The impact of foreign divestment on economic growth in Myanmar: evidence from ARDL approach

In 1988, Myanmar started pursuing an open door policy and released its economy from closed-door policy to market-orientation. The foreign direct investment started flowing into the country, and the foreign trade rapidly increased. Unfortunately, market liberalisation was short-lived because Myanmar being imposed an economic sanction by Western countries in the late 1990s. In subsequent years, multinational firms substantially pulled out their investments from Myanmar market.

This study seeks to investigate the patterns of foreign divestment and its impact on Myanmar economy. The primary objective of this research is to formulate the systematic analysis of the impact of foreign divestment on economic growth of Myanmar. Firstly, this study reviews the determinants that influence divestment in Myanmar. Secondly, patterns of divestment are analysed based on the firm-level characteristics. Finally, an empirical model is estimated to analyse the impact of divestment on economic growth by employing Autoregressive Distributed Lag Approach (ARDL) by covering the annual data from 1990-2013. The test confirms that there is a cointegration between foreign divestment and real GDP. The results shows foreign divestment has a negative impact in economic growth of Myanmar in both short and long run. This study also finds that the human capital was negatively significant in the context of Myanmar while explaining its relationship with economic growth. These findings embrace practical implications for policy makers, investors and government.