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Myanmar has recently taken rapid steps to liberalize its state-controlled economy in addition to its political reforms. Tom Carver talked to Vikram Nehru about the economic challenges that lie ahead.

Nehru explains that Myanmar must first set its public finances in order, open up its economy to international trade, lift restrictions on investment, and manage its natural resources carefully to ensure socially and environmentally sustainable development. If it holds steady to these reforms, Myanmar has enormous potential for sustained rapid growth.

Carver began by asking Nehru what made the Myanmar government decide to open up its economy.

CARVER: Why is the Myanmar government open to new ideas and willing to opening its economy?

NEHRU: I think probably for a range of reasons. First of all, there is a recognition that Myanmar has simply been left behind by the rest of Asia, particularly Southeast Asia. You just have to look across to see the dynamic economies of Southeast Asia. The comparisons are very stark.

Secondly, the prospect of chairing ASEAN in 2014 was a big prize for the government. But the condition was that they would have to open up and become more acceptable in terms of openness and transparency with respect to the rest of the world.

The third is that there was concern within Myanmar about being too closely tied to China. Many of the Chinese investments may have been done with the connivance, if you wish, of certain military leaders who profited greatly from these deals. And so this overreach by China may have led to a little bit of a reaction. Certainly there was a reaction among locals where these investment projects were undertaken but who saw no benefit from those investments and clearly felt that they were not given a fair shake, so to speak.

CARVER: That’s one of the points you make—that the government must use any additional revenue for social investments. Do you think they understand that?

NEHRU: I believe they grasp the importance of having investments in natural resources which lead to sustainable development results. But it’s not an easy thing to do. It’s very difficult.

CARVER: The government is getting a lot of advice from many people, including from you. Are they able to absorb all of this?

NEHRU: That is one of the big concerns—that they are going to be peppered with advice of all kinds. And obviously Myanmar has a lot of things to do. The crucial question is: what should it do first, and what can it leave for later?

In terms of priorities, Myanmar needs to set its public finances right and they have to get the resources. They’re already doing that, the budget is being discussed in parliament. And once they get their budget in order they can start financing infrastructure and supporting agriculture, both of which are absolutely crucial.

The second most important thing they need to do is to open up their trade. They need to allow imports and capital goods to come in, because that will jumpstart the economy.

Third, they need to get rid of all these restrictions on investment. That’s going to be difficult because many of those currently in power have benefitted from the red tape that’s troubled the Myanmar private sector.

CARVER: What will Myanmar look like in five years?

NEHRU: If they hold steady to these reforms, I think there is enormous potential for growth in Myanmar. The challenge is translating these assets—which are under the ground, so to speak—into real human capital, physical capital, and sustainable growth.

And as I said, it’s a very tall order. But given their resources and given the fact that Myanmar is at this very crucial, strategic point in Asia connecting China, India, and Southeast Asia, it is in a very good neighborhood.