Situation and cooperation

Woman on a market in Rangoon, Myanmar

Myanmar was once considered the richest country in South-East Asia. Yet the military takeover in 1962 ushered in a period of decline. Today, Myanmar is ranked only 148th out of a total of 189 countries listed on the Human Development Index (HDI). Allowances must however be made due to the difficulty of realistically assessing Myanmar’s economic and social development. During the many years of isolation almost no reliable statistical data were collected.

Following the first free elections, which took place in November 2015 and which the party of Nobel Peace Laureate Aung San Suu Kyi won by a clear majority, Myanmar now finds itself at the start of a lengthy and difficult process of political transformation.

Parliament in Nay Pyi Taw, capital of Myanmar

Minimum rule of law standards are not yet being met in Myanmar. There is no clear separation of powers, nor is there an independent judiciary. The government that was voted out of power in 2015 had, however, taken the first steps on a course for reform: censorship has been relaxed, and a new demonstration and assembly law has been passed. Trade unions have been permitted and given the right to strike. The government has also launched a peace initiative and begun a dialogue with ethnic groups who have been waging an armed struggle for greater autonomy and rights.

The problem of corruption has also now been publicly noted. Myanmar is at present still one of the most corrupt countries in the world. The non-governmental organisation Transparency International ranks the country 136th out of 175 countries listed on its Corruption Perceptions Index 2016.

Human rights

Woman on a market in Rangoon, Myanmar

Although the human rights situation in Myanmar has improved in recent years – numerous political detainees have been released from prison, forced labour is to be made a crime punishable by law and the deployment of child soldiers is to be prevented – the process of change has come to a standstill. The path of transformation is not without its stumbling blocks.

Myanmar has still to sign or ratify the most important human rights agreements such as the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights and the UN Convention against Torture. The situation is not good for the country’s Muslim minority. In particular, the Muslim Rohingyas living in Rakhine State are viewed as stateless persons and are subject to discrimination and persecution. According to reports from human rights organisations, following an attack on border control posts between Myanmar and Bangladesh in October 2016, the Rohingyas suffered massive human rights violations at the hands of the military, causing tens of thousands to flee across the border into Bangladesh.

Further human rights violations by the military and by ethnic militias, arbitrary arrests and waves of displaced persons have also been reported in other border regions (Kachin, Shan State (North)) where fighting has flared up once again.

People’s basic economic and social rights are also still being violated. The situation in the health sector, for example, is alarming; and child mortality is significantly higher than in other countries in the region.

Social situation

Two monks walking on a street in Myanmar.

In 2011, around one quarter of the people in Myanmar were living in absolute poverty, and that figure is much higher still in rural areas; no newer figures are as yet available.

According to World Bank figures, 0.7 per cent of the population aged between 15 and 49 was HIV positive in 2014. This is one of the highest rates in Asia.

The level of public spending on social affairs continues to be one of the lowest in the world, despite significant increases in the last six years. The government headed by Thein Sein (2010 to 2015) presided over a fourfold nominal increase in the budget for education and a twofold increase in the health budget. In the current budget (2016/2017), spending on education, health and social welfare programmes accounts for about ten per cent of the total. Spending on defence is just over 14 per cent.

Ethnic conflicts

Myanmar is a multi-ethnic state: 135 ethnic groups are officially recognised. Some groupings continue to be engaged in an armed struggle for greater political and cultural autonomy. They feel that the central government discriminates against them: the regions where minorities live are less developed, with high levels of poverty; the people living in them often have no access to public health or education facilities.

Another cause of conflict is landgrabbing: for example, large-scale Chinese investments have led to many farmers being pushed off their land. The only options they then have are either to look for work as day labourers or to emigrate.

The conflict in Rakhine State on the border with Bangladesh remains unresolved. About 800,000 Muslim Rohingyas live in Rakhine State. Defined by the government as foreign immigrants, they are regarded as stateless persons and are not accorded any civil rights. Following clashes between Buddhist Rakhines and the Rohingyas in 2012, there are some 140,000 internally displaced persons (IDPs) living in refugee camps in Rakhine State. The United Nations High Commissioner for Refugees (UNHCR) calculates that there are about 375,000 IDPs throughout Myanmar who have been displaced by ethnic conflicts.


Fisherman in Myanmar

According to the 2011 constitution, Myanmar has a market economy system. Due to the long period of political isolation and the economic embargo imposed by the West, however, Myanmar is poorly integrated into the global economy, and necessary investments have long been lacking. To date the economy has been dominated by the agricultural sector, which is however not very productive. Around two thirds of all those in gainful employment live in rural areas.

Since summer 2011, the government has been initiating comprehensive economic reforms designed to improve the country’s financial situation and the climate for doing business. This includes a new investment law, the gradual modernisation of the financial sector and a debt rescheduling agreement with the Paris Club (see below). The most important source of income for the government is the country’s rich natural gas reserves.

Development potential

Myanmar’s economic potential is enormous. This country, which stretches from the Himalayas to the Gulf of Bengal, has the biggest confirmed natural gas reserves in South-East Asia. Other resources include high-grade timbers, copper and precious stones. It also has huge hydropower resources as well as abundant agricultural land with fertile soil.

Lying between India, China and the emerging economies of South-East Asia, Myanmar is furthermore well placed geographically to do business in one of the most economically dynamic regions of the world.

Priority areas of German de­vel­op­ment co­op­er­a­tion with Myanmar

Federal Minister for Development Gerd Müller meets Aung San Suu Kyi in Berlin.

In order to support Myanmar’s reform process, Germany resumed its bilateral development cooperation with the country in 2012. Since then Germany has pledged 201.771 million euros – 91.9 million euros for Technical Cooperation and 109.871 million euros for Financial cooperation with Myanmar.

The two countries have agreed that the priority area of cooperation will be sustainable economic development. The focus here will be on:

  • technical and vocational education and training (TVET)
  • banking system development / SME development
  • private sector development
  • mining sector advice
  • quality infrastructure

The German Development Ministry has also been supporting rural development since 2014. The regional focus here is on Shan State in the eastern part of the country. One of the activities in which Germany is involved is improving and expanding rural electrification. In addition, as part of its Financial Cooperation, Germany intends to support the development of the rural road network. This will provide the rural population with improved access to markets, vocational training, financial services, hospitals and educational institutions.

At the same time as bilateral development cooperation was resumed, the funds allocated to German civil society organisations such as churches, political foundations and private institutions operating in Myanmar were also increased.

Technical and vocational education and training (TVET)

The education sector in Myanmar has been neglected for decades. As a result, skilled personnel who are urgently needed for the economic opening-up and development of the country, and for the process of democratisation, are in short supply. In order to remedy this deficit, Germany is supporting the government and selected educational institutions in designing and applying needs-based TVET strategies.

This includes further developing the Ministry of Industry’s Industrial Training Centre (ITC) in Sinde. On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), GIZ is advising Germany’s Myanmar partners on developing curricula and training instructors. KfW Development Bank is supporting the provision of modern technical equipment. Together with the Education Ministry, KfW is elaborating a strategy for turning schools into vocational training colleges. Support is also being provided for establishing a national vocational certification authority.

Banking system development / SME development

In the financial sector, Germany is supporting Myanmar’s Central Bank and its other banks in developing financial services specifically for small and medium-sized enterprises (SMEs). In partnership with German banks, various activities are being carried out. For example, the training provided at the Myanmar Institute of Banking is being adapted to the new economic framework. Furthermore, the Central Bank is receiving assistance for the development and implementation of regulations and for implementing international accountability standards.

KfW has supported the establishment of a microfinance institution, ACLEDA Bank, in Myanmar and is providing funds for the refinancing of loans.

Private sector development

Public payphone in Rangoon

Over the past three years, the government of Myanmar has taken important steps towards reforming its economic policy. However, neither government institutions nor the private sector in Myanmar are currently able to implement these economic reforms effectively. Small and medium-sized enterprises (SMEs) in particular have almost no opportunity to participate in the political dialogue and influence the processes of change that are taking place. There is a lack of non-governmental organisations to represent the interests of the business sector. Germany therefore wants to systematically support capacity building for private sector development. The focus is on cooperation with SMEs in rural economic centres, for example in Shan State. German activities include working with partners in Myanmar to improve value chains for agricultural products such as coffee, tea and chilli, and helping to develop tourism.

Mining sector advice

Myanmar is rich in extractive resources. These valuable resources can play an important role in the country’s economic development. As part of its development cooperation with Myanmar, Germany is working with various partners, including the Ministry of Mines, in order to improve institutional capacities in the mining sector. Advice and further training are being used to assist with the development of national, regional and local-level strategies for the sustainable use of extractive resources. These strategies are also meant to take the needs of the local population into account.

Quality infrastructure

A rickshaw driver waits for customers as dusk falls in Yangon.

In order for small and medium-sized enterprises in Myanmar to be able to operate internationally, they must work towards compliance with international norms and quality standards. For this they need access to services in the field of measuring, certification and laboratory testing. The Physikalisch-Technische Bundesanstalt (Germany’s national metrology institute – PTB) is supporting the efforts of partner organisations in Myanmar to establish the infrastructure needed for quality assurance and metrology.

Debt relief

Myanmar is heavily indebted. Arrears owed to Germany alone were more than one billion euros. The Burmese government had stopped repayment of trade debts and Financial cooperation loans after Germany stopped all development cooperation activities following the military coup in 1988.

In January 2013, as a first step, Myanmar concluded a debt rescheduling agreement with the Paris Club. This agreement provides among other things for the cancellation of 50 per cent of the country’s debts. Bilateral negotiations with Germany were concluded in August 2013. It was agreed that Germany will cancel just under 508 million euros of Myanmar’s debts stemming from Financial Cooperation. Just under 577 million euros of trade receivables, which is about six per cent of the total amount owing, will be cancelled. The remaining amount owing will be restructured in a way that is conducive to repayment as agreed. These debt rescheduling arrangements constitute an important prerequisite for the future provision of export credit guarantees (Hermes coverage).

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