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‘Window is closing’: business leaders vent frustrations over govt’s economic performance


Business leaders in Myanmar have cast serious doubts on the government’s management of the economy for the last 2.5 years, with one domestic investor warning that “the window is closing” on reforms and a leader of an Asian business group criticising Nay Pyi Taw as working “in silos” and having “no urgency to get things done”.

As the National League for Democracy-led administration approaches midpoint of their five-year term, it is presiding over falling approved FDI, stagnant tourism numbers and reforms stifled by incompetence and protectionism.

Business leaders in Myanmar have cast serious doubts on the government’s management of the economy for the last 2.5 years, with one domestic investor warning that “the window is closing” on reforms and a leader of an Asian business group criticising Nay Pyi Taw as working “in silos” and having “no urgency to get things done”.

As the National League for Democracy-led administration approaches midpoint of their five-year term, it is presiding over falling approved FDI, stagnant tourism numbers and reforms stifled by incompetence and protectionism.

“My guess is that Kool-aid drinkers have all pretty much left Myanmar, with or without Rev Jim Jones’ help. Those of us remaining in Myanmar are pretty much gluttons for punishment, because beating your head against the wall feels good when you finally stop.” (The American phrase “drinking the Kool-aid” is a cultural reference, referring to followership at its worse and coined after Jim Jones who led his cult to mass suicide.)

The government has prioritised encouraging foreign investments into remote regions, but doing business in those areas is difficult. This, Mr Walsh said, stops investors from coming in.

“The impact on the wider economy is that the slower things go, the more foreign investors will fall prey to exhaustion of patience, get fed up, strike their tents and go the hell home. Or go to Bangladesh, where FDI into electrical power projects is booming, due largely to power purchase agreement that guarantees a return on investment, and a bureaucracy that is markedly easier to deal with.”

Yet, it is unfair to attribute all the difficulties in remote regions to the NLD side of the government. The ruling party does not control Ministry of Home Affairs, which appoints the General Administration Department (GAD) at each level of government, and hence “the NLD can’t be blamed for the way things are going out in the sticks”.

While the Myanmar Investment Commission (MIC) works very well for the three main cities, “out in the the provinces local [military-appointed] GAD administrators aren’t extremely aware of what the MIC does, exactly, or that Myanmar has a set of laws on FDI, much less about how they are supposed to function to make it all happen. “Even Myanmar companies I know that are trying to do power projects out in the provinces remark on the behaviour of the GAD and various state-level ministries, in that the view is that it ought to be illegal for the private sector to actually make any money. ‘It’s like we’re still stuck in the 1960’s Burmese Road to Socialism’ say some of them.”

The American businessman added that the only decisive improvement is the ease of electronic communications, which is “due in full to the work of the private sector FDI”.

Mr Walsh’s grim reading resonates with what other international players are complaining about. This week, British and European business groups in the country have told this newspaper that the Rakhine factor is not “the sole or main factor” for Myanmar’s “current economic malaise”, criticising the protectionism, lack of policy clarity and reform inertia.

Yet, it would be preposterous to think that Asian investors are somehow happier.

‘No urgency to get things done’

The decision-making by ministries is “very slow”, and there is no coordination among ministries and “at times within departments in the same ministry,” according to Sunil Seth, President of the India Myanmar Chamber of Commerce.

“People [in government] still work in silos … At times, one feels there is no urgency to get things done and get a closure, and projects drag on for too long, leading to a sense of demotivation among investors,” he explained via email. At the same time, the lack of clarity on rules and regulations and the weak legal framework disrupt Indian investors as much as others. Myanmar is also bogged down by its government’s “limited capacity to understand complex infrastructure projects” and conduct “techno-commercial discussions with potential investors”, which in turn renders bankability and fund-raising difficult.

Many of these issues present major impediments for Japanese investors as well. Kunio Negishi, chair of Japan Chamber of Commerce and Industry in Myanmar (JCCM), insisted that, despite the difficulties, Japanese businesses remain “positive on investing in Myanmar” in the long term. “That is why many Japanese investors are still coming to this country. They are looking for the economic opportunities. The recent notification on opening up the retail/ wholesale sector, and the new Companies Law, are achievements which encourage potential Japanese investors to come,” Mr Negishi remarked.

Having said that, he added, repeated delays in the insurance market liberalisation has discouraged Japanese insurers, which have set up offices in the country waiting for changes. In addition, the regulation on lending for local banks, foreign exchange and financial services should be relaxed if the country were to improve the economy. These, along with lack of clarity on the Companies Law and lack of infrastructure – power supply in particular – are big hurdles.

Missed opportunity

Also criticising the political leadership was U Pyi Wa Tun, head of Parami Energy.

Asked whether time is running out for Nay Pyi Taw on the economic front, the businessman said “We have already missed a train. The window is closing, but it is never too late. The government should start acting and involve the younger people and women ASAP.”

His frustration derived from the government’s poor communications over their broader priorities as well as policy details. It also fails to consult with the younger generation in the private sector, preferring to stick with “a small clique”, referring to the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). He, however, applauded the efforts on addressing corruption and rice and garment export sectors, but stressed the need to “bring in women or younger talents” in the cabinet. “To be fair, rice and garment exports have reached an extraordinary amount under this government, while the anti-corruption initiative has gained momentum,” he noted.

The International Crisis Group stated in August that the new regime has “come in for sharp reproach” from the domestic private sector. Among them is U Zaw Naing, managing director of Mandalay Technology. He defended the new administration having required a long time to settle down owing to “the absence of prior experience in governance, economic policy making and resource mobilisation.”

However, there’s where his sympathy ended.

“The economy [economic growth] has been slower day after day. The unanticipated issue of Rakhine is a logical defence, but scarce attention paid to economic policies and slow pace of reforms and development are the underlying reasons for this situation,” he said.

State Counsellor Daw Aung San Suu Kyi has been burdened with “so much on her plate”, having been the “final decision-maker in many areas”. He was supportive of her leadership. But the problem is that “many of her cabinet ministers are very slow to act, not decisive and not making progress in their own portfolios. Many of them have been staying in their comfort zone and there is a collective lack of a sense of urgency to the economic woes [among cabinet minister].”

Recently, she started delegating work to “a handful of people”, including U Win Myint, U Kyaw Tint Swe, U Thaung Tun and U Kyaw Thu. U Zaw Naing welcomed the shift, but warned that policy-making and implementation “need to be made much faster.”

Defending the record

Chris Hughes, chair of the Australian Chamber of Commerce in Myanmar, maintained an upbeat tone, emphasising “it is important to acknowledge the hard things that the government has done well.” He listed the good news under the new administration: managing the current account and budget deficits and inflation, pushing the National Economic Coordination Committee to drive reform implementations, installing “experienced and business friendly ministers” to head the MIC and finance ministry, anti-corruption drive, decentralisation of DICA and MIC, new legislation, the Myanmar Sustainable Development Plan (MSDP) as well as renegotiating on Kyaukphyu and Dawei projects to secure a better deal.

However, he conceded, “investment needs to be higher, projects need to be brought to market quicker, growth needs to be faster.” The key to this is the implementation and making “bolder policy decisions”. Reforms essential in the near future are improving project approval process, especially in relation to mining, energy and infrastructure; adopting bankable investment structures and transparent and efficient procurement processes for PPPs; continuing financial sector liberalisation; facilitating management of foreign exchange risk; and mechanisms deal with investor grievances and disputes.

Source: Myanmar Times

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