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NLD’s One-Year Anniversary: Government’s Economic Focus a Little Thin on Substance (I)

While a year has passed since the new government proclaimed “It’s time for change”, there’s no evidence of substantive changes for the private sector. Bureaucracy, lack of policy clarity and political uncertainty have dampened the mood of businesses.

One year has almost passed since the new government took office with the slogan that shouts “It’s time for change!” And, there are clear indications that there are changes in the administrative area and in terms of policies. Since the new government has been in power for a year, an interim verdict on its performance in relation to the business community is both possible and timely.

After the new government has sworn in, there was a 12-point policy implemented and there are also considerable changes for local and international investors.

First off, the Myanmar Investment Commission (MIC), which has the authority to issue investment permits, has restructured its organisation and revised its policies.

On one hand, a new Investment Law will combine and replace two older legislations. The new law will also change the authority and role of the MIC. The business community is waiting to see its effects when it is officially implemented on April 1.

On the other hand, the Yangon Stock Exchange (YSX) is also approaching its first anniversary. Stock exchange is usually seen as a vital part of the investment market. Yet, in Yangon, economic experts and businessmen have lamented that the new administration has not really brought significant changes to the investment market and the investment sector. The YSX is not performing well – only four firms are listed on the stock exchange and trading activities are lacklustre. The many regulations suffocate wider participation among investors.

Furthermore, there are obvious challenges within the currency exchange market: the devaluation of the kyat, the decline in currency trading and the sky-rocketing inflation rates in the country.

Interweave of business and politics

Politics, economy and businesses are entwined. Investors and the commercial sectors take into account the politics and political stability of a country when they make decisions. As the NLD party won a sweeping victory in the last election and new administration was being formed, these changes have affected the approach and attitude of business sectors.

The private sector has taken a wait-and-see approach when it comes to investment in Myanmar. So, with the new government going into office with a new mandate and new positions, many are taking the time to scrutinise the new government’s approach towards the economy. Hence, private sector development has slowed down in the NLD’s first year of government.

Many investors postponed their projects before and during the 2015 election, due to the huge uncertainty surrounding the country. Businesses do not like uncertainty. Even post-election, many were worried about whether a smooth transfer of power would take place and whether reforms rolled out under U Thein Sein’s government would witness a reversal.

Hence, observation, not action, dictated the private sector during that period, which spanned from the 2015 pre-election until the new administration had been in office for six months. There was a halt in developments and investments in many sectors among large companies.

Worried that the “democratic program” might be derailed, business development became stagnant during the first half a year of the new government.

Indeed, there were signs which suggest caution might prevail over optimism. Notably, upon taking office, Yangon Region Chief Minister U Phyo Min Thein decided to put a halt to the construction of around 200 condominiums. This is a heavy blow to the real estate and construction industry.

“If I can suggest frankly, most of the large companies are looking at the situation and circumstances until the new government has been in power for half a year. At the same time, some decisions affecting important investments were also suspended.

“The period of transition was very long due to the delicate situation of the country. The 2015 transition has affected the national economy in 2016.

“If there are many political factors and uncertainties, it can affect and slow down economic growth. Therefore, it is fair to say that the economy in 2016 was delayed and slowed down,” said U Ye Min Aung, who works in banking sector as well as the electricity and agricultural sector.

Bureaucracy standing in the way

Since coming into office, the new government has displayed a number of weaknesses when it comes to managing – and developing – the economy.

Most notably, the authorities cannot effectively manage the local currency circulation. The Central Bank is still not independent and autonomous from the civil service and politicians.

“If the currency circulation amount is very much in the local market, currency inflation may happen.

“To control and balance the situation is for the Central Bank to do so through the banks and the financial sector. The Central Bank needs to be decisive on many issues,” explained U Soe Thein, government budget analyst and former deputy director general in the budget department of the Ministry of Planning and Finance.

Although there is a change in government, many ministries have shown that they have not changed in their way of working. The momentum of reform and development is slow, according to many businessmen.

“Now is the time for the government to actually deliver. We can spot three weaknesses in the ministries.

“The first is that the cooperation, coordination and communication among the ministries are very weak.

“The second one is that the ministries which are involved in businesses have shown that they are reluctant to relinquish their authority or involvement in the businesses.

“The last one is that all the ministries are the same as before. That is, if one ministry has to make a decision, it asks for comments and feedback from other ministries, which can be as many as seven or eight ministries. They do not go ahead and make any decisions if the feedback is not perfect. These three facts have weakened the efficiency and performance of the government up to today,” said U Kyaw Kyaw Hlaing, hair and CEO of Smart Technical Service.

Moreover, the systems in which ministries operate also stand in the way of investments and businesses.

“If we look at the situation over this year, the main difficulty that investors are facing is not because of the rule and law, but because of process or procedural matters.

“Ministries do not have exact and clear processes. For example, there is no exact way to achieve the final result and it cannot be possible to estimate or predict the final result because it may be different.

“Another issue is that there is no clear or specified timeframe in policies or procedures. When a business applies for a permit, it is unclear when the outcome of the application will be available – whether it will be within three months or one year. Sometimes, it takes two years to get permission to do business.

“There isn’t any organisation which monitors these ministries and holds them accountable.

“The main fact is that the bureaucracy needs to be monitored. We need the government to have a systematic approach in business. Questions such as ‘How much time will it take for a decision regarding a permit application?’, ‘What possible outcomes are there?’, ‘Are there systematic instructions to follow?’,” U Aung Thura, an investment market expert, suggested.

 

Source: Myanmar Time

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