To : Dr. Thinzar Win, thinzarthinzarwinaung@gmail.

com

From : Khaing Mon Mon Kyi, IMPA.32, khaingmonmonkyi.uec@gmail.com

Date : 23Dec'2023

Assignment _ Industrial Agglomeration in Myanmar

No of pages : Total 5 ( from page2 to 6)

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The summarize of Industrial Agglomeration in Myanmar

The paper investigates the impact of industrial agglomeration on labor productivity and
working conditions in private manufacturing enterprises in Myanmar. It is focusing on the effects
of planned industrial zones and their impact on labor productivity and working conditions for
private manufacturing enterprises. It emphasizes the role of industrial zones, which were
established in the mid-1990s to strengthen industrial development and attract foreign investments.

The authors explore the unique setting in Myanmar, where industrial zones were initially
established through policy prescription rather than financial incentives, and they assess the benefits
amid riticisms of infrastructure, investment, regulation, and efficiency in these zones. The study
aims to contribute to the literature on gglomeration economies in developing countries, particularly
in the context of Myanmar's economic and political reforms.The study compares the benefits of
planned industrial activities, such as those in industrial zones, with naturally-driven industrial
clustering.

The three main objectives of the paper are:

(1) Labor Productivity Differentials: The paper examines the labor productivity
differentials between firms operating in industrial zones and those outside in
Myanmar's private manufacturing sector.
(2) Working Conditions Implications: The study investigates the implications for working
conditions, including labor share in value added, employee wages, working hours,
social benefits, and female labor force participation.
(3) Comparison of Outcomes: A comparison is made between enterprises in industrial
zones and naturally formed industrial clusters, with a focus on Myanmar's unique
context and the impact of planned agglomeration.

Here are some key points from the text:

1. Objectives:

- Investigate labor productivity differentials for firms operating in industrial zones.

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- Study implications for working conditions, including labor share, wages, working hours,
social benefits, and female labor force participation.

- Compare outcomes of enterprises from industrial zones and those from naturally formed
industrial clusters.

2. Background:

- Industrial agglomeration is seen as desirable for providing benefits like cost reduction,
market linkages, and improved access to labor and knowledge.

- Industrial zones, a product of planning and government intervention, are common in

developing countries and aim to boost exports, industrial upgrading, and employment.

- Benefits of industrial agglomeration include increased productivity, foreign direct

investment, and wages.

3. Context of Myanmar:

- Myanmar presents a unique setting to study planned versus natural industrial

agglomeration.

- The first industrial zones were established in the mid-1990s, with firms initially forced
to locate there.

- Myanmar is undergoing economic and political reforms, transitioning from military

governance to democracy with a market-based economy.

- Industrial zones criticized for a lack of infrastructure, investment, regulation, and

efficiency.

4. Methodology:

- Data from the first representative survey of manufacturing enterprises in Myanmar.

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- Quantitative results supplemented with qualitative interviews to understand contextual

factors.

5. Findings:

- Operating in an industrial zone in Myanmar associates positively with higher labor

productivity for manufacturing firms.

- However, the productivity gains are not transferred to employees in terms of improved
working conditions.

- No effects on labor share, wages, benefits, working hours, or female labor share.

6. Criticisms of Industrial Zones in Myanmar:

- Lack of infrastructure, investment, regulation, and efficiency.

- Electricity shortages, land grabbing, and high land prices are issues faced by industrial
zones.

7. Policy Implications:

- The study highlights the need to consider both positive and limited impacts of industrial
agglomeration for effective policy development.

8. Measures of Industrial Agglomeration:

- Two standard measures include the employment location quotient and the Ellison-Glaeser
index.

9. Industrial Zones in Myanmar:

- Established in the mid-1990s to strengthen industrial development and attract foreign

investments.

- Criticized for a lack of infrastructure, investment, regulation, and efficiency.

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The authors use data from the first representative survey of manufacturing enterprises in
Myanmar, including both quantitative results and qualitative insights from interviews with
enterprise owners and key institutional actors.

The paper explores the implications of industrial zones on labor productivity and working
conditions in private manufacturing enterprises in Myanmar. Commencing with a presentation of
descriptive statistics, key findings indicate that approximately 20% of surveyed firms are located
in industrial zones, with an average real revenue per employee around 19 million Myanmar Kyats.
The sample encompasses a mix of both established and recently established enterprises,
predominantly situated in urban areas.

The analysis extends to employee outcomes, focusing on wages, working hours, social
benefits, and the representation of female employees. The average real wage is observed to be
approximately 130,000 Kyats, with larger enterprises exhibiting a capacity to offer higher wages.
Notably, only about 40% of employees receive social and health insurance benefits, and females
constitute 26% of the workforce.

The impact of industrial zones on enterprises is thoroughly examined, revealing that these
zones correlate positively with higher labor productivity and wages. However, operational
challenges arise, as firms in industrial zones face increased costs due to additional fees. Visual
representations of industrial zones and natural industry clusters in Myanmar offer further insight.

The paper proceeds to present the empirical specification of the regression model,
establishing a positive association between being located in an industrial zone and heightened labor
productivity. Despite the acknowledged benefits, the study contends that industrial zones do not
necessarily translate into improved working conditions for employees. Challenges such as higher
operational costs and fees in industrial zones are discussed, highlighting potential trade-offs.

The study concludes by recognizing inherent limitations and calls for further research.
Emphasis is placed on policies that target the enhancement of working conditions and human
capital investments, crucial aspects in ensuring long-term enterprise growth. The persistent
positive relationship between industrial zones and productivity, despite various measures and
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controls, underscores the need for nuanced, context-specific policies to optimize the benefits of
industrialization in Myanmar. The structure of the paper includes a literature review on industrial
agglomeration, the establishment of industrial zones in Myanmar, details about the data and
estimation strategy, presentation of results, and a concluding section highlighting policy
implications.