Transcript International Finance and India

Addressing Myanmar’s development
challenges: Lessons from the experience of
other developing countries
Jayati Ghosh
Jawaharlal Nehru University, New Delhi
Action Aid Myanmar, Mizzima and Myanmar Economic Association
Yangon
27 August 2016
What is development?
Human and social progress, variously described.
Simplistic approach based on GDP growth approach to
more complex and multidimensional ideas of human
development and of development as freedom, as the
progressive realisation of human rights, of capabilities, etc.
Here I will consider the basic aspect of productive
diversification of productive structures in the economy
towards higher value added activities as the essential basis
for development: so development as productive
transformation.
This can imply movement of the working population across
sectors or increased value addition of work within sectors.
Classic “Kuznets-style” structural change: South Korea
Structural change in South Korea
70.00
20000
18000
60.00
16000
50.00
Primary share of GDP
(right scale)
14000
Primary share of
employment
12000
40.00
10000
Manufacturing share of
GDP
30.00
8000
Manufacturing share of
employment
6000
20.00
GDP per capita (1990 $)
4000
10.00
2000
0.00
0
1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
This requires clear strategies
Planning in the sense of co-ordination across
departments and official actors with a medium-term
approach
Trade and industrial policies
Financial policies especially directed credit
Social policies
All this implies important role for government – so
it is crucial for government actions and public
spending to be transparent, democratically decided
and socially accountable.
Some examples of trade and industrial policies
Local content requirements for upstream and ancillary
industries (Indonesia for petroleum, Philippines for mining)
Export bans or taxes for unprocessed commodities (DR
Congo for raw copper, Dominican Republic for some wood)
Building clusters with economies of scope
Focus on viability of small and informal production in all
sectors (especially agriculture), through infrastructure and
access to credit, inputs, marketing.
Myanmar needs to exploit flexibilities available for LDCs in
WTO and in ASEAN, but needs to exercise great care when
signing new agreements to maintain policy space.
In particular BITS with Investor State Dispute Settlement
need to be carefully negotiated (India Model BIT).
Social policy as development policy
 Expansion and universal delivery of basic services, especially in
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nutrition, sanitation, health, education
This was crucial to the Nordic model of development (Sweden,
Norway, Denmark, Finland) and important but unrecognised feature
of successful Asian industrialisation (Japan, East Asian NICs, China)
Improves material and social conditions and gender equality.
Positive effects on employment and growth directly and indirectly
through the multiplier process.
Helps to manage social tensions generated by rapid development.
Public provision of affordable and reasonably good quality housing,
transport facilities, basic food, school education and basic health care
improves workers’ living conditions, ensures healthy and skilled
workforce and (indirectly) reduces overall labour costs for private
employers.
It also provides greater flexibility for producers competing in external
markets, since a significant part of fixed costs is effectively reduced.
More and better social protection
 Integrated set of social policies designed to guarantee income
security and access to essential social services for all, paying
particular attention to vulnerable groups and protecting and
empowering people across the life cycle.
 Can includes guarantees of:
 Basic income security, in the form of various social transfers (in
cash or in kind), such as pensions for the elderly and persons with
disabilities, child benefits, income support benefits and/or services
for the unemployed and working poor;
 Universal access to essential affordable social services in the areas
of health, water and sanitation, education, food security, housing,
and others defined according to national priorities;
 Employment – though this is not “social protection” as such since
it involves wage labour.
Can Myanmar afford this?
 Basic social protection measures often only cost a small
percentage of national income even in severely resourceconstrained countries.
 In countries like Benin, El Salvador, Mozambique and Viet
Nam, major social protection floor programmes estimated to
cost only 1-2 per cent of GDP.
 This is tiny compared to the tax revenues often forgone by not
effectively collecting revenue from the wealthy and by not
tackling inefficiencies that exist in many expenditure
programmes.
 In the long run these schemes pay for themselves, by enhancing
the productiveness of the labour force, the resilience of society
and the stability of the polity.
Financing increased public expenditure
 Fiscal space can come be created through increasing tax revenues and
better management of resource rents.
 Increased public investment can “crowd in” private investment,
especially when public investment is in physical and social
infrastructure.
 Cope for increasing direct tax collections through specific taxes better
tax administration and compliance.
 Design or change contracts with MNCs to retain as much royalties
from natural assets as possible, for use in public spending directed
towards benefiting the people. (Ecuador, Bolivia,
 Crucial for public expenditure processes to be transparent and socially
accountable.
Lessons from Southeast Asian emerging markets”
Directed credit is crucial for development, through institutions like
development banks.
Financial liberalisation may lead to “financial deepening”, but it
does not have a positive effect on investment and real economic
growth.
Rather it can generate savings “surpluses” that are then exported and
retard productive diversification, and expose economy to domestic
and global boom-bust cycles.
Domestic growth then is sustained by consumer credit that fuels
housing and real estate booms and finance for related investment.
These usually end in tears - downturn began a couple of years ago –
unravelling of household debt has knock-on adverse effects on bank
viability and on investment.
Thanks for your attention!