Description:
Abstract:
"The development objective of agro-based industry as one of policy instruments of
industrialization had been and still continues to pursue over forty years in Myanmar. Yet its
performance still stands stagnant, unable to transform the agrarian economy into agro-based
industrial economy. It is estimated that agro-based industry contributes about 3 percent of
GDP and 43 percent of industrial output value. The level of industrial formation in terms of
the ratio of the manufacturing sector to GDP is also stagnant around 8 to 9 percent.
This paper examines why Myanmar still could not have step up from the agrarian
economy to the agro-based industrial economy and attempts to provide a policy framework
how agro-industrial development is likely to occur.
The industrial ownership structure consists of large number of small scale, scattered
private enterprises and few number of large scale, capital intensive industries of state
economic enterprises (SEEs). The major problem of most agro-based industries is found to be
insufficient raw materials supply which could be ascribed to (i) the government?s policy
conflict of self-sufficiency vs. export (ii) raw materials procurement policy of SEEs at lower
than market prices, and (iii) highly distorted exchange rate and macroeconomic instability
affecting the costs of imported goods for import-dependent agro-based industries. Unless the
correct course of actions are taken in dealing with these issues, the raw material supplies
would decline to a crisis point and agro-based industries could be forced into a dead end -- a
?raw material trap?. In the mill areas of SEEs industry, declining raw material supply and poor
performances of factories are often generating vicious circle. The paper points out how
vicious circle could be converted into virtuous circle by adopting market-driven contractual
linkage between farms and factories, and it calls for the management reforms of SEEs,
strengthening the capacity of private entrepreneurs, managing macroeconomic stability and
domestic capital formation. It also assesses the competitiveness and comparative advantages
of the agricultural commodities as the raw materials of agro-based industries in its integration
to the ASEAN Free Trade Area. The results indicate the gloomy prospect."
Source/publisher:
Institute of Developing Economies (VRF paper 414)
Date of Publication:
2006-03-00
Date of entry:
2010-08-17
Grouping:
- Individual Documents
Category:
Language:
English