Pyithawtha Redux

FIRST
RANGOON

Burma Redux
November, 2015 A Memo to the Incoming Government
First Rangoon Corporation

148 A1 Street
Rangoon, RGN 11061
Union of Burma
A MEMO TO MYANMAR
FIRST
November 2015 RANGOON
Preface
Burmese people of a certain age remember Pyitawtha manifesto, an Eight Year Plan of Economic
Development drafted with American help in the 1950s. Subtitled A New Burma, the report
outlined plans to jump-start the countrys post-colonial economy and double its GDP in ten years;
no sector was ignored, no stones left unturned, and no minutiae was too small for the report which
ran almost to 1,000 pages. Few read it, and most of its goals were abandoned after 1962, but not
before leaving behind as legacy a centralized economy obsessed with 5-year and 10-year plans.
Pyitawtha was a report brimming with hope and optimism; our true history lies ahead it declared,
citing fertile land, raw materials, and abundant human resources of Burma. That has not changed
in ensuing fifty years, although Myanmar today is a much diminished country following decades of
misrule. In this too, we take a line from Pyitawtha: it exhorts: we shall waste no energies in
lamentations or bitterness over the past to achieve the bright future.
Our report follows Pyitawtha in spirit. We are still chasing that New Burma promised by Pyitawtha
(which means pleasant royal land), that Asiatic rendering of shining city upon a hill. The upcoming
elections give Burma its first real chance since 1962 to realize this dream and we intend to greet it
with this report. Many of our recommendations will be unpopular with entrenched elites, but the
incoming democratically elected government with its popular mandate will be able to handily
implement them.
For this report, we have travelled far, interviewed many, and debated some. Our position
throughout the report is opposite of the old report. We wrote this as fervent supporters of market
economy and fiscal prudence. As such our plans do not focus on billion dollar investments or
centralizing bureaucracies. Instead, we outline incentives, nudges, and guidelines the
government, the private sector, and the civil society can give one another to build a better, more
prosperous Burma.
Partners
First Rangoon Corporation
Yangon | November 2015
Pyitawtha Redux: A Memo 2

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Contents

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A Note on Names
Throughout this report, the names Burma and Myanmar are used interchangeably. In the
opinion of the partners of First Rangoon, two names are identical. In the Burmese language, one
would refer to the country formally and in writing as Myanmar, and informally and in verbal
communication as Bama or Burma.
In 1989, the year after the pro-democracy was violently crushed, the military government of what
was then the Socialist Republic of the Union of Burma changed the countrys name to the Union of
Myanmar. It was a mere exercise in PR and rebranding, and the governments argumentthat
Burma had an ethnic-supremacist tinge as it only referred to the Burman majoritywas never a
coherent or accurate explanation. Burma and Myanmar have the same etymological roots.
As this report presents a collection of ideas, we will begin by suggesting a name change for the
country itself. We solicited potential names for the country; many favour Ayeyawaddy already
the name of a region in Burma, and the name of the river that sustains and binds most of the
country. Others are poetic -- Minhtarni (Birthplace of Kings); Shwetaing (Golden Land) and
some names look back at history Tharawaddy. The name of our very report, Pyitawtha is a
suitable candidate. First Rangoons personal favourite is a name which looks forward to our
shared vision and shared density as a federal republic, Pyitaungsu an epithet meaning Union.

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General Administration

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Presidential Administration
Age and residency requirements for presidency should be
reduced. Apart from more well-known and controversial
Chapter 3, Clause 59(f) of the constitution, which requires the
president of Burma to be someone who "he himself, one of the
parents, the spouse, one of the legitimate children or their
spouses not owe allegiance to a foreign power", the
constitution requires a citizen to be at least 45 years in the age
and must have 20 years of residency in the country to qualify
for the presidency.
In Burma, median age is 27, yet the country has never been
led by someone born after its independence a fact that is
unlikely to change even after the November elections. In that
aspect, Burma resembles many other South East Asian
countries, which are led by men in their late sixties and
seventies. In Western democracies, aging populations coupled
with younger leaders meant that age gaps are not so drastic.
The United States, Britain, France, Germany, and Spain are all
led by men and women in their fifties and early sixties; Italys
Matteo Renzi is mere 41-year old.
Age gaps are worrying. The young, battered by economic
crises, globalization, and unemployment, view their leaders as
distant, both in age and in socioeconomic terms. Young voter
turnout is low when the young doesnt feel represented. An oft-
discussed fact about the Arab Spring is the age difference
between youthful populations and their old leaders.
A good first step will be to reduce age and residency
requirements: a good age limit is probably between 35 and 38,
instead of 45. However, broader attitudes in Asia such as
views equating age with wisdom or experience need to
change before Asians will have leaders that resemble them.
Presidential Administration
Salaries of the Executive Branch should be reduced.
President of Burma is paid 5,000,000 kyats per month
($3,900). There are two vice-presidents who are paid around
$3,000 each per month, as well as three positions (speakers of
two chambers, chief justice) who are paid around $2,600 each
per month. These are high salaries unimaginable for ordinary
citizens in Burma.
Narendra Modi, Indias current prime minister, takes home
around US$ 30,000 annually; Xi Jinping, presiding over the
worlds most populous country and fast rising economic power,
get only $22,000 in annual salary, and this after a 62% pay rise
earlier this year.

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In many other countries, the head of state gets paid only

double or triple MPs salaries. In Japan and Italy, the Prime
Minister is truly primus inter pares his salary is virtually the
same as that of an ordinary MP. In Burma, the president is
paid 16.6 times more than average MP whose monthly salary
is 300,000 kyats ($230). Considering that the president (as
well as two vice presidents) gets other perks medical
expenditures for himself AND his family abroad, a presidential
household containing cooks, maids, and six chauffeurs(!)
such a gap is significant.
Burma has only recently instituted a daily minimum wage of
Monthly Salary of President 3,600 kyats ($2.7). Annually, president is paid over 60 times
of Burma the minimum wage worker. Such differences are not so stark in
neighbouring countries. Thailands executive is paid 8.3x the
minimum wage worker; in Vietnam and Cambodia, it is 3x and
6.6x respectively.
Executive pay is not the be-all, end-all indicator: lowly paid
ones are prone to corruption and graft, and public service
should not be the sacrifice for these executives who might be
remunerated more handsomely had they gone into private
sector. At least that is the argument Singapores leaders make:
prime minister there is the worlds highest paid leader, taking in
around $2.2 million (40x its GDP per ppp; the country has no
minimum wage).
There are a few solutions. Firstly, the parliamentarians salary
should be linked to minimum wages. MPs often vote to award
themselves pay rises, and in linking salaries with minimum
wages, the latter will raise accordingly. Secondly, if ministers
and MPs want to raise their own salaries without raising
minimum wage (for inflationary reasons), they must cut their
numbers accordingly. Thus, a 10% cut in number of MPs will
result in corresponding increase in an individual members
salary. Ditto for all those well-heeled ministers and permanent
secretaries.
In a short-term fix, Burmas future leaders should consider
giving themselves severe pay cuts. The presidential salary at
$1,500 will put ratios at 6x (in GDP terms), and 25x minimum
wages still large, but not as obscene as before.

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Public Sector
Number of ministries and ministers should be reduced.
Currently, Burma has 30 ministries and 36 minister-level
officials (including ministers without portfolios). To
professionalize the Civil Service, an old post of Permanent
Secretary has been revived in 2015.
As the result, each ministry is now overseen by four officials: a
Minister, two Deputy Ministers, and a Permanent Secretary. A
deputy minister costs 2 million kyats per month, and abolishing
two deputy ministerial positions all ministries save around 1.4
billion kyats in salaries annually.
Smaller ministries will have to be abolished or combined with
one another. China runs its 1 billion population with mere 20
ministries respectively, and the United States has only 15
cabinet-level departments.
In Myanmar, fifteen of thirty ministries commend less than 1
percent of general government spending each. They should be
combined or abolished. Ministries of Industry, Electric Power,
Energy, Mining, Construction, and National Planning can be
combined into a Ministry of Economic Affairs. Ministries of
Religion, Culture, Sports, Labour, and Social Welfare can be
combined into a Ministry of Social Affairs.
Reduction in number of staff and ministries means that the
government can pay remaining civil servants more.
Ministerial Budgets, 2015
Source: Ministry of National Planning

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Proposed Plans for Ministerial Restructuring
* Department of Environmental Affairs to be transferred to Ministry of Social Affairs
Source: First Rangoon

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Home Office
Portfolio under the Ministry of Home Affairs should be
reduced. The Ministry of Home Affairs in Burma is a lean
organization. It receives only around 1.5% of the government
budget. The Ministry controls the police, but the police force is
small. There are only 178 police per 100,000 residents half
the size of Thailand and Malaysia. Global average is around
400 police per 100,000 residents.
However, Home Affairs whose ministry is constitutionally
appointed by the military is a powerful department. Apart
from the police, it oversees the fire department, the bureau of
special investigations, the prison service, the intelligence
services, visa control, anti-narcotics bureau, and the
censorship board. Lastly, it controls General Administration
Department (GAD) the shadow Civil Service within the civil
service which appoints bureaucrats from township level to
permanent secretary level.
Massive devolution is needed at the ministry. The general
administration should be run through local government and an
independent Civil Service board. Police and fire departments
could be devolved into state governments and for big cities like
Yangon and Mandalay, into municipalities. Bureau of special
investigations and prison system should be administrated
under a newly created Ministry of Justice.
Police per 100,000 ppl in Asia

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State-Owned Businesses
SOEs should be partially privatized or abolished. Burma
has 36 state-owned enterprises. In last few years, reforms
have led to SOEs becoming more competitive, and some are
ready now to be privatized.
Loss-leaders are SOEs under the Ministry of Industry, whose
products (such as Burmese-made cars) are not commercially
viable. More lucrative enterprises and factories under the said
ministry have already been privatized between 2008 and 2013,
and currently the ministry is left with an annual loss of around
200 billion kyats. Closing down the ministry and selling its
factories for scrap will save taxpayer a lot of money.
For successful enterprises, partial privatization is important to
bring transparency to those businesses, many of which are in
extractive industries. Partial privatization will free up capital for
the state to invest in other industries and services. Via external
auditors and public scrutiny, privatization will increase the
corporate governance of state-owned enterprises and free
them from political interference.
Biggest State-Owned Enterprises by Revenues, 2015
Source: Ministry of National Planning

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According to the Ministry of National Planning, the revenues

from the state-owned enterprises were 6.3 trillion Myanmar
Kyats, or US$5.02 billion, (around 11% of the country's GDP)
in 2014-15 fiscal year, and this figure does not include
revenues from the military-owned enterprises. More
importantly, of US$54 billion invested in Myanmar as FDI,
US$16.6 billion are in state-owned enterprises and further
US$24 billion are as production sharing contracts (in oil & gas
and mining, which is only done via SOEs).
Two transportation SOEs also come under similar criticisms.
Myanmar Railways has revenues of around 60 billion Kyats
($47.9 million) annually, and expenditures of around 130 billion
Kyats ($103.79 million). The Inland Water Transport (IWT), an
entity which regulates and operates waterways and river ports,
has annual expenditures around 13 billion kyats, but revenues
have been below 10 billion Kyats ($7.98 million).
Reforms of these SOEs have been planned, but progress has
been slow. Parliament enacted the Inland Water Transport
Board Law in December 2014 in order to corporatize IWT but
no further developments have been reported. Other plans to
corporatize SOEs have not been entirely successful. In late
2014, the country restructured its ill-reputed state-carrier
Myanma Airways, rebranding it as Myanmar National Airlines
and announced plane purchases and aggressive marketing
campaigns. It is slated to lose 9 billion Kyats ($7.18 million) in
the 2015-2016 fiscal year. A problem has been the lack of
proper oversight and international expertise.
The current government has sought assistance from
international donors and consultants to reform SOEs under the
Ministry of Electric Power and Myanmar Post and
Telecommunications (MPT). The Ministry of Electric Power is
considering plans to spin off Yangon and Mandalay's Electricity
Supply Boards (YESB). There are also plans to transform
these ESBs into listed companies. MPT's corporatization can
provide a useful template for future parastatal reforms. A
detailed roadmap has been drafted by the World Bank, which
covers not only strategic planning for MPT, but also human
resource management.
There are various ways to reform state-owned enterprises:
revenues from those which extract resources from ethnic
states (for instance, jade mining is in Kachin state and major
gas fields are offshore Rakhine state) should go towards the
development of those states. Firstly, SOEs should also leave
their non-commercial activities. Many SOEs, including MOGE
and MPT, also oversee the awarding of licenses or contracts in
their respective domains, and also has some oversight of
projects and enforcement of legal rules. This creates a conflict
of interest.

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Secondly, the state-owned corporations need human resource

management. In the recent past, many top-level military
personnel were transferred into civilian ministries and SOEs to
maintain rigorous military control of all facets of Burmese life.
As such, top management of many SOEs in Myanmar are now
ex-military officers who do not have experience in managing
these industries. Creating skilled, technocratic management
and boards of directors will be a crucial step. Meanwhile,
capacity should be created among the junior staff to take on
leadership roles in the future.
Pensions
The government should take over pension obligations of
state-owned enterprises and assets that are privatized.
Moreover, the government should grant more flexible hiring
and firing policies to private companies which take over
management of state-owned factories.
In 2013, the government privatized a dozen textile and
garment factories under the Ministry of Industry without clear
guidelines over how the new owners should review pension
and employment policies. This has led to controversy and
strikes, most notably at 640-acre facility at Palate. In the future,
the government should have clear guidelines towards pension
obligations to public sector employees before privatization of
state-owned enterprises. Encouragingly, in a recent donor-
sponsored performance-review of MPT, the state-owned
telecom, pension policy is given priority. Such practice should
extend to other ministries.
Pensions
Deep reforms of pension system are needed for public
sector. Currently, the Ministry of Industry spends 29% of its
wage budget on pensions; the ministry supports 1.17
pensioners for each person employed within the ministry.
Other government departments are in similar situations.
Burma can follow reforms undertaken by Chile in the late
1970s, which offered every worker the chance to opt out of the
state pension system, which was supported by payroll taxes.
Instead of paying payroll tax, a worker can put an equivalent
amount (10pc of their wages) into an individual Pension
Retirement Account, managed by private companies. Upon
retirement, the participant can withdraw his money and use it
to buy an annuity or if he preferred, can keep working and
contributing.
The idea, formulated by a Harvard economist, was to give a
worker a sense that the money being set aside was really his

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own capital. Social security programs often fail to include

incentives for individual efforts, and free-riders emerge.
In Chile, total government expenditure as percentage of GDP
declined from 34pc to 22pc thanks to these reforms. Private
savings increased to 30pc of GDP, the highest in Latin
America. As private pension companies are prevented from
investing more than a percentage of their money outside Chile,
these large savings were channelled into Chiles own
economic development.
Social Security
Personal social security contributions should rise. In
Burma, the Social Security Act 2012 sets rates of contribution
by employees and employers at 6% and 7% of the total wages
respectively. According to UBS, global social security
contributions average 10% of gross wages for the employee
and 19% for the employer; In India, contributions are 12% for
the employee and 12.5% for the employer.
In Burma, social security is ineffective as workers have no
incentive to join the social security scheme. As of March 2015,
there were only 780,000 people within social security scheme,
each contributing around 40,000 kyats per annum. In 2014-
2015, total social security contribution was merely 31 billion
kyats.
Government itself should also play a more active role, for
instance, by matching the employees contribution (thus giving
the employees incentives to join the scheme). State
contribution to social security which ceased in June 1991
should be resumed.
Some workers have been automatically signed up to the social
security programs by their employers, with their contribution
automatically deducted from their salaries. Private sector
efforts such as this should be encouraged: For instance, a
company applying for a government contract or investment tax
breaks should be required to have a certain percentage of their
employees registered with social security.

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Pensions
Financial instruments catering to pensioners should be
introduced. Under the Socialist government of General Ne
Win, the Bank of Civil Servants financed the needs of the
pensioners. The retirees used their pension plans as a
collateral to receive short-term loans from the Bank a system
which continues informally through pawnshops and
moneylenders after the Bank was abolished post-1988.
Under the current law, only a pensioner can withdraw his/her
pension payments from the government. This restriction
somewhat prohibits pensioners from using their pension plans
as a collateral at banks, as the latter cannot become legal
possessor of the pension plan should the retiree defaults.
Total Number of Pensioners Some retirees however have pawned their pension plans at
in Burma, 2014 moneylenders to receive a lump sum (for rent, medical
payments, etc.), for interest rates around 10%. A more formal
lending system (via existing public or private banks) should be
promoted, and the aforementioned restriction should be
repealed.
In addition, affordable housing for pensioners should be
introduced. Government employees had to move out of their
public housing when they retire. Due to their meagre salaries,
many do not have their own property and subsequently
become renters devoting much of their pension payments
towards rent.
Some affordable housing projects should be targeted at
pensioners. Since the retirees are in their fifties and sixties,
normal 30-year mortgages cannot apply. Instead, the
government should use set up a pension fund to finance
affordable housing projects.

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Devolution
States and regions should be given bigger budgets and
more authority. In recent years, the amount of budget that
goes directly to the regional authorities have increased from
4.7% (of total government spending) in 2011-12 to 13.3% in
2014-15; more deprived areas such as Chin, Kachin, and Kaya
states also saw huge increases to their budgets. However, it
should be noted that in per capita terms, regional authorities
are allocated less than 54,000 kyats per inhabitant annually.
For starters, local authorities should be allowed to issue their
own regional and municipal bonds. Currently, only the federal
government has such authority. In recent years, local
authorities have been trying to get around this restriction by
forming regional development public companies (DPCs) and
selling shares (promising high dividends in near future) to local
businessmen. These DPCs are then given local governments
contracts, ranging from construction to toll-collection.
While such entrepreneurship outside the box is welcome, it is
not an efficient or long-term solution. A regional and municipal
bond market will be a better way to harness market forces and
to raise funds for capital-intensive projects in rural areas.
Regional Governments Budgets
Source: Ministry of National Planning; Census; First Rangoon

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Capital Investments
In both public and private sector, stronger scrutiny of
investments is needed. As Myanmar opens up, the country is
flooded with opportunities and capital. First Rangoons analysis
suggests that this capital is not ideally allocated.
Effectiveness of investments are measured by Incremental
Capital-Output Ratio (ICOR) -- the ratio of investment to GDP
growth. The higher the ICOR, the lower the productivity of
capital. In most countries ICOR is around 3, but during rapid
developments, ICOR can be between 3 and 4. However, in
Myanmar (2011 to 2015 average), ICOR is 4.2, suggesting that
capital is not efficiently allocated towards projects that
contributes to GDP growth. The chart below shows how
unproductive Myanmars capital is compared to regional
countries during their comparable growth periods.
Incremental Capital Output Ratios
Source: First Rangoon via Nomura Securities.
Inclusive Growth
Myanmar should foster more inclusive growth. The UNDP
has reported that between 2005 and 2010, poverty (defined as
population living under the $1-per-day line) has gone done by
6%. Meanwhile, we estimate that during that same period,
gross domestic product of Myanmar has grown by 5% annually
(our estimates are lower than the IMFs and the government of
Myanmars estimates).
At 5% annual growth rate, and 6% reduction in poverty in five
years, Myanmar has only managed to reduce poverty by
0.24% for each percentage increase in GDP. This measure is
called growth inclusiveness (percentage point reduction in
poverty for every percent of GDP growth) and Myanmar
performs poorly compared to international norms.

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The measure is an indicator that growth is not trickling down

into far-flung areas of the country. Poverty rates in the Arakan
and the Chin states are significantly higher than the national
averages, and due to recent floods in the Chin Hills and the
communal violence in the Arakan, situations will undoubtedly
worsen. Fairer economic and social policies, as well as
equitable sharing of finances with regional governments will be
needed to increase growth inclusivity in those regions.
Growth Inclusivity
Data for other countries are for 1999-2010; for Myanmar, 2005-2010.
Statistics
The government should improve its statistical capabilities.
For last three years, the IMF has repeated encouraged the
government to improve its statistics, and while the government
has paid lip-service to the idea, it has not been a top priority.
A priority should be to update Myanmars GDP figures, which
are estimated at producer prices, instead of at market prices,
which is the international norm. GDP figures are also
inaccurate because private sector surveys had never been
conducted. Moreover, Myanmar needs to implement the 2008
SNA, as her current national accounts are calculated based on
the out-dated 1968 SNA Guidelines.
In the past, the government has been content with current low
GDP figures because they classify Myanmar as an extremely-
low income country, and thus qualify her for development
grants and subsidies. However, low GDP figures are
counterproductive because it restrains borrowing (due to debt-

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to-GDP ratio) and presents wrong information to foreign

investors who might think Myanmars economy and purchasing
power are too small to gainfully scale up operations.
Public Broadcasting
Government monopoly on broadcasting should end.
Through the Ministry of Information, the government of Burma
still exercise considerable control over media. A new
Broadcast Law has been passed, but by-laws and regulations
are yet to be drafted.
The government should privatize parts of the state-owned
media and liberalize other parts. Of two government-owned
major newspapers Myanma Alin and The Mirror the
government should privatize at least one: the former has
annual circulation of 52 million and the latter has circulation of
66 million and both will be attractive businesses to be
privatized.
Newspaper Circulation
MRTV, the national channel, should be reduced into a public

service broadcaster. Through its joint-ventures with well-
connected local businesses, MRTV and its affiliate stations still
occupy three quarters of digital TV channels. A proper
liberalization, whereby TV spectrum is auctioned in a
transparent process, should be considered.
Consolidation of TV channels into a handful of conglomerates,
all close to the former military junta, is unadvisable. Moreover,
even these nominally private digital channels are subjected to

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tight regulations: they cannot broadcast certain types of news

shows and they cannot broadcast live. These restrictions give
competitive advantage to state-owned broadcasters and
therefore should be lifted.
Broadcast Law should be reviewed and overhauled. However,
a current provision in Broadcast Law, whereby broadcasters
are prohibited from owning print media (and vice versa),
should remain. This restriction has been controversial with
local businesses but will be instrumental in preventing media
consolidation.

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Education
Although the number of schools in Myanmar is said to have
increased to more than 40,000, catering effectively for eight
million students remains a challenge, especially with regard to
access, quality, and retention. Statistics show that the primary
enrolment ratio is high; nevertheless, primary education faces
two main problems: there are not enough schools (the
numbers range from one school for five villages to one school
for 25 villages in the border regions).
The structure of the countrys formal school system is 5+4+2,
comprising a total of eleven years: five years at the primary
level; four at the secondary (middle) level; and two years at the
upper secondary (high) level.
Most kids drop out of school after 4th grade because middle
and high schools are located in towns or larger villages in a
village tract. Parents do not have the capacity to take them to a
faraway school or have other resources to relocate a child to
be where the school is at. This high drop-out rate, estimated to
be about 40 percent, further widens the inequality gap between
have and have-not in a community.
High repetition rate in rural and urban areas is problematic as
well. School curricula are out of date and do not prepare for
the real world. Complementary teachings needed if a school
were to follow the national curriculum.
Teachers low compensation, combined with the need for
complementary teachings, have created a secondary market
where public sector teachers hold private classes for their
students outside school. Although schooling is free in principle,
parents are expected to contribute to the financing of
education, partially at school, and at these private classes.

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Education
School dropout rates should be targeted. An average adult
in Myanmar has less than five years of formal education,
according to 2014 census: in the survey of 27 million citizens
who are twenty-five year old or older, 4.3 million has no formal
education whatsoever, while 12 million has only primary school
education.
Dropout rates at the end of primary school (after Grade 5) are
caused by two reasons: firstly, until 2014, the government only
provided free education only for primary school. Secondly, in
the agricultural heartlands, parents pull their kids out of school
around aged ten to work in farms and/or in manual labour.
Providing free education until the end of secondary school
(Grade 11) is a worthwhile pursuit for Myanmar. If free school
meals are also provided, fewer students will drop out of school.
Free school meals will also provide an important statistical
glimpse into poverty, and lead to better targeting of educational
other social services.
Highest Educational Attainment in Age 25 and over, 2014
Source: Census; First Rangoon

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Education
Introduction of free middle and high-school educations
should accelerate. Starting in FY2014-15, the government
began subsidizing middle school (Grades 6 to 9), and in
current FY15-16, the government began a pilot program to
provide free high-school education (Grades 10 and 11).
First Rangoon estimates that provision of free education until
Grade 11 will cost 40.5 billion kyats annually nearly double
21.7 billion kyats that the Ministry of education spent towards
free schools in FY14-15. However, it should be noted that
spending on free education only represents 2.5% of the
Ministry of Educations current account budget (847 billion
kyats) in FY14-15.
Budget Towards Free Education
Eventually, the government should move beyond free

education into a subsidized education. In Brazil, the
government instituted a program where poor families with
children receive about US$35 in return for keeping their
children in school and taking them for regular health checks.
The program has reduced poverty and broke the cycle of
intergenerational poverty transmission.

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Education
Wholesale reorganization of Grades and Exams is needed.
Currently in Myanmar, primary education (Grade 1 to 5) starts
at kindergarten, which is designated Grade-1. Secondary
education ends at Grade-11, after which the students take a
national-wide exam called matriculation.
Thus, even a student who finishes his secondary education
only completes ten years of education, plus one year in
kindergarten. High school education is only two-year long
(Grades 10 and 11). This is inadequate.
At minimum, an extra year should be added to high school
(which in the figure above, we budgeted as High School+).
Ideally, kindergarten should be re-designated as Grade-0, and
two extra years should be added to high school, which will run
from Grade 9 to 12, as in other countries.
Currently, at the end of Grade-11, a student sits for the
nationally standardized subject tests, which are only offered
once a year each March. University entrance is based on his
performance in these tests. This puts enormous pressure on
* Each year, around 200,000
students take the students (who have only a single chance to ace the exams per
matriculation exams. On year) and on examiners (who have to grade 1.2 million answer
average, each student take sheets* by hand in gruelling April heat).
six subject tests.
These standardized tests should be offered three or four times
per year. This will reduce pressure on both the students and
examiners. In addition, part of these tests (multiple choice
questions, etc.) should be administered via machine readable
answer sheets, to reduce the examiners workload.
Education
Current system of university admissions should be
abolished. Matriculation exams are deemed extremely
important in Myanmar (as in other Asian countries) because
they decide into which university the students can be admitted.
Typically, a student takes six subject tests on his matriculation
exam. Each test is graded on scale of 0100, and maximum
attainable score is therefore 600. Prestigious universities have
high cut-off score (e.g., University of Medicine has score of
500 as threshold), and only students who get above that score
are eligible to apply to the said university.
This system has led to inefficiencies. Due to the linkage
between higher scores and prestigious universities, students
who attain high scores are pushed to pursue degrees and
careers in which they are not interested. Burn-out rates are
high: many students who graduate with medical degrees do
not practice medicine, but go into other professions.

FIRST
Ideal reforms will take years to implement: the American

system of making some professional degrees (in medicine, in
law) into post-graduate programs (i.e., an undergraduate
degree is needed to pursue those careers) is an elegant
solution. Another proposal will be to grading matriculation
exam on a simple Pass/Fail and requiring students to take
university entrance exams/interviews.

FIRST
Education
Teacher shortage can be addressed by recruiting young
professionals. A basic assessment of Burmese education
system shows that the quality of instruction, not access, is the
biggest issue. One problem is shortage of teachers, which
leads to lack of effective engagement in classrooms which in
turn leads to higher dropout rates.
There are around 8.85 million students in basic education
(primary school, middle school, and high school) and only
330,000 teachers, implying a student teacher ratio of 26-to-1.
In middle schools, the ratio is 34-to-1 and some understaffed
schools, student teacher ratio is higher around 50-to-1. (In
Thailand, the ratio is 16-to-1).
Moreover, there are vacant positions for teachers; the
government has failed to fill around 60,000 teaching positions
in 2015. Most of these vacancies (27,000 teaching posts) are
in primary school level. The government has relaxed hiring
rules and initiated programs in which the recently-retired and
pensioned teachers are rehired under two year short-term
contracts. However, there is very little interest from the retired
teachers towards these jobs.
Instead, we propose that the government recruit recent college
graduates, young professionals, and repatriated Burmans to
teach for two years in urban and rural communities throughout
the country. We understand salaries will be low and turnovers
high, but further perks and compensations can be funded
through corporate sponsorships and private CSR programmes.

FIRST
Education
Privately drawn up curricula should be used. Majority of the
schools in Myanmar are State schools and follow the same
centrally prescribed curriculum. The archaic education system
is still based on rote learning and still depending on outdated
curricula which was drawn up in the 1960s and 1970s. Many
scientific facts which these curricula proclaimed have been
discredited by recent discoveries and many historical and
socioeconomic lessons contained within them have socialist
and nationalist undertones.
State-endorsed curricula are written and revised by the
National Curriculum Board, a body made up of aged university
academics which rarely convenes. Instead of state-imposed
curricula, the Ministry of Education should allow private
publishers to print textbooks (subject to minimal state
oversight) and make the schools choose from these private
offerings. This will create a competitive space and usher in
more frequent revisions and updates.

FIRST

FIRST
Banking and Finance

The institutional capacity of banks and financial institutions in
Burma remains weak. Our experience has shown that
improvements will come from private banking system rather
than from the reform of the state-owned banks. As such,
banking sector reforms should be focused on decentralized
institution-building and penalties for weak banks.
With expansion of private banks into rural areas and entry of
microfinance institution, financially excluded population has
fallen in Burma. Access to finance is, however, still low due to
weak financial literacy, lack of collateral, and limited effective
demand for financial services due to low incomes as a result of
high poverty.
Various financial sector reforms such as improving the
regulatory frameworks for banks and non-bank financial
institutions, facilitating the entry of new foreign participants to
make the market more contestable, savings mobilization,
increasing access to finance for small and medium enterprises
(SMEs) and the general public, and enhancing consumer
financial literacy will be needed.

FIRST
Central Bank
The Central Bank of Myanmar should digitize its report-
gathering process. Banks in Burma are required to submit
the daily, weekly and monthly reports to the Central Bank on
reserve positions, liquidity rations, cash-in-hand, and capital
adequacy. Although leading banks have acquired core banking
software that automatically generates standard reports, reports
to the CBM must still be hand-written.
This is an onerous and labour-intensive process, which
actually necessitates local banks to devote many man-hours
on compliance, instead of serving the local financial sector.
Broadly speaking, the Central Bank should reform its
regulatory framework from direct, ex-ante approvals of
transactions to indirect, ex-post supervisions.
Banking
Banks should be given more autonomy. The Central Bank
of Myanmar tightly regulates the banking system. Banking
hours (currently mandated to end at 3 pm) should be
lengthened. It should be make easier for foreigners and foreign
companies to open bank accounts, and they should also be
allowed to open kyat accounts.
The current practice of requiring a license for each individual
ATM has created unnecessary backlog of paperwork and
bureaucracy and limited the growth of cashless economy. This
rule should be reformed.
Most importantly, the directives on fund transfers and
repatriation of profits and capital by foreign investors should be
clarified and/or simplified. Currently, the law allows these
transfers, but they have to be approved by the Central Bank,
and delays are common.
Banking
Central Bank should support commercial banks in
reducing the amount of money kept in reserves. Liquidity
ratio (currently 20%) and capital adequacy ratio (10%) for
banks can be lowered slightly, or set in a range-band to give
local banks more discretion in their lending and risk
management. (The minimum CAR recommended by the Bank
for International Settlements is 8%). Currently, some local
banks have liquidity ratio as high as 25% to 30%. Even one-
percent decrease in liquidity ratio requirements can free up
around 300 billion kyats, which banks could lend to businesses
and individuals.

FIRST
Banking
Consolidation is needed among private banks. Apart from
state-owned banks which handle government budgets and
payrolls, banking in Myanmar is dominated by three private
banks (KBZ Bank, CB Bank, and Aya bank) and one military-
owned bank (MWD bank).
Twenty or so other small banks make up around 12% of the
banking sector. As international banks enter Myanmar and the
countrys financial sector opens up, these smaller banks will
increasingly be outpaced by their larger counterparts.
Bigger banks achieve economies of scale by driving down their
operation costs, for instance by reducing IT and compliance
redundancies. This, in turn, allow them to penetrate a larger
portion of the unbanked population and to ride on the back of
rapid economic growth. Recent changes in banking
regulations, on reserves requirements, also favours the
economies of scale.
The government has recently allowed new entrants which
lower franchise values, encourage risky behaviours, and
increase the probabilities of bank failures. Instead, the
authorities should encourage mergers between banks.
Mergers between such smaller institutions will consolidate their
HR, credit card, and remittance departments, as well as
enabling them to reach out a larger customer base outside
Yangon. Since many international financial institutions are
interested in retail banking in Burma, cross-border acquisitions
should be allowed as the first step in opening up retail banking
to multinational banks.
Burmese Banks Marketshare by Assets, 2014
Source: Ministry of Finance

FIRST
Interest Rates
Monetary policy should be tightened. Since mid-2014 many
emerging-market currencies have been hit by a wave of
volatility due to an anticipated interest rate rise in the US and
slowdown of the Chinese economy. Across South East Asia
and Latin America, currencies have been weakened in a
particularly dramatic fashion and Burma has not escaped this
trend. In last nine months, the kyat has dropped from around
1,000 kyats per dollar to 1,300 kyats per dollar.
Kyats downward trajectory
Source: Ministry of Finance
More worryingly, there is little to suggest that an imminent

recovery in the value of the kyat is likely. This has presented a
monetary policy dilemma for the Central Bank, which is
reluctant to raise already high interest rates. With commodity
prices also remaining low, Burma is at risk of becoming mired
in a prolonged period of trade deficits and slower economic
growth.
The collapse in the value of kyat has an immediate impact on
local economic conditions. Weaker currencies will make
imports more expensive and exports more competitive, but
with commodities (natural gas and minerals) comprising a
large share of Burmese exports, the fall in global prices will
result in a fall rather than a boost in export earnings.
Inflation looks set to increase across the region as rising import
costs are passed on to consumers through higher retail prices.

FIRST
Burmese inflation, already high, is expected to enter double-

digits in 2016.
With the Fed likely to start raising the interest rate in the
December, the Central Bank of Myanmar will come under
significant pressure to begin raising rates as well, particularly
in the light of high inflation and currency depreciation. The
Central Bank last changed interest rates in March-2011, when
it reduced the rates by 4%.
The IMF believes that some tightening will now be needed,
especially as the recent floods could lead to a spike in demand
for liquidity. It has urged the Central Bank to mop up liquidity
by scaling up deposit auctions and by recalibrating reserve
requirements (Current reserve requirement excludes
government bonds from liquid assets).
Interest Rates
Interest rates should be fully liberalized. Currently the
Central Bank of Myanmar sets savings and lending rates;
savings rate is set within the band of 8% to 10% per annum,
and lending rate is set at 13%. Banks are allowed only small
variations on these rates.
This is inefficient: savings and lending rates should be settled
by a free market. In a free market, the gap between savings
and lending rates will be smaller. The large gap between two
rates guarantees local banks easy profits when turning
deposits into loans. If this gap were to disappear, banks will
have to become more competitive with one another and
consolidation in banking sector will follow.
Cheap credit is needed for investments in the economy.
Current high lending rates (and deposit rates) essentially
prevents companies and individuals in Burma to invest in or
expand their businesses. In Myanmars primitive financial
landscape, the central bank could consider replacing a fixed
interest rate structure with a floor for lending rates and a ceiling
for interest rates, which should introduce some competition
among banks.
Eventually, the Central Bank of Myanmar should stop
publishing benchmark rates. Instead, it should use bond
repurchase rate (interest it charges banks that borrow short-
term cash from the Central Bank using bonds as collateral) to
influence market rates. Central Banks in other countries guide
market rates by their own borrowing and lending, not by setting
rates by decree.

FIRST
Deposit Insurance
Myanmar should establish a deposit insurance system.
Less than ten percent of the households have a bank account
in Myanmar; this is partially due to distrust in the financial
system, which suffers periodic bank runs. Depositors have
limited information about their risk and often rely on rumours
which lead to bank runs and contagion.
Deposit insurance limits the risk of bank runs by guaranteeing
that depositors will receive some, or all, of their funds if banks
become insolvent or illiquid. Out of 189 countries in the IMF,
112 countries (or 59 percent) have deposit insurance
schemes; their insurance guarantees vary dramatically, but
Myanmar should set its limit at around US$ 2,500 initially
(twice its GDP per capita).
Deposit insurance protection can increase bank deposits, bank
lending, and the money supply. To fund the scheme, Burma
can choose to fund potential bail-outs ex ante or ex post. In ex
ante schemes, premiums are collected from banks on a
scheduled basis, while ex post schemes collect funds from
surviving institutions only when a covered bank fails and the
failed banks assets are insufficient cover depositors.
Deposit Insurance Schemes in Asia, 2013
In Logarithmic Scale
Source: IMF

FIRST
Repatriation
The Central Bank should relax its profit repatriation
guidelines. It is also difficult for foreign businesses in Burma
repatriate profits without a MIC permit and without the approval
from the Central Bank of Myanmar with each repatriation. The
MIC permit only allows repatriation once a year which makes it
difficult to make quarterly or regular interest payments to
foreign banks/investors.
This also poses an issue for non-MIC permitted foreign
business. In the initial stages of their market entry into Burma,
foreign companies have used their profits and retained
earnings to further finance their Burmese businesses (factory
and network expansions) but in the near future, they will need
to make more frequent repatriations of profits and the Central
Bank should relax its restrictions.
Sovereign Wealth Management

Myanmar should establish a sovereign wealth fund.
Currently, Myanmar is in talks with Norways Oil for
Development program to establish a sovereign wealth fund,
and a ministerial-level commission has been formed to
oversee the establishment of such a fund. A deputy minister of
finance was quoted as saying there is political will to pursue
the idea of a sovereign wealth fund.
Of the 6.3 trillion Kyats in revenues SOEs garnered in 2014-
2015 fiscal year, 2.3 trillion ($1.83 billion) comes from the
Myanma Oil and Gas Enterprise (MOGE), which has operating
profits of 42%. Other SOEs which are in the extractives
industries (ranging from Timber to Pearls to Metal Mining) are
equally profitable.
Starting in 2012, as part of comprehensive SOE reforms, the
government of Myanmar reduced the payments that profitable
SOEs are obligated to pay to the state, and to increase these
companies ability to retain revenues. These retained earnings
are kept in "other accounts" with some oversight from the
supervising ministries (e.g., the Ministry of Energy in the case
of MOGE), and the Auditor Generals Office. According to
Natural Resources Governance Institute (NRGI), in the 2012-
13 and 2013-14 fiscals, retained earnings for nine SOEs under
the Ministries of Energy and Mines were around $1.6 billion
annually.
There are many objections to such a sovereign wealth fund
(SWF), however. A SWF is normally established only when a
government has a budget surplus, but Myanmar has been
running a worsening budget deficit over the last five years.
Others, meanwhile, point to corruption as a reason why a SWF
can fail.

FIRST
External fund managers should be appointed for such a fund,

and percentage of revenues from oil & gas contracts, mining
contracts, private-public partnership profits, taxes, and land
concessions should be invested into a Myanmar sovereign
wealth fund. A dollar-denominated SWF can serve as a
bulwark against a depreciating local currency.
Another way to manage government wealth and assets
(ranging from extractive revenues to state-owned enterprises)
is by creation of powerful government holding companies
(GHCs). However, these GHCs have differing fates in Asia,
depending on how their management is structured. In
Singapore Temasek Holdings are efficiently run, while in
Malaysia, Khazanah Nasional Berhad is currently mired in
scandals.
A GHC and a sovereign wealth fund can also be set up
separately and later merged, as Kazakhstan had done with
Samruk, a government holding company, and Kazyna, the
countrys sovereign wealth fund. The resulting Samruk-Kazyna
is a well-run outfit, which boasts several successful European
business leaders as its managers and directors.
Accounting
Private Sector should be granted a flexible fiscal year.
Under the current Myanmar Companies Act (MCA), all
economic entities within the country have to follow the fiscal
year, running from 1-April to 31-March.
This has placed unnecessary strain on auditors in the months
of April, May, and June, and on tax authorities in subsequent
months. Moreover, the month of April has long public holidays
(Thingyan) which contributes to further delays. The reality is
that many local companies are still waiting until November to
get their accounts and audits done.
End of fiscal year in
Myanmar is legally set on Private Sector should be allowed to choose any of four
31st March of each year
quarterly dates (31-March, 30-June, 30-September, or 31-
December) as the end of their fiscal years. This should allow
international companies operating in Myanmar to align their
local financial declarations with those of their parent
companies. Moreover, it will give taxmen and auditors more
time to do accounts more thoroughly.

FIRST
Stock Exchange
State-owned enterprises are good candidates for Yangon
Stock Exchange. Myanmar will get her first stock exchange in
December 2015, but first few years of Yangon Stock Exchange
(YSX) will be slow.
The number of companies planning to list on the exchange has
variably been put at one, three, five, or even ten. Initially, YSX
index might perform well on paper (as only a few lucky
investors will be able to buy shares due to large demand) but
might lack liquidity and leave many investors hungry for
alternatives.
The stock exchanges regulator wants to help more companies
list and state-owned enterprises are good candidates. When
Vietnam launched its bourse in 2000, first five firms listed (two
at launch, and three added later) were SOEs.
A few other lessons from Vietnam are worth learning; its
exchange had imposed a strict limit on daily price movements,
which may not exceed 2% in either direction. It was only open
three days a week, for an hour each session. These controls
made Communist Vietnams transition into capital markets
easier in early years.
Income Tax
Myanmar should change how income tax is collected. In
2015, Myanmar collected 2.3 trillion kyats in income tax a
figure which is expected to stay flat in the coming year, after
dramatic increases in last few years. Less than ten percent of
the countrys workers pay taxes and the income tax intake of
2.3 trillion kyat translates to mere 126,000 kyats ($100) per
working age adult.
Income tax is levied in a progressive rate, with the highest
marginal tax rate being 30%, which kicks in at incomes above
30 million kyats. Tax rates and bands are comparable to peer
economies and regional countries.
Tax avoidance can be tackled by requiring companies to report
salaries of its employees, while also requiring companies to
deduct income tax payments from the monthly paycheques.
The employees can subsequently reclaim tax rebates (such as
parental and child allowances) from the government at the end
of the fiscal year. Such a practice -- the norm internationally,
and observed by multinationals operating in Myanmar for their
foreign staff -- will put the onus of income tax reporting on
companies which are easier to monitor (through audits) and
also compel the working population to deal regularly and
proactively with tax authorities (to receive rebates).

FIRST
A tax measure requiring companies to deduct income tax

payments from paycheques can be initially implemented for big
conglomerates, which are working with newly formed Large
Taxpayer Office (LTO), before being rolled out for all corporate
entities.
Income Tax Collected per Working Age Population
Source: Government of Myanmar
Commercial Tax
Burma should reform how commercial taxes are collected.
Commercial tax in Burma is a complex system of which
combines the features of VAT/GST (Goods and Services Tax)
system with Excise Tax system. Manufacturers are liable for
commercial taxes when goods are sold. However, importers
have to pay taxes before selling the products, but to avoid
double taxation of commercial tax, importers are eligible for an
exemption. There were also exemptions for resellers of
imported goods.
In the current commercial tax framework, taxes have to be paid
for the purchase of fixed assets, but disposable assets can be
expensed. A complex array of paperwork was necessary to
track commercial tax receipts between different companies (to
prevent a double taxation).
The country should abolish its mix of taxation policies and fully
implement a VAT system. Officials from both the International
Monetary Fund and local Large Taxpayer Office (LTO) have
encouraged the implementation of VAT. Myanmar remains the
last country in ASEAN to use a Commercial Tax system.
Others countries use a VAT system or do not have commercial
tax.

FIRST

FIRST
Postal Service
Myanmar Post Office should be utilized for financial
inclusion initiatives. Only around 5% of Burmese population
has a bank account. While banks can be used for domestic
remittances by those who do not have bank accounts, most
banks have a very limited branch network, and the population
generally rely on informal hundi money transfers for domestic
and international remittances. Turning the state-run Myanmar
Post Office into a postal bank can help address the problem.
In many countries, postal services also offer insurance and
other financial services, such as remittances and welfare
annual remittance to Burma payments. In Burma, these services will benefit from the post
by immigrant labourers offices already existing vast network of 1,400 branches across
working abroad the country (compared with around 300 branches each for two
biggest banks). While many of these branches are small
offices, they can offer limited financial services, help with
financial inclusion in faraway corners of the country, and can
generate additional revenues for the post office. The post
office can also become a low-cost savings vehicle for short
term saving for rural households.
Banks
Restrictions on trade facility documents should be eased.
Letters of credit are not widely used in Burma due to
complicated procedures and high set up costs. Local banks
normally require 100% cash deposit to open the L/C and
onerous amount of documentations.
Exporters are required to receive the funds from the buyers
before exporting. Meanwhile, importers are required to provide
advanced payment or bank balance which covers the invoice
amount on imports. This creates problems for export/import
businesses.
The government should allow local banks to issue letter of
credits with a margin (to avoid 100% cash deposit).
Requirement to show bank balance and accept as per sales
contract term and conditions should be eliminated. Letter of
recommendations or reference letters from buyers competent
authority (i.e. Chamber of Commerce or equivalent) should be
allowed as documentations.
Banking
Private Banks should be allowed to open institutional
foreign currency accounts. Currently, foreign embassies and
international NGOs (including UN-related organizations) are
allowed to open their accounts with Myanmar Foreign Trade
Bank (MFTB) only.

FIRST
State-owned banks also hold a similar monopoly on state-

owned enterprises: SOEs are allowed to open foreign currency
accounts with the countrys four state-owned banks. Even
partially government-owned banks like Myanmar Citizens Bank
are not allowed to bank SOEs.
Joint-ventures between Myanmar SOEs and foreign firms are
also restricted to only use state-owned banks. These
restrictions effectively give state banks guaranteed business
and inflated balance sheets. Foreign embassies and NGOs
should be allowed to open bank accounts with private banks.
External Audits
External audits of both private and public banks should be
conducted. A challenge in understanding the Burmese is in
resolving the question about non-performing loans (NPLs).
While the banks claim that NPLs are very low, many debts
which are not recoverable may not be classified as such by the
banks. A good starting point would be confidential audits
(including operational audits) by reputable international firms
and strong application of prudential norms, without regulatory
forbearance. An IFRS and ICA compliant audits should be
required for the financial sector. (Currently only Aya Bank has
such a system in place).
Financial Inclusion
Financial inclusion should be promoted. Burma has not
fared so well in bank-based lending, deposits, and remittances
to individuals relative to other lower middle-income countries.
Only 10% of the households (and 5% of the individuals) have
bank accounts. Remittances tend not to go through financial
institutions, with people relying on hundis and other money-
transfer operators. After three demonetizations in the 1980s,
and sporadic banking crises, the trust in the banking system is
low.
Population of Burma with Alternative uses of mobile phones would improve financial
bank accounts in their inclusion in remittances and deposits at lower cost. Burma
names would need major changes in regulation for finance and
telecommunications before banking sector can take
advantage of the countrys increasing number of mobile phone
subscriptions. A good international example is Kenyas M-
Shwari, which launched in 2012, and by end-2014 had 9
million accounts, total deposits of $45 million, and outstanding
loans of nearly $18 million. Its deposit holders can apply for
short-term loans. Financial inclusion in Burma would also
require higher-quality credit information on borrowers.

FIRST
Credit Bureaus
Burma should set up credit bureaus. Currently, the country
does not have credit rating agencies or credit bureaus. Burma
seems to be waiting for a sovereign credit rating before
embarking on credit bureaus internally. This is a mistake.
Bureaus are needed to gauge creditworthiness of individuals
and companies, thus facilitating the flow of loans.
When government of Burma is accessing public private
partnerships, tenders, and contracts, the government can use
credit ratings to access creditworthiness of each company, and
gauge feasibility of their proposals and obligations. Current
criteria used, based on past financial statements and crude
business plans, are not in accordance with international best
practices.
Love and Mylenko (2003) found that private credit registries
are positively related to availability of bank financing for small
and medium-size firms. Credit bureaus can be run by the
government, or in a joint venture, but sharing information is
crucial. Bank lending is higher and credit risk lower in countries
where lenders share information, regardless of the private or
public nature of the information-sharing mechanism.
Information sharing increases the supply of financing,
decreases defaults, and enhances monitoring of the risks
taken by the financial system.
Insurance
Deregulation of Insurance Industry should accelerate. Like
most Asians, the Burmese are under-insured. During the
recent floods, it was noted that only around 399 million kyats
out of 165 billion kyats in losses are insured (0.24%). In
comparison, 8% of disaster losses in Asia, and 60% in
America are insured.
Insurance industry has been recently partially deregulated
among 12 private companies and the state-owned Myanma
Insurance, but these enterprises do not compete with one
Insurance coverage in another.
Myanmar, 2015
Under current laws, all insurers can only sell same policies at
same prices and premiums, and can only pay-out same
benefits. Abolishing of these rules will increase competition,
see more innovative insurance products being offered, and
lead to more people and enterprises being insured. For
instance, crop insurance is a product for which there is
demand in the market, but insurance companies are currently
forbidden to offer crop insurance due to regulations.
For natural disasters, Burma should also consider regional
risk-pooling mechanisms (multi-country disaster-relief funds) or
catastrophe-bonds.

FIRST
Accounting System
Burma should update its accounting standards. On paper,
the country currently follows the Myanmar Financial Reporting
Standards (MFRS); however, it is not enforced. Many local
companies, including banks and state-owned corporations, still
use a simplistic cash-based accounting systems, rather than
accrual-based accounting system recommended for economic
entities of significant size.
Moreover, MFRS is slightly different from International
Financial Reporting Standards (IFRS). The country broadly
follows IRFS 2010 guidelines, but they have not yet been
translated into local languages, and a further reconciliation is
needed as IFRS rules are not fully implemented in IFRS 9-13,
which governs Financial Instruments, Consolidated Financial
Statements, Joint Arrangements, Disclosure of Interests in
Other Entities, and Fair Value Measurement.
Crucially, Burmese government allow infrastructure projects
including Build, Operate and Transfer (BOT) contracts to be
capitalised as fixed assets. As such assets are usually
transferred back to the government at the end of BOT term,
this is an unusual allowance, which allows local companies to
inflate their balance sheets.
Auditors have to be citizens of Myanmar and registered with
local accountancy regulator to obtain a Certificate of Practice
a bottleneck that should be relaxed.

FIRST
Currency
Burma should institute reforms to its currency. It is hard to
advocate for reforms to currency not to fiscal or monetary
systems, but to currency itself in a country which has had
three demonetizations and countless bank-runs since 1962.
Seventy percent of money supply is in circulated currency, and
virtually all transactions even purchases of property are
done in cash.
Despite this, the highest value banknotes in Burma is 10,000
kyats around $10. In countries from Laos to Mongolia,
Nepal to Pakistan are around $10 too; in China, it is around
$15. In Cambodia, the largest bill equates to around $25; in
Thailand, to around $30.
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e denominations could be help money laundering and other
criminal activities. However, in Burma which still lacks modern
banking system, larger denominations can solve the challenge
of physically moving huge sums of money around which
adds additional logistics challenges for banks and their
nascent ATM businesses. Some machines had to be refilled
daily and repaired monthly.

FIRST
The government should issue bigger bills; in addition, it should

also redesign the currency to reflect the changing political
landscape of the country. Burma remains one of the few
countries in the world which does not feature a person on its
currency. The past iterations, which featured General Aung
San gradually disappeared after 1988. He should return to the
currency onto 1,000 and 5,000 kyats notes which are widely
circulated. This return was briefly mooted in 2013 but not
followed through.
Two other historical figures who once graced the Burmese
currency Thakin Pho Hla Gyi and Saya San, both leaders of
revolts against the colonial rule should be featured too, along
with other distinguished icons U Thant, the late UN Secretary
General; U Nu, Independent Burmas first premier; Sao Shwe
Theik, the countrys first president and head of a princely Shan
state; Thakin Kodaw Hmaing, a revered writer. It is time for
Burma to celebrate the memories and achievements of these
men.

FIRST

FIRST
Property Development
Construction
National Building Code should be implemented. The
Myanmar National Building Code was enacted in 2012; a
series of draft amendments crucial for development of high
rises has been proposed, however not yet adopted. Process
and requirements to gain building approvals are complicated
and vary widely from city to city.
A similar labyrinthine process governs Building Completion
Certification (BCC), needed before an individual or a business
can occupy a newly completed building. These rules are open
to abuse and corruption, add to increased costs for developers
and increase risks for people buying or using the
developments. A more transparent approval process is
needed.
Public protection policies are also lacking. While high rise
buildings are now tightly regulated, design criteria and codes
for low rise buildings (less than 12 stories) are very loose.
There are many apartments and factories being constructed
which would not meet the minimum design criteria proposed in
the draft National Code (such as wind loading and seismic
design).
Moreover, there is no scrutiny or independent review of the
designs. Designers are often not well qualified to do so even
though they may be liable under the current laws, they have no
way to provide proper compensation if things go wrong as
there are no insurance mechanisms. There is also limited
recourse for injured persons via the courts.
The government should initiate PI insurance; professional and
indemnity insurance should be made available by Myanma
Insurance and other local insurers. The government should
only allow licensed consulting firms (Architects, Structural
Engineers, and consulting Engineers) with proper PI insurance
to conduct business. In the long run, Burma will need to set up
integrity test laboratories private or government to verify
materials strength.

FIRST
Housing Development
Private Enterprise towards affordable housing should be
promoted. According to JICA, Yangon alone needs to build
1.23 million new affordable dwellings before 2040 an annual
rate of 49,000 units; the government has only managed to
build 60,000 units in five-year period from 2011 to 2015.
The government of Burma owns substantial land holdings
Total Number of Affordable across the country, and various parties want to develop these
housing Yangon needs by lands. The government should reduce annual and
2040 transactional property taxes for those developers who promise
to build affordable housing in return of land rights. (See New
York Citys System 421a). An alternative is to introduce tax
exemption and subsidies to building developers who set aside
units for lower-income residents in buildings where higher
income residents otherwise would pay market rates.
Property Taxes
The government should increase property taxes. Property
taxes are easily enforceable (and critical) tariffs in a country
where income taxes are harder to collect. The government
currently imposes a land tax on both freehold and grant land,
but they are negligible amounts.
In Rangoon, one kyat per square foot increase to monthly
property tax (which translates to annual increase of around
$22 for average household) can raise around 25 billion to 30
billion kyats, which can significantly bulk up the governments
current budget for affordable housing (46 billion kyats).
Property Rights
Property Registration should undergo deep reforms.
Currently maps of land plots are still kept in a paper format and
there is no electronic database for recording boundaries,
checking plans and providing cadastral information. Converting
them into electronic format, as well as establishing a
government-run web-based land registry (which also details
encumbrances on land such as liens, mortgages) will reduce
fraud and increase confidence in land rights documentation.
Current lack of confidence in land ownership documents has
led to delays in lending and collateralization.
The government should begin a total mapping of all country,
starting with major cities and the peripheries of the industrial
zones. A comprehensive title registration system and
preferably a Torrens Title type system should be implemented,
as well as mechanisms for pooled development and group
ownership e.g. strata title system.

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Property Rights
Property Transactions should be regulated more tightly.
According to the World Bank, Myanmar stands at 151 in the
ranking of 189 economies on the ease of registering property.
It is rather difficult for a business in Myanmar to transfer
property on average, it requires 6 procedures and takes 113
days.
Despite these lengthy rules, property rights themselves are
murky and it is near impossible for a private party to switch
land type from one category to another (for instance, from
farmland to industrial land).
Currently, land transaction contracts are drawn up by lawyers
on government-certified transactional forms, which are sold as
blanks on street corner. They do not have to be authenticated
afterwards at a court, and are not bound by any state
oversight. While such contracts are suitable for small-scale
transactions (e.g., rentals), for property sales, greater
regulatory oversight is needed. Currently, property sales go
unreported to tax authorities, go unregistered, and occasionally
become mired in lengthy legal disputes.
The government should phase out these forms for property
sales. Instead, the law should require that all sales be
registered at the Immovable Property Registry (see above).
This system of immovable property registration should also be
subject to a state guarantee. (Therefore, losses incurred by
parties who engaged in a transaction based on wrong
information certified by the Registry will be compensated in full
by the State). A special Land Court staffed with trained judges
and adjudicators to deal solely with land and immoveable
property registration issues and disputes should be
established.
Urban Development
The state should focus development towards second-tier
cities. By continuing to focus its development on Yangon,
Burma risks following the route of Bangkok, whose greater
metropolitan area holds 22.7% of Thailands population and
44% of GDP. This capital vs. regions tug-war has led to fraught
political environment for Thailand in recent years.
Yangon has 14% of Myanmar population, and contributes 22%
to GDP. Yangon region attracted 72% of the governments
investments on affordable housing, as well as 54% of all
private sector investments across industries. Garment industry,
a notable attractor of FDI in recent years, is also concentrated
in Yangon (95% of all garment factories are thought to be in
Yangon).

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Yangons Share of Business, 2015
Urban Development
The state should develop Naypyidaw as a business hub.
There are recent attempts to refashion Myanmars capital as a
destination for business conferences. A more fruitful plan will
be to develop Naypyidaw as a manufacturing hub.
The city is conveniently located in the middle of the country,
and has many infrastructure advantages. It has wide highways,
fast internet, and cheap real estate an ideal combination to
become an industrial centre. Naypyidaw also has an
international airport with capacity of three million passengers
annually (which is comparable in capacity to Yangons existing
airport. A special economic zone (SEZ) and a dry-port at
Naypyidaw are two ideas worth exploring.
Industrial Development
Existing industrial zones should be upgraded. Myanmar
has nearly 12,000 acres of industrial estate, according to
government data from 2013. Such acreage is several times
larger than current land available at Thilawa Special Economic
Zone Phase I, which is 365 acres (148 hectares). Thilawa will
eventually develop 6,000 acres of land but development will
take further five to ten years.
While special economic zones are being established, Myanmar
should make existing industrial estates more attractive to

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international investors. Zones should also have their own

electricity supply (via solar or gas-fired plants on site) to
guarantee stable electricity, and incorporate proper water,
waste, and sewage treatment systems.
First Rangoon understands that current lack of waste
management systems prevents many Western companies
from working in existing industrial zones, as they have to meet
rigorous health and safety rules back in their home countries.
Their regulators and legal counsels back home are unwilling to
green-light projects in Burmese industrial zones which do not
have waste and sewage regulations.
Notable Industrial Zones
Foreign Land Ownership

The Immoveable Property Restriction Act should be
repealed. Foreign investors cannot own land according to the
Immoveable Property Restriction Act and this relic of Socialist
era legislation is not in accordance with international best
practices.
Since they cannot own land outright, foreign companies
currently negotiate with individual landowners within these
industrial zones to rent land for long terms. In the future, zone
authorities should make acquiring land in industrial estate
easier for foreign companies. This could be done by setting
aside a parcel of land specifically for rental to foreign
companies.
However, the most effective solution will be to repeal the Act,
which is a major hindrance in attracting foreign investment.
Foreign businesses who want to invest in job-creating, high
value manufacturing operations, are reluctant to commit to
investing in Burma, when they cannot guarantee the security of
their location for more than 12 months at a time.

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If the Act is not repealed outright, the government should at

least allow the long-term lease of immoveable property by
foreigners (up to ten or fifteen years from currently restrictive 1
year) and provide new protection for the foreign ownership of
immoveable assets.
Firstly, the government need to redefine foreigner currently
defined as a company which has one foreign shareholder.
Redefining it as a company in which foreigners own 50% or
more of the shares will be a sensible first step. Moreover,
residential, commercial, and condominium strata title
ownership rights for foreigners should be granted.
However, it should be noted that all these measures will be
futile if the government does not allow foreign investors to hold
and enforce security over land (such as ability to foreclose on
a mortgage).

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Agriculture
The need for Burma to diversify its economy from oil & gas and
extractives is often mentioned. While doing so, the country
needs to refocus on agriculture and agribusiness to lift itself
out of poverty and put it on the path to prosperity.
Agriculture is the most important sector of the Burmese
economy and will be its driving engine out of poverty. There is
an urgent need to boost agricultural productivity to achieve
sustainable industrial and agribusiness development even as
urbanization and immigration reduces the number of available
farm workers. The transformation of agricultural raw materials
into industrial products will able the Burmese farmers to
participate and compete in global, regional and local value
chains.
As the country opens up, the local agribusiness value chains
will have to adapt to changing market conditions, continuously
improve efficiency. That will be one of the biggest challenges
facing the next government. Agriculture sector (including
forestry and livestock) engages almost sixty per cent of the
workforce in in a country that is seventy per cent rural.
Agriculture in Burma has not progressed enormously since the
early 1960s. Value added by agriculture remains very low, and
there are concerns over the quality and sustainability of the
sector. Labour productivity in agriculture remains much lower
than in comparator countries. Unclear land rights and
restrictive land transfer rules meant that the sector is
fragmented and dominated by smallholder-farmers.
Economic issues include low smallholder profitability, heavy
underemployment among agricultural workers, uncertain food
safety, low value addition, gaps in farm-to-market connectivity,
limitations in storage and cold-chain logistics, and limited
technological or institutional innovation.

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Agriculture
Increases to agriculture productivity should be
encouraged. Agriculture is Burmas largest economic sector,
but agriculture annual income per worker in Myanmar was only
US$194 compared to $706 in Thailand and $367 in Vietnam.
Main crop is paddy, but Burmese paddy yields are among the
lowest in the region. While well-managed paddy fields can
yield around 4 tons per hectare (ha), average yield in Burma is
around 2.5 tons per ha. (Average per ha yield in Thailand is
2.9 tons; in the Philippines, 3.7 tons; and in Vietnam, 5.6 tons).
A successful agricultural system requires reliable access to
financing, as well as high-quality seeds, fertilizer, and water.
Other essentials include access to robust markets that could
absorb the higher level of agricultural output, a solid
postharvest value chain for the output of farmers, and
programs to train them in best practices so that they can raise
productivity.
To make the agricultural system work better, additional annual
investments of as much as $3 billion are needed. This need
will have to come from private and public sectors, as well as
donors, and new business models are needed to increase the
level of investment.
Four general opportunities will have to be noted. The first is
adopting new genetic technologies, such as a, which have high
returns on investment and could raise small farmers from
poverty/debt-circle. Second, new value chain approaches aim
to improve access to markets and help groups of farmers raise
their productivity.
The third opportunity is via mobile telephony. Increasing
mobile penetration means that the state can directly inform
farmers, as well as send them vouchers for subsidized seeds
and equipment, weather alerts, and price changes, thus cutting
out predacious middlemen and brokers.
Lastly, large-scale farming should be encouraged by making it
easier for farmers to buy out other farmers and transfer farm
deeds. Large part of Burmese farming and milling is done on
small-scale. A new kind of consolidated industry structure
nucleus farms will raise the productivity of smallholders.
These large 100-acre farms will be operated by
professionals/sophisticated farmers who also help small
neighbouring farmers by lending out machinery, fertilizers and
seeds. In return, smallholders market their crops through the
nucleus farm. Other large-scale farming approaches include
warehouse aggregators (entrepreneurs who own warehouses
used to distribute fertilizer and seed and to store crops) and
food manufacturers- and retailers-led supply chains.

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Rice
Burmese farmers should diversify away from rice. Burma
is a major exporter of rice, shipping nearly 2 million metric tons
of rice ($650 million worth) in 2014-15. Due to self-sufficiency
policies of the socialist government, rice dominates the best
agriculture land and much of the countrys irrigation capacity.
Although paddy occupies 41% of agricultural land by sown
acreage, it makes up 90% of the agricultural loans by the
government, and 72% of the irrigated land.
Rice Supremacy
However, rice yields are low at around 2.5 metric tons per
acre, and farmers can get only $150-$250 per hectare of rice.

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Other crops are more lucrative. As rice production is self-

sufficient, Burmese agriculture has room to diversity to higher
margin crops. If Burmese agriculture follows regional and
global patterns, land use patterns will change in coming years
(less rice, more value-added crops, and more livestock). The
government could support farmer shifts from rice mono-
cropping to mixed cropping.
Horticulture
Burmese farmers should focus on high-value crops.
Agricultural output can be improved by shifting crop mixes
away from low-value crops such as paddy and maize toward
more high-value crops such as fruits and vegetables. For fruits,
revenues per hectare (at around $3,000 to $4,000 per hectare)
are more than ten times that of cereal crops.
Crop choice is often determined by cultural or historical factors,
and is limited by availability of irrigation; sown area of fruits
and vegetables in Myanmar is 970,000 hectares (4.6% of
country's cultivated land), and large majority of all fruits sold in
the country, not only at supermarkets but also at traditional wet
markets, are imported. In 2014, Myanmar exported $46 million
Worth of apples were
in fruits and nuts, and imported $105 million. Imports are led by
imported by Myanmar in
apples ($44 million) and mandarins ($36 million).
2014
This is a missed opportunity given that apples and mandarins
can be grown in the mountainous areas of Burma, and their
high-value means that they can even be used as substitute
crops for opium production (opiums revenues are around
$6,500 per hectare).
Cocoa is another crop widely grown across South and South
East Asia which is currently not grown in Myanmar. In India, for
instance, cocoa is grown as an intercrop with rubber and
coconut and such a practice can be successful in Myanmar.
Cocoa has revenues per hectare around $9,000 and there is
high European demand for cocoa since Indian exports have
fallen in recent years.
First Rangoon estimates that by reallocating just 10 per cent of
the cultivated area within each state to appropriate higher-
value crops, Myanmar could raise agricultural output by $8
billion annually. Global markets for three fruits Myanmar
produce, bananas, mangos, grapefruits are respectively $14
billion, $2 billion, $980 million respectively and Myanmar can
gain small share of this market.

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Agriculture
Farmers should be able to decide what to grow. Under a
rule dating back to the collectivist 1960s, the Burmese
government restricts what crops farmers grow, and confiscates
land if farmers grow crops that are not categorised as regular.
This rule is devised to prevent farmers from planting more
lucrative crops and abandoning staple crops such as rice.
Newly revised Farm Land Law of 2012 still contains these
restrictions. The decision on what a farmer can grow rests with
Farm Management Body (FMB), a powerful government
department whose decisions cannot be appealed at a court of
law. The FMB is slow in granting farmers permission to grow
crops apart from authorized crops. The FMBs restrictive
policies hinders farmers from increasing crop intensity and
from intercropping (a practice of growing two or more crops in
proximity to produce a greater yield on a given piece of land).
Farmers should be allowed to grow whatever made sense
under their own economic and climatic conditions. In the short-
run, by allowing farmers do decide what to grow, the farmers
will be able to devote a small part of their farms to test-plant
new and different crops. This will help them transition into
growing higher value crops in the long-run.
Agriculture Spoilage
Infrastructure improvements are needed to reduce post-
harvest losses. Currently, smallholder farmers lose a
significant portion of harvests of certain crops to spoilage and
waste, due to lack of access to markets and affordable
storage. Waste varies by crop. For beans and pulses, harvest
and post-harvest losses are 8% to 10%; for oilseeds (which
include one of Burma's main exports, sesame), losses can add
up to 25%. For rice which requires dryers and modern milling
losses vary from 10% to 30%. (In African countries, the FAO
estimates post-harvest waste as 8%-18%; and in Latin
America, it is 3%-14%).
There are a number of causes contributing to the losses, such
as improper harvesting, inadequate handling, inefficient
threshing, poor transport infrastructure, out-dated primary
processing equipment and bad storage conditions. Together
with upgrading rural infrastructure (such as improving roads),
on-farm storage and better access to markets could reduce
waste. The poor transport conditions beyond infrastructure
bottlenecks trucks used to carry pulses, beans and oilseeds
are not solely dedicated to the transport of dry legumes and
seeds also cause contamination.

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Food Processing
Development of food, beverage, and tobacco processing
will contribute to the success of agriculture. These are
manufacturing industries not counted as agriculture in national
accounts. However, in the long term, these processing
industries will determine the success of Burmese farmers as
they have huge growth potentials.
Currently, there is limited primary processing (cleaning,
sorting, splitting, de-husking) in Myanmar due to a main focus
on export of bulk commodities. Myanmar only processes
between 5% and 10% of beans and pulses it exports annually.
When it exists, primary processing is often inadequate
because of limited knowledge and inadequate machinery. For
instance, sesame bags sometimes contain a high content of
sand, and rice bags would contain high water content caused
by poor cleaning.
A government-led solution will be to create staple crop
processing zones near where export-oriented crops such as
sesame are grown; some industrial zones in agricultural
regions should be encouraged to become food processing-
oriented zones. By attracting industries such as flour mills and
canneries to these zones, there can be knowledge transfers on
proper harvesting and transport techniques, also reducing
agriculture spoilage.
Price Volatility
Government should attempt to reduce food price
volatilities. While price fluctuations are to be expected in open
markets, since output varies from period to period due to
factors such as weather, pests and disease, Burma suffers
from more volatile food prices than comparable peer countries
in the region. The recent economic liberalization and promotion
of agriculture exports have reduced glut and lowered volatility,
but there is room from improvement.
Sometimes price volatility is seasonal. High paddy production
in November and December leads to drops in prices in
December and January and sharp rises between May and
October. Stronger integration of Burma with world markets and
open trade will lead to price stability as traders can quickly
import food when shortages occur.
Seeds with different harvesting periods and growth duration,
and advice on production technologies would allow farmers to
spread production more evenly over the marketing year and
would reduce the volatility. Investments in mills, private storage
infrastructure, and export logistics can reduce further
volatilities.

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Price Volatility
Government should relax import/export restrictions on
meat. Burma has one of the most expensive meat products in
the region. A Burmese person needs to spend US$148 on food
per month (to receive daily intake of 2,400 calories). By
comparison, a Thai spends $125 and an Indian $76. A kilo of
chicken breasts in Burma costs 6,300 kyats ($5.20), whereas
in Thailand, it is $2.90.
Spending on Food
160.0
140.0
Monthly Spending on Food (US$)
120.0
100.0
80.0
60.0
40.0
20.0
-
India Malaysia Vietnam Thailand China Laos Myanmar
First Rangoon's analysis reveals that chicken is not even the

most egregious when it comes to high prices. Poultry is one of
the few whose price remained relatively stable in last two
years. Pork and beef prices skyrocketed, and prices of various
vegetables such as onions and tomatoes seesawed. High
prices and frequent fluctuations are caused by Burma's trade
policies; without international competition, and with long and
arduous processes to import foreign food, local producers
have become complacent, inefficient, and predatory.
These high prices do not actually benefit farmers, who still rely
on traders and middlemen. Farm-gate prices of fruits,
vegetables, and animals are abysmally low. Citing logistics and
transportation hardships, traders hike up the prices. For
tomatoes, garlics, and onions, retail prices at wet markets are
2 to 2.5 times higher than wholesale prices.
For meat, profit margins between wholesale and retail
averaged 35%, according to our analysis of data from 2010 to
2014. As Burma bans export of draught animals (which include

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buffalos and cows), local production is not scalable. Import

restrictions advocated by livestock farmers, who insisted that
their industries will be negatively impacted by such
liberalization and influx of 'cheap, sub-par' meat from Thailand
and other neighbors harms the end customer. The
government should relax trading regulations and lift restrictions
on imports of meats, fruits, and vegetables.
Profit Margins on Meat
60%
Profit Margin Between Retail and Wholesale
50%
40%
30%
20%
10%
0%
Chicken Duck Pork Mutton Beef Seafood
2010 2011 2012 2013 2014
Land Rights
Myanmar must take steps to improving its system of
farmland management in the country. Many in agricultural
sector are smallholder farmers. In the past, land confiscation is
rife, ranging from state sponsored agriculture projects to land
confiscated and given to connected businessmen to military
seizures of land. More recently, a reversal has taken place,
with confiscated land being given back to the owners.
Land use certificates and communal titles should be issued in
rural areas, following customary law and customary land use.
Smallholder rights should be fairly balanced between
protecting land rights from confiscation or foreclosure but
allowing land to be mortgaged in order to secure loans. A type
of agriculture debt, secured by land and attached to fruits from
that land, should be introduced. The lender of this debt cannot
alienate land from owner of the land use rights. Such a debt
would encourage fiscal discipline combined and secure land
tenure.

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Land property owner may sell the land rights (maybe to pay off
debt if they so choose) but they may not be forced to do so by
any branch of the Government. Such a legal protection
combined with access to micro-finance credit will avoid stress
sales of land property rights.

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Social Services
Next decade in Burmese social life will be dominated by the
quest for universal health coverage (UHC). Both the current
government and the opposition have expressed their desire to
roll out UHC in Burma, but their timelines differ.
A lack of universal coverage means that millions of people in
Burma either do not get the health care services they need or
they have to pay dearly for it, often falling into poverty as a
result. The heaviest burden falls typically on the poor and
vulnerable. Achieving more rapid progress toward UHC is
important for the broader goals of ending extreme poverty and
escaping least-developed country status for Burma.
Due to the countrys socialist past, Burma practices an all-
inclusive welfare state structure an education, health, and
social system that has a fair presence across the country.
However, most of the country lacks a coherent and quality
welfare structure. A privileged minority in selected schools and
hospitals (mainly in major cities) benefit from the system.
A complete overhaul of the system will take decades and
billions of dollars. As such, this section of the Pyitawtha Report
has been the most difficult one to assemble.
The next government will have to tackle the lowest end of the
social strata the migratory workers on the outskirts of
Yangon, living in the areas which are devolving into slums. It
will have to address gender imbalances in the society, and will
also have to provide pensions, unemployment benefits, and
work accident insurances niceties of a civilized society that
past governments have long ignored. But these policies will be
integral in shaping inter-generational and intra-generational
social mobility. Without social reforms, political and economic
reforms will bring little solace or improvement to millions of the
most neglected citizens.

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Gender Equality
Private sector should promote more gender equality.
Women are three times less likely to start a business than men
in Myanmar, as well as half as likely to be employed in the
private sector. First Rangoon estimates that the country can
increase its GDP by 13.8% by addressing gender equity and
female work force participation.
Labour Force participation rate (F/M ratio): This is the ratio of
how many women are employed in the economy for each man
employed. Burma scores 0.53 on this ratio, slightly behind
regional peers such as Malaysia, Indonesia, and the
Philippines, and significantly better than India, Pakistan, and
the Middle East. It should be noted that the ratio is 0.74 in
government sector, but only 0.53 in private sector. This means
woman represents around half of working population in private
sector; worryingly this ratio has hardly changed since 1995,
when the ratio in non-agricultural sectors was measured at
0.506. However, it should be encouragingly noted that among
20-24 year olds, labour force participation ratio is 0.72,
suggesting that things are progressing in the right direction.
Labour Participation, 2014
Source: Census
Business Leadership: In a recent survey, both men and

women answered that men make business leaders than
women: 71% responded that men make better business
executives than women (41% agreed strongly; 30% agreed
somewhat). This societal preference for male leadership is
clear in business ownership. In 2014 census, only 270,000
women said they are business owners, versus 780,000 men.
There are only three women amongst CEOs of 100 biggest
Burmese conglomerates. While around half of all local

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journalists in Burma are women, almost none of the editorial

and op-ed writers are.
Political Leadership: A strong majority (71%) said that men
make better political leaders than women (42% agreed
strongly; 29% agreed somewhat). A disappointing 8% of
parliamentarians are female, representing only 24 of the 330
parliamentary seats; only of out 38 ministerial level officials
(5.2%) are female. Lack of female representation in the
parliament has led to promulgation of laws that restrict
womens freedom.
Unpaid Work: In 2014 census, 7.2 million women answered
their occupation was household work, compared to only
270,000 men. A large part of womens labour goes into unpaid
For further reading,
McKinsey, Power of Parity work that is not accounted for as GDP. In Burma, women do
(2015); Asia Foundation, an average of 84% of total unpaid care work, including the vital
Civic Knowledge and tasks that keep households functioning, such as child care,
Values in a Changing
Society (2014)
caring for the elderly, cooking, and cleaning.
Education Level: Enrolment figures for girls are at parity with
boys at primary and secondary education, and higher than
boys at university level. Yet, views are more ambivalent: when
asked whether a university education is more important for a
boy than for a girl, 44% agreed that it is more important for a
boy and 52% disagreed. Meanwhile, countrywide literary rate
for men is 92.6%, while for women, it is 86.9%, although these
rates differ wildly from region to region.
Sex Ratio at Birth: Myanmars record on sex ratio at birth
needs to be further explored. While number of males for every
100 females is 93 (across all age groups), this is because
higher male mortality starting from adolescence; sex ratio at
birth is 102 males for every 100 females. Myanmar should
investigate whether gender imbalance from birth to age 15 are
due to sex-selective abortion or female infanticide as in India
and China.
Maternal Mortality per 1,000 births: As part of Millennium
Development Goals (MDGs), Burma has tackled maternal
mortality rates. They have come down from over 400 per
100,000 births in the 1990s to around 140 per 1,000 births in
2013. The country still has a long way to go before reaching
regional levels of around 50 (as in Malaysia, Thailand, and
Vietnam).
Child marriage: Human trafficking is common, and more than
half the cases of human trafficking involved forced marriages
to Chinese men. Around 12% of girls aged 15-19 have been
married, compared to 8% of boys. More positively, adolescent
fertility rates have halved between 2000 and 2015.
If Burma can increase female labour participation from 0.54 to
0.75 (not an unrealistic number as it has already been

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achieved by the government sector), shifting around 2.5 million

female workers into paid work from unpaid work, the countrys
GDP will increase by $6.9 billion (13.8% growth).
And this is only part of the picture. The Economist noted that
women tend to work fewer hours than men and in jobs with
lower productivity. They also suffer lower wages as a result of
discrimination. Paid domestic workers (maids, washerwomen,
etc.) in Burma who receive in low wages are predominantly
women too. If these concerns are addressed, productivity and
GDP increases will be significantly larger.
In order to regain this lost GDP, Burma should do more to
reduce the amount of time women spend in unpaid care work.
Unpaid household work has a strong negative correlation with
labour-force participation rates. Unequal sharing of household
responsibilities is a significant barrier to enhancing the role of
women in the global economy.
Gender Equality
The Civil Service should promote more gender equality.
Labour Force participation rate (F/M ratio) is 0.74 in
government sector and 52% of public sector employees are
women. However, on closer scrutiny, the civil service doesnt
deserve this praise: while 52% of public sector employees are
women, only 39% are female at senior levels of the civil
service (senior level is defined officially as the rank of Deputy
Director or above).
Some ministries are egregious offenders. In the Ministry of
Mines, 40.8% of its workforce is female, but less than 8% of its
senior level positions are occupied by females. Women are
forbidden by law to work in mines (female mining engineers
are non-existent in Myanmar) and in local culture, it is believed
that if a woman were to enter a quarry or a mine, the said
quarry will stop producing minerals or collapse altogether.
The Foreign Office, whose workforce is 50.3% women, has
only 21.6% women at senior levels. In between 1967 and
2015, Burma had no female ambassador. That year, Ms. Yin
Yin Myint was appointed ambassador to Germany, becoming
the countrys only second female ambassador ever, following
Ms. Khin Kyi, the widow of General Aung San, who served as
Burmese ambassador to India from 1960-67.
The figure below shows by how much each government
department needs to increase the number of women in its
senior levels to achieve gender parity. The Ministry of Religion
needs to quadruple the number of women in its leadership
roles, the Ministries of Construction, Industry, and Finance
need to double the number of women in its leadership
positions. (No included in the figure is the Ministry of Defence

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where 65% of workforce is female, but only 4% of leadership

roles are occupied by women; we have excluded it because
women cannot yet be appointed to army officer corps).
Percentage Lags in Females in the Civil Service, 2015
Even in the Ministries that supposedly do well on the above

figure, gender disparities exist. In the Ministry of Education,
78% of the workforce is female and 74% of the leadership
roles are filled by women an almost parity to which other
departments should aspire. However, on micro-level, even the
Ministry of Education is not a paradise for female workers: in
elementary schools, 87% of the teachers are female, but only
63% of principals/school heads are female. In middle schools,
90% of teachers are female, but only 60% of principals are. In
high schools, 82% of teachers are female, and only 58% of
principals are female.
Beyond the ministerial administrations, further work is needed
too. During the current parliamentary election, the Union
Election Commission prescribed rules on defaming your
political opponents, based on their race or religion. However,
there were no rules against question your opponents
credentials because of their gender. No wonder since the
election commission itself is predominantly male: while its
workforce is 64% women, less than 14% of its senior level
positions are occupied by females.
Similar levels of discrimination are found in municipalities,
where less than one-fifth of leadership positions are taken up
by women, despite their workforces achieving almost parity
levels.

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In short, the country now needs to catch up to other nations

which it long ago led in gender equality indicators: suffrage
was granted to women in Burma in 1932 long before Japan,
China, or India did.
Women in Municipalities, 2015
Nurseries
Childhood care programs should be introduced. In both
public and private sector, childhood care programs will bring
many benefits to Myanmar. As noted above, among 20-24
year olds, female labour force participation ratio is 0.72,
significantly higher than female labour force participation of all
ages. Measures should be taken to prevent this high
participation from dropping off at latter ages due to child
rearing.
Studies prove that early childhood care programs help women
to re-enter workforce quickly after they have children. In
addition, childhood care programs can raise fertility. While
Myanmars fertility rates currently remain above replacement
levels, the country should plan ahead for a low-fertility future
which is currently among Asian neighbours. In the clearest
example, cheap nurseries helped Quebec raised its birth rate
from one of the lowest in Canada to one of the highest.

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Health Coverage
The barriers to opportunity in rural areas should be
reduced. Targeted initiatives in education, nutrition, and
sanitation can close the large gaps in opportunities for rural
citizens and greatly decrease infant mortalities. A child in
Magwe or Ayeyarwaddy is twice more likely to die before his
fifth birthday than a child in Yangon.
Poverty mapping and healthcare gap analysis should be
conducted. Public health care services, provided by the
Ministry of Health are available to all citizens. The problem is
that what is available for everyone is not very good, and the
poor are often left behind.
under-5 mortality rate in To better target healthcare investments, Burma needs to
Magwe
develop information systems, and produce poverty maps of
regions with high concentrations of poor people. These should
be combined with maps identifying geographic gaps in social
infrastructure. These maps can help prioritize investment for
poor areas, not only via government but also via NGOs,
donors, and civic and grassroots organizations.
under-5 mortality rate in
Yangon In addition, using such a tool, UHC can be rolled out in a way
that prioritized the poorest municipalities. Meanwhile the richer
neighbourhoods can be covered by private insurance an
opting-out incentivized through tax exemptions for private
health insurance.
Social Assistance
Means-testing should be introduced. As Burma has limited
resources to dramatically expand its social services, in the
initial years, social assistance schemes will have to be
introduced through selective targeting methods.
There are several ways of doing this. Community-based
targeting uses a group of community members or leaders to
decide who in the community should benefit from a social
assistance program. School officials or the parentteacher
association may determine entry to a school-linked program; a
group of village elders may determine who receives grain for
drought relief, etc.
The advantage of such targeting is that it relies on local
information on individual circumstances and permits local
definitions of need and welfare. Conversely, it may lower the
cohesion of local communities if anyone is perceived to benefit
unfairly. Demographic targeting can be more objective, but
demographics may be only weakly correlated with poverty.
First Rangoon recommends mean testing in social assistance
schemes. Proxy means tests generate a score for applicant
households based on observable household characteristics,

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such as location and quality of the households dwelling, its

ownership of durable goods, its demographic structure, and
the education and occupations of its adult members. (The
indicators should not be made public to avoid gaming by
applicants).
A more rigorous form of means-testing will seek to collect
nearly complete information on households income or wealth.
However, it is only suitable when declared income is verifiable
(which is not the case in Burma).
Increasing Enrolment
Financial incentives should be given to the enrolment
agency to encourage outreach. In India, the government
insurers a premium per each family below the poverty line
enrolled in the insurance program; Argentinas Plan Nacer
pays provincial governments for each pregnant mother
enrolled in the official beneficiary lists. In rural China, local
authorities performance is judged by their success enrolling
the population in their jurisdictions.
While incentives are often provided to the enrolment agencies
(be they NGOs or insurers), there may also be financial
incentives for users, such as conditional cash transfers (CCTs)
requiring, say, immunization, nutritional counselling, or growth
monitoring. As an additional benefit, the membership card in
the social assistance scheme (such as the UHC) can serve
multiple purposes such as a discount card or a bank card
during digital technology, and will help the government
distribute targeted subsidies more efficiency.

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Healthcare Services
Additional care services should be slowly added beyond
MDGs. Initially, Burma should keep its focus on services
related to the MDGs (child and maternal mortalities, HIV and
TB). Beyond 2018, the country should complement the health
systems MDG services by adding other primary care services,
such as those for non-communicable diseases (NCDs),
secondary and tertiary care, and drugs for chronic diseases.
Burma can embark on the UHC program only after establishing
a relatively sound foundation of primary healthcare (PHC)
services, especially those related to MDGs. The country
currently ranks higher than the neighbouring and comparable
economies on child mortality. Twenty-two percent of children
under the age of 5 is underweight in Burma, compared to 12%
in Vietnam and 7% in Thailand.
Selected Millennium Development Goals Indicators
Source: UN
A short-term goal will be to eliminate any formal or informal co-

payments from patients for MDG-related services. Many

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countries have programs to exempt maternity services from

user fees and some even subsidize transport for deliveries.
However, problems can arise on quality assurance of providers
and on access to emergency obstetric care, including safe
blood transfusions.
Beyond the MDG package of maternal, child health, and
infectious disease services, the next expansion should be
outpatient primary care. While a form of outpatient primary
care services already exists in Burma, a more thorough re-
examination is needed to extend coverage to pharmaceuticals,
laboratory and basic radiology services, and specialist
consultations.
Maternal Health
Abortion should be legalized. Under the Penal Code of
Myanmar, abortion is illegal (apart from in life threatening
situations) and any person performing an abortion is subject to
up to three years imprisonment and/or a fine.
Despite the ban, estimates indicate that the country has an
abortion rate of about 80 per 1,000 live births. According to the
latest numbers from UNICEF, maternal mortality ratio (MMR)
in Myanmar is 316 per 100,000 live births. Nearly 10 percent of
all maternal deaths are abortion-related, and complications
arising from unsafe terminations are the third leading cause of
maternal deaths after post-partum haemorrhage and
eclampsia.
Since abortion is legally restricted in most cases, even skilled
providers must work in clandestine environment, which often
compromises the safety of the procedures they perform and
frequently leads them to complications. Women also delay
seeking care for post-abortion complications because they fear
that they will receive legal repercussions or judgmental
treatment from health care providers.
The government's 2006-2011 National Health Plan lists
addressing abortion as a priority, but made no indication on
how to tackle in. Unplanned pregnancy is the root cause of
most abortions. Increasing contraceptive usage and preventing
unintended pregnancies will be followed by the reduction in the
number of abortions.
The government should ensure that free or affordable public-
sector family planning services reach all women, especially
those who are poor and young. It should also legalize
abortions up to 20-24 weeks.

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Waste Management
Waste Management system should be improved. Yangon
generates around 1,800 metric tons of waste per day. Waste
collection has improved in recent years, although illegal
dumping still persists and the municipal authorities across the
country still struggle to fully address the daily waste generated.
For Yangon, the biggest open dumpsite is in Htain Bin, which
receives around 850 tons of incoming waste per day. Another
site receives around 600 tons of incoming waste. The
government should prioritize waste-to-energy recovery plants
there. Net electrical energy of 500 to 600 kWh can be
produced from per ton of waste incinerated, and a plant with
nameplate capacity of around 90MW could be built from
Yangons waste.
Water Resources
Myanmar needs a water resources administration. The
country is favourable situation with respect to water resources.
All water resources of Myanmar are within the national
borders. Its water resources -- more than 19,000 m2 per capita
each year -- are about 9 times the available levels in China, 16
times India, 5 times Vietnam and 16 times Bangladesh.
However, there is insufficient access to clean water. Myanmar
faces acute water shortages and a lack of safe drinking water;
30 percent of households do not have access to improved safe
drinking water. Only nine percent of the households are
connected to water grid. The rest relies on borewells, which
are unregulated and are damaging to groundwater.
Myanmar receives average annual rainfall in the range of 750
of water in Yangon is mm to 5,000 mm across various regions but lacks a robust and
extracted from replicable mechanism for harnessing rainwater. Most of the
groundwater country is still active with unstable river branches and the delta
is prone to tropical cyclones with high storm surges. Floods are
a permanent threat.
The country will need an administrative body to look after river
basins and sub-basins. The countrys hydroelectric power
plans need to be reviewed, and standardize water
management across the country. Eventually, the administration
can transfer some activities to user groups, such as
maintenance of the distribution system, water distribution
scheduling and control, etc.

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Minimum Wage
Minimum wages should be set regionally not nationally.
Myanmar has recently instituted a national-wide minimum
wage of 3,600 kyats per 8-hour day. While a minimum wage
should be welcomed, since the country contains varying
regions with varying demographics and productivity, regionally-
set minimum wages are better suited for Myanmar.
Moreover, regionally-set minimum wages will help with free
* in our calculations, average movement of labour and capital away from expensive urban
value added per worker is the
ratio of GDP to the working-
areas such as Yangon. Above, we cautioned about the
age population; 40pc peg is countrys reliance on Yangon region as economic engine, and
comparable to Thailands setting lower minimum wages outside Yangon will attract
minimum wage to average
value added per worker ratio. investment and development to those regions.
First Rangoons suggestion is that daily minimum wage should
be pegged to average daily productivity of the workers in a
particular region. In the table below, we pegged minimum
wage at 40% of average value added per worker*, and the
results are largely reflective of socio-economic realities on the
ground (except in Rakhine and Tannitharyi, where presence of
offshore oil & gas concerns distorts gross regional products).
Such a calculation suggests a federal minimum wage floor of
3,000 kyats per day, rising to 4,300 kyats per day in Yangon.
Minimum Wage Recommendations, 2015
Source: Ministry of National Planning; Census; First Rangoon

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Identification Cards
The government should fast-track issuing national IDs.
The recent census has found that 27% of total population over
the age of 10, and 14.3% of total population over the age of 20
has no form of identification whatsoever (be it national ID or
temporary registration card). While these problems are
greatest in conflict-torn Karen and Rakhine states, millions live
without documentation in Shan, Bago, and Irrawaddy regions
too.
of Myanmars population While we at First Rangoon are not necessarily fans of national
has no form of ID IDs (and other coercive forms of identification such as
whatsoever household registration documents), the reality in Myanmar
currently is a person needs national ID card in his or her daily
life. These cards are required to travel, to book hotels, to
establish businesses, and to enter into binding legal contracts.
Most importantly, an ID card is required to open a bank
account in Myanmar (and strictly speaking, an ID is required to
buy a SIM card, but this is a law more honoured in its breach
than in its observance). Lack of IDs in rural areas is another
hindrance in bringing banking services to those areas.
Household Registration
The government should deemphasize household
registration system. In the past, household registration
system is used to control migration and to monitor the citizens
by the military junta. Even today, the registration system is still
controlled by General Administration Department (GAD) and
the Police two institutions still under the military-run Ministry
of Home Affairs.
While the force of the system has waned, it remains a source
of inequality of opportunity and an effective tax on migration.
Household registration is linked to access to public services,
including schooling, and such administrative services as
registering a vehicle, applying for a birth certificate, electricity
connection, or a passport. Some foreign embassies also
require household registration for visa approvals, and directors
of a company are required to show their household registration
to register a company.
Many Burmese people lack permanent household registration
in their place of residence. A phased reform of the household
registration system is needed for urbanization and better
access to public services.

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Infrastructure
As Burma continues to open up infrastructure emerges as a
major constraint on doing business. Studies from other
developing countries have shown that negative impact of
deficient infrastructure is at least as large as that associated
with crime, red tape, corruption, and financial market
constraints.
The main deficiency is power only one-third of the country is
connected by the grid. Power consumption, at 164 kilowatt
hours per capita per year is one-twentieth of that in Thailand,
and equivalent to powering one 100-watt light bulb per person
for four hours a day.
However, inefficient functioning of roads, ports, logistics and
associated customs clearance is an equally significant
constraint. Deficiencies in broader transport infrastructure and
infrastructure for information and communication technologies
(ICT) are getting fixed but nonetheless remain insurmountable
in some cases.
The problem is two-fold. Burma has low infrastructure stock
and it has been expanding stocks much slower than the growth
rate and also slower than other comparable economies
meaning that unless something changes the gap will widen
over time.

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Infrastructure
Private-Public Partnerships should be encouraged. It is
estimated that Burma needs to spend around $20 billion
annually on infrastructure an unsustainable figure for a
country with GDP of just $63 billion. (Sustainable spending on
infrastructure is generally considered to be around 1 percent of
GDP per project).
Only significant infrastructure investment of recent years have
been concentrated on mobile telephony. This is an attractive
market, and the required infrastructure had a relatively short
payback period. Investments in electricity generation,
distribution, and transmission are sorely lacking, due to unclear
power purchase agreements between government and private
sector, and the governments reluctance to increase buying
price.
Private Sector Infrastructure Opportunities
* Circle sizes indicate the size of opportunity.

Quasi-monopolistic nature of local businesses (whereby a few

well-connected local businesses dominate certain
infrastructure sectors, such as road building or construction)
has also be a hindrance in international firms entering Burma.

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Finding the right local company to partner with still gives

multinational companies immediate access to excellent
political and business relationships, as well as expertise in
managing local labour and regulations.
A key to compete with local businesses in infrastructure is
diversification. A wide portfolio of projects will make the new
multinational entrant an important player with the government
and help build crucial political and labour relationships. This
approach is fundamental for construction companies and
funders, since asset-specific expertise is not the most essential
value driver for them; Chinese state-owned firms have been
particularly successful in working on as diverse projects as
engineering, construction, hydroelectric as well as residential
and commercial construction, and mining.
Particular attention will have to be paid to Yangon and
Mandalay, two main metropolises. In a 2015 survey of
businesses, these two places scored poorly on infrastructure
quality, defined under five categories: (a) access to land,
factory or office space; (b) telecommunications; (c) supply of
electricity; (d) supply of water; and (e) transport and logistics.
Yangon Region and Mandalay Region ranked of 10 and 13,
out of 15 regions, respectively.
Infrastructure Quality Index
* Higher index rating reflects poorer infrastructure ratings.

Source: UNESCAP
Power Generation

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Power losses should be reduced. Myanmar can improve its

electricity shortage by tackling transmission and distribution
losses. The country has high electricity losses losses are
around 23% of total electricity distributed. Although down from
peak losses of around 30% in the 2000s, this meant loss of
around 3,000 million kWh in 2014-15.
It is estimated that for every $1 invested in Myanmars power
sector, 30 cents are lost due to poorly run plants with aging
equipment.
Privatization can solve this problem: When Actis, a British
investment firm, took over Umeme, which runs Ugandas
power-distribution grid, power losses were 40% of the
electricity generated. By simple changes such as replacing old
insulators on its cables and reducing the theft of electricity by
dismantling illegal connections, Actis was able to reduce those
losses in half.
Power Losses
Industrial Electricity
Utilities should provide transformers. Myanmar requires
companies to buy their own transformers for any connections
above 30 kVa. While this decision makes sense for production
facilities in faraway places (e.g., mines) or communal
developments (e.g., gated communities), transformers should
generally belong to the utility.
Transformers owned by the utility can be used by other
businesses in the area, thus eliminating unnecessary
redundancies and reducing costs of getting electricity by
businesses. In Myanmar, cost of getting electricity is 16.7

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times that of income per capita, whereas in neighbouring

Thailand whose utilities own transformers, the cost is 0.3 times
the income per capita.
In general, the international norm is external connection works
are the utilities responsibility and internal connections are
done by businesses and are subject to the utilities inspection.
In Myanmar, all connection works (including buying a
transformer) have to be done by businesses. Before
connection works can begin, one application for a new
connection has to be approved by the utility; and after all
connection works are finished, another application had to be
submitted.
These unusual procedures nearly doubles the amount of time
and paperwork required to connect to the grid. By Burmese
utilities providing transformers and external work (at least in
industrial zones), costs and time it take to connecting to the
grid can be significantly reduced.
Ease of Getting Electricity, 2015
Source: World Bank
Telecom Towers
Land-use rules for telecom towers should be relaxed.
According to industry experts, Myanmar needs 20,000 towers
to achieve 90% mobile coverage desired by the government.
As of March 2015, Myanmar had only 5,500 towers (around
7,200 towers are expected to be operational in Myanmar by
the time Pyitawtha Redux has gone to press).

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Delays are common because the long list of requirements with

which the tower companies need to comply. In May 2015, the
government published a new set of required documents they
need to provide in order to acquire land leases: minimum of
twelve separate documents are required for each tower
(including such info as ID number of the land owner, approval
for tower construction affidavit from three levels of government,
local neighbours approval). In some cases, cautious
authorities are not issuing building permits unless tower
companies provide approvals from local religious authorities or
armed insurgency groups.
Red tape and delays have led to payment disputes among
operators, tower companies, and their sub-contractors.
Documentation requirements should be reduced. Another
hindrance is the current government policy of refusing to grant
permits for towers within 150 meters of each other. Instead of
encouraging co-tenancy as the government hoped, this has
created a shortage of suitable land for siting towers. These
policies should change.
Telecom Towers, 2015*
* as of March-2015

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Telecoms
Data and rural voice will be important driver of growth for
telecoms. Since telecommunications sector was liberalized,
growth has been astounding: merely one year into their
operations, new multinational entrants have signed up 15
million subscribers. There remains connectivity issues, but in
urban markets, penetration in major cities such as Yangon,
Mandalay, and Naypyidaw is over 120 percent or more, with
many owning multiple SIMs.
The market is increasingly competitive, and tariffs are being
slashed significantly. Still up for grabs are two key pockets of
growth, data and rural voice. Rural voice telephony is expected
to bring additional revenues of $1.08 billion, and revenues from
improvements to data services will generate an additional
revenue pool of $4.8 billion.
To capture rural opportunities, operators will have to resort to
new operating models. Eventually, Burma will have four
national operators, and co-tenancies should begin in earnest to
address rural telephony needs. Slashing the cost of deploying
towers and base stations, innovating in distribution and
recharging (top-up and power) practices, and rolling out more
individualized pricing models will be needed. Since distribution
and advertising sometime do not reach the most rural areas,
telephony services will have to be delivered directly to
customers rather than through advertising.
Data services are the other large growth pocket. Experience in
other countries suggests that a 10 percent increase in
broadband penetration translates into additional GDP growth
of some 0.5 to 1.5 percent. Social welfare and small and
medium enterprises benefits as well: for instance, fishermen
and farmers will be able to use mobile-data services to select
the best ports and markets for their goods.
Authorities can help with data and rural markets by making
more spectrum bands available, promoting infrastructure
sharing (even via state-owned MPTs towers), providing rollout
incentives and tax breaks. On the other hand, operators must
develop low cost models, such as low-cost off-peak packages,
scaling up compelling applications, and making data-enabled
handsets available more cheaply. Providing cheap charging
stations and diesel generators should also be a priority for both
authorities and operators in this country with extremely low
rural electrification rates.

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Airlines
Consolidation is needed in both private and public sector.
The Burmese flag carrier, Myanma Airways, has recently
signed an agreement with GE to lease ten Boeing 737s and to
begin flying internationally. The airline is going through
rebranding as Myanma National Airways, but turnaround might
be harder to achieve.
Total Number of Seats flying Low-cost carriers (LCCs) such as AirAsia and TigerAir
into Myanmar daily dominates regional routes and there are simply too many seats
in air. Total number of seats flying to Myanmar grew from
1,700 per day in 2009 to 6,800 per day last year.
Consequently, seat occupancy is down from 75% to 63% in
the same period.
In Burma, seven domestic airlines competing with 91 weekly
flights planned between Yangon and Mandalay alone. Many of
these airlines are loss-making. Consolidation is needed, and in
some cases, even liquidation.
Railways
Rail travel needs to improve. Local Burmese rely on road
and air transport because railways are slow, uncomfortable,
and terribly maintained. The speed between Yangon and
Mandalay is dismal 40 kmph (16 hour trip), although plans
currently underway to increase it to 50-60 kmph are in pipeline.
The state-owned Myanma Railways lost 300 billion kyats in
last three years. Government should slowly increase rail fares.
In mile-to-mile comparison, a sleeper from Yangon to
Mandalay costs cheaper than a simple seat in main arterial
railway of other South East Asian countries.
Myanma Railways Profits
Source: Ministry of Rails

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Rail Travel Costs in Asia, 2015
Around 50-60 million passengers and 3 million tons of freight

travel on Burmese Rails annually; by increasing per trip cost by
50 cents on average, Burma can raise additional 50 million
dollars annually enough to cover the railways budget hole
and make it self-sustaining. (Raising freight cost will be
impossible in medium-term as freight costs via rail are already
10x times costs via road).
Transportation
The state should focus more on better public
transportation than infrastructure upgrades. In recent
years, the municipal government in Rangoon has spent 120
billion kyats on seven flyover projects. Meanwhile, it plans to
devote only 10 billion kyats towards a new bus rapid transport
(BRT) system.
Using JICA data and comparisons from other developing
countries, we calculate that BRT system in Rangoon (which
will have 150 km), costs around 2 billion kyats per km. BRT is
a much cheaper alternative than mass rapid transport (metros)
or light rapid transport (skytrains).
Studies from developing countries in Africa suggest that even
when spending on roads has risen, traffic does not get better.
Glamorous elevated highways encourages car ownership
while providing opportunities to officials for extracting
kickbacks. While passenger cars are more comfortable than
public buses, cars use vastly more road space than a single
bus passenger, as well as needing more parking spaces. Shift
from cars to buses will only happen with bigger emphasis
towards public transport options.

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Transportation
Congestion pricing should be introduced. For congested
metropolitan Yangon, congestion pricing is the most effective
measure to reduce congestion and reduce the need for
capacity additions. It can also be paired with intelligent traffic
solutions.
London's congestion chargeintroduced in February 2003
has managed to ease the gridlock in the city centre. A
detection system, called tag-and-beacon, which is used in
Singapore and in Europe is instructive: cars are fitted with
electronic tags that are read by roadside masts. Then
intelligent traffic systems charges drivers based on how
congested the roads are (rush hour pricing), or how long they
stay. The system allows drivers to pay charges by direct debit
or SMS. Different prices can be introduced for vehicles used
for commercial purposes (taxis, trucks, etc.)
Over time, congestion prices will allow drivers adjust to road
pricing to reduce their costs, including driving at off-peak times
(which is cheaper if variable tolling systems are employed),
chaining trips (that is, combining multiple tasks on a single
trip), shifting onto public transport, telecommuting, or
carpooling.

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Public Transportation
Wholesale restructuring of Yangon bus transport is
needed. At 4,000-5,000 buses operating each day, Yangon
has adequate number of buses (Singapore has 4,200 Buses,
serving the similar population in a land area 20% bigger.
Bangkok has over 8,000 buses, serving a land area 160%
bigger). The problem is the lack of efficiency, discipline, and
organization within the sector.
The lack of discipline is the biggest issue. Each bus driver and
bus ticket collector wishes to maximize profits. As such they
compete not only with other companies and buses offering
other routes, but also with buses from their same company,
offering the same route. Hence, buses stop wherever they
want to pick up and drop off passengers; wait wherever they
want, for as long as they can, contributing to traffic jams. The
same competitive mindset causes bus drivers to break traffic
rules, and overtake each other, causing accidents.
A partial solution will be to stop the current system where
passengers pay with cash. If an electronic/card payment
system is implemented, revenue collection process will be
taken out of drivers/ticket collectors hands. Moreover, by
increasing their salaries and making them not dependent on
number of fares they collect each day, some of the discipline
problems noted above can be alleviated.

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Another problem, with so many companies and so many

routes, is that several buses are all going to the same place, or
at least in the similar direction. A master plan for all the bus
routes and bus stops is needed. The bus routes need to be
efficiently interconnected, and the stops need to be placed at
locations that wont cause too much traffic. Bus stops need to
be properly identified too currently, bus stops not clearly
identified on most routes. Signage which includes what lines
stop there, and the direction of travel and the next stop should
be introduced. Signs are modular so routes can easily be
added, removed, or modified in the future.
The current system, where over fifteen different companies (a
confused mixture of state-owned, regional-government-owned,
military-owned, veterans-owned, private-public companies) run
different bus routes, should be consolidated, and then partially
privatized. By consolidating the number of routes/bus
companies, efficiency can be achieved by reducing oversupply
of buses running half-empty at non-peak hours. Older buses
should be replaced by those with digital signage, so that
routes/destinations can be changed easier as demand shifts
over the course of the day.
An ambitious plan is underway to introduce Bus Rapid
Transport (BRT) system with MMK 10 billion from the
municipality and MMK 15 billion from the private sector. The
BRT plan, which follows JICA recommendations from 2014
might prove to be costlier than the government envisioned:
costs of the system (including designs, bus stations,
pedestrian ways, maintenance, parking spaces, and traffic
management) range from USD 0.5 million per km in Taipei to
USD 6.9 million per km in Bogota. Assuming it will cost USD
1.5 million per km in Yangon, two phases of BRT system will
cost USD 225 million.
Yangons bus transport system makes 4 million passenger-
trips daily; at average bus fare of 300 kyats, the whole
systems fare revenues is USD 438 million. (You can also
consider additional revenues such as from ads on side of
buses). At EBITDA margins of 25%, and multiple of 8x,
Yangon bus transport system can be valued at USD 876
million. (Here, two comparables are noted: Singapores SMRT
and SBS. SMRT has EBITDA margin of 26% and EV/EBITDA
of 10.6; SBS has EBITDA of 9.5% and EV/EBITDA of 11.3). A
partial privatization should free up valuable resources to
increase wages, to upgrade buses, and to expend the network.

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Regional Connectivity
Improvements to regional linkage infrastructure should be
explored. As noted earlier, we are not strong believers in
government-led billion dollar projects; with Myanmars railways
having dismal returns, we are especially cautious about
recommending further rail projects. However, this is an
exception.
Feasibility studies for rail linkages to neighbouring countries
were conducted in the mid-2000s, and they revealed
low/negative rates of return. However, new feasibility studies
are needed to see whether these projects are viable now, with
loans from ODA or from China-led Asian Infrastructure
Investment Bank (AIIB), of which Myanmar is a founding
member.
A game-changer is that trade between Myanmar and her
neighbours has exploded to beyond the original feasibility
studies predictions. Trade with China (including only the
categories of goods which are measured in weight) is 10.7
million tons, while with Thailand is 14.3 million tons. While
trade with India is small, India-Myanmar linkage can reduce
transit time between Yangon and New Delhi to nine days from
current twenty-two days, reduce freight costs by 70%, and
make Myanmars beans and pulses exports very attractive in
India.
Moreover, there is potential for these rail linkages to be used
for passenger transport. Currently, around 200,000 Thais and
125,000 Chinese visit Myanmar annually. Together they make
up nearly 30% of all tourists to Myanmar, a figure that will
surely grow with increased connectivity.
Planned Rail Linkages

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Trade and Customs

FIRST
Trading Partners
Burma should diversify its trading partners. Burmas
economy is highly dependent on international trade. The
countrys exports are dominated by minerals and agricultural
products. The geographical distribution of exports is heavily
concentrated in South East Asia and China. Imports are mainly
from Singapore and China and largely comprise of food, fuel,
and machinery. There is limited trade with other important
ASEAN economies, such as Indonesia, Vietnam or the
Philippines.
In FY14-15, Burma reported US$5 billion in exports to China
this amounts to 40% of the countrys exports. Dependence on
one country for over 40% of exports is problematic even in the
best of times, and with Chinese economy slowing down,
Burma not only needs to diversify its exports, but also needs to
diversify its trading partners.
Integration into the regional and global economy is a critical
prerequisite to spurring investment, growth and employment.
This will require both new trade agreements and making
strategic use of existing trade agreements.
Burmas Main Export Partners

FIRST
Customs
Burma should curtail responsibilities of the customs
department. Although the country made trading across
borders slightly easier in 2014 by reducing the number of
documents required for exports and imports, the procedures
remain labyrinthine and the customs department highly
corrupt. As noted elsewhere, 50% of importers noted that they
have to bribe the customs.
According to Doing Business, in 2015, an exporter takes 144
hours for border compliance and further 144 hours for
documentary compliance. Importing is slightly easier but not by
much, and cost to export/import is nearly double than in
Malaysia, Thailand, or Indonesia.
Time to Export
Source: Doing Business 2016
Customs department is highly corrupt and any meaningful

reform there is futile. Its ineffectiveness is clear in the integrity
of data it provides. In 2014, Burmese customs reported $27
billion in total trade ($11 billion in exports; $16 billion in
imports). However, counterparty data, using other nations
customs department, reveals that trade with Burma is $40
billion ($24 billion in exports; $16 billion in imports); vast
amount of jade trade that passed through Burmese borders
went totally unregistered on Burmese customs ledgers. In
recent years, China has improved its customs reporting
guidelines, shining light on Burmese customs reporting
shortcomings.

FIRST
The government should simply disband the customs

department and outsource it. In mid-1980s, when faced with a
similar problem, Indonesia replaced its national customs
service with a Swiss-based foreign contractor (SGS or Socit
Gnral de Surveillance), which operated under simplified
customs regulations, which are largely successful.
At the core was a concept called pre-shipment inspection
(PSI); SGS inspects imports and set their taxable value at the
point of departure, before the goods arrived into the country.
Once the goods entered, government customs officials were
prohibited from opening the containers unless they saw
evidence that the container had been tampered with. They
were required to let the containers pass through customs if the
tariff specified in the paperwork was paid. This procedure
reduce customs officials discretion, reducing their ability to
accept bribes in exchange for falsifying the value of the goods
and altering tax payments.
Volume of Trade Comparisons

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Customs
Burma should reform its custom rules and regulations. We
have proposed outsourcing of the customs to an international
accreditor above. Failing that, Burma should at least reform
rules and regulations which restrict the import/export and
custom clearance processes, leading to unnecessary delays
and high clearance costs.
Burmese customs use adopt the green channel, the yellow
channel and the red channel. A fee of 20,000 MMK per
container is charged for using x-rays or scanning systems.
Only custom agents are allowed to handle import clearing.
There are multiple payments for custom security fees for one
container in the case of Less than Container Loads (LCL)
consignment. If there is no recorded price, customs conduct
local market surveys at the retail shops and wholesale markets
as well as the internet for valuation. For post valuation, total
tax with one time deposit of 100% value has to be paid. As the
procedures are complex and difficult to understand, this allows
the clearance agents to manipulate the process.
Burma will need to create a modern customs clearance
management system based on risk assessment to avoid 100%
checking. Risk assessment is done by categorizing the level of
customer or the level of the custom broker agent. Export and
import custom procedures should be made clear to the general
public and to the local business people to prevent the customs
department to manipulate the process.
The customs should also allow export/import company staff to
handle their cargo clearance. A proper system for receiving
custom security fee should be created, and valuation process
time should be fixed by the custom for all kinds of cargo.

FIRST
Tariffs
The government should pursue reduced tariffs for
Burmese agricultural and textile products abroad. In
December 2015, Myanmar will enter ASEAN-Free Trade Area
(AFTA) and the country will join ASEAN Economic Community
(AEC) by 2017. As such, Myanmar will have to lower its
current commercial tariffs of goods from other ASEAN
countries from 25% to 5%. In reciprocity, Myanmar should
seek reduced tariffs for Burmese agricultural products in
ASEAN, and also with other big trading partners.
Most importantly, Myanmar should pursue bilateral trade
agreements on rice with the governments of China, the
Philippines, Malaysia and Taiwan. These are major existing or
potential markets but they currently impose high tariffs on
Burmese rice, ranging from 40% in Malaysia to 230% in
Taiwan.
Beyond regional markets, Myanmar should cite its LDC status
in application of reduced tariffs in the EU and the US. Burmese
garments are taxed at 11.5% in the EU, while Cambodia and
Bangladesh have managed to use their LDC status to achieve
0% (zero) tariffs for their garment products.
The tariffs that First Rangoon believe Myanmar should
prioritise to reduce are listed in the table below.
Tariffs on Burmese Products

FIRST
International Trade
Myanmar should allow foreign companies to conduct
domestic trading activities. Apart from four categories
(covering vital agriculture and health products), Myanmar does
not allow foreign companies to conduct domestic trading
activities. Foreign companies have to use a third party local
company to import items on their behalf. The third party simply
acts as a rent-seeking entity, and these restriction creates non-
level playing field, as some foreign trading companies which
had been in Myanmar since the 1990s are exempted from this
law.
Moreover, these restrictions on foreign companies restricts
Myanmars integration into the global supply chain. Foreign
companies have noted that this restriction also provides
opportunity for corrupt practices. Giving ministries the power to
approve import licenses for every consignment is impractical
and time consuming.
There are cases where the goods were approved duty-free, by
the MIC, but spare parts are excluded. Import licenses should
also include spare parts and installation services.
A common de minimis value is being discussed in ASEAN and
the latest country to introduce a US$ 50 de minimis baseline
was Cambodia in October 2012. Myanmar should introduce a
de minimis threshold in Myanmar, initially set at US$ 50,
gradually moving towards US$ 100 or higher.
International Trade
Myanmar should allow cross-border trucking. Currently,
Myanmar is the only country in ASEAN which requires cargo
trucks from other countries to be off-loaded and on-loaded to
Myanmar registered trucks and trailers at the border crossing
points. In other countries, only the truck and driver needs to be
swapped at the border.
Myanmar should be encouraged to ratify and implement the
ASEAN Framework Agreement on Facilitation of Goods in
Transit (including its related protocols) and all other related
agreements to facilitate cross border road freight. This will
lower cross-border transportation costs and enhance
Myanmars connectivity with its ASEAN neighbours. It will also
allow Myanmar to take advantage of its strategic geographical
location connecting India, China and ASEAN.

FIRST
Burmese Crossborder Trade
International Trade
Burma should dismantle its license raj. The license
requirements for some of items being imported are very
complex and it is very difficult to apply license for some items.
Furthermore, there is very little public awareness whenever
there is a change in rules and procedures. Custom Department
(under the Ministry of Finance) and Ministry of Commerce
have no internal liaison offices and communication.
Elsewhere, we have argued for combining Ministries of
Finance and Commerce. Such a move should facilitate
licensing processes: the customs can license exports and
imports based on the Harmonized System (HS) code by the
Ministry of Commerce.
The government should so further by remove the license
requirement for all non-sensitive products. Currently, license
requirement is waived for some products but such a list should
vastly expand.

FIRST
Logistics
Extensive reforms of logistics sector are necessary. There
is high cost and delay in Burma due to insufficient
infrastructure/equipment/machinery.
There is no track and trace system for any kind of transports
and businesses cannot receive up-to-date status of their cargo.
No trailer can carry containers for more than 8 hours as there
is no electricity support generators installed. There is also a
shortage of facility to handle the containers.
Due to customs issues outlined elsewhere, the ports become
congested if two or three ships berth at the same time. There
is no proper container freight station at every port. As a result,
cargos stored are inside the containers and detention and
demurrage fees are charged to importers.
The LCL deconsolidating charges are very high, and the
customs require the shipping line BLs. Freight forwarders BL
are not recognized (as is international practice), and shipping
line BL is still required throughout Burma. Forwarders HBL
should be recognized by the authorities and right to issue
delivery order to their customer.
For air freight cargo, the airport cargo storage is insufficient for
both general cargo and cold storage cargo. The open cargo
storages can be damaged and there is no channel to complain
for damages. There is one stop service at the airport customs
but a visit to the custom head office in downtown Yangon is
sometimes required. Moreover, the airport customs process
slowly, requiring a photo of the cargo. Due to the delay in
custom clearance process, cold storage are fully occupied and
there is normally no space available for upcoming shipments.
Extensive reforms are necessary, beginning with infrastructure
upgrades, including cold chain management facilities,
infrastructure and equipment upgrades in port and container
yards, and plug in stations for containers along the highway to
main cities. The government should allow private sector to
manage bonded warehouse with modern facilities for fast and
safe movement of cargo and storage of the cargo, and
computerize the system for empty container location for easy
tracking.
In the near future, the government should establish a free
trade zone under the management of third party logistics
service provider, expand warehouse facilities to cover current
trade value, and establish a logistics park and dry port as well
as bonded warehouse outside the port premises.

FIRST
Hazardous Materials
Burma should ban TEL and asbestos. In January 2013,
Burmas investment commission issued a directive, which
outlined which economic activities are allowed, and which are
banned in the country. In 2014, and earlier this year, revisions
were made to this directive, which reduced the number of
economic activities banned in Burma significantly.
The original 2013 directive banned manufacturing of chemicals
which can harm the ozone layer, persistent organic pollutants
(POPs) banned under the Stockholm Convention, construction
materials made with asbestos, and lead-based anti-knocking
agents. These bans were not continued in later directives.
While the Ministries of Environment and Health has various
regulations on hazardous chemicals, not much work nor
education has been done on the issue. As of late last year,
Convention on Biological Diversity (CBD) is still advocating the
Burmese government for ban of tetraethyl lead (TEL), an
extremely harmful fuel additive still allowed in Burma.
Burma is one of the last seven countries (alongside
Afghanistan, Algeria, Iraq, North Korea, Sierra Leone, and
Yemen) which still allow TEL to be used three years behind
an UN-imposed deadline to phase out TEL. As The Economist
pointed out, lead lowers intelligence, and make children anti-
social, violent and aggressive, with crime rates reflecting
childhood exposure to lead.
Asbestos is equally prevalent in the country, with many a
government building having been built with it, and the Ministry
of Industry still running an asbestos cement plant. Eradicating
asbestos, TEL and other hazardous chemicals will require
more than reinstituting the Investment Commissions bans.
Since many of them were imported from China (although TEL
is banned in China, some factories there still manufacture it
and export it through Sino-Burmese border), tighter and more
transparent border procedures will be needed. Nonetheless, a
ban from the Investment Commission will be the first step
towards improving quality of life in Burma.

FIRST

FIRST
Industrialization
We had been here before.
Throughout the 1990s and 2000s, Burma emulated other
regions of the world in undertaking import-substituting
industrialization. This led to some limited progress but was
ultimately hindered by political cronyism, by external sanctions,
and by the limits of the model.
Burma needs alternate models that plays to its strengths and
satisfies the need for transformation. Drafting an industrial
policy, which will give impetus to private sector-led
industrialization, export-orientation, value addition, skills
development, and economic diversification is crucial.
The first step is labour incubation -- a process that substitutes
demand for labour with an inclusive model that then allows
talent to be shifted into more progressive roles based on trues
dedication, skill and talent. With up to 70% of Burma still
heavily reliant on the agricultural sector, commodity-based
industrialization speaks to our strength.
Commodity based industrialisation also offers immediate
scope for value addition and plenty of opportunity for exploiting
consequential linkages, even as the rest of Asia and the world
move away from agriculture. In extractive industry, Burma
must value to gold, gemstones and minerals before exporting,
something which can ensure new jobs for its youth whilst
boosting the manufacturing industries.

FIRST
Vocational Training
Vocational Training should be promoted and
decentralized. State-run vocational education and training
institutions are no longer able to meet the demand for
adequately trained, skilled workers. The jobs they are training
for are no longer in much demand, and their training content
and the methods they use no longer serve the needs of a
modern economy.
A fundamental reform of technical and vocational education
and training (TVET) system is needed, with international help
and expertise. Around 500 public training institutions provide
TVET in Myanmar, and there are also a large number of
private training providers. The system has a wide coverage;
however, public sector TVET is extremely centralized under
the ministerial control and there is no delegation of authority to
the state or local level.
In addition to decentralization, new curricula should be drafted
in accordance with international norms. New industries from
agriculture value chains to renewable energy to tourism should
be targeted. Another goal is to bring informal and grey
economies (including mechanics, grocers, butchers) into the
formal economy by informal curriculum to show them value-
additions. Remedial assistance to aid them into more formal
education (e.g., engineering for mechanics) should be the next
step on the agenda.
A crucial goal should be to link up with international or local
companies to create job opportunities for the graduates of
TVET programs in the workforce. The companies can pro-
actively help with lecturer training and recruit targeted
candidates suitable for their targeted needs.

FIRST
Industrialisation
Industrialisation policy and import policy can be
coordinated. Foreign companies that are committed to
making investments in local production of their products should
be given trading permits and import licenses (for a limited
period) until local manufacturing could be established.
For instance, in Nigeria, under the governments cement
industry plan, companies building cement plants locally where
allowed to import cement from abroad for a limited period. This
policy led to Nigerian cement production increase sixfold and
the country becoming a regional cement titan.
In Myanmar, such a policy can be implemented for a diverse
array of products which are consumed locally, such as cement,
tyres, barbed wire, furniture, disposable medical instruments,
leather products, basic electrical products, and other low- and
medium- tech goods.
Basic Consumables Imports, 2014

FIRST
Manufacturing
Burma should focus on low-tech manufacturing. Recent
global slump in oil prices pose an opportunity for Burma to
create and promote a manufacturing centre. Majority of
manufacturing investment in Burma in last three years has
gone into garment manufacturing. Apart from textiles, clothing,
and footwear, Burma can be competitive in a few other
sectors.
At Thilawa Special Economic Zone, foreign investments have
gone into manufacture of radiators, speaker and headphones,
corrugated boxes, coils, instant noodles, doors, and stuffed
toys. Of these, in furniture and toys, Burmese manufacturing
can be competitive. Experience of Thailand between 1970 and
1995 suggests that apart from garments, attractive sectors in
manufacturing are food & sugar, low-tech electrical appliances,
and chemicals.
Possible Manufacturing Product Mix
These are also labour intensive industries which will provide

thousands of jobs and establish a conduit for the introduction

FIRST
of new technologies. Local Burmese firms should also explore

these low-tech manufacturing sectors, as it will become crucial
for local firms to be more integrated into globalized production
networks.
The country needs to add value-chains to its exports, as noted
in our rubber/tyre example elsewhere in this report. Burma
recently become an important exporter of tin ores, exporting
20,000 metric tons in 2014 (around 7% of global market). With
slowdown in China, demand for tin will slow, but Burma can
develop tin-related industries domestically, such as tin cans,
soft solder, pewter, bronze, and anti-corrosive coatings.
Global and Burmese Tin Industry
Manufacturers typically lack scale in two ways. Small

manufacturers lack scale within their businesses, so they
struggle to finance major capital investments that would
improve productivity. Secondly, clusters of manufacturers may
also lack scale, in that their networks and supply chains may
be incomplete (requiring increased imports), or complementary
players in their supply chain may be too distant to be cost-
effective. Special Economic Zones can help address these
challenges, and local businesses should also be encouraged
to join these SEZs.

FIRST
International Trade
Myanmar should reduce its Sino-dependency. In recent
years, the government has become wary of China. Myanmars
recent political and economic liberalizations can be seen as
the ruling elites desire to distance itself from the countrys
gigantic neighbour to the north.
In business sector, Myanmar is less successful in reducing its
Sino-dependency. In 2014, 65% of Myanmars exports went to
China, and 42% of her imports come from China. Almost all of
of Myanmars exports went mining products (most notably, tin, ferronickel, and iron) are
to China in 2014 exported to China, as are agricultural products (notably, maize
and sesame).
Such a dependency on a single country is dangerous.
Although Myanmar has $9 billion in trade surplus with China
(thanks to jade exports), Myanmar remains beholden to the
economic conditions in China, and recent economic turmoil in
China has rocked the Burmese economy. Businesses in
Myanmar should be actively looking for markets outside the
Peoples Republic. Fisheries industry has been particularly
successful in locating markets in Europe, United States, and
Australia.
Exports to China, 2014
Source: UN; First Rangoon
Garments

FIRST
Garment industry should explore FOB manufacturing.

Currently all garment production in Myanmar is done through
CMP manufacturing. In CMP, buyers provide local Burmese
firms with the inputs for a garment, which they then cut and
assemble.
A common next step in the evolution of the garment industry in
many countries is FOB manufacturing. In FOB, local firms will
procure its own inputs and in some cases designs. This offers
local firms more opportunities for value retention and addition.
In Myanmar currently, domestic and investment tariffs favour
CMP manufacturing over FOB. Inputs for FOB are taxed,
whereas inputs for CMP are not. This has made local garment
manufacturers unwilling and unprofitable to move up the value
chain. These tariffs should be revised, and Myanmar
Investment Commission (MIC) has recently made some
encouraging noises in this front.
However, it has been noted that among local manufacturers,
here is little knowledge on how to procure FOB inputs, of
textile varieties, characteristics and potential foreign markets.
This will remain a bottleneck even if MIC revises tariff patterns
soon.
Garments
Garment industry should seek markets for higher valued
products. Currently, garment production in Myanmar focussed
on mens wear; 27% of all garments made in Myanmar are
mens shirts (in which the country is worlds 7th largest
exporter) and 90% of all garments made in Myanmar are for
mens shirts, coats, suits, and overcoats.
shirts were exported by Unlike womens wear, mens clothing have few differentiating
Myanmar in 2014 features and come in high-volume orders, which allows
Burmese factories to churn them out efficiently but without
innovating. However, mens wear also tend to be cheaper, low-
margin goods; for example, mens shirts Myanmar export are
valued on average at $11.25. Higher margins are available in
production of jackets and overcoats but Burmese garment
industry has only limited success so far in manufacturing them.
With the introduction of minimum wage, production costs have
risen, and there will be need for productivity-improving
machinery and automated processes. In addition, machinery
and expertise beyond CMP process (activities such as curing,
cementing, fusing, moulding, and riveting, grommeting) are
missing from Myanmar, as little of this is required in the
production of mens wear. However, these capabilities will be
increasingly needed if Myanmar wants to have a competitive
garment industry. Investors and financial institutions should
prepare for these capital needs in coming years.

FIRST
Currently, 70% of Burmese garment exports are to Japan and

South Korea (Burmese textiles enjoy lowest tariffs amongst
competition in these two countries). However, it should be
noted that Myanmar has less than 1% of the market-share in
both countries. Myanmar also has similarly marginal market-
share in Europe, highlighting vast opportunities that remain to
be tapped.
The country will want to diversify and enter new markets. As
noted elsewhere, the country should also seek out better tariffs
for in the EU and the US. When the US sanctions are lifted,
Myanmar should seek extension of Generalized System of
Preferences (GSP) LDC tariffs to Myanmar garments.
Myanmars Garment Exports
Source: UN

FIRST
Rubber
A domestic rubber industry needs to be developed.
Myanmar exports around 80,000 tons of rubber annually
(earning around $100-$200 million depending on global rubber
prices). Meanwhile, the country imports around five million
tyres annually.
Local rubber industry is small, using only around 20,000 tons
of rubber annually. Myanmar needs to develop a domestic
rubber industry, and specifically, there are opportunities for
international players in tyre industry. Three factories exist, with
combined capacity of 1.65 million tyres annually, but two of
tyres were imported by
them are deemed sub-par facilities.
Myanmar in 2014 Recent years have seen doubling of number of vehicles on the
streets with relaxation of import tariffs; increase in number of
trucks and trucking companies is especially dramatic. First
Rangoon estimates that Myanmar will need eight million tyres
annually by 2018, suggesting large opportunities in the
industry.
Local rubber industry needs improvements: Burmese rubber
commands low prices internationally due to its low quality,
which stems from outdated harvesting and storage techniques.
With yields around 750 kilograms of rubber per hectare
annually, Myanmars average net productivity is about half that
of India or Malaysia. Acreage of rubber plantations have tripled
in recent years (due to high global rubber prices in the past),
and when these newer plants become ready to tap in next few
years, techniques and prospects of Burmese rubber industry
are expected to improve.
Burmese Rubber Trade

FIRST
Beer
Opportunities in beer industry lie beyond major cities. If
analysed correctly, beer consumption is a reliable indicator of
economic growth in a country. Beer industry in Myanmar is
long-dominated by military-owned Myanmar Beer, but
Heineken and Carlsberg has recently entered the market.
Litres of beer were Assessments of beer industry vary. Myanmar Beer claims it
consumed in Myanmar in has 83% of the local market, but this is a dubious claim, due to
2014 large imports from abroad. In 2014, Burma produced 42 million
gallons (160 million litres) of beer domestically; imports from
abroad, mainly Thailand, amounted to 190 million litres. As
such, per capita beer consumption in Burma is 6.8 litres per
person.
Burmese Beer Industry
Heineken and Carlsberg are hoping that Burmese beer market

will reach the size of other Asian nations: per capita
consumption is 30 liters in Vietnam, 26 liters in Thailand, and
36 in China. Yet, per capita consumption figures for alcohol are
misleading because in reality, not 100% of the population
drinks. According to WHO, 90% of Burmese population did not
consume alcohol, compared with 70% in Thailand and 60% in
Vietnam. Burmese Buddhism frowns upon alcohol
consumption.
Therefore, 350 million litres of beer consumed in Burma are
consumed by just 10% of the population (5 million people)
suggesting an effective beer consumption of 70 litres per
person. This means Myanmars effective beer consumption is

FIRST
already comparable to those in Vietnam and Thailand, and not

10x to 15x as suggested by per capita figures.
Key to beer industry in Myanmar lie beyond major cities. Major
cities are well-saturated with pubs and beer stations, and in
faraway places, where supply chains are difficult to manage,
Myanmar Beer has so far managed to fend off new entrants,
but those places are crucial to crack into Myanmars consumer
market.

FIRST

FIRST

FIRST
Burma 2020
Wander the streets of any Burmese city and it is abundantly clear that a lack of enterprise is not
the problem. Despite, or perhaps due to, the country's bitter years under collectivist socialism,
streets and pavements bustle with hawkers, touts, and vendors. Betel nut stands now sell top-up
cards for phones. Food is delivered door-to-door via bikes in the packed downtown of Yangon.
Cafes, restaurants, and bars thrive.
What you won't find are clean toilets, potable water, or stable electricity. Bar a few, you won't find
many people earning over a few dollars a day, or many goods manufactured in Burma. These
challenges, seemingly disparate, underline the route Burma needs to take in the next decade
fixing its anaemic infrastructure.
Business people extol 'leapfrogging'; having failed to adopt now-outdated technologies, Burma
can simply jump straight over them and go right to the latest innovations. This "catch-up growth
where latecomers also benefit from investment and transfer of technology and know-how from the
richer countries has produced extraordinary episodes of economic success in South East Asia,
East Asia and elsewhere since the end of World War II.
There is some applicability of this formula to Burma mobile phones have indeed overcome the
need for landlines and millions of Burmese, even in rural communities, have been connected to
mobile telephony and internet. In this report, we have discussed some of these big 'leapfrogging'
ideas drones which can deliver supplies to remote areas, and during emergencies; apps which
sell goods on credit, using mobile money to collect payments and to monitor the creditworthiness
of customers. But leapfrogging has limits. Mobile banking services and remittances have been
slow in taking off. While solar panels are useful for people still relying on kerosene to light their
homes, they cannot replace a functioning grid that manufacturers need. Free education and
healthcare apps are no substitutes for well-funded schools and hospitals.
A sluggish global economy notwithstanding, foreign direct investment in Burma has hit record
heights in last two years. It is time for Burma to piece together the right mix of ingredients for rapid,
sustained growth. Five broad areas -- agriculture, light industry, import substitution, natural
resources and cheap labour will be the foundation for such as growth.

FIRST
Perhaps the biggest factor in Burma's favour is geography. Its borders with China and India, still
disquiet with insurgencies, give the country a direct access to trading with nearly three billion
people. The next government is likely to have time, mandate, and (in Ms Suu Kyi) leadership to
negotiate a peaceful settlement that has long eluded Burma and its ethnic peoples. Despite
Burmese citizens' scepticism, cooperative relations with a rising China will remain essential.
Burma is one of the signatories to and founding members of the AIIB. Its infrastructure financing
needs over the next several decades will run into tens of billions of dollars a year, and the AIIB
could cover much of the emerging financing gap.
A relatively young population adds to Burma's appeal. Whereas China's median age is 36, and
Vietnam's 31, in Burma, the median age is 27. Seven in ten Burmese live in the countryside, about
the same as India or Vietnam compared with only 44% in China. Urban workforce in Burma has
much scope to grow, and mechanization of agriculture where 60% of the population currently
works will free up further workers. This reservoir of rural workers should help dampen wage
pressures, giving Burma time to build labour-intensive industries and manufacturing hubs.
Economic engine is also about to kick off. Burma's GDP is around $1,200 per capita. Looking at
other successful economies (those with at least a three-and-a-half-fold increase in per capita
income in the first 25 years of their growth accelerations), the starting points for the growth
accelerations were close, with Thailand at $835 at the lower end and Taiwan, China, at $1,365 at
the upper end.
What happens from here on is important. The next government should take advantage of these
geographic and demographic dividends. A crucial investment will be in turning the young
workforce into a skilled one. Public spending on education should increase. Spending should go
towards boosting enrolment, ensuring minimum standards, and teaching vocational education.
Simultaneously, the state should open itself up to international trade and investment. It should
pursue clear and consistent policies and strong intellectual-property rights that give foreign
companies the confidence to build factories. Like in China or Vietnam, the central government
should allow its constituent states to compete with each other to attract investors; federalism
desired by the ethnic minorities can also foster such a competition. Special Economic Zones make
flashy headlines, but developing local state-level industrial parks, marrying foreign money and
managers with local competitive advantages and raw materials, will be a winning formula.

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FIRST

First Rangoon Corporation

First Rangoon Corporation

Yangon | November 2015

Pyitawtha Redux: A Memo 2

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In many other countries, the head of state gets paid only

Pyitawtha Redux: A Memo 7

Ministerial Budgets, 2015

Source: Ministry of National Planning

Pyitawtha Redux: A Memo 8

Proposed Plans for Ministerial Restructuring

* Department of Environmental Affairs to be transferred to Ministry of Social Affairs

Source: First Rangoon

Pyitawtha Redux: A Memo 9

Police per 100,000 ppl in Asia

Source: First Rangoon

Pyitawtha Redux: A Memo 10

Biggest State-Owned Enterprises by Revenues, 2015

Source: Ministry of National Planning

Pyitawtha Redux: A Memo 11

According to the Ministry of National Planning, the revenues

Pyitawtha Redux: A Memo 12

Secondly, the state-owned corporations need human resource

Pyitawtha Redux: A Memo 13

own capital. Social security programs often fail to include

Pyitawtha Redux: A Memo 14

Pyitawtha Redux: A Memo 15

Regional Governments Budgets

Source: Ministry of National Planning; Census; First Rangoon

Pyitawtha Redux: A Memo 16

Incremental Capital Output Ratios

Source: First Rangoon via Nomura Securities.

Pyitawtha Redux: A Memo 17

The measure is an indicator that growth is not trickling down

Pyitawtha Redux: A Memo 18

to-GDP ratio) and presents wrong information to foreign

Source: First Rangoon

MRTV, the national channel, should be reduced into a public

Pyitawtha Redux: A Memo 19

tight regulations: they cannot broadcast certain types of news

Pyitawtha Redux: A Memo 20

Pyitawtha Redux: A Memo 21

Pyitawtha Redux: A Memo 22

Highest Educational Attainment in Age 25 and over, 2014

Source: Census; First Rangoon

Pyitawtha Redux: A Memo 23

Budget Towards Free Education

Source: First Rangoon

Eventually, the government should move beyond free

Pyitawtha Redux: A Memo 24

Pyitawtha Redux: A Memo 25

Ideal reforms will take years to implement: the American

Pyitawtha Redux: A Memo 26

Pyitawtha Redux: A Memo 27

Pyitawtha Redux: A Memo 28

Pyitawtha Redux: A Memo 29

Banking and Finance

Pyitawtha Redux: A Memo 30

Pyitawtha Redux: A Memo 31

Burmese Banks Marketshare by Assets, 2014