The opening of the Burmese economy will no doubt benefit the labour market. The market economy will provide the incentive for workers to improve their productive capacity in order to receive higher wages. Higher wages, or the ability to purchase more goods, should in turn foster business and job creation and economic growth. Observing the economy standing of most workers in newly developed economies makes it hard to dispute the advantages of the market economy.
However, in many less developed countries, Myanmar as a good example, the influx of foreign firms also serves to exploit the excess supply of unskilled workers. These firms, relying on the low-cost worker for labour-intensive production, have no incentive to teach these workers more than the rudimentary skills necessary to work on a crude production line. This translates into a long-run situation where the productive ability of the workers does not improve, thus placing the country in a low wage equilibrium trap. Cheap labour – the comparative advantage of a nation –turns out to be its worst enemy.
The benefits of opening the economy of Myanmar will depend on the extent to which market failures are recognized. Addressing the many issues that come up will take time and investors, international agencies, and the Burmese government must be cognizant of the often opposing factors which are unleashed. Political-economic skills must be fully harnessed to avoid instability, disruption, and a return to the violent past. It would be naive in the extreme to assume that historically massive capital inflows and changing labour markets will not create a mixed bag of cost and benefits. The challenge of Myanmar is to create a framework which benefits the economy and society.