YANGON — Impatient with the sluggishness of the economy, local investors are losing confidence in the pace of economic reform and blame it on a lack of direction by the National League for Democracy (NLD)-led government after two-and-a-half years of its administration.
“The economy is really slow. The government doesn’t know how to deal with the problem. They need to listen to advice from the experts,” said U Than Lwin, a senior advisor to Kanbawza Bank Ltd and a former deputy governor of the Central Bank of Myanmar.
“They don’t choose the right people for the right positions,” he told The Irrawaddy.
He stressed, “The government has a trust problem. They don’t rely on people who have a proven ability in business and finance in the country. They don’t take advice from them either.”
U Than Lwin is not the only one upset at State Counselor Daw Aung San Suu Kyi’s government for ignoring advice from economists who understand the actual conditions and economic problems in Myanmar, which has been isolated from the rest of the world for more than five decades under the military dictatorship.
In December, the Myanmar Business Sentiment Survey found that the economy is declining and local business confidence is falling regarding the coming year. Released by the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), the survey found that short-term business sentiment has fallen from 73 percent in 2016 to 49 percent, with a majority of businesspeople citing a lack of clear economic policy from the government.
“The government’s economic reforms have not been not very effective for the business environment. A key problem is that they don’t hire real economists,” said U Myo Min, chief executive officer at the PS Business School.
“If you don’t know how to drive a car, you really don’t know what should be included in the road safety law,” he said.
He added, “If you are an economic policymaker, you must have experience doing business in Myanmar.”
The survey also found that entrepreneurs have been losing confidence in the economy because of high taxation and non-competitive import practices. It found that 22 percent of local investors had zero understanding about taxation.
“They don’t listen to us, so they don’t know our problems,” said U Myat Thinn Aung, chair of the Hlaing Thar Yar Industrial Zone.
U Than Lwin and U Myo Min told The Irrawaddy that in their experience the NLD declines to accept advice from outside economists, and only consults its own economic committee members.
“The country’s economy is in the hands of people with no experience in business,” U Myo Min said.
Speaking at the Union of Myanmar Federation of Chambers of Commerce and Industry Convention in Yangon on Dec. 9 last year, Dr. Myint, a former chief economic adviser to former President Thein Sein, said the government lacks economic direction and that Daw Aung San Suu Kyi’s government needed to engage with people who are qualified in business, finance and other crucial sectors in order to ensure economic growth.
He urged the State Counselor to listen to what experts have to say, especially economic advisers and key officials at the Union, state and division levels.
In the UMFCCI survey, local investors urged the government to prioritize the development of economic infrastructure, create transparent financial management systems, fix problems with taxation, trade deficits, banking and finance, create jobs for local people, tackle the kyat’s depreciation,
institute rules and regulations to protect intellectual property and prepare for businesses to survive in Asian and international markets.
In 2017, Vice President U Myint Swe also made a promise to local investors belonging to UMFCCI that Myanmar would make the top 100 countries on the World Bank’s Ease of Doing Business list. However, in 2018 Myanmar declined to 171st on the list of 190 countries, down one place from the previous year.
Myanmar remains the least favorable ASEAN country in which to do business, ranking below even Cambodia (141st), Laos (125th) and Vietnam (68th).
Myanmar per-capita GDP, 2000-2016 / The Irrawaddy
According to the World Bank, Myanmar’s GDP per capita has improved, rising from $193.2 in 2000 to $1,195.5 in 2016, but is still among the lowest in ASEAN. Foreign investors have criticized the government for delaying the New Company Law, as well as failing to address weak infrastructure and regulatory changes they expected would be tackled last year.
Local dissatisfaction with economic conditions has not been appeased by growth in the size of the overall economy. The World Bank reported that Myanmar’s GDP growth rose to 6.4 percent in 2017-2018 from 5.9 percent in 2016-2017. It is forecast to increase to 6.6 percent in 2018-2019. The Asian Development Bank put GDP growth at 6.8 percent in 2017 (up from 5.9 in 2016). It said that if the government can manage the reform in such a way as to improve the business environment, growth could even top 7 percent by 2019.
According to the Directorate of Investment and Company Administration (DICA), in fiscal 2016-2017, under the NLD-led government, foreign direct investment (FDI) totaled USD6.6 billion, down by USD3 billion from fiscal 2015-2016. Under former President U Thein Sein’s administration, FDI totaled USD9.5 billion in 2014-2015.
“The textile industry has been struggling; some businesses have already shut down. Foreign investors are also withdrawing from the textiles sector,” U Myat Thinn Aung said.
Former minister of Planning and Finance U Kyaw Win earlier insisted that country’s economy is on a growth trajectory that was encouraging to investors, but he resigned from his post after being investigated for alleged bribery by the Anti-Corruption Commission in May. He also admitted that the doctoral degree in finance cited on his CV was fake.
U Than Lwin stressed that choosing the right people is crucial to improving the country’s economy.
“Previous people [military rulers] made that mistake; don’t make the same mistake again,” U Than Lwin said.
During the two-and-a-half years of the current administration, an investment law has been approved, the New Companies Law took effect on Aug. 1, and new rules under the Condominium Law were released, but the economy has still not shown signs of improvement.
Myanmar inflation rate, 2013-2017 / The Irrawaddy
“The government has been implementing reforms, so why is the economy almost dying? We need to find the reason. I understand that solving economic problems is difficult for the politicians. So, they need to listen to expert voices,” U Myat Thinn Aung said.
In 2016 July, four months after taking office, the NLD government announced a 12-point economic manifesto to support competition and increase the vibrancy of the private sector, to strengthen the public financial sector, to privatize appropriate state owned enterprises, to improve infrastructure development, to support the agriculture and livestock sector for inclusive growth, to create job opportunities and encourage foreign investment, to create a stable financial system and to help small and medium enterprises thrive in the market, while also promising inclusive economic growth. But many investors have been disappointed, as those promises have been slow to take shape.
“I accept our economy is slow. The government also understands and they are trying to improve things,” said U Ye Min Oo, an NLD economic committee member and a former managing director of AGD Bank.
In July, the government announced that U Thaung Tun, Union minister for the Office of the Union Government, will take over as chair of the Myanmar Investment Commission (MIC). He is formerly a member of MIC.
Also, in June, the NLD nominated new Planning and Finance Minister U Soe Win, 80. The minister said there are many challenges ahead that can’t be underestimated. He has professional experience in international banking, having worked for the Myanmar Foreign Trade Bank for more than 30 years.
“The government has appointed a new Finance Minister and Investment Commission Chair. We will see progress. Normally, we can’t see the impact [of economic policy] on the ground immediately; it needs time. We will see progress in our economy during the coming three to six months,” U Ye Min Oo said.