Trade, Foreign Investment and Myanmars Economic Development.pdfVIP

INSTITUTE OF DEVELOPING ECONOMIES IDE Discussion Papers are preliminary materials circulated to stimulate discussions and critical comments IDE DISCUSSION PAPER No. 116 Trade, Foreign Investment and Myanmar’s Economic Development during the Transition to an Open Economy Toshihiro KUDO* Fumiharu MIENO** August 2007 Abstract Throughout the 1990s and up to 2005, the adoption of an open-door policy substantially increased the volume of Myanmar’s external trade. Imports grew more rapidly than exports in the 1990s owing to the release of pent-up consumer demand during the transition to a market economy. Accordingly, trade deficits expanded. Confronted by a shortage of foreign currency, the government after the late 1990s resorted to rigid controls over the private sector’s trade activities. Despite this tightening of policy, Myanmar’s external sector has improved since 2000 largely because of the emergence of new export commodities, namely garments and natural gas. Foreign direct investments in Myanmar significantly contributed to the exploration and development of new gas fields. As trade volume grew, Myanmar strengthened its trade relations with neighboring countries such as China, Thailand and India. Although the development of external trade and foreign investment inflows exerted a considerable impact on the Myanmar economy, the external sector has not yet begun to function as a vigorous engine for broad-based and sustainable development. Keywords: Myanmar (Burma), international trade, cross-border trade, foreign direct investment, economic development, development cooperation JEL classification: F14