6 - Market-Oriented Period under Military Rule, 1988–2000: Sectoral and Social Developments

Summary

“Governments must govern themselves before they attempt to govern others. Exercise of power is always a trust. If we care for long-term results, power should be used with justice and charity”.

His Excellency S. Radhakrishnan, Vice-President of India, 1956

A. Introduction

Following the introduction of the Foreign Investment Law in 1988 and the official revocation of the “1965 Law of Establishment of Socialist Economic System” in 1989, a series of liberalization measures were carried out in order to enable the transition to a market-oriented system. These definitely have a positive impact on sector-wise reforms.

But since SLORC became SPDC in 1997, there has been some back-tracking, and the government's command and control over the economy has become more pervasive. Also, sudden and arbitrary changes in policy, referred by some as “flip-flop” policy or “swing door” policy, meaning that doors tend to close immediately after they are pushed open, tend to add uncertainty to the business environment. This, together with macroeconomic instability (making up an unsound business environment), has a negative impact on sector-wise reforms.

The major economic reforms by sector may be summarized as follows:

1. • Introduction of Foreign Investment Law: enhancing development in all sectors except those reserved for the state;

2. • Industrial sector reforms: restitution of small and medium-sized establishments; transfer of management autonomy to state-owned economic enterprises (SEEs); allowing more private sector participation through the relaxation of restrictions on private investment; promotion of cottage industry; promotion of privatization;

3. • Land and agricultural sector reforms: initiating institutional changes such as the establishment of land commission to ensure optimum use of land resources; abolishing price controls, reduction of compulsory delivery quota for paddy; reduction of subsidies; leasing of land for private investment as well as foreign direct investment; measures for production expansion;

4. • Fishery and aquaculture sector reforms: granting of fishing rights to foreign fishing vessels, marine fisheries, fresh-water fisheries, aquaculture;

5. • Mining sector reforms: building legal framework; allowing private sector participation in mining;

6. • Tourism sector reforms: allowing private sector participation in hotels and tourism business;

7. • Reform of frontier areas administration: pacification and promotion of development of minority races in frontier areas.