With a score of 46.9 in the Heritage Foundation’s “Index of Economic Freedom 2015”, Myanmar needs to improve many areas of its economy to keep up with countries in the region and the world.
Myanmar’s score is well below the regional average of 58.8 and the world average of 60.4, ranking it the 161st freest economy in the world.
Published in cooperation with Wall Street Journal, the report ranked Myanmar 38th out of 42 countries in the Asia-Pacific region.
However, the overall score is a 0.4-point improvement over last year. There has been improvement in five of the 10 economic freedoms – including freedom from corruption, labour and monetary. The economy, however, saw substantial decline in control over government spending.
“Over the past five years, economic freedom in Burma has advanced by about 9.0 points, the second-best improvement among graded countries. From a low base, Burma has made considerable strides in liberalising its economy and opening itself to the outside world. Gains in eight of the 10 economic freedoms include greater price stability and double-digit improvements in labour freedom and investment freedom,” the report said.
“Nevertheless, Burma remains a “repressed” economy due to years of state intervention, poor institutional structures, and autarkic investment and financial regimes. To solidify and build on the past half-decade’s gains, the government must continue its reform agenda with particular emphasis on stamping out corruption, enforcing property rights, creating an independent judiciary, and further opening up the economy to the international marketplace,” it added.
The report noted that rule of law and protection of property rights are weak.
“Judicial decisions are often influenced by government interference, personal relationships, or bribes.”
Meanwhile, overall tax revenue is less than 5 per cent of gross domestic product, while public expenditure amounted to 27.2 per cent of the domestic economy. Public debt is now around 43 per cent of total domestic output.
Due to low tax revenue, the government has limited capacity to spend.
Myanmar’s top individual income tax rate is 20 per cent, and its top corporate tax rate is 30 per cent.
The report further stated that significant bureaucratic impediments to entrepreneurial activity and economic development persist. The labour market remains underdeveloped, and enforcement of labour codes is ineffective. The informal sector continues to be an important source of employment.
While the country showed no change in the score for investment and financial freedom, its trade freedom improved. Myanmar’s average tariff rate is 3.2 per cent though some imports face additional restrictions.
“The financial system remains underdeveloped, and the banking sector is dominated by state-owned banks. Most loans are directed to government-led projects, and access to credit remains very poor,” the report concluded.