Kyaw Hsu Mon: Welcome to Dateline Irrawaddy! The United States pledged to lift economic sanctions against Burma during Daw Aung San Suu Kyi’s visit last week. We’ll discuss to what extent it will impact Burma’s economy and citizens. MKT Construction chairman U Myo Myint and economist U Khin Maung Nyo join me for the discussion. I’m Irrawaddy senior reporter Kyaw Hsu Mon.
US President Barack Obama has promised to lift sanctions against Burma, but will it benefit Burmese citizens or only big businessmen?
Khin Maung Nyo: It will benefit Burmese citizens but only after some time. There won’t be immediate impacts. We should not talk about businessmen and citizens separately. If it benefits businessmen, it should also benefit citizens. The more foreign investment that comes into the country, the more job opportunities emerge, the more incomes increase. We can expect to find more trade opportunities by loosening trade with the United States, so we can expect to increase exports and earn greater export revenues. But these things will not happen immediately.
KSM: U Khin Maung Nyo said we will have to wait for sanctions to benefit Burma. U Myo Myint, what do you think?
Myo Myint: I agree. We can’t expect to see results overnight. Our country’s preparation in terms of human resources and other resources is not yet adequate [to receive benefits from lifting sanctions]. We have made some preparations for the AEC [Asean Economic Community] and AFTA [Asean Free Trade Area], but there is still room for improvement. If capable businessmen who want to serve the country take a leading role in leveraging the lifting of sanctions, everyone will benefit.
KSM: Military-owned businesses such as Myanmar Economic Holdings Ltd (MEHL) and Myanmar Economic Corporation (MEC) dominate many markets in Burma. They will also benefit. To what extent will lifting sanctions impact military-owned businesses?
KMN: There has been constant criticism of military-owned business dominating many markets. But what is more interesting is that most of the military-owned businesses are taking a loss due to mismanagement. Although there is a saying that “whoever starts a business dominates it,” [referring to the Burmese acronym for MEHL— Ooe-Pai: ‘ooe’ meaning to do something ahead of somebody else and ‘pai’ meaning ‘own’ in Burmese]. There are many examples in which they don’t dominate the market even though they enjoyed many privileges. They came into existence under the circumstances of the time. The times have changed, and they have to change along with them—which they are already doing.
For example, they did not pay taxes before and now they do. They now have to compete with others on an equal footing. Foreign investors will choose business partners based on their management, business model, transparency, responsibility and accountability—not on whether or not they are owned by the military.
KSM: Many doubt that local businesses can compete with foreign businesses when foreign investment enters the country. U Myo Myint, as a builder, do you think local businesses are ready? What difficulties do they face?
MM: We are not yet ready in terms of technology and human resources. Local businesses are very weak in that regard. Before talking about foreign investment, I would like to point out the tender systems of international organizations like the UNDP and UNICEF. Their tender system is very different from local systems as they take into consideration the amount of tax we have paid, greening measures, environmental conservation, CSR [corporate social responsibility], index of transparency and capital. So, we have a lot to prepare. Frequent policy changes have been a continual challenge to businessmen in our country, but I hope this will not happen in the future.
Regarding the construction industry, the new government has abolished policies adopted by the previous government [referring to high-rise building policies]. If this continues, it will deter potential foreign investors. If every new government fulfills the pledges of its predecessor, potential foreign investors will not be hesitant to invest. No government will be in office for eternity. There will be changes. We don’t mean that policies should not be changed, but if they take effect retroactively, there will be negative impacts.
KSM: What do you think government employees need to do in order to adopt good policies?
KMN: Their duty is to do whatever they are asked by the current administration. Typically, government staff do not take initiative or practice discretion. They do as they are ordered. Now, the new government has come into power and it does not know what instructions to give. That is not its fault, as it has no [administrative] experience. On the other hand, staff members are waiting for instructions. They can’t just take initiative because procedures restrict them from doing so. They are not supposed to overstep the boundaries of procedure.
There are also cases of government staff exploiting weak procedures for their own benefit. While the upper echelon is shouting for continuous improvement and inclusive economic growth, I wonder to what extent the lower echelon grasps that notion. I heard there were policy clarifications in the ministries lately. Previously, the idea was simple: the goal was economic development. But now the goal is sustainable, inclusive economic growth. I’m afraid that the government has work to do to educate its staff and the public.
KSM: Cronies will see greater opportunity after the United States lifts sanctions. How should the government hold them accountable?
KMN: Previously, cronies who were close to the government enjoyed lucrative business concessions and there was only domestic competition. Now they will have to compete with foreign competitors. Foreign investors will consider norms regarding employees’ rights, environmental friendliness, CSR, auditing, management and so on. There will be a lot of challenges in that regard. Burma has joined the AEC and while some have prepared for it, some haven’t and some don’t even know what AEC is.
After sanctions are lifted, we will have to compete with international companies. Can we compete? If we can’t, how can we cooperate and are we ready to cooperate? We will have opportunities, but the benefits will depend on how capable we are of taking advantage of these opportunities. The government has already changed and [unlike the previous ones] it does not award contracts to those who are closely associated with it, but instead lets them compete. Businessmen used to pay under the table to win contracts because the government allowed them to do so. If the government does not allow it, they won’t. If the government has changed, businessmen also have to change. If they can’t, they will be left behind.
KSM: What will be the main challenge facing local businessmen in controlling the quality of their products if the generalized scheme of preferences (GSP) is granted by the United States?
MM: It involves technique and human resources. We have to try. If we don’t try, we will be swallowed by them when they come in. For example, Max brand soft drink has been swallowed by Coca Cola now. Likewise, a toothpaste brand was swallowed by Colgate since it couldn’t compete. We have to try to be able to work shoulder to shoulder with them, rather than being swallowed up by them. We have to do a lot to catch up with them both in terms of quality and capacity. Only when we exert greater efforts will we benefit.
KSM: The United States has promised to grant the GSP for about 5,000 items. How will this affect the country?
KMN: The garment industry is not included in the GSP and manufacturers say they won’t be able to export as much as people expect, but we will be able to export more items at low duties. I’m concerned that we might face the same problem with the EU. The EU has granted us the GSP, but our exports do not meet its standards. If we are going to take advantage of the GSP, we need to make sure our production meet international norms.
MM: The GSP allows us to export 3,500 items and since we are a LDC [least developed country], we are allowed to export 1,500 items [duty-free], totaling 5,000 items. But one of the challenges is quality control regarding agricultural and fishery products. In the case of fruits, we have to be mindful of quality and packaging and in the case of fishery products, we need to take care of freezing techniques and packaging. We only have a few mass-produced export items. In the case of agricultural produce, we currently only buy from farmers for export. If we can establish firms and farm on a larger scale, like in foreign countries, we will benefit from the GSP.
KSM: U Myo Myint, U Khin Maung Nyo, thank you for your contribution.