Domestic businesses need to lobby govt to liberalise economy

Those who expect the government alone will deliver economic reforms are barking up the wrong tree. Domestic businesses need to play their part and push for reforms.

The Myanmar government recently appointed a competent finance minister and decided to retain the central bank governor. These appointments and changes warrant a review of how the executive has done so far.

It is a tricky task to evaluate Nay Pyi Taw’s performance in economic management without mixing with the broader political landscape. It is almost impossible to separate the two. The ongoing humanitarian crisis in northern Rakhine State, in particular, has dominated newspaper headlines across the international media and dictated the narrative of the country. The subsequent diplomatic and political crises are not helped by the fact that the civilian government has done little to proactively communicate its positions, concerns and intentions to the wider world.

For any international investor, both government policies and the country’s political stability are two key parameters when they consider an investment destination. The Rakhine crisis has certainly tarnished the reputation of Myanmar among the investors, and, as other lawyers have pointed out, brought reputational risks to Western businesses.

Meanwhile, the slow pace of economic reforms derives, partly, from Myanmar’s unique and hybrid political system, akin to a coalition government. This is the reason why economic policies haven’t been as effectively carried out as the world expected.

State Counsellor Daw Aung San Suu Kyi is barred from assuming the presidency. But even more significant is that her National League for Democracy-led government is in a power-sharing arrangement with the powerful military, which controls, among other bodies, the three key ministries – home affairs, defense and border affairs.

This hybrid political system, led by a democratically-elected civilian government but where the residual authoritarian regime plays a key role, means that the military-governed ministries can choose not to work with the civilian executive. There is also the question of whether the rule of law is strong enough to prevent a new coup d’état. A lot of efforts have been spent on compromising and negotiations, in the form of “reconciliation”.

Myanmar businesses I have talked to, including those I met in Thailand and Mandalay, all agree that it is naive to expect sweeping changes to take place after the 2015 general election. This applies to changes of political leadership in America and Europe as well, where significant differences in policy-making can be observed only in the medium term.

The current administration in Nay Pyi Taw has an additional layer of challenge in that the NLD has no experience in governing before. It remains woefully inexperienced in running the country. While the cabinet and political leadership have changed, the civil service, the machine behind the entire government, is by and large intact, with the same bureaucrats who created, sustained and passed down the same old and ineffective bureaucracy and practices.

International analysts often see countries as products of their leaders. There’s a blind-spot – because of the challenges new leaders face once they assume office, they are bound to be limited by the broader environment. The civilian government alone cannot secure sweeping changes. Hence, two issues are crucial in this regard.

Domestic businesses

Firstly, domestic businesses need to make their voices heard to push for more liberalisation and reforms. For Myanmar to raise its game in infrastructure, carry out concrete reforms of its credit system and improve the business environment, the private sector and the country’s urban, educated middle class should be at the driving seat, pushing the country ahead. Both private businesses and emerging skilled labour need to understand the importance of openness and foreign investments for their country’s future.

Many business leaders in Myanmar have rightly argued that perpetuating protectionism is a key area which this government has disappointed investors. Myanmar businesses need to realise that protectionist policies will only limit the growth potential of the country and undermines the domestic small and medium-sized enterprises (SMEs). They need to throw their weight behind the administration to open up the sectors and put regulations in place to tackle monopolies. At the same time, growth also depends on Myanmar’s decentralisation progress and the level of autonomy individual cities and regions secure.

For instance, decentralisation should entrust local authorities to independently design their own tax policies (also, tax rate), collect revenues from local citizens and businesses, and use such income to serve the needs of local communities. Secondly, Myanmar needs to adjust to the wider geopolitical landscape, which spells new challenges for the country’s balancing act.

Goh Chok Tong, former Singapore prime minister, clearly stated during ASEAN’s 50th anniversary celebration in Bangkok last year that the internal issues of ASEAN member states shall be resolved by the member states themselves, without ASEAN playing any significant role. But the Rakhine crisis has wrecked this ASEAN boat, with Malaysia going vocal and defying the 10-member bloc on the issue. This has thrown a spanner in the works, since ASEAN has repeatedly espoused a “non-intervention” approach, in stark contrast to the US and the EU. But, on this instance, the solidarity is destroyed.

International relations

Economically, ASEAN is an important trading partner for Myanmar. But given its structure and complexities, a common market akin to the EU’s single market for ASEAN is only possible in a distant future.

Meanwhile, Myanmar isn’t on the radar under Trump’s America. American FDI in the country trails behind a dozen countries, and the 312 Patriot Act adds an additional challenge for American banks and investors.

Beijing emerges as the biggest player, whereas India has yet to pull itself together to establish a recognisable economic force in the region. Japan is equally active, with investments and aid pouring into the country.

China, with a more assertive leader Xi Jinping, has prioritised economic partnerships with Myanmar, as part of its flagship Belt and Road Initiative as well as its efforts to tackle poverty in Yunnan Province, which shares a long border with Shan State. It is likely that Beijing, Nay Pyi Taw and ethnic groups will return to political stability in the Sino-Myanmar border, though at what price will peace be achieved is another question.

Nay Pyi Taw has yet to work out a strategy in managing the relations and partnerships with these big players. For example, it needs competent officials dedicated to promote bilateral trade and investment with those countries.

Let’s remember that the country’s massive votes for Daw Suu and her party is a vote for a better and fairer economy, among other factors, and reduced malpractice in running the country. The current government has to prove that they are delivering what the electorate asked for, and – in terms of the economy – they have yet to do so.

Pietro Borsano is lecturer at Mandalay International University and Shinawatra International University.

Source: Myanmar Times

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