Conference: Asia and Africa in Transition

Panel: Doing Business in Difficult Times: The Myanmar Case

Convener: John Rand, Department of Economics, University of Copenhagen

Panel programme
Monday, 28 June, 13:30-15:30 (Copenhagen time/CEST), room 27.0.17
In-person presentations 

Hanna Berkel, University of Copenhagen

Informality and Firm Performance in Myanmar

Using a panel survey of enterprises in Myanmar and four formality indicators, we examine formalization effects on firm performance. We find that formalization mostly has insignificant consequences for performance. However, in some cases, we also find negative impacts of formalization depending on the indicator. Insignificant and negative findings are due to the high costs of formalization outweighing the few to non-existing benefits of formalization. To find alternatives to formalization, we compare the performance gap of formalizers and informal enterprises through Oaxaca-Blinder decompositions. If informal firms had the same size and capital, and used as many business practices as formalizers, a large part of the performance gap would close. Hence, easier access to capital could support Myanmar firms in doing business.

Neda Trifkovic, University of Copenhagen 

The governance of global value chains, the state, and small-scale processors: The case of timber in Myanmar

We use the case of the timber industry in Myanmar to analyze the role of the state in a global value chain. In doing so, we are able to understand how national regulatory framework and international ecological discourses affect forest management and small-scale processors in a supplier-driven value chain in which the state assumes the role of a lead firm. We find that the state plays two roles in the timber industry in Myanmar: it is the main producer and legal source of raw timber for the private sector; and it regulates timber extraction and the legality of operation of private sector firms. The implications of this for the private sector are twofold: a) the strict regulatory framework increases operational costs, as multiple licenses and permits are required and  b) the state-controlled supply of raw materials results in inefficiencies, such as shortage and high raw timber prices. Under these conditions, the smallholder wood industry in Myanmar is at risk of stagnating at best, if not disappearing.

Henrik Hansen, University of Copenhagen

Traditional and Modern Employee Benefits in Myanmar's Manufacturing Sector

Employer-provided benefits are aimed at attracting and retaining preferred employees, often for the benefit of both employers and employees. In Myanmar, there are two benefit systems: an unregulated traditional system where firms offer their employees in-kind benefits such as meals and accommodation, and a modern mandatory system where firms are required by law to offer payment schemes such as payment-while-absent and compensation for accidents. Using a survey of matched employers and employees in the manufacturing sector in Myanmar, we identify firms and workers that supply and demand the two types of benefits. We show that traditional benefits are widely used while modern benefits are supplied by fewer firms and provided to fewer workers. Firms that provide accommodation appear to attract young, unmarried, uneducated workers who are often migrants, and who, on average, get lower wages compared to similar workers that do not receive equal in-kind payments. Large firms are more likely to offer the modern benefits and highly educated workers are more likely to demand them. Moreover, workers who get modern benefits tend to stay longer with the firm and the benefit appears not to have an adverse impact on their wage level. Our findings indicate that both types of benefits contribute to the sorting in the labor markets. Therefore, both must be taken into account when labor laws are amended. Moreover, if increased minimum wages are accompanied by reduced provision of traditional in-kind benefits to low-wage workers then there is a real risk that inequality in consumption will increase even though wage inequality decreases.