The Irrawaddy

Finance Minister Admits Economy is Underperforming

Finance Minister U Kyaw Win.

NAYPYITAW — Planning and Finance Minister U Kyaw Win has admitted that Myanmar’s economy has not improved as well as expected, six months after he compared the country’s economy to a jet plane about to take off.

“There are suggestions that the country’s economy has not picked up as we expected. Considering the current situation, we have to accept that it is true,” the minister said in his address to a meeting on small and medium enterprise (SME) development in Naypyitaw on Wednesday.

The address was a sharp contrast to his remarks at the Myanmar Investment Forum in June. “We see that last year the country’s economy was like a plane moving on the runaway,” he said at the time. “Now this year we will defy gravity with jet power, meaning this is the year economic development will take off.”

However, the minister declined to answer questions about exactly what was holding the economy back.

His address on Wednesday followed the recent release of a report stating that business confidence among entrepreneurs in Myanmar dropped drastically this year. The report was based on a survey conducted by the German consultancy Roland Berger and the Union of Myanmar Federation of Chambers of Commerce and Industry.

Roland Berger published the results of the first Myanmar business survey in December 2016. It found an enormous sense of optimism among both local and international investors  — 73 percent of businesspeople expected the country’s business landscape to improve. This year, those expectations were shared by only 49 percent of them.

The main reason for the drop in confidence was a lack of clear economic policies and plans from the government; of the roughly 500 local and international business owners in Myanmar surveyed, 77 percent of them flagged it as a significant or very significant concern.

Frustration with the National League for Democracy (NLD)-led government’s management of the economy has grown over the past year as the administration has largely failed to flesh out its 12-point plan.

The International Monetary Fund has lowered its forecast for the growth of Myanmar’s gross domestic product this year from 7 to 6.7 percent.

“The lack of clear policies and guidelines shows that leaders have no capacity. The NLD is also wrong to have continued with policies that were introduced by the previous government, before the power transfer, to increase taxes,” said U Than Lwin, an adviser to Kanbawza Bank.

“It doesn’t make a difference to do what its predecessor has done. It needs to see if it is right or wrong,” he added.

He suggested that the government establish economic think tanks and appoint advisers to ministries and to the chief ministers of the regions and states.

“The government thinks that it will get more tax revenues if it increases the tax rates. It is wrong. While the economy is slow, taxes just increase the burden on the people,” he said.

“People don’t want to pay high taxes and so they evade them. The government also needs to make sure taxpayers want to pay the tax,” he added.

U Aung Hlaing Win, a former member of the Lower House Economic Committee, blamed longstanding monopolies for the country’s poorer-than-expected performance.

“It is one of the legacies of the previous government that small businesses are not in a position to compete with much bigger businesses,” he said.

Myanmar’s economy will not improve unless and until those monopolies are ended, he argued, citing the example of Yangon Bus Service (YBS).

“In the case of YBS, in the past any bus owner could join the service. But then it was monopolized by individual companies. There are many monopolies in the country like this,” he said.

The SME development meeting, proposed by State Counselor Daw Aung San Suu Kyi, was attended by relevant Union ministers, chief ministers and department heads.

At the meeting, U Kyaw Win criticized the provision of 90 million kyats ($66,000) to a beauty parlor under an SME loan scheme. Yangon Division Chief Minister U Phyo Min Thein argued that true SMEs do not get government loans.

Edited from the Burmese by That Ko Ko.