Economic and Social indicators and Development : Case Studies in Burma & Malaysia (Part-1)

Introduction

The world today has been characterized by large income inequalities and different capabilities among the countries. Countries are different in terms of ethnicity, culture, religion, ethical principles and ideological doctrines. However, the main differences that divide between the countries recently has become the development issues such as poverty and inequality, international debt, rich-poor economic confrontations leading to the social dislocation that can turn into the global chaos.

As development is a normative concept, it may have different definitions for different people. However, economics tried to determine the development of the country by using the agreed-on measurement criteria. Traditionally, the measures were strictly in the form of the capacity of a national economy and later supplemented by the social indicators.

Although the indicators cannot give the complete picture, they were used to measure progress, identify problems and underpin evidence-based decision making linked to a goal or important issue or a policy concern.

This paper will discuss about the how economic and indicators can be applied to compare and analyze the countries by taking the examples of one upper-middle income country called Malaysia and on low income country called Burma (Myanmar). Both countries are situated in the same region and have similar historical background and traditions with different stages of growth, structural patterns and levels of freedom and capabilities. To get the overview picture of the country, structure of economies well be carefully examined in the light of the models of the economic development.

Economic and Social indicators

With a conventional measurement approach, countries were ranked in terms of their economic indicators. However, this approach does not take account the non-priced subsistence production and income distribution considerations. To remedy these defects, efforts were being made to create the composite indicators that show the realization of human potential and capabilities. As a result, social indicators were chosen as alternative measures of Development (Todaro, 1997:62)

In short, economic indicators assess how economically developed a country is, while social indicators assess how well a country is developing in key areas such as health, education and life expectancy.

Examples of economic indicators include GNP, real GDP, consumer prices, export volume, terms of trade, current account, debt, foreign direct investment (FDI), investment ratios in percent of GDP and so on.

Examples of social indicators include adult literacy rate, under-five mortality rate, percentages of population using drinking water and sanitation facilities, primary and secondary school enrolment and so on.

Classifications of countries

The World Bank classified the countries into low income economies, lower-middle income economies, upper-middle income economies and high income economies according to the Gross National income (GNI) per capita.

According to the World Development Report (2007), economies were divided according to 2006 GNI per capita, calculated using the Atlas method. By this way, countries with GNI per capita $905 or less are classified as low income countries (LICs), $906 to $3595 as lower middle income countries (LMCs), $3596 to $11,115 as upper middle income countries (UMCs) and $11,116 or more as high income countries (HICs), respectively. In general discussions, the Bank used the term “developing economies” to denote the low and middle income countries.

Apparently, there are 53 LICs, 55 LMCs, 41 UMCs and 60 HICs in 2007’s classifications. Among them, I would like to choose Burma (Low income country) and Malaysia (Upper Middle Income Country) for comparative analysis by using the economic and social indicators.

Overview of the countries

Burma (also known as Myanmar) is one of the largest countries in South East Asia and 132 ethnic groups make up the population of around 50 millions. Due to the natural disasters, civil wars and poor economic policies, it has become one of the region’s poorest countries. According to the World Bank estimates, approximately one in four households live below the poverty line.

In contrast, Malaysia has a multi-ethnic and multi-cultural population that enjoys a good standard of living and gives high priority to education and healthcare. It has reduced income inequalities and sustained the rapid economic growth for more than 30 years.

Structure of economies

Todaro (1997) mentioned eight critical components to portray the structural diversity of the developing countries. These include

1. The size of the country
2. Its historical and colonial background
3. Its endowments of physical and human resources
4. Its ethnic and religious composition
5. The relative importance of its public and private sectors
6. The nature of its industrial structure
7. Its degree of dependence on external economic and political forces
8. The distribution of power and the institutional and political structure within the nation (Todaro, 1997:32)

By examining each component, I would like to analyze the similarities and differences between the structure of economies of Burma and Malaysia.

(i) The size of the country

The physical size of the country and the size of its population are important to determine the country’s economic performance. As endogenous growth theory associated market scale with the emergence and application of innovation, the scale of the economy has become a prominent factor to explain technological progress and size became important when increasing returns to scale. If countries are only imperfectly integrated with world markets, country’s size may be matter. (Saldanha & Tavares, 2001:276)

Malaysia is situated in Asia Pacific Region and the sheer physical size of the country is 127,355 square miles residing 25.3 millions people. Similarly, Burma is situated in Asia Pacific Region and the physical size is 261,218 square miles residing 50.7 millions people. In general, Malaysia is more integrated with the world economy than Burma. Malaysia has a free market economy since independence in 1957, while, Burma only used the open door policy for foreign investment after 1988.

(ii) Historical and Colonial Background

The colonial legacy of the country contributed to the political, economic and institutional structures of the economy. Actually, the laws and institutions inherited from colonial powers were often designed to exploit ethnic, religion and ideological differences leading to civil wars, conflicts and turmoil (McCoy, 2001)

Both Burma and Malaysia have British colonial legacies and experienced ethnic and religious conflicts during the post-colonial period. Federation of Malaysia gained independence in 1957 and Malaysia was founded in 1963. Similarly, Burma gained independence in 1948 after seven decades of British colonial rule.

(iii) Physical and Human Resources

Alfred Marshall, the first author of a major principles book that characterized the economic problem as being man over nature, declared as “although nature is subject to diminishing returns, man is subject to increasing returns---“. It can be therefore claimed that a country’s economic performance is influenced by both natural resources and human resources.

For Burma, it is endowed with abundant natural resources. The logging of teak and other hardwood and the mining of precious gemstones contribute significantly to GDP. Other major economic activities include manufacturing, with an emphasis on heavy industrial production. The major exports include rice, timber and wood products (especially quality hardwood), petroleum and various minerals and precious gems. Energy production is an increasingly important activity and several foreign companies are engaged in oil exploration and hydroelectric projects. (Tan, 1999)

For Malaysia, it is well-endowed with physical resources in areas of agriculture, fisheries and minerals. It has become the star economy in South East Asia with extensive deposits of hydrocarbons, natural gas, tin, copper, bauxite, coal and uranium. The major exports include palm oil, tropical hardwoods and rubber. (Islam & Chowdhury, 1997)

In the light of human resources, a range of diverse issues such as population growth, nutrition, health and education contributed to human capital investment. Universal primary education was achieved by Malaysia by 1990. The reduction in child and maternal mortality has been exceptional and a well - developed primary health care system including substantial investments in reproductive health service and access to quality water, sanitation and nutrition was attributed. (UNICEF, The Big Picture) In contrast, universal primary education has not achieved in Burma yet as well as ill-infrastructure to develop human resources. In addition, primary health care system and education systems have major weaknesses and failures due to inadequate resources.

(iv) Ethnic and Religious Composition

Ethnicity and religion play an important role to portray the structure of the economies and development efforts because ethnic and religious diversities often lead to conflicts, violations and even civil wars. Even there is no physical conflict; researchers claimed that indigenous people have lagged behind other groups in measuring economic and social progress. Being indigenous makes it more likely that an individual will be less educated, in poorer health, and in a lower socioeconomic stratum. (Lee, 1993)

From ethnic perspectives, there are eight major ethnic groups and 134 so-called national races in Burma. For the matter of religious diversity, Burma has large communities of Christians, Hindus and Muslims although the majority of the people are Buddhists. Although considerable efforts were done for reconciliation among the ethnic and religious groups, the coup of the military regime in 1962 slid a country’s disorder and several unsavory features pertinent to the ethnic and religious minorities. (Matthews, 2001)

However, ethnic and religious diversity does not lead to inequality or instability if there is a successful economic and social integration effort in diverse society. Malaysia is a good instrumental case. Among the 25 millions of population, 51 percent of the population is Malay, all of whom are Muslims. Chinese make up 26 percent of the population, most of whom are Buddhists combining Taoist and Confucian practices, while a small number identify as Christian. Indians comprise 7 percent of the population of which most are Hindu with a small minority of Sikhs, Muslims and Christians. Various ethnic groups, such as different indigenous groups mostly situated in the Borneo region, and Eurasians and migrants workers, most of whom are Indonesians, make up the remaining 16 percent of the population (Peletz 2005, p.243). The New Economic Policy (NEP) in 1969 aimed to accelerate the process of restructuring Malaysian society to correct economic imbalance, so as to reduce and eventually eliminate the identification of race with economic function. (Government of Malaysia, 1971:1) Certainly, malaysia took unprecedent steps to overcome the ethnic inequalities and improve the welfare of Malaysians.

(v) Importance of the Public and Private Sectors

The degrees of ownership in public and private sectors play an important role for economic development. Public-sector activities and state-owned enterprises has led to widespread economic failures in most low income contires. As a result, a centerpiece of reform efforts during the 1980s was to privatize the public-sector enterprises. (Mier, 1995)

Within the private sectors itself, the degree of foreign ownership also play as an indicator to determine the economic performance of the country because it can create more economic opportunities in developing countries.

For Malaysia, it has implemented many different private sector participation models under its Privatization Master Plan while Burma opted the state-owned enterprises under the military regime. Under the policy of ‘Burmese way to Socialism’, foreign investment and privare sectors were not encouraged that leads to an economic downturn in Burma. (Trager, 1967)

(vi) Industrial Structure

The levels of economic development is largely influenced by the degree of interdependence among the industiral structures. Three main types of industrial structures include primary sector (agriculture, forestry and fishing); secondary sector (manufacturing) and tertiary structure (commerce, finance, transport and services). In fact, low income countries depend heavily on industrial imports and have primary sector industrial structure. (Syrquin, 1988:234)

The rapid structural chage during the two decades of 1980s and 1990s has transformed Malaysia from a primary producing country to a next-tier newly industrialising economy. On the other hand, industry in Burma lags well behind that of its neighbors largely because of double standards, military meddling, and stiffer US economic sanctions. (Zin, 2003)

(vii) External Dependence: Economic, Political & Cultural

The development level of the economy is also affected by its degree of dependence to foreign nations in terms of politics, economics and culture. Dependency theory claimed that developing countries are locked into a stagnationist positions as suppliers of primary products for the core economies. (Dicken,1986). However, external dependency is not only shaped by the economic situations but also the political and cultural aspects.

In the case of Malaysia, it underwent a rapid structural change of the economy from primary producers to secondary producers during the 1970s and 1980s. As a result, it has become one of the industrialized economies in the region during 1990s. Today, its industrialization process highly depends on imported capital and intermediate products. The inflows of foreign direct investment also play a significant role and due to political and macroeconomic stability, foreign investment rapidly increased after 1989.

On the contrary, the inflow of foreign investment is seriously affected by the political and macroeconomic instability. Fluctuations in exchange rates, state interventions in business sectors and human rights problems cause lack of motivation for transnational businesses to invest in Burma.

(viii) Political structure, Power & Interest Groups

Effective structural change for economic and social development requires either the support of ruling elites or the power of that elites are offset by more powerful democratic forces. (Todaro, 1997) Although it used to be argued that there must be a cruel choice between rapid expansion and democratic processes (Bhagwati, 1966), cross-country studies were able to demonstrate a positive correlation between levels of economic development and stable democracies. (Lipset, 1959). In judging economic development it is not adequate to look only at the growth of GNP-----we have to look also at the impact of democracy and political freedoms on the lives and capabilities of the citizens. (Sen, 1999)

In the case of Malaysia, it is a parliamentary democracy with a figurehead monarch and an executive parliament elected by popular votes. Following the race riot in 1969, the reassessment of the issues led to New Economic Policy (NEP) to be implemented.

On the other hand, Burma is ruled by a military regime since 1962 and high levels of military expenditures and lack of political and civil freedoms limit the capabilities and welfare of the citizens.

(to be continued)