Title Financing Small and Medium Enterprises in Myanmar Author(s ...

to limit the issuance of licenses to construct new factories, because the state-owned
factories were already at the losing end. 19 The ownership pattern for 1961-1962 reveals
that nearly 91 percent of the registered establishments were owned by Myanmar
nationals (up from 86 percent in 1953-1954), while those under joint ownership
increased 4.5 percent to 5.5 percent, thereby reinforcing the indigenization trend set
after independence 20 .
The boom in private businesses came to an end when the military took over in
1962. The Revolutionary Council declared the adoption of the socialist economic system
and nationalized all sizable private businesses. According to socialist economic system,
all means of production and distributions were undertaken by the state and
cooperatives. However, small private businesses, most of them employing less than 10
workers, were retained. They were operating under various constraints posed by the
socialist economic system while providing basic consumer goods that could not be
effectively fulfilled by state-owned enterprises. Nonetheless, the number of
establishments was far greater than the combined number of state-owned enterprises
and cooperatives. In 1970, the total number of registered industrial establishments
reached 15,453, made up of 1,048 state-owned enterprises, 159 cooperatives, and 14,246
private enterprises. However, the private sector’s production remained stagnant,
keeping the 1961-1962 level. The state’s control and restrictions dampened the spirit of
the private processing industries, which was compounded by the shortage in spare parts
and machinery. This resulted in a vicious cycle of technical obsolescence, decline in
quantity and quality of products, low return of investment, and little or no investment
activities 21 .
Due to the deteriorating economic condition of the country under the socialist
economic system, an institutional restructuring with limited reforms were made during
the mid-1970s. Since then, the role of private enterprises was implicitly recognized by
the state. To enhance economic development through private sector investment and
employment, the Right of Private Enterprises Law was promulgated in September 1977,
which recognizes the legal status of private enterprises and allows them to perform
specified economic activities. However, private investments throughout the socialist
period were confined to small-scale activities, concentrating on processing natural
resources. The role of SMEs in the private sector was subordinated to state-owned
19 Burma’s Industrial History, Vol. III: pp. 350-53
20 Tin Maung Maung Than, State Dominance in Myanmar, The Political Economy of Industrialization
2007 p.90
21 I bid p. 127