investment had reached about $7.4 billion. However, most of this—$6.23 billion or 84%—came before the Asian financial crisis of 1997. Before 1997, foreign investment approvals had averaged close to $900 million a year; from 1997 to 2000, the average was $234 million a year. The economy has not recovered from the effects of the 1997 crisis, and problems have only worsened with the global slowdown in 2001, and the worldwide decline of foreign direct investment in the aftermath of the 11 September 2001 terrorist attacks on the United States. In 2001, the government introduced its third five year short-term plan, with a targeted average growth rate of 6%. However, both continued reform and substantial foreign investment would be necessary to meet the goals of the plan. Such needed reforms include dismantling unproductive state-owned enterprises, establishing an independent state bank, making available private sector credit, controlling government spending, and adjusting the official exchange rate. However, in 2002, the gap between the official exchange rate and the market rate had widened to an astounding 100 to 1, and foreign investment has slowed to a trickle. In the first six months of 2002, investment from other ASEAN countries, the source of most of Myanmar's foreign investment to date, was actually zero.