Loss-making factories should be privatised, officials say

Government officials have raised the need to restructure most of Myanmar’s state-owned factories, as just four out of the 57 factories controlled by the Ministry of Industry (MOI) are now making money.

Around one third of these factories need to be closed down with the MOI losing about K300 billion-K400 billion each year, said U Aung Kyaw Kyaw Oo, secretary of the Pyithu Hluttaw’s Investment and Industrial Development Committee.

For the remaining factories that are still operating, upgrades and overhauls of existing machinery and equipment are urgently required. The solution, officials said, is full or partial privatisation.

“We’ll go for a management system that focuses on profitability and reduce the number of state-owned enterprises. Many factories and the land which they are built on are not being utilised to generate returns. We want to privatise these assets in a systematic way to reduce the burden as well,” said U Aung Kyaw Kyaw Oo.

He added that the authorities would explore various business models to raise cash, including selling stakes to local and foreign investors, joint ventures and Public Private Partnerships (PPP). “Under these arrangements, the MOI will just take on a supervisory role,” he said.

A total of 55 state-owned factories have already been restructured under various PPPs with the private sector between 2012 and 2015, according to government data.

“It’s important to privatise the factories and promote production that is in line with market demand. In doing so, it would be effective if the ministry can cooperate in managing shares, assets, PPP bonds and take necessary action to prevent further financial losses,” deputy minister of Planning and Finance U Set Aung told the Pyidaungsu Hluttaw recently.

Economist U Aung Ko Ko said it is important for the privatization process to be free from corruption if it is to be effective and sustainable. “To reform, we need to reduce unnecessary expenses. We need to use the funds for other urgent infrastructure. Therefore, we need to the privitisation process to be transparent and ensure no transfers based on personal relationships or with undervalued prices are made. We need to call a tender for that,” he said.

Bloated workforce

One of the main reasons for the losses is high staff costs. The total salary paid for all MOI staff is around K50 billion and pensions for retirees are K25 billion. These are being paid even though most of the factories are not even producing.

“The MOI has too many employees who don’t have any work,” said U Aung Kyaw Kyaw Oo.

There are about 440 staff members under the Department of Industrial Cooperation who ensure policies are carried out and regulations are adhered to. However, there are also a total of 1486 employees in a separate Department of Industrial Supervision and Inspection. This has resulted in unnecessary work overlaps and cost inefficiencies.

“It’s crucial to review and modify these roles to develop a better organisational structure,” said U Set Aung.

Merging ministries

An expected merger between the MOI and the Ministry of Planning and Finance to streamline processes, put forth by President Win Myint last month, should also help to weed out inefficiencies and speed up the reforms, U Set Aung said.

He added that a department should be formed under the merged ministry to support reforms of state-owned factories and facilitate the private sector in industrial sector development. Furthermore, there should also be a priority system that categorises the factories based on sectors and strategic importance.

As the current aim is to achieve a market economy, a smooth reform of the state-owned factories under a new and more streamlined structure is really important, U Set Aung said.

U Aung Ko Ko agreed. “Merging is good. We can’t produce anything nowadays and have to buy everything from others, resulting deficits in trade and finance. Both of these are growing and dragging the economy down,” he said. – Translated

Source : Myanmar Times

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