As of 2000 nearly 75% of the economy was in the private sector comprised chiefly of agriculture (including fish and forestry), which is almost entirely private, contributing nearly 42% of GDP, down from 60% in the 1990s and employing close to 65% (1999 est.) of the work force. Myanmar is self-sufficient in food. Principal crops are paddy rice, corn, oilseed, sugarcane, and pulses. Traditionally rice was the major product and the major foreign exchange earner, accounting for about 70% of the country's cultivated land. In 1996, rice exports quadrupled to $197 million, and accounted for 22% of merchandise exports. The Asian financial crisis hit Myanmar hard, reducing rice exports by about one-third. The major recipients of Myanmar's rice are Indonesia and China. Myanmar also has the world's largest stand of hardwood trees.
Industries include agricultural processing, textiles and footwear, wood and wood products, petroleum refining, mining production (mainly copper, tin, tungsten, and iron), construction materials, pharmaceuticals, and fertilizer. In 2000, industrial production accounted for 17% of GDP, up from 11% in 1998. In the past Myanmar was a net petroleum exporter, but production decreased steadily. Both oil and gas exploration is on-going with the participation of foreign companies, and in 1997/98 the energy sector grew by 37.7% (from virtual non-existence) due to investment in the Yadana natural gas pipeline to Thailand, which came on-line in 1999. The $1.2 billion pipeline was a joint venture between the California company Unocal and the Myanmar military government. In 2003 the government was considering a $1 billion Myanmar-Bangladesh-India pipeline that would be built in cooperation with Unocal Bangladesh, Unocal having been forced by the US government to sell its share in the Myanmar Oil and Gas Company (MOGC). For the most part, Myanmar's significant mineral resources have not been fully developed due to out-dated equipment and poor management.
Infrastructure is a major impediment to economic growth. Water treatment and distribution, sewage disposal, and irrigation systems, as well as power transmission and distribution, require up-grading. Industry faces chronic shortages of electricity. Roads are poor and many are not passable during parts of the year. Telephone facilities are lacking; in 1993 there were only 100,000 telephone lines for the entire country. Presently a telecommunications modernization program includes the installation of a cellular telephone system in Yangon. The financial sector suffers from excessive bureaucratic red tape and foot-dragging by state economic enterprises fearing competition. The government drafted new laws on a central banking and financial institutions as steps toward improvement in the financial sector.
The government reported that the economy grew by 6% in 1995 and 6.8% in 1996. Growth was estimated by the US State Department at 1.1% for 1998. In 1999 strong growth of 10.9% was reported, propelled by a 13.8% growth in industry and 11.5% growth in agriculture. The government reported growth in 2000 at 13.6% overall but according to the Asian Development Bank (ADB), independent estimates suggest more modest progress of around 6%. Inflation had averaged about 25% for more than a decade, but a drop in food prices due to a bumper rice crop (and the heavy weight given rice in Myanmar's consumer price index) brought a sharp drop in inflation, to a negative 0.1% according to government statistics. In 2001 a slower annual growth of 5% was reported with a 9.6% resurgence of inflation.
It should be noted that it is difficult to assess the true economic situation in Myanmar due to the existence of an enormous and all-pervasive informal market. Much of Myanmar's economic activity is illicit, notably the smuggling of drugs. Myanmar, which forms part of the "Golden Triangle" (along with Laos and Thailand), is the world's largest supplier of illegal opiates. The government's efforts to control poppy production and drug traffic to China and Hong Kong were ineffective. Since 1989, the only kind of US aid for which Myanmar has been eligible, besides humanitarian aid, is counter-narcotic and crop substitution assistance, because of the human rights issues involved with the imposition of military rule in 1988. By 1995 Myanmar's opium production was estimated at 2,340 metric tons (the source for over 60% of US heroin imports). Large quantities of smuggled consumer goods are sold in Myanma cities, where the black market thrives.
The military regime, SLORC, which took over Myanmar in 1988, proclaimed a market oriented economic policy and invited foreign investment. A 1992 United Nations Development Programme report noted that Myanmar after a few years of recovery from the economic and political upheaval of 1988 was again slipping into recession and hyperinflation. Myanmar's main donors suspended aid. The country has not fully serviced its foreign debt since 1988, a situation that by 2002 amounted to default. Two trends have been apparent in the government's economic policies: the capture of revenues from short term, quick turnover sources such as hardwoods, prospecting rights, and taxes on profits from illegal sources; and spending patterns that emphasize defense spending and acquisition of armaments. An estimated 87% of tax revenues are spent on the military whereas expenditures on health and on education both amount to less than 0.5% of GDP. Myanmar receives no aid from US or EC programs and aid from Japan is run at a maintenance level. The International Monetary Fund (IMF), the World Bank, and the Asian Development Bank (ADB) extend no credit to Myanmar.