Posted in Political Institutions on May 23, 2019
The civilian government that emerged from the 2015 general election soon revealed its 12-point plan for economic development. Unsurprisingly, given the country’s relative underdevelopment compared to its neighbours, since ‘opening up’ Myanmar has been undergoing a period of significant growth. GDP grew by 6.2% in 2018, slightly down on 2017’s rate of 6.8%, placing Myanmar 5th in the ASEAN ranking for economic growthi. Looking ahead, GDP growth is predicted to rise by 6.6% in 2019, and 6.8% in 2020.
According to the World Bank, growth in the industrial sector is estimated at 9.4% in the 2017-18 financial year, declining to 8.2% in 2018-19. The decline has been explained as being due to softening consumption, slowing investment (including foreign direct investment), and rising production costs due to fuel price increases and the depreciation of the kyat.
It is natural for a country in Myanmar’s position to wish to prioritize the industrial sector, given its outsized contribution to GDP growth. Recognising this, the Ministry of Industry drew up an industrial policy in 2016. Included as central policies for supporting growth are the creation of ‘industrial zones’ and ‘special economic zones’, regional agro-industrial parks, and border industrial and economic zones.
According to the Ministry of Industry, Myanmar already has 19 industrial zones and 6 implementing industrial zones. The expansion of zones is processed on a regional basis. There are three ‘Special Economic Zones’ – Thilawa, Kyaukpyu and Dawei – established under the Myanmar Special Economic Zone Law, 2014 passed during the first Hluttaw.
A new Industrial Zone Bill has now been submitted whose aims are to attract domestic and foreign investment, create competitive industries, encourage an ‘industrial zone culture’, and to reduce the social and environmental impact caused by industry.
Why is an Industrial Zone Law needed?
The aim is to attract companies to establish their operations in a particular area, by reducing their costs of doing business through tax reliefs, provision of good quality infrastructure, and easy access to raw materials and labour.
The current situation with industrial zones in Myanmar
Industrial zones have been around in Myanmar since the 1990s, with their implementation under government instruction, rather than under a separate industrial zone law. The lack of a law is perceived as one of the reasons why they often suffered from insufficient electricity and infrastructure supply. There were also incidences where grants from government were used to make speculative investments in land rather than develop the zones. In addition, rather than achieving the desired clustering, zones actually had the opposite effect of scattering industries. Administration of existing industrial zones is under a central industrial development committee led by the chief ministers of the related region or state, a management committee led by the district general administrator, and an administration committee of industrial zone. The management committee is considered the more powerful of the three.
Things to consider
When drawing up this new industrial zone law, existing and new industrial zones should be taken into account separately, but policies brought into alignment where possible. For example, there are existing industrial zones (especially in Yangon Region), that used to be on the outskirts of the city which have now been subsumed by rapid urbanisation. Common international approaches to this problem include moving, closing and controlling by law these sites. Consideration also needs to be given to sites that have been designated as zones but where development is yet to take place.
New industrial zones should be part of an overarching economic strategy, with industries encouraged to cluster together that use similar technologies, access similar markets, or have similar skills requirements such as a need for factory labourers and/or a need for highly-skilled workers. To support industrial development a provision should be included to support local and foreign market research, and promotion teams, for respective zones.
Before approving the industrial zone bill, it is important to harmonize it with the existing laws like Factories Act 1951, Private Industrial Enterprise Law drawn by the Ministry of Industry in 1990 and Small and Medium Enterprises Development Law drawn in 2015.