The Post-Socialist Economic Transformation in Poland and Myanmar

7/30/2019 The Post-Socialist Economic Transformation in Poland and Myanmar

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The Post-SocialistEconomic Transformation

in Myanmar and Poland:

The Consequences for theInvestment Climate

Dr. Andrzej Bolesta

Coordinator

The Polish Reform Mission to Myanmar


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Centrally planned,

state-command, socialist economy

In Poland (1945-1989)

1982-1989 reformed socialism (J. Kornai, 1987)

In Myanmar (then Burma) (1962-1988)

1948-1962 - democratic socialism


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GDP per capita (constant prices 1990) in 1950 and 1990

12210

2447

5115

2397

2000

6000

10000

14000

1950 1990

Pola n d S pa in

2 4 8 0

6 4 7 1

1 6 8 8 1

3 7 0 6

2 0 0 0

6 0 0 0

1 0 0 0 0

1 4 0 0 0

1 8 0 0 0

1 9 5 0 1 9 9 0

Hu n ga ry Au st r ia

Central Planning and Market

in Europe

Source: L. Balcerowicz 2008, after Maddison Database 3


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GDP per capita (constant prices 1990) in 1950 and 1990

Central Planning and Market

in the World

Source: L. Balcerowicz 2008, after Maddison Database 4

8 5 4 1 1 2 7

1 5 7 3 2

8 5 4

0

4 0 0 0

8 0 0 0

1 2 0 0 0

1 6 0 0 0

1 9 5 0 2 0 0 3

Nor th Kor e a Sou th Kor e a

2046 2569

10950

3670

0

4000

8000

12000

1 9 5 0 2 0 0 3

C u ba C h i le


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The Initial Conditions for the

Transformation

Macroeconomic situation

Economic system

Structural composition of the economy

Financial liabilities to foreign actors

Human capital


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The Process of Post-Socialist

Economic Transformation

in Poland

The Shock Therapy(1989-1993, core period until 1991)

The Incremental Changes (1993-1997)

The Four Major Reforms (1997-2001) Polands EU Accession (2001-2004)


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Post-Socialist Economic

Transformation

S Stabilization

L Liberalization

I Institutionalization

Based on: Balcerowicz 1997


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S Stabilization

reduction of the budget deficit

strict control of money supply

transition to positive real interest rates

wage control



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L Liberalization

reduction of state intervention

increase in elasticity of supply and of prices

removal of restrictions on private economic activity

removal of central allocation of goods and resources

liberalization of prices

removal of most quantitative restrictions on importsand exports

unitary exchange rate

internal convertibility of currency



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I Institutionalization

privatization

antitrust/antimonopoly legislation

strengthening of central bank independence

banking sector reform

insurance sector reform tax reform

creation of local government

social security network reform



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Changes in legal regulations - examples

Privatisation law

Antimonopoly law

Insurance law

Law concerning establishment of the stock exchange and treasury bonds

New foreign investment law

Income tax law

Budget law

Changes in the real economy

Reduction in macroeconomic imbalances e.g. the shortageflation syndrom

Changes in the strcuture of industrial production and increase in effectiveness

Positive impact on the natural environment

Reduction in foreign liabilities


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The Incremental Changes

Focus on development policy and economic reforms

simultaneously

Continuation in reducing the macroeconomic imbalances(decreasing inflation and unemployment at the same time)

Private business development

Management reforms: decreasing the number of ministries

and affiliated institutes and delegating power downwards New Constitiution (1997)


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Four Big Reforms

Administrative reform

Pension reform

Healthcare reform

Education reform


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The EU Accession

Poland benefited from EU technical and financial assistance prior to joining the Community

The process of accession was charactersied by adopting/negotiating the provisions of

acquis communautaire

The Community acquis or acquis communautaire, sometimes called the EU acquis, and

often shortened to acquis, is the accumulated legislation, legal acts, and court decisions

which constitute the body of European Union law.


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During the process of the enlargement of the European Union, the acquis

was divided into 31 chapters for the purpose of negotiation between the EU

and the candidate member states for the fifth enlargement

(the ten that joined in 2004 plus Romania and Bulgaria which joined in 2007).

These chapters were:

1. Free movement of goods 2. Free movement of persons3. Freedom to provide services 4. Free movement of capital

5. Company law 6. Competition policy

7. Agriculture 8. Fisheries

9. Transport policy 10. Taxation

11. Economic and Monetary Union 12. Statistics

13. Social policy and employment 14. Energy

15. Industrial policy 16. Small and medium-sized enterprises

17. Science and research 18. Education and training

19. Telecommunication

and information technologies 20. Culture and audio-visual policy

21. Regional policy and coordination

of structural instruments 22. EnvironmentConsumers and health protection 24. Cooperation in the field of Justice and

Home Affairs

25. Customs union 26. External relations

27. Common Foreign

and Security Policy (CFSP) 28. Financial control

29. Financial and budgetary provisions 30. Institutions

31. Others


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GDP constant prices (bln PLN)

0

200

400

600

800

1000

1200

1400

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: IMF


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Change of GDP constant prices (%)

0

1

2

3

4

5

6

7

8

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: IMF


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GDP per capita constant prices (PLN)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: IMF


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The Process of Post-SocialistEconomic Transformation in

Myanmar Phase I (1988-2011) reforms and retrenchments

- liberalization and/or authorization of private enterprise

activities- liberalization of international trade and foreign direct

investments

- financial sector reforms (incl. establishment of private

banks)

Fujita et al. 2009


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However

Attempts to maintain the dominant role of SEE (state

economic entreprises) in some sectors of the national

economy

Reimposition of restrictions on private business activities and

trade (e.g. by Trade Policy Council)

Control of agricultural production (esp. rice) perhaps for

social reasons

Lack of adequate institutionalisation and liberalization within

the financial system (restrictions after thebank run of 2003)

Asian financial crisis 1997

International sanctions 1997


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Phase II - 2011 onward

Economic liberalization and market

institutionalization (gradual)

new foreign investment law

new exchange rate policy

expansion of banking sector activities


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Myanmar:

In the Footsteps of Central-Eastern

Europe

or East Asia? Polands success:- doubled GDP;

- joined the group of 20 largest economies, OECD (1996) and EU (2004);

- significantly increased the standard of living.

The model: free market economy, transparent non-discriminatory regulations,

few market access barriers

East Asia success:

historically Japan, South Korea, Taiwan, to some extent Malaysia,

Thailand

currently - post-socialist China, perhaps Vietnam

The model: more interventionist, regulatory economic regimes with various non-tariff

barriers focused on domestic business development


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The Mixture of the Models:

The Case of Myanmar?The Consequences for the Investment Climate

Myanmar will use its attractiveness to attract foreign investment. Due to

its relative underdevelopment and potential untapped resources, foreign

investors will have a broad pallet of economic sectors to choose from; Myanmar authorities will continue to support foreing investment related

activities due to the countrys development necessities;

However, Myanmar will restrict access to certain sectors deemed

important, strategic, etc.,

The authorities will offer preferences to domestic companies; The state will continue to be involved in the economy through

regulations, through state-owned companies, through state bureaucracy,

as well as through privately-owned companies.


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Thank you!

[email protected]

The Post-Socialist Economic Transformation in Poland and Myanmar

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