Ten Reasons Behind Myanmar’s Economic Slump
By Nan Lwin 30 August 2018
YANGON—A recent business sentiment survey of the second quarter of 2018 outlined ten main reasons why Myanmar’s businesses are facing worse conditions now compared to the two previous years.
Nearly 1,500 businesses from the service, manufacturing and trade sectors contributed to the survey which was conducted by the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).
The survey said the country’s economy has been slowing since 2016 but business in all sectors dropped significantly this year in particular. Overall business confidence is down by nearly 25 percent compared to last year.
The manufacturing sector experienced a downturn in the last three years, with an overall wellness drop of four percent. The export and import trading sectors have decreased, with the overall wellness index down by five percent and 1.2 percent respectively in the last three years, according to the survey.
The survey results showed 10 root causes for the decline. These are higher taxations and tariffs; restrictions in financing and banking; depreciation of the kyat; unstable economic rules and regulations; lack of market demand; delays in the import and export procedure; increases in local costs and inflation; competition from foreign companies; a lack of skilled human resources; and poor infrastructure.
According to the survey, taxes are unreasonably high while illegal trade can’t be controlled on the ground. Moreover, the tax payment process still involves much red tape within the government departments, the survey said.
The survey said kyat depreciation causes chronic losses in the production sector and also affects product imports and creates inflation and overall higher costs across the country. Business people have said that raw materials cost more due to kyat depreciation and as a result the production sector is declining very quickly.
The survey also suggested 26 points of reform for the government to remove deterrents of the economy’s ability to grow.
Survey participants suggested that reforms are needed in the financial and banking sectors, specifically in the documents required for getting loans, and the long wait for verification of private loans.
The survey pointed out that despite reforms made in the financial and banking sectors to date, the banking process is still outdated with poor human resources and services, while a majority of business people still don’t fully understand the bank loan process.
According to results from the survey, retailers welcomed the government’s decision to allow foreign investors into the retail and wholesale market but were concerned that they wouldn’t be able to compete with them under current conditions. To be able to compete with foreign retailers, they have demanded that the government abolish the withholding of tax, relax the permit license process and draw up a Foreign Investment Law for the retail and wholesale industry.
The industrial sector has requested that the government set up a department to promote exports which would impose proper regulations on exporters and take action against illegal traders who operate without paying tax to the government.
According to survey participants in the trade sector, poor infrastructure is a major challenge as it makes business time-consuming and raises consumer costs. The trade sector said illegal trade remained the biggest challenge with traders suggesting that the government impose proper trading rules and regulations based on international or ASEAN standards.