Time to focus on Myanmar’s economy

Much has been said about the National League for Democracy (NLD)-led elected government’s stance on peace and security in recent weeks, with attention being drawn to the conflicts in Rakhine state and the actions of Myanmar’s de facto leader Aung San Suu Kyi.

Within the country there is concern, however, over the state of the economy.

Recently, Professor Sean Turnell of Macquarie University of Australia, the Special Economic Consultant to the State Counsellor of Myanmar, came out to paint a positive picture of the Myanmar economy at his briefing, Myanmar’s Economy 2017: Taming Dragons, Finding Tigers. He said the NLD government has saved the economy from bankruptcy after the so-called “sugar-rush” spending during the final years of the previous Thein Sein administration.

The previous government was wasteful as it pushed the Budget deficit to 4.5 per cent of gross domestic product (GDP) in 2015-2016, which was funded through the printing of money.

Prof Turnell said the NLD government had reduced the Budget deficit to 2.5 per cent of GDP in 2016-2017. He forecast optimistically that Myanmar’s GDP growth would be 6.9 per cent this year, putting it among the world’s top five fastest-growing nations.

Echoing his remarks, Myanmar’s National Planning and Finance Minister Kyaw Win likened Myanmar to “an aircraft on a runway in 2016, but ready to take off in 2017”, at a forum with local and foreign businessmen. “Our mission is also trying to fix things… to boost the economy,” he asserted.

But the World Bank’s Myanmar Economic Monitor estimates that Myanmar’s economy slowed down in 2016-2017, with growth expected to moderate to 6.5 per cent from 7.3 per cent in the previous year.

On the streets, ordinary people have been complaining about higher daily food prices and businesses have few positive things to say about the government’s economic measures.

De facto leader Suu Kyi is seen paying attention to peace as the priority, but her supporters say the economy is coming into focus.

The NLD government, in fact, has been slow to set up a new Investment Commission.

It took six months after it came into office to announce various economic measures, which were subject to visible delays.

When Myanmar’s 12-point economic policy came out on July 29 last year – four months after the new administration was formed – there were questions on implementation. The policy outlines were rather vague.

It was portrayed as a people-centred policy, with broad grassroots participation.

It raised hopes on actions towards national reconciliation, protection of natural resources, and setting up of an economic framework in order that the resources can be allocated equally and fairly among states and regions.

At first glance, the NLD government’s policy appeared as a possible reversal of the previous government’s policies. It suspended many government projects and subjected many to reviews. There were delays to payments and some construction works were suspended.

Additionally, the Yangon chief minister ordered the suspension and review of high-rise construction in his domain, the business capital of Myanmar, which further weakened local construction activities.

Many people in the business community have criticised the government for its lack of serious attention to economic policy as priority and novice approach to getting things done.

Many in town said “life is as tough as ever”, including once “privileged cronies”, as business opportunities dried up and the state pursued higher tax collection.

A year after government formation, ministers said they were serious about economic reforms and would pursue macroeconomic stability, encourage small and medium-sized enterprises’ (SMEs) development, and ensure more credit to the private sector at the micro level.

Prof Turnell said, at a recent economic forum, that the Myanmar government had introduced a number of important financial-sector reforms in recent months, and stricter capital requirements and liquidity ratios for private banks.

In April, the government enacted regulations for a new investment law – introducing a new regime of incentives based on geography and sector – and in July, it submitted a draft company law to Parliament.

In September last year, the United States surprised many with the decision to lift all of its remaining economic sanctions on Myanmar. One hundred and eleven individuals and companies were taken off the blacklist.

The US also reinstated Myanmar’s trade Generalised System of Preferences scheme. The status grants Myanmar tax privileges on exports to the world’s largest economy and, in turn, brings in foreign investment to the industrial sector.

But, those economic opportunities seem in vain as Myanmar is far from ready to export its products or services.

Moreover, some critics say the NLD government has neither a broad economic vision nor the ability to create harmonious economic conditions to attract local and foreign investors.

The government reported that foreign direct investment (FDI) grew in 2017-2018, with more than US$3 billion (S$4.1 billion) worth of investment approved by the Myanmar Investment Commission in the first four months of the fiscal year, which is well ahead of the government’s US$6 billion target.

But one must distinguish between FDIs on paper and actual inflows. Frequently, they may differ.

According to media reports, agriculture, mining, oil and gas, and construction received no investment, but a few million US dollars came in for transport and communication, manufacturing, power generation, hotels and the tourism sector.

There are necessary conditions for Myanmar’s economy to grow and the government must acknowledge that “business confidence” is most important to increase investments and domestic consumption spending.

The government needs to cut bureaucracy and red tape, increase investment in infrastructure (especially in transport, logistics, and providing electricity), and support SMEs in securing land, finance and accessing new technology, in the short term.

Education must be reformed for long-term productivity enhancement.

The Myanmar economic policy outlined objectives to nurture human resources, to give high priority to develop infrastructure such as electricity supply, roads and ports, and to set up a “Data ID Card System”, “Digital Government Strategy” and “e-Government System” to create job opportunities for all Myanmar citizens who live in Myanmar and those who have returned from foreign countries.

Yet, its performances against these objectives are far from realisation and, unfortunately, recent racial tensions and conflict in Rakhine as well as international pressure on human rights are shifting further attention to security, rather than the economy.

Source : The Straits Times

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