Burma is going through a period of major political, economic, and social reform. Foreign investors from around the globe are seeking to enter a market that has been largely isolated from the world economy for over two decades. Until 2012, Burma was virtually off limits to U.S. companies due to U.S. sanctions against Burma including bans on investment, the importation of Burmese products into the U.S. and the export of financial services from the U.S. to Burma. Although non-financial U.S. exports to Burma were permitted, very little trade flowed in that direction due to the reputational risk involved in doing business in a country ruled by an oppressive military junta.
In March 2011, Burma’s military government transitioned to a nominally civilian one and initiated a series of small but significant democratic reforms which led to Secretary of State Hillary Clinton’s visit in November 2011, the first visit of a U.S. Secretary of State in more than 50 years. In April 2012, the government held a parliamentary by-election that was considered largely free and fair by the international community. In the by-election, the opposition National League of Democracy (NLD) party won 43 out of the 45 seats contested, or approximately seven percent of all seats in parliament. Aung San Suu Kyi, Nobel Peace Prize winner and head of the NLD, became a member of parliament for the first time. The Parliament is dominated by the ruling Union Solidarity and Development Party (USDP), and both the upper and lower houses of Parliament have 25% of their seats reserved for the military.
On January 13, 2012, Secretary of State Hillary Clinton announced that the U.S. would appoint an Ambassador to Burma for the first time since 1990. In May 2012, she announced that the U.S. would ease certain financial and investment sanctions on Burma in response to the historic reforms taking place in the country. On July 11, 2012, the Department of Treasury issued two general licenses which allow new U.S. investment in Burma as well as authorize the exportation of financial services to Burma. On the same day, Ambassador Derek Mitchell took up his post in Rangoon. Shortly before President Barack Obama’s historic visit to Burma in November 2012, the Administration further eased sanctions by allowing Burmese exports to the U.S., with the exception of rubies and jadeite. On the occasion of Burmese President Thein Sein’s visit to Washington, D.C. in May 2013, the U.S. and Burma signed a Trade and Investment Framework Agreement (TIFA) to promote dialogue and cooperation on trade and investment issues. The easing of sanctions is part of a broader effort to help accelerate broad-based economic growth and recognize and encourage continued political and economic reform.
Some U.S. economic sanctions remain in place, including restrictions on doing business with the military or individuals or companies on the Specially Designated Nationals (SDN) list, which is compiled and maintained by the U.S. Treasury Office of Foreign Assets Control (OFAC).
In addition to political reforms, the Government of Burma (GOB) has begun to implement more open market policies. In April 2012, it abandoned a fixed exchange regime in favor of a managed currency float. In November 2012, it approved a new Foreign Investment Law (FIL) to encourage more foreign investment, including by offering incentives to foreign companies. Between March and May 2013, it removed trade license requirements on the import and export of over 600 products. More tariff reforms are expected as Burma prepares for ASEAN free trade integration in 2015. In addition, the GOB approved legislation in July 2013 that provides for the Central Bank of Myanmar’s (CBM) autonomy in setting and managing monetary policy.
Nevertheless, poor policymaking, lack of rule of law, a heretofore stunted banking system, inadequate infrastructure, and a weak education system hold back economic growth in Burma. Political intervention, corruption, and centralized state control continue to hamper investment in some economic sectors. Although the GOB has undertaken important macroeconomic reforms, detailed information on new legislation or implementing regulations is opaque and often unavailable. The government controls extractive industries, sources of capital, educational institutions, movement of labor, and access to official information. The country’s abundant natural resources have kept production in the extractive sectors on a generally upward path, though far below potential. Production in historically strong sectors such as agriculture, fisheries, and forestry has been flat or declining due to a combination of underinvestment, low productivity, restrictive government policies, and poor macroeconomic conditions.
Burma is largely an agricultural economy. Agriculture, livestock, fisheries, and forestry account for 40-50 percent of GDP, and around 70 percent of Burma’s population relies on these sectors for their livelihoods. Beans and pulses, rice, timber, and marine products are the primary agricultural exports. Burma's mining, oil and gas, and energy sectors also supply significant exports, though revenues are opaque. The manufacturing and service sectors remain undeveloped. The informal economy is very large and includes activities from currency trading to education to commodity trade. Unrecorded border trade is very common along all of Burma’s borders. According to unofficial reports, the most commonly smuggled exports are illicit narcotics, gems and jade, and timber; the most common smuggled imports are consumer goods, medicines, vehicles and vehicle parts, electronics, fertilizer, and diesel fuel.
Growth is picking up in Burma. The IMF estimated 6.5 percent GDP growth in 2012-13 with a forecast of 6.75 percent growth in 2013 -14, driven largely by commodity exports and foreign investment. According to Burma's Central Statistical Organization (CSO), Burma ran a trade surplus in 2011- 2012 of $810 million. The largest export by value was natural gas (from two offshore foreign-operated production sites), followed by teak and hardwood, pulses and beans, marine products, garments, metals and ores, and various other agricultural products.
Burma’s major trading partners are Thailand, Singapore, China, India, Malaysia, Japan, and South Korea. In 2012, the United States exported $67.8 million worth of products to Burma, a 39 percent increase from 2011. Major U.S. exports to Burma were electrical machinery, cereals, optical and medical instruments, vehicles, and other machinery and miscellaneous items. The U.S. did not import any products from Burma in 2012 due to import sanctions which were relaxed in November that year. In the first four months of 2013, imports from Burma rose to $3.7 million.