Thalun Zaung Htet: Welcome to Dateline Irrawaddy! This week, we’ll discuss Burma’s economic potential under the new government. The Irrawaddy’s business reporters Ma Kyaw Hsu Mon and Ko Thit Nay Moe will join me for the discussion. I’m Irrawaddy Burmese editor Thalun Zaung Htet.
The new government has been in office for more than two months now, and business circles have complained that President U Htin Kyaw did not talk about economic policies in his inaugural address. Both foreign and local investors have shared this criticism because they are not clear what economic policies the country will adopt. There has been no significant change in the country’s economy over the past two months under the new government’s 100-day plan. How much has this upset businessmen and investors?
Kyaw Hsu Mon: As everyone knows, the country faces many challenges and difficulties during the transition. Although the new government has articulated its economic policies, it failed to make the details clear to the public, businessmen and potential foreign investors—this is what people are currently criticizing. The NLD [National League for Democracy] government has good economic policies in hand, as they took their time designing them with the help of experts. The problem is that they failed to be transparent in explaining them, which made people raise questions. Businessmen now wonder what the economic policies and opportunities are, and how the new government will handle the bad legacy of their predecessor. The new government has not made clear statements regarding various economic sectors such as banking, financial services, production, or exports and imports, which also raises questions. We understand that the government has to give priority to political stability under the current circumstances, but it should also take care of the country’s economy because the economy is the lifeblood of the country. It is time for the new government to clearly elaborate on the best possible policies. It would be best if they do this within the first 100 days.
TZH: There were laws enacted during former President U Thein Sein’s government, like the Foreign Investment Law and the Myanmar Companies Law. Economic laws, however, are not ready to be put into practice. Businessmen claim that the laws are not ready to attract investment or business. Recently, the US Chamber of Commerce said that the existing economic laws in Myanmar do not offer any protections and they urged [Myanmar] to make sure they do. What is wrong with the laws? Ko Thit Nay Moe, why do businessmen say that the existing laws can’t attract foreign investment?
Thit Nay Moe: [Business] laws were enacted under U Thein Sein’s government. The Foreign Investment Law was enacted in 2012, and the administration also enacted the Myanmar Citizens Investment Law. The two laws were contradictory. Businessmen claimed that the Myanmar Citizens Investment Law favored Myanmar citizens while the Foreign Investment Law favored foreign investors. They tried to combine those two laws, but it couldn’t be enacted. A previous Myanmar Companies Act was enacted a long time ago in 1914. This law was amended with the help of ADB [Asian Development Bank], but it has not been passed yet. These two laws directly concern foreign investment. The MIC [Myanmar Investment Commission], which scrutinizes and approves foreign investment had to reform itself, as required by law. To foreign investors, it is not a positive sign that the MIC still hasn’t been reformed and that those laws aren’t yet amended. Until the MIC is reformed, foreign investors who submitted investment proposals can’t receive approval. I heard that there are as many as over 100 proposals. This is one reason for slow inbound investment.
TZH: So, you mean nothing is ready yet for investment. The concerned laws aren’t ready and the MIC isn’t ready, so investments aren’t coming in as part of the 100-day plan. People have said that it was difficult to do business in Myanmar previously because there were sanctions against the country, mainly by the United States. But on May 10, Americans extended their sanctions against our country. This mainly targeted individuals, while sanctions against the government have largely been lifted. Government banks like the Myanma Economic Bank [MEB], Myanmar Investment and Commercial Bank [MICB] and Myanmar Foreign Trade Bank [MFTB] were removed from the sanction list. So, it is fair to say that there are almost no sanctions against the government. But then again, lifting sanctions against the government does not immediately bring in investments. There is hardly any suggestion that lifting sanctions against the government will result in inbound investment. Why?
KHM: At the economic seminar between the United States and Burma yesterday, representatives said that sanctions only targeted specific individuals on the SDN [Specially Designated Nationals] list, like top businessmen U Teza, U Zaw Zaw and U Tun Myint Naing of Asia World to name a few. Those who remain on the list are key business players in the country. So, it is doubtful that the SDN does not affect the country’s economy. Regarding sanctions against Burma, there are different views held by the government, Congress and businessmen in the United States. Some of them call for not lifting sanctions on Burma, while others, including some US businessmen, have called for them to be lifted. Both governments need to think about whether the sanctions impact Burma’s economy. The US government needs to find out who is affected by sanctions, and whether they are only targeting top businessmen or people at the bottom as well. The Burmese government needs to ask itself if the country is ready for investment if the US government lifts all sanctions and invests in the country. Because Burma has suffered mismanagement and lack of infrastructure for ages, we still do not get full access to electricity. The government needs to question if the country is ready in terms of infrastructure requirements in regards to things like water and telecommunications. Without proper infrastructure, affordable land prices and affordable rent for office spaces, foreign investors won’t come. Potential investors will take all these things into consideration. So, it is fair to conclude that foreign investments will not come in if the government fails to consider all of these aspects.
TZH: Our country is a developing country and taking a look at its import and export sector, exports are low and imports are high. For a household, if expenses are large and income is small, it will become poor. In our country, exports are very small, but import volume is large—we import cars and building materials into the country. Ko Thit Nay Moe, what actions is the government taking to boost exports?
TNM: As far as we know, the commerce minister has said that he intends to boost exports three-fold over the next five years. But, our export volume is at an all time low and our import volume is very high, so there has been trade deficit. In the 2012-13 fiscal year, the trade deficit was just over US$225,000, but it increased to $5 billion in the 2014-15 fiscal year because we could not export. The export total was $10 billion in the 2014-15 fiscal year, a small amount compared to our neighbors. Thailand’s export total was about $220 billion and Vietnam’s was over $130 billion at that time. So, it is clear that we don’t have things to export. To address this situation, the government needs to consider which sectors should be prioritized. The commerce minister talked about boosting exports in the agricultural sector and improving small and medium enterprises [SMEs]. In reality, the agricultural sector receives less than one percent of foreign investment, just around 0.5 percent. So, it will be interesting to see how the new government will handle this. It is a real challenge. Regarding SME development, U Thein Sein’s government provided loans, but they were not sufficient. The previous government also established SME centers, but businessmen say that those did not succeed. The previous government did something, but it was far from a success. It will be a tough challenge for the new government to handle and improve the failed SME policies.
TZH: So, there are two challenges: to boost exports and to develop SMEs. Regarding the banking sector, we also have shortcomings. One of the main problems is that banks can’t provide loans for businesses. What measures has the new government taken to fix this?
KHM: It is critically important that the Central Bank of Myanmar has stable policies and adopts laws that can effectively encourage the private sector. It needs to adopt good regulations that can support local businessmen. We will have to see how much the Central Bank can back up private banks so that they can provide loans to local businessmen. Now, businessmen are pushing the Central Bank to make some of its policies more clear. I think the government needs to handle this in the best possible way if it wants to see private sector development.
TZH: Ma Kyaw Hsu Mon, Ko Thit Nay Moe, thank you for your contributions.