Chapter 2: Current Performance and Future Potential

Shiro Armstrong29 April workshop

Outline

• How does Myanmar measure up against comparable economies?

• Trade and investment potential

• Achievable trade and growth scenarios

• Challenge for national economic reform

Source: UN Comtrade and WDI (Ng, 2013)

Trade/GDP ratios at GDP per capita of 830 USD (t=0)

-10 -8 -6 -4 -2 0 2 4 6 8 100

20

40

60

80

100

120

140

160

180Myanmar (2002-2012)

China (1989-2009)

Vietnam (1997-2012)

Indonesia (1983-2003)

Malaysia (1964-1984)

Thailand (1974-1994)

Time

Trade/GDP (%)

Trade performance

• How to define and measure? • What do we expect Myanmar’s exports and

imports to be given its size, place in the world, endowments and other characteristics?

• Estimating a hypothetical frontier (maximum) based on characteristics of global best performers

• Performance = actual/potential

The (more) technical explanation

• Stochastic frontier analysis applied to the gravity model (normal and non-negative residuals)

• Achievement of potential is measure of economic distance. Estimates difficult to measure or unexplained resistances and barriers

• Cannot compare actual to predicted trade from gravity model

• GDP, distance, endowments to estimate performance

• Policy variables and barriers help explain performance

Average import performance

2006 2007 2008 2009 2010 20110.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

CambodiaLao PDRMalaysiaMyanmarThailandVietnamASEANWorld Average

Average export performance

2006 2007 2008 2009 2010 20110.10

0.20

0.30

0.40

0.50

0.60

CambodiaLao PDRMalaysiaMyanmarThailandVietnamASEANWorld Average