SMEs voice frustration over confusing government policies as challenges mount

Small and medium enterprises (SMEs) are still struggling to compete and expand five years after U Thein Sein’s former government established a central committee to support the sector and after the Central Bank of Myanmar recently permitted banks to approve loans without collaterals.

On top of limited access to capital, insufficient supporting infrastructure, high taxes and the proliferation of illegal products, new challenges like lack of regulations in the digital economy are also emerging for SMEs.

But the most frustrating issue is the government’s ever-changing policies and its inability to make those changes clear both to the business community as well as its own staff, businesses said during discussions at a two-day SME conference in Nay Pyi Taw on October 14-15.

The conference was held by the Asia Council for Small Business and the International Council for Small Business Myanmar. It was attended by U Set Aung, Myanmar Deputy Minister of the Ministry of Planning and Finance, other government officials, entrepreneurs and local and foreign corporations..

“When working on development, there will be always be difficulties for both the government and private sectors. So, things need to be done systematically and strategically, going from one step to the next. The problem is the government’s priorities are constantly changing. And because the changes aren’t communicated well, businesses don’t know which policies to follow,” U Ngwe Tun, founder of Aung Nay Lin Tun Co, which produces Genius Coffee, told The Myanmar Times.

He added that government policies need to be clear and strategic as well as set for the long term. “Only then will our businesses slowly develop. But, as it’s always changing, we are not getting anywhere.”

Government blunders

A Central Committee for SME Development was first initiated in 2012 under U Thein Sein’s government. Under the current government, Vice President U Myint Swe is heading the committee. However, the difficulties faced by local SMEs and entrepreneurs remain the same as before.

To support the development of the private sector and local SMEs, the current government in 2017 began meeting monthly with business owners and has continuously made changes in attempts to alleviate the problems.

Business owners point out though, that the government’s new policies have had little or no effect because of the lack of cooperation and communication between the various ministries and government bodies.

“In the past, domestic businesses were weakened because of illegal products in the market. It has gotten a lot better now as the government has taken efforts to conduct more spot checks and inspections. But because of the lack of cooperation between the government bodies, some difficulties still remain as the goods are not inspected with a solid system and cooperation of the departments,” said U Ngwe Tun.

The other issue is while it has been actively encouraging trade, the government also raised the taxes payable on the income generated, which offsets the effect of higher trade and thus the reform has no effect,” he added.

Other shortcomings include incomplete business categories for new company registration, the absence of laws to regulate digital advertising, no law for intellectual property rights, unreliable electricity and no clear procedure for loans and assistance.

Emerging challenges

Meanwhile, new challenges are emerging. One is the lack of regulations and procedures to protect startups.”The digital market is gaining momentum now. But there is no policy for proper administration of these businesses. There is no organisation or association that takes responsibility or provides recourse for defaults and conflict between the large and small businesses. In this situation, it is hard for startups and younger SMEs to develop,” said Daw Chan Myae Khine, Head of Amara Digital Market Service Agency.

Poor business knowledge and being unaccustomed to doing business among the younger people are also some of the reasons for weaker economic development, Mr. Felix Haas, independent consultant, said.

“Many young people I met in Myanmar want to do business. But I frequently hear that they don’t know where to start. Therefore, topics like how to start an own business should be taught at the universities. The young people should be trained at the universities to manage a business. Only then can a new generation of SMEs and businessmen be produced,” Mr. Haas said.

These issues are emerging even as Myanmar’s time to join the ASEAN Economic Community (AEC), which promotes equal trading and fair competition among members, is running out. Myanmar will join the AEC in January 2019.

“There are many things left to do for the SMEs. There are many difficulties like limited loan access, new technologies and illegal products which the government will need to regulate. If the current situation goes on, it is worrisome for our SMEs when AEC comes into effect. Our steps towards SME development have been very slow,” U Tin Cho, an economist for the AEC said.

“Starting from January 2019, we have no right to ask for any relief or favours and we have to participate under the AEC equally. Actually, the country should have reached a certain level of proficiency with some good experience in the local industries.”

Therefore, although it has passed through two five-year government terms, the SME Development initiative is still struggling to make an impact and is still at a basic stage. As such, new and existing policies must be better shaped, communicated and implemented.

Source: Myanmar Times

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