UNIVERSITY OF THE PHILIPPINES –MANILA

COLLEGE OF ART AND SCIENCES

MASTER OF MANAGEMENT

Assignment No. 2

Economic Analysis of Myanmar, Japan and the Philippines

BM 201 – Economic Analysis

SECTION: HJL

Submitted by:

Soriano, Philippe Yzrael G.

2017-45056

Submitted to:

Prof. Rommel Linatoc MA, MMDM, PhD

September 5, 2018
Economic Analysis of Myanmar, Japan and Philippines

In studying macroeconomics, the single most important concept is the Gross Domestic
Product (GDP). GDP is the name that was given to the total market value of the final goods and
services produced within a nation during a given year. GDP equals the total production of
consumption and investment goods, government purchases, and net exports to other lands
(Sameulson & Nordhaus, 2010).

Having been used as the measuring rod of money to the diverse goods and services that a
country produces with its land, labor, and capital resources, GDP’s most important purpose is to
measure the overall performance of an economy.

This paper will analyze three economies in East Asia. This includes the GDP of Japan,
Myanmar and the Philippines. The analysis will be done by first obtaining charts and data of the
country’s historical GDP from 1995 to 2015, then certain points, years or periods were chosen to
explain the reasons as to how that country was able to obtain that GDP for that specific period or
year.

I. Myanmar’s GDP

Myanmar’s 676,000 square kilometers land area straddle the Indian subcontinent to the
west, the People’s Republic of China (PRC) to the northeast, and Southeast Asia to the east. Its
61 million people are among the world’s most ethnically diverse, with more than 135 ethnic
groups. With an abundant natural and agricultural resources, a large offshore deposit of natural
gas, arable lands and teak forests, Myanmar poses a strong potential in terms of its economic
growth.

A. Brief Historical Background of Economy

In the 1940, Burma (now Myanmar) is one of the wealthiest countries in southeast asia.
During its 50 years since independence, there have been five instances of double-digit GDP
growth: twice in the 1950s (1950 and 1956) and three times in the 1960s (1962, 1964 and 1967).
In all these instances, a double-digit growth year has always been either immediately preceded
by or immediately followed by a negative-growth year. For instance, real growth of 12.9 per cent

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Economic Analysis of Myanmar, Japan and Philippines

in 1950 was preceded by a 10 per cent real GDP decline in 1948 and a further 5 per cent fall in
1949. Similarly, 13 per cent growth in 1962 was followed by a decline of 6.1 per cent in 1963.
For three decades preceding the fiscal year 1999/2000, there had not been a single instance of
double-digit real GDP growth (Wilson & Skidmore, 2010)

Table 1 summarizes how real GDP growth and the GDI/GDP ratio have changed in
Myanmar in the past five decades and in the early years of the new millennium.

Table 1: Myanmar: real GDP growth rates and the GDI/GDP ratio,
1950/51–2004
Fiscal years Average GDP growth rate (%) Average GDI/GDP ratio (%)
1950/51–1959/60 5.8 18.9
1961/62–1970/71 3.5 12.2
1970/71–1979/80 3.9 12.8
1980/81–1989/90 1.9 16.1
1990/91–1999/2000 6.1 13.6
1999/2000–2004/05 12.6 11.8
Table taken from (Wilson & Skidmore, 2010)

In table 1, we can say that in the 1950s, with an average annual growth rate of about 6 per
cent, Myanmar was not a least-developed country. However, policies and management styles,
such as the change of government into a command-style economic management under military
rule in the 1960 and 70s by Prime Minister U Nu who embarked upon a policy of nationalization
and self-imposed isolation, had turned the Myanar’s economy into deterioration. Things got into
worst by the 1962 burmese coup d’etat which was followed by the economic scheme called the
‘Burmese way to socialism’, Real GDP growth was reduced to 3–4 per cent per annum, while the
GDI/GDP ratio fell to between 12 and 13 per cent. (Wilson & Skidmore, 2010).

In the next two decades (the 1960s and 1970s), as a consequence of command-style
economic management under military rule by Prime Minister U Nu, the country embarked upon
a policy of nationalization and self-imposed isolation the economy deteriorated. Things got into

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Economic Analysis of Myanmar, Japan and Philippines

worst by the 1962 burmese coup d’etat which was followed by the economic scheme called the
‘Burmese way to socialism’, Real GDP growth was reduced to 3–4 per cent per annum, while the
GDI/GDP ratio fell to between 12 and 13 per cent. (Wilson & Skidmore, 2010)

In 1987, Myanmar applied for and was granted ‘least-developed country’ status by the
United Nations. And in 1988, a new regime came to power and Myanmar abandoned the
‘Burmese way to socialism’ and adopted a ‘market-oriented’ approach for the country to become
a ‘modern developed nation’. (Wilson & Skidmore, 2010)

At the time when the military regime took power in 1988, the economy was in an
extremely bad shape, having suffered severe declines for three consecutive years from 1986 to
1989. The economy was in near collapse as a result of mismanagement, sanctions, runaway
inflation, and a lack of foreign investment. Industries like tourism and textiles were sluggish.
There was growing government deficient, shortages of energy supplies, and shortages of foreign
exchange. The government took urgent reform measures to halt the decline, spur a recovery and
stabilize the economy in the period from 1989 to 1992.

B. Myanmar’s Economy from 1995 to 2015

A claim could be made that economic reforms in the first half of the 1990s that enabled
the country to attain a respectable 6 per cent growth in this decade. By retreating from
totalitarian socialism, the private sector has allowed and was able to expand some foreign
investment.

During this period, the military government of Myanmar, like China and Vietnam,
introduced market reforms. This was done by introducing market economy reforms while
keeping a repressive government wherein small-scale capitalism was “tolerated” and foreign
investment was welcomed albeit with strings attached. (Head, 2007)

According to Head (2007), “the military tried opening up the economy to market forces
and foreign investment, but it never was willing to release its grip on crucial areas of the
economy. Imports and exports required licenses, confronting entrepreneurs with mountains of

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Economic Analysis of Myanmar, Japan and Philippines

red tape, and opening opportunities for corruption. The trade in rice was entirely controlled by
military-connected companies. Internal transport was hobbled by poor infrastructure and
frequent military bans on access to troubled areas. Many commodities are subsidized, but
available in very limited quantities. There was an official exchange rate for the local currency,
the kyat, which is 200 times lower than the black-market rate. Add to that the fact that more than
half the annual budget went to the armed forces, and that Burma was subject to strict sanctions
by the United States and the European Union. The spending of hundreds of millions—perhaps
billions—of dollars on a secretive new capital city hacked out of the bush didn’t help matters.

In 1991, as soon as a measure of economic stability was restored, Myanmar formulated a

Short Term Four Year Plan (1992-1996). On this plan, a special focus was given to the
enhancement of production, especially in agriculture and export industries.

In 1995, Myanmar’s economy has improved. Infrastructures and expensive hotels were
built, and new office buildings were erected. But for the most part the reforms seem to have only
made the rich richer; little money trickled down to the ordinary people. As seen on Table 2,
Myanmar’s economy grew as compared to their economy’s performance from the previous
years. However, as their economy grew, their inflation rate has also increased. Inflation ran
between 30 and 45 percent a year. The government printed money to pay soldiers and
bureaucrats. The prices of essentials such as rice and cooking oil have risen dramatically. Food
prices rose 400 percent between 1988 and 1995.

In 1996, sanction were placed on Myanmar by a number of countries after Aung San Suu
Kyi was imprisoned. Many foreign investors pulled out after only a couple years of investment
and new investment didn’t materialize. Construction slowed down because builders could not
pay their workers while professionals, intellectuals and technocrats fled the country for
opportunities outside Myanmar. In the summer of 1996, the government banned nonessential
imports and foreign capital from flowing out of the country. This generated a lively black
market, thus, a runaway in inflation continued. (Hays, Economic History of Myanmar, 2013)

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Economic Analysis of Myanmar, Japan and Philippines

Table 2: Myanmar: GDP at 1985/86 constant prices, and GDI as a ratio of GDP, 1990/91–
1999/0
GDP change from
Fiscal year GDP (million kyat) GDI/GDP ratio (%)
previous year (%)
1990/91 50 260 2.8 13.4

1991/92 49 933 –0.7 15.3

1992/93 54 757 9.7 17.6

1993/94 58 064 6.0 12.4

1994/95 62 406 7.5 12.4

1995/96 66 742 7.0 14.2

1996/97 71 042 6.4 12.3

1997/98 75 123 5.7 12.5

1998/99 79 460 5.8 12.4

1999/00 88 157 10.9 13.4

Total 61.2 135.9

Average 6.1 13.6

Table 2 taken from (Wilson & Skidmore, 2010) from Myanmars Central Statistical Organisation
1995, 1997 and 2003, Statistical Yearbook

According to official statistic the economy in Myanmar grew 10.9 percent in 1994, but
analysts estimate that a more accurate figure was probable 4 or 5 percent. Growth in fiscal year
1993-94 was 6.0 percent. In 1994-95 it was 7.5 percent. In 1995-96 it was 7.0 percent. (Hays,
2013)

The government of Myanmar formulated a Five Year Plan spanning 1996 to 2001 with
more specific targets, priorities and strategies. Average annual growth rate in real terms of Gross
Domestic Product was targeted at 6 percent.

During 1996-97, the GDP grew by 6.4 percent. The financial crisis in Asia in 1997-98
resulted in a 5.6 percent reduction of foreign investment. Overall Myanmar was less impacted by

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Economic Analysis of Myanmar, Japan and Philippines

the crisis than other Asian nations. Growth was 4.6 percent in 1997-98. By 1998/99, the
economy bounced back, with growth of 5.7 percent. (Hays, Economic History of Myanmar,
2013)

It can be said that Myanmar’s economy largely stagnated since 1997 due to poor
macroeconomic management, large public sectors debt, economic sanctions, and a sharp decline
in foreign investments (Park, 2014)

In 1998-99, trade with Asian countries accounted for 71.9 percent of total exports and
93.9 percent of total imports. “Exports and imports increased during 1988-89 and 2000-2001,
with an increase from $320 million to $1.97 billion for exports and an increase $541 million to
$2.48 billion for imports. Myanmar’s trade was mainly with Asian countries” (Hays, Economic
History of Myanmar, 2013).

In the early 2000s inflation was running at 60 percent, foreign investment had largely
dried up and the value of the kyat quickly lost its value against the dollar as the government
printed more money. On this year, myanmar experienced a banking crisis in the early 2000s that
it never really recovered from. Three banks completely collapsed and policies by the Central
Bank, such as recalling loans from borrowers, made the situation worse. The state of the
economy sometimes seem to be guided by what was happening to Aung San Suu Kyi. While
this was happening the Myanmar government was boasting of economic growth of 10.9 percent
in 1999-2000 and formulated a third five-year short term plan (2001-2006) with an eye to future
economic growth and a targeted average annual growth rate of 6 percent. (Hays, Economic
History of Myanmar, 2013)

In 2002, the economy went through a crisis when account holders withdrew money from
Myanmar’s 20 private banks after the collapse of about a dozen private financial institutions.
Also on this year, Aung San Suu Kyi. was released in May of 2002, prompting the value of the
kyat shot up 30 percent. (Head, 2007)

In 2003, there was another, more serious run on the banks. This time it was prompted by
a statement by the governor of Myanmar’s central bank that there was nothing to worry about,

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Economic Analysis of Myanmar, Japan and Philippines

however people take this words with real meaning that there was something to worry about.
Many people tried to withdraw their money that the government had to limit withdrawals from
bank accounts to around the equivalent of $1,000. This banking crisis was believed to have been
the result of the collapse of some shady schemes. According to government figures inflation fell
from 54 percent in 2002 to 8 percent in 2003 due to a banking crisis. Myanmar’s ability to grow
was hampered by China’s ability to attract most of the foreign investment that flowed into Asia.
(Hays, Economic History of Myanmar, 2013)

In 2004, Burma's gradual retreat from contact with the outside world began. This was
triggered when Than Shwe fired his prime minister, Gen. Khin Nyunt, and ordered his arrest,
ostensibly for corruption. While Khin Nyunt had been head of military intelligence, some Asian
governments regarded him as a moderating force on the issue of democratic change. (Sipress,
2005)

In 2005, the escalating fuel prices have stoked inflation, now running as high as 40
percent annually, up from about 10 percent in 2004. Sipres (2005) wrote that “without advance
notice or explanation, the government slashed fuel subsidies, hiking gasoline prices by nine
times, and then boosted bus fares by as much as five times, forcing many day laborers to stay
home rather than look for work. But as this were happening Rangoon's markets still teem. Store
shelves are heavy with cheap goods from China and Thailand. Crowds of peddlers, hawking
shoes, shortwave radios and pirated software, make the sidewalks a maze, and the narrow aisles
of the traditional meat and vegetable markets are clotted with shoppers.”

By the end of 2006, prices of basic commodities began rising sharply in Burma. Food
prices all went up by around 30-40 percent. “For a population that on average spends 70 percent
of its income on food, this was very difficult to absorb. It is not clear why this happened, but the
inherent distortions and rigidities in the military's economic management can easily lead to
sudden bottlenecks in the supply and prices of basic necessities. A decision to raise admittedly
paltry civil service salaries by up to 1,200 percent in 2006 did not help either.” (Head, 2007)

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Economic Analysis of Myanmar, Japan and Philippines

Head (2007) further noted that “Then came the rise in fuel prices on 15 August. There
was no warning. Gas prices rose by 500 percent, and diesel - which more or less powers
everything in Burma, from transport to the essential generators - doubled in price. The impact
was immediate. People could not afford to go to work, and the increased cost of transport started
pushing food prices even higher. Within days activists were out on the streets in protest.”

In 2007, China and India attempted to strengthen their ties with the Myanmar for
economic gains but many nations, including the United States and Canada, and the European
Union, imposed investment and trade sanctions on Burma. While the United States had banned
all imports from Burma direct foreign investment poured in to the country from China,
Singapore, South Korea, India, and Thailand. Also in this year, there were large anti-government
protests in Myanmar that brought 100,000 people into the streets of Yangon and resulted in a
crackdown that left dozens dead and over 3,000 people were arrested. The unrest began with
protests over a sudden hike in fuel prices. (Hays, Economic History of Myanmar, 2013)

The Washington Post (2009) reported that “[In 2009] The current crisis grew out of
protests against an overnight fuel price hike of 66 percent. As the generals and their allies raked
in higher profits from exports of oil and natural gas, they rationed fuel supplies for everyone else.
Under strict government quotas, private vehicles are allowed 2 gallons a day in the country's
principal city, Yangon, while those in Mandalay, the second-largest city, receive half that
amount. Drivers who can afford to buy are turning to the black market. There they can buy as
much as they need, at just over $2 a gallon, 75 percent above the government-set price. Sharply
higher fuel costs are driving up inflation, which is the highest in Asia at more than 35 percent,
according to the International Monetary Fund”

In 2010, ahead of a parliamentary election in Myanmar, a shift in the economic landscape

had been noted. This includes “privatisations of state firms and properties, sell-offs of assets
including ports, factories and cinemas, four conglomerates on international sanctions lists and
run by junta-friendly tycoons have been given licences to start up new banks” (Hays, Economic
History of Myanmar, 2013). On this same year, Aung San Suu Kyi was released from detention.
(Davies, 2010)

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Economic Analysis of Myanmar, Japan and Philippines

Since the return of civilian rule in 2011, the new government has launched impressive
reforms. Focused initially on the political system to restore peace and achieve national unity and
moving quickly to an economic and social reform program. However, even if “Dollars are
pouring into Myanmar's fragile and largely opaque economy, with foreign investors keen to tap
its vast resources and visiting traders buying up gemstones. But most of that money ends up
lining the pockets of cronies of the military dictators who controlled the country for decades.”
(Tun, 2011)

In November 2015, the first free general elections since the 1990 elections was done,
resulting in a victory for the National League for Democracy (NLD). The NLD formed a new
government in 2016 with Htin Kyaw as the first non-military president since 1962, and with
Aung San Suu Kyi in the newly-created position of State Counsellor (Stokke, Vakulchuk, &
Øverland, 2018)

Park (2014) stated that in 2012, Myanmar’s gross domestic product in current US dollars
was estimated at $56 billion making per capita income at $876. This value is considered as one
of the lowest in Asia.

Today after almost 50 years of military dictatorship, Myanmar has become one of the
fastest-growing economies in Southeast Asia, with average economic growth of 7.5% during the
period 2012–2016; this is expected to continue for several years. One explanation of the rapid
economic growth is the country’s young population, which helps ensure high growth in
consumption and incomes during the period 2015–2025 (Stokke, Vakulchuk, & Øverland,
February 13, 2018).

At present, according to The World Bank/Myanmar (2018), “Myanmar is a lower-middle

income economy with a GNI per capita of $1,455 in 2017. It is one of the fastest growing
economies in the East Asia and Pacific region and globally with a GDP growth rate for
2016/2017 at 6.4 percent and is expected to remain the same in 2017/18, growing to 6.7% in
2018/19 and 7 percent in 2019/2020. Its economy is mainly driven by services, industry and
agriculture.”

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Economic Analysis of Myanmar, Japan and Philippines

Growth may be hampered by challenges including the ongoing and incomplete peace
process with multiple ethnic armed organizations and the crisis in Rakhine State. The country
must continue to improve its investment climate, banking sector and strengthen its
implementation capacity on major reform programs.

Figure 1: Economic Indicators of Myanmar from 19802 to 2013

Citing the recent Myanmar-World Bank joint poverty analysis, The World
Bank/Myanmar (2018) stated (as shown on the above table) that “poverty in Myanmar has
declined from 44.5% in 2004 to 37.5% in 2009/10 and 26.1% in 2015. However, even if there is
a remarkable decline, poverty remains substantial, especially in rural areas where people rely on
agricultural and casual employment for their livelihoods. “

Furthermore, The World Bank/Myanmar (2018), states that “among ASEAN countries,
Myanmar has the lowest life expectancy and the second-highest rate of infant and child
mortality. Based on the study in 2014 by their Population and Housing Census, Out of every 100
children, 6.2 die before their first birthday and 7.2 before their fifth. The school dropout rate is
high, especially in rural areas where 6 out of 10 children who start grade one dropout before the
end of middle school; among the poorest families, this figure is 7 in 10.”

In concluding their overview report, The World Bank/Myanmar (2018) noted that
“Access to basic infrastructure and services remains a challenge in both rural and urban area”
this is due to the fact that only one-third of the population has access to the national electricity

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Economic Analysis of Myanmar, Japan and Philippines

grid, while road density remains low at 219.8 kilometers per 1,000 square kilometers of land
area. However, with the recent liberalization of the telecommunications sector, mobile and
internet penetration has increased significantly from less than 20% and 10% in 2014, to 60% and
25% respectively in 2016”.

II. Japan’s GDP

Japan has one of the largest and most prosperous economies in the world. As of 2013, it
had the third largest economy in the world by nominal gross domestic product (GDP), the fourth
largest by purchasing power parity (PPP) and was the second largest developed economy overall.
Japan is a member of the Asia-Pacific Economic Cooperation (APEC), the World Trade
Organization (WTO), the Organization for Economic Co-operation and Development (OECD),
G-20, G8, and several others. (EW World Economy Team, 2013)

Figure 2: GDP Growth Rate of Japan from 1981 to 2016

A. Brief Historical Background of Economy

After the World War II, Japan ignored defense spending to allow rapid economic growth.
They referred this growth as the Japanese post-war economic miracle.

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Economic Analysis of Myanmar, Japan and Philippines

Surrendering to the United States and its allies in 1945, Japan’s economy and
infrastructure was revamped under the S.C.A.P (Supreme Commander of the Allied Powers)
Occupation lasting through 1951. A variety of Occupation-sponsored reforms transformed the
institutional environment conditioning economic performance in Japan. These includes, the
liquidation of the major zaibatsu by the Holding Company Liquidation Commission; land
reforms that wiped out landlordism and gave a strong push to agricultural productivity through
mechanization of rice cultivation; and collective bargaining was given a guarantee of
constitutional legality. Finally, education was opened up, partly through making middle school
compulsory and the creation of national universities in each of Japan’s forty-six prefectures.
Additionally, tension between rural and urban Japan through land reform and the establishment
of a rice price support program was resolved. This guaranteed farmers incomes to be comparable
to blue collar industrial workers. (Ohno, 2006)

Enhanced by the new international economic order, and its access to American
technology bolstered through its security pact with the United States, Japan experienced the
dramatic “Miracle Growth” between 1953 and the early 1970s. Striking in the Miracle Growth
period was the remarkable increase in the rate of domestic fixed capital formation, the rise in the
investment proportion being matched by a rising savings rate especially that of private household
savings. (Mosk, 2004)

There were two major economic shocks in the 1970s which were common to all
countries: the oil shocks and the beginning of general floating of major currencies (Ohno, 2006).
The oil shock was due to the dramatic rise of oil prices in 1973 by the organization of Petroleum
Exporting Countries (OPEC) while the floating of major currencies was due to the
announcement of US president’s Richard Nixon that the US dollar will no longer be fixed to
gold.

B. Japan’s Economy from 1995 to 2015

The 1990s is sometimes called the Lost Decade for Japan because the Japanese economy
entered a long period of deflation and recession. Growth slowed down and sometimes became

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Economic Analysis of Myanmar, Japan and Philippines

even negative. For the first time in the postwar period, prices declined persistently. Economic
statistics remained gloomy and producers became extremely pessimistic. Up to the early 2000,
japan experienced bad economic conditions due to the global IT recession and terrorists impact.

With a GDP figure in 1995 of $5,449,118 million the Gross Domestic Product of Japan
grew 1.9% in 1995. This rate is 5 -tenths of one percent less than the figure of 2.4% published in
1994. (The country economy, n.d.)

In 1995, the bank of Japan implemented a new monetary policy to combat deflation. This
policy, dubbed as “Yield-Curve Control”, allowed the central bank to keep a 10-year government
bond yield at zero thus, steepening the yield curve and increasing the difference between the
yields of short-term bonds (negative in Japan) and long-term bonds. By fixing the bond yield at
zero, Japans commercial banks are expected to free more money for investment. (Takayama,
2016)

In 1996, Japan went into a recession, which was exacerbated by the state policy to cut
public spending, reinforce the monitoring of bank loans, and increased taxes, leading to even less
spending. “The “big bang” reform of the banks in 1996 involved the following changes: limiting
budget deficits to 3 percent of the GDP till 2003, reducing the national debt by 4.3 trillion yen,
raising the consumption tax from 3 to 4 percent, withdrawing personal income and property tax
relief (1994–96). However, by strengthening the banks’ monitoring of loans, the 1996 reform
actually worsened the economic recession by cutting down on spending.” (Takayama, 2016)

According to Japan Macro Advisors (2018), Japan’s GDP has been on a declining trend
since 1997. The decline is due to low real growth (0.6% per year on average between 1997-2012)
and outright deflation (-1.2% per year on average between 1997-2012). The reason behind this is
that, in 1996 Japan’s real growth registered 3.5 percent which was highest among the G7
countries. This period also coincided with the relatively weak yen, which was good for Japanese
exporters. But in April 1997, the Hashimoto Cabinet, backed by the Ministry of Finance’s desire
to restore fiscal soundness, raised the general consumption tax from 3 to 5 percent. The economy

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Economic Analysis of Myanmar, Japan and Philippines

weakened immediately and towards the end of 1997, a number of major financial bankruptcies
occurred.

From 1997 to 1998, banks and consumers preferred holding cash to investments because
banks tightened the monitoring of performance. Short of credit, many companies went bankrupt.
The reduction of government spending and banking reforms led to deflation. (Japan's recent
economic decline, 2002)

The Gross Domestic Product of Japan fell -0.2% in 1999 compared to 1998. “This rate is
0 -tenths of one percent higher than the figure of -2% published in 1998. In terms of figures, the
GDP was $4,562,078 million, leaving Japan placed 2th in the ranking of GDP of the 195
countries that we publish. The absolute value of GDP in Japan rose $529,568 million with
respect to 1998”. (The country economy, n.d.)

In 1999, the Bank of Japan instituted a 0 percent short-term interest rate policy to ease the
money supply, at the same time the government poured 7.5 trillion yen in public funds into 15
major banks. As a result of these measures and with the growing demand for Japanese products
in Asia, in late 1999 and 2000 signs of recovery were shown, such as increasing stock prices and
revenue growth in some industries. (Japan Economic Reforms, n.d.)

The government of Prime Minister Junichiro Koizumi in 2001 tried to push economic
reforms. These include privatization of post offices, putting a stop to over-generous highway
construction, pension reform, local government reform, and bank reform. Japan Economic
Reforms (n.d.) stated that “In 2001, however, the economy slid back into recession because of
domestic problems--- sluggish domestic demand, deflation, and the continuing huge bad-debt
burden carried by Japanese banks---as well as international factors that included a decline in
Japanese exports due to deterioration of the U.S. economy.”

According to an article entitled, Japan’s economic decline (2002), “The government’s

continued protection of some large banks from collapsing, particularly the banks helping the
smaller companies, and its protection of companies (e.g., department stores) to keep them from
going bankrupt, perpetuates the existence of bad loans that prevent further economic

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Economic Analysis of Myanmar, Japan and Philippines

development. Some companies have been allowed to go bankrupt, but some 17 million people
are artificially kept on the payroll to prevent bankruptcies of their companies. “

The government is loaded with tremendous debt because of the recession. Its constant
decisions to cut spending are said to perpetuate the deflation, a result of the lack of consumer
spending.

Japan Economic Decline (2002) also said that “many companies’ decisions to relocate to
other countries (e.g., China), where the average worker’s pay is one twenty-fifth of that of the
Japanese worker, only exacerbates the domestic economic woes. Many Japanese university
graduates find it hard to find full-time jobs, and some have decided to work at temporary or part-
time jobs for life, which only contributes to lower levels of consumption at home.”

In 2003 and 2004, economic indicators began to pick up and momentum for reforms was
revived.

Quoting Japan Economic Reforms (n.d.) the “Growth was 2.7 percent in 2005 and 2.1
percent in 2006 and 2007. The expansion was led primarily by robust domestic demand and trade
with China. This was seen as a sign that recovery was for real. Japanese banks had better shape
as a result the strong economy and their success shedding bad loans. In May 2005, seven major
banks said they had met government targets in slashing bad loans and making healthy profits. In
2006, the stock market soared to six-year highs, land prices increased for the first time in more
than a decade and deflation was declared all but dead.”

In March 2008, “the dollar broke the ¥100 mark, dropping as low as ¥95 at one point, for
the first time since 1996. By then Japanese economy was beginning to falter and growth was
slowing due to high inflation fanned by huge energy and commodity costs. Inflation rose at their
highest rate in almost a decade. Stocks fell. Consumer spending was down. Housing starts to
plummet while Foreign reserves fell.” (Japan Economic Reforms, n.d.)

When Shinzo Abe was elected as Prime Minister of Japan in 2011, he set out a series of
economic policies, dubbed “Abenomics”, to try and promote private investment, reviving the

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Economic Analysis of Myanmar, Japan and Philippines

national economy. “Another aim in Abenomics is to correct excessive yen depreciation, however
this hasn’t proved successful yet. After Abe nominated Haruhiko Kuroda as the new governor of
the Bank of Japan in 2013, the yen depreciated drastically. In 2011, the exchange rate between
US dollar and Japanese yen was almost 76 yen to 1 US dollar, after Kuroda’s nomination, it went
above 100 yen to 1 US dollar.” (Japan Macro Adivsors , 2018)

Japan’s GDP was 475.7 trillion yen in 2012. Using the average USD/JPY rate of 79.8 for
2012, it translates into 5.96 trillion USD, placing Japan as the third largest economy after U.S.
(15.68 trillion USD) and China (8.22 trillion USD). Germany was the 4th largest with a GDP of
3.4 trillion USD. In Japan, private consumption accounts for 60.9% of its GDP, followed by
government consumption (20.5%) and private non-residential investment (13.4%). Exports and
imports account for 14.7% and 16.6% respectively. (Japan Macro Adivsors , 2018)

The annual inflation rate in 2013 was 0.36%. In 2014 it showed some promise increasing
to 2.75%. But it went back to 0.79% in 2015.

Since January 2016 the Bank of Japan has been charging a negative interest rate on a
portion of reserves that commercial banks keep with the bank. This means the central bank
charges a fee to the commercial banks, instead of these banks receiving some interest in return
for depositing money. The aim is to encourage banks to allocate money to more productive uses
for the economy, such as investing in businesses. World Bank data shows that this sort of credit
to the private sector has been going up in Japan since 2011 but there hasn’t been a noticeable
response in the economy.

At present, according to (Economics, 2018), the Gross Domestic Product (GDP) of Japan
was worth 4872.14 billion US dollars in 2017. The GDP value of Japan represents 7.86 percent
of the world economy. GDP in Japan averaged 2704.95 USD Billion from 1960 until 2017,
reaching an all time high of 6203.21 USD Billion in 2012 and a record low of 44.31 USD Billion
in 1960.

Recently, the Bank of Japan (BoJ) updated its economic projections, and now expects the
economy will expand between 1.3% and 1.5% in the 2018 fiscal year, which ends in March

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 Economic Analysis of Myanmar, Japan and Philippines

2019. In the subsequent fiscal year, the BoJ sees GDP growth between 0.7% and 0.9%
(Economics, 2018).

III. Philippines’ GDP

In the 1950s and early 1960s its economy ranked as the second most progressive in Asia,
next to that of Japan. Philippine exports consisted mainly of agricultural and mineral products in
raw or minimally processed form. In the 1970s, the country began to export manufactured
commodities like garments and electronic components. (Hays, 2015).

Figure 3: GDP Growth Rate of the Philippines from 1961 to 2015

A. Brief Historical Background of Economy

After 1965, when Ferdinand E. Marcos became president, the nation experienced
economic problems and social unrest, especially from the 1970s, when corruption and cronyism

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Economic Analysis of Myanmar, Japan and Philippines

took hold. The Philippines economy grew at a relatively high average annual rate of 6.4 percent
during the 1970s but this is financed in largely by foreign-currency borrowing. External
indebtedness grew from $2.3 billion in 1970 to $24.4 billion in 1983, much of which was owed
to transnational commercial banks (Hays, 2015)

In 1972, Marcos placed the country under martial law to stifle unrest and control
economic development. In 1981, on his third term as president, democratic institutions in the
country had severely eroded, the foreign debt ballooned, and the country's economy plummeted.
And the country has started to become the "sick man of Asia." Major economic problems during
this time includes political instability, authoritarianism, increasing foreign debt, falling
commodity prices, corporate mismanagement and vast unemployment.

In 1986, Marcos was removed from office through "People Power" revolution. Corazon
Aquino became the president, and a new constitution was approved in 1987. From a 3.5 percent
in 1986, the country’s GDP growth rate increased steadily to 4.3 percent in 1987 and peaked in
1988 at 6.7 percent. Still in 1988 the economy once again began to encounter difficulties. The
trade deficit and the government budget deficit were of particular concern. In 1990 the economy
continued to experience difficulties, a situation exacerbated by several natural disasters, and
growth declined to 3 percent (Hays, 2015).

In an analysis that was done by Nations Encyclopedia (n.d.), The Philippines adopted the
development plan that was dubbed as " The Philippines 2000" under Fidel Ramos. “Under the
plan, several industries critical to economic development were privatized, such as electricity,
telecommunications, banking, domestic shipping, and oil. The taxation system was reformed,
and external debt was brought to more manageable levels by debt restructuring and sensible
fiscal management. By 1996, GNP was growing at a rate of 7.2 percent and GDP at 5.2 percent.
The annual inflation rate had dropped to 5.9 percent from its high of 9.1 percent in 1995. By the
late 1990s, the Philippines' economic growth gained favorable comparisons with other Asian
countries such as Taiwan, Thailand, South Korea, and Malaysia.”

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Economic Analysis of Myanmar, Japan and Philippines

Furthermore, “The Philippine economy took a sharp downturn during the Asian financial
crisis of 1997. Its fiscal deficit in 1998 reached P49.981 billion from a surplus of P1.564 billion
in 1997. The peso depreciated (fell in value) to P40.89 per U.S. dollar from its previous rate of
P29.47 to a dollar. The annual growth rate of the GNP fell to 0.1 percent in 1998 from 5.3
percent in 1997. Despite these setbacks, the Philippine economy fared better than that of some of
its Asian neighbors, and other nations praised the Ramos administration for its "good
housekeeping."” (Nations Encyclopedia, n.d.)

“In 1998, Joseph Estrada was elected president. Even with its strong economic team, the
Estrada administration failed to capitalize on the gains of the previous administration. His
administration was severely criticized for cronyism, incompetence, and corruption, causing it to
lose the confidence of foreign investors. Foreign investors' confidence was further damaged
when, in his second year, Estrada was accused of exerting influence in an investigation of a
friend's involvement in stock market manipulation. Social unrest brought about by numerous
bombing threats, actual bombings, kidnappings, and other criminal activities contributed to the
economy's troubles. Economic performance was also hurt by climatic disturbance that caused
extremes of dry and wet weather. Toward the end of Estrada's administration, the fiscal deficit
had doubled to more than P100 billion from a low of P49 billion in 1998. Despite such setbacks,
the rate of GNP in 1999 increased to 3.6 percent from 0.1 percent in 1998, and the GDP posted a
3.2 percent growth rate, up from a low of-0.5 percent in 1998. Debt reached P2.1 trillion in 1999.
Domestic debt amounted to P986.7 billion while foreign debt stood at US$52.2 billion. In
January 2001 Estrada was removed from office by a second peaceful "People Power" revolution
engineered primarily by youth, non-governmental organizations, and the business sector.
President Estrada was the first Philippine president to be impeached by Congress, and his vice-
president, Gloria Macapagal-Arroyo, became the fourteenth President of the Republic.” (Nations
Encyclopedia, n.d.)

At the time of Arroyo, growth was recorded at 3.4 percent in 2001, 4.3 percent in 2002
and 4.5 percent in 2003. In 2004 the economy was hurt by high oil prices. Still more growth was
needed just to keep pace with 2.36 percent population growth rate. Inflation was less than 6

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Economic Analysis of Myanmar, Japan and Philippines

percent but the deficit grew at an alarming rate as the government spending increased and tax
revenues fell. Raising revenues became one of the main problems. In 2003, the deficit reached
$3.6 billion and debt was estimated to be over $100 billion. The government’s debt burden
reached its peak in 2004 when it settled at 74 percent of GDP. Growth in 2003 and 2004 was
around 5 percent due to rising demand for Philippines electronic exports. Growth occurred
despite continued hikes in oil and consumer prices on top of typhoons and floods. Growth was
4.7 percent in 2005. That year exports amounted to 40 percent of GDP. Many of the export items
were electronics. Two-thirds of Philippine imports are used to build exported computer parts,
disks and other electronic products made by local units of companies such as Texas Instruments
Inc. and Toshiba Corporation.

“The economy of the Philippines is hampered by huge foreign debt, a low savings rate,
inefficient tax collection, inadequate infrastructure and poor agricultural performance. The
Philippine economy is vulnerable to oil-price increases, interest-rate shifts by the U.S. Federal
Reserve, and the performance of international stock exchanges. Social factors that have a
negative impact on the economy include a high crime rate, especially kidnappings and rape,
pockets of Communist rebels in rural areas, threats from Muslim separatist movements, high
rates of poverty and unemployment, and the government's inability to begin its land-distribution
program. Environmental factors also damage economic development, including frequent
typhoons and drought. Worker productivity is adversely affected by illnesses brought on by air
and water pollution. In metropolitan Manila alone, the effect of pollution on health and labor
productivity has been estimated to be equal to a loss of about 1 percent of gross national product
annually” (Nations Encyclopedia, n.d.)

Much has changed during the presidency of Benigno Aquino and the current president
Rodrigo Duterte. At present, “the Gross Domestic Product (GDP) in Philippines was worth
313.60 billion US dollars in 2017. The GDP value of Philippines represents 0.51 percent of the
world economy. GDP in Philippines averaged 77.31 USD Billion from 1960 until 2017, reaching
an all-time high of 313.60 USD Billion in 2017” (Economics, 2018).

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Economic Analysis of Myanmar, Japan and Philippines

IV. Comparative Analysis of Japan, Myanmar and Philippines Economy

Taken from the available world bank data (see Appendix A) and placing the GDP Annual
Growth of the three countries alongside each other. We were able to come up with the following
Chart on the GDP Annual Growth rate from year 2000 to 2015.

Figure 4: The GDP Annual Growth rate of Myanmar, Japan and the Philippines from fiscal year
2000 to 2015.

Based on the figure above, we can see that there seems to be a commonality in the growth
rate (or decline) of the three economies. Most notably are the decline in 2001, the drastic
downturn in 2009, the upward point in 2010 and the drop of points in 2011.

After a period of high growth in the mid-1990s, Asia had experienced the 1997 Asian
Currency Crisis also known as the Asian Financial Crises. This crisis started in Thailand with the
financial collapse of the Thai baht after its government was forced to float their currency due to
the lack of foreign currency to support its foreign exchange rate against the U.S dollar. Even
before the collapse of currency, Thailand is already burdened by a foreign debt that made the
country bankrupt. As the crises spread, most of South East Asia including the Philippines, saw a

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Economic Analysis of Myanmar, Japan and Philippines

slump in currency while Japan was affected but less significantly as compared to its south east
asian neighbors. (Nakaso, 2015)

In 2001, slightly decline from their previous performance. This can be attributed to the
September 11 terrorist attack in U.S. wherein almost all economies in both Europe and Asia were
adversely affected by it.

The decline of the three country’s economy in 2008 through 2009, may have been caused
by the Global Financial Crisis. This crisis was triggered by the banking problem, including the
Lehman's Brothers bankruptcy filing, and the housing market bubble in the United States. This
caused a significant decline in the GDP of many economies, the majority of the which are the
European economies. In contrast, most Asian economies experienced a temporary slowdown in
their rates of economic growth, particularly Japan, South Korea, and China, but resuming their
normal growth soon after. (Havemann, 2010)

Such crisis was deeply felt by the three economies as seen on the steep decline in the
GDP per capita growth for 2009 in Figure 5.

In this same year of 2008, the trade surplus of Japan turned to a deficit. But analysts said
that Japan's problems were mostly self-inflicted and not the result of U.S. subprime loan crisis.
“The percentage of part-time workers compared to all employment has climbed from 20
percent in the early 1990s up to its highest level, more than 30 percent in 2009. Next, the
debt-to-equity ratio of the corporate sector has dropped from 4 in the 1990s to as low as 2 in
2008. Finally, the ratio of the business sector’s saving-investment balance to GDP has shown
a surplus since the late 1990s, which means that businesses have invested with their own
cash without raising funds from financial markets.” (Abe, 2010)

Although, the three country’s economy is affected by global crises, we can say that these
economies have also shown some resilience to global economic factors. According to Nakaso
(2015), “Despite the unprecedented impact of the crisis, the regional economy proved its strength
and resilience, with its foundations firmly rooted in a strong manufacturing base, as many Asian

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Economic Analysis of Myanmar, Japan and Philippines

economies soon regained the prosperous export-led recovery trail. Another more recent
illustration of this resilience is the Lehman Shock and the subsequent global financial crisis.
After the crisis, the Asian economy continued to follow a relatively high growth path.”

This can also be seen in the slight increase in the GDP Annual growth rate performance
for the year 2013.

In May of 2013, the Federal Reserve of the United States had announced that it will taper
back its bond and mortgage back it securities program. This announcement has caused a panic
among the emerging market in the United States because investors will start to buy emerging
markets thus “Emerging market economies will need to find sources of growth domestically and
will no longer be able to rely on booming global commodity and credit markets in a post-QE
world.” (Rapoza, 2014)

Overall, the decline in the economic performance of the three countries on the years of
1997, 2001, 2009 to 2011 can not be solely attributed to the effect on the movement of the global
economies. Internal factors had also contributed to this downturn. In Myanmar, the internal
banking crises and the unsurmountable surge in fuel prices have contributed to the downturn in
their economic performance leading to the fiscal year of 1998. The change in the political and
economic landscape in the years of 2010 and 2011 also brought their GDP to a slowdown.
(Park, 2014)

On the part of Japan, Through the guidance of its Ministry of Economy, Trade and
Industry, Japan was able to mark an average growth rates of 10% in the 1960s 5% in the 1970s,
and 4% in the 1980s. With these achievements, Japan was able to establish and maintain itself as
the world's second largest economy from 1978 until 2010, when it was surpassed by the People's
Republic of China. (Abe, 2010)

For the Philippines, the country fared better than some of its Asian neighbors during the
Asian Financial Crises. However, things got into worse unto the succeeding years due to issues
of cronyism, incompetence, and corruption. In the early years of 2000, the Philippine economy

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Economic Analysis of Myanmar, Japan and Philippines

was hampered by huge foreign debt, a low savings rate, inefficient tax collection, inadequate
infrastructure and poor agricultural performance. Frequent typhoon and earthquakes have also
affected the country by the years of 2010 to 2011.

Despite the economic troubles that the three countries are experiencing today, the Asian
stock and foreign exchange markets remained to be relatively resilient. Nakaso (2015) cites two
reasons. First reason is because of “Asia’s position as "the factory of the world”. This position
was achieved position achieved through the continued expansion of exports that are driven by
direct investments from abroad.

Nakato (2015) said that “Firms in advanced economies proactively engaged in strategic
global allocation of production sites in order to ensure the most efficient means of production. In
this way, these firms could not only cushion the effects of higher wages and saturated demand
for goods in advanced economies, but also reap the benefits of growing demand in emerging
economies.”

Secondly reason is because of the autonomous growth in domestic demand spurred by the
development of export industries wherein “As evidenced in the recent increase in direct
investment in the non-manufacturing sector, Asia is now recognized not only as "the factory of
the world," but is also gaining prominence as the world’s biggest "consumer base."

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Economic Analysis of Myanmar, Japan and Philippines

Figure 5: GDP Performance of Japan, Myanmar and Philippines GDP per capita growth (Annual%) from 1994 to 2017

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Economic Analysis of Myanmar, Japan and Philippines

APPENDIX A. World Development Indicators from the World Bank for Myanmar, Japan and Philippines

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