Foreign direct investment and economic transformation in Myanmar

Working and discussion papers
March 2017
Stephen Gelb, Linda Calabrese and Xiaoyang Tang

Structural economic transformation is the reallocation of resources (especially labour) from less-productive to more-productive activities, as well as changes in the composition of output and higher average productivity in the economy as a whole. Reallocation can occur either from low-productivity to higher-productivity sectors, for example from subsistence agriculture to manufacturing, or from less-productive to more-productive activities within the same sector, such as from less- to more-mechanised production techniques within manufacturing or agriculture.

Myanmar provides an interesting study on economic transformation. Agriculture’s share of Myanmar’s gross domestic product dropped from 60% in 1991 to 27.9% in 2014; however this does not necessarily mean that there has been extensive transformation, as 42% of the workforce is still found in agriculture and the sector remains largely unmechanised.

This study examines Myanmar’s economic transformation over the past two decades, and its potential for further transformation in the future. It focuses on foreign direct investment in Myanmar, in particular from China (which has itself undergone rapid transformation in the past few decades), and the four sub-sectors with the potential to accelerate economic transformation, namely garments, agriculture and agro-processing, construction, and tourism.