‘We Will Have to Do More, Practically and Mentally’
By Kyaw Hsu Mon 26 January 2015
Despite much vaunted economic reforms since 2011, some observers have noted that Myanmar’s economy is underperforming. In the lead up to national elections slated for late 2015, economists and business leaders have also voiced concerns that possible political instability could hamper economic progress. Dr. Maung Maung Lay, the vice chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), spoke with The Irrawaddy’s Kyaw Hsu Mon on the prospects for growth in a crucial year ahead.
Question: Last January, President U Thein Sein said the country was targeting 9.1 percent GDP growth for 2014-15. Do you think this is likely?
Answer: President U Thein Sein’s statement was optimistic. The facts and figures which he referred to are more favorable than I’ve seen. [Even] the president’s economic advisor U Myint recently said that this economic data might be incorrect. As you know, the government has often politicized data. That’s why the government’s Central Statistical Organization has now been reconstructed in order to gather quality data. Past data might be incorrect because it was not systematically collected through township offices. If the data collection process is poor, the resultant facts and figures will also be incorrect. We need accurate figures. At the moment, the data collection system is improving and is not so different from that of other organizations like the World Bank or the Asian Development Bank.
Q: When do you expect Myanmar will graduate from least developed country (LDC) status?
A: We can count the countries that have graduated from LDC status. Some observers have indicated that Myanmar has many requirements to fulfill before it can graduate from LDC status, and that will take time. Some expect it may take at least 5-10 years. If we try our best, dreams will come true. But it’s not possible to simply move from LDC status at once.
Q: Are factors such as the tax rate, the trade deficit and other aspects of trade policy a major barrier to this?
A: It is due to all these factors. We need to improve across all sectors. We still need to improve on a micro and macroeconomic level in our country to develop the economy.
Q: Is the UMFCCI acting as an independent body?
A: We’re now elected by members so it is independent. In the past, we were advocating for the government. Now we not only advocate, we also make claims to the government on what our members want and on the requirements of international standards. We’re trying to upgrade our members’ capacity and closely follow international economic trends.
Q: How do you collaborate with the different government ministries?
A: The UMFCCI is currently working with all sectors. Collaboration with government ministries is getting better. They’re listening to the UMFCCI’s input and suggestions in order to help solve problems. We have a good mutual understanding and are working well together.
Q: What do you think of the claim that high tax rates are making it difficult for some businesses to compete with regional competitors?
A: The government has recently decreased some taxes for local businesses to encourage production. According to international guidelines the government shouldn’t always protect local businesses, but here, the government is protecting some small businesses. It’s true that commercial tax rates are still high. People are criticizing the 5 percent commercial tax rate for consumers and manufacturers. However, the government collects less tax compared to other countries. How will the country’s infrastructure improve [without higher taxes]? People need to know the advantages of paying tax to the government.
Q: Why is Myanmar’s trade deficit on the increase?
A: Many countries have this kind of trade deficit, but the amount is different. [In Myanmar] imports are higher than exports. We need to negotiate gradually to reduce the trade deficit. But the country is still surviving despite this issue. It’s only about a US$2 billion deficit in Myanmar. It’s not a serious problem, but some have said so because the country has never reached this level of deficit before.
Q: How will the economy fare this year when the ASEAN Economic Community (AEC) begins, since there will be more tax-free imported goods flowing into the country?
A: The trade deficit will increase this year. The government needs to encourage local entrepreneurs but not provide trade protections that are against World Trade Organization rules. It’s difficult to balance exports and imports. Government ministries will have to work together. The AEC should actually mark the end of the beginning for us. Not the beginning of the end. I’ve warned that it should not be seen as negative for small and medium-sized enterprises (SMEs). More than 80 percent of our businesses are SMEs. What’s needed is good corporate governance. Otherwise, we will be overwhelmed by our competitors. The government should also control the rate of inflation next year. We need comprehensive policies.
Q: Have the UMFCCI and the military-owned Myanmar Economic Corporation collaborated?
A: No we haven’t. They are an independent entity. We have invited them for some workshops and business discussions with foreign trading partners, but they rarely attend.
Q: Do you agree that Myanmar’s Central Bank is not standing up for local businesses? What is your personal opinion?
A: The Central Bank has been working under the Ministry of Finance for a long time. Now they are trying to emerge from its shadow. The bank’s leading officials are good people. We aren’t too critical of them. They are relatively independent compared with the past. I hope [the Central Bank] will gradually improve.
Q: Some people are concerned that Myanmar’s economy may be impacted by political uncertainty this year. What’s your view?
A: I don’t think it will be impacted by the political situation. People will be trying to win over voters by campaigning hard but they will be more focused on political rather than business issues. Some will pledge to do more in order to be reelected. Almost all countries in the world tend to move cautiously in election years. Whether or not we’re ready for the AEC may become a political issue. The next government may face problems [concerning the AEC]. Some officials have indicated they’re prepared for the AEC but it will be hard to implement. Even Thailand is still trying to prepare for it. We will have to do more, practically and mentally.
This interview originally appeared in the Jan. 2015 issue of The Irrawaddy Magazine.