Gap may widen between rich and poor in Myanmar – Economists

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Economists warn that although the super rich in Myanmar may get richer, the gap between the rich and poor may grow wider in the next 10 years.

Currently there are only 40 people in Myanmar who own more than US$ 30 million in personal wealth. By 2022 the super rich will increase to 307 according to Wealth-X, a global leader on ultra high net worth (UHNW) individuals.

This is in a country still considered one of the poorest in East Asia, according to the World Bank, with an estimated GDP per capita of between US$ 800 and US$ 1,000.

“At the moment, the gap between the rich and the poor of Myanmar is the highest in the world,” said the economist Dr. Aung Ko Ko.

“The existence of the gap between the rich and the poor depends on the country’s policy of income distribution. If the country is depending on selling the country’s resources such as oil and gas, the gap may continue to exist,” he added.

As the government embarks on a series of political and economic reforms, foreign investors and capital are pouring in as companies vie for lucrative contracts in new hotel businesses, construction, natural gas and energy. Myanmar looks set to embrace the economic growth witnessed by the emerging Southeast Asian economies in the early 90’s.

However, economists fear that if Myanmar fails to rethink some of its economic policies on how to balance the distribution of income, the rich will only grow richer while the poor will grow poorer. Such income inequality can lead to political instability and lower growth in the future.

After decades of state-run socialism, Myanmar is now embracing a free market economic system which allows for competition. However, equal access and opportunities in the market place are still lacking as companies known locally as “cronies” – because of their connections to the old regime – have often been the first to profit from lucrative contracts and deals.

Widening participation, guaranteeing fairness through laws as well as preventing economic manipulation are also crucial to avoid the emergence of a crony economy, according to Dr. Aung Ko Ko.

“There are competition laws in over a hundred countries of the world except Myanmar. Even in China. In some local markets, there is no competition at all. Therefore, there is no price emerging from competition. A market without competition will only result in unbalanced incomes,” added Dr. Aung Ko Ko.

To ensure fair competition in the market there has to be equal opportunity for every citizen to do business, without special priviledges being awarded to companies due to corruption or connection. Creating such opportunities are also essential to encourage innovation.

“Cronies from Myanmar were doing businesses at least some ten or twenty years before. They have more benefits in manpower, financial power and technology know-how compared with those who just started their businesses. Therefore, the government will grant them projects because they are better equipped. We need to give equal opportunity to everyone,” said a young entrepreneur.

The tax list of the top 500 Myanmar businessmen will soon be established, said an official from the Department of Revenue in June. Until now no list has emerged leading some to criticise a lack of transparency in the tax system.

“Myanmar has tax dodgers and the two committees of the Lower House need to cooperate to submit a report to ensure everyone is taxed,” Lower House Speaker Shwe Mann said on August 1.

Although Myanmar has more than 30,000 of local and overseas companies, only about 3,000 commercial organisations paid tax.

Most of commercial organisations are small and medium enterprises and a tax break for small enterprises is not certain yet. About 26 percent of the total population lives in poverty and 75 percent have no electricity.

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