Daw Suu under pressure to drop car import licences for govt officials

Daw Aung San Suu Kyi greets her supporters after the meeting with government officials and people in Bago in March 2019.

Daw Suu under pressure to drop car import licences for govt officials

Exclusive: Daw Aung San Suu Kyi’s government is under renewed pressure to drop plans to award tax-exempt car import licences to senior officials.

The Automotive Association, which is Myanmar’s top industry body, and six European chambers of commerce, have written to the State Counsellor directly to complain about the possible revival of the licence scheme. The letter, seen by The Myanmar Times, warns of “unprecedented disruption” in the automotive industry and damage to Myanmar’s foreign investment prospects if approved.

Under the controversial scheme, issued as a reward for long serving civil servants, imported vehicles would be exempted from custom duties, income tax and road tax, bypassing car dealers and showrooms. There were also no limits set by the authorities in regard to the number of cars one permit holder could import.

The scheme was suspended earlier this year following backlash from the public and business groups.

But the Automotive Association of Myanmar and EuroCham Myanmar told this newspaper that the government intends to implement the scheme “any time soon”, citing unnamed sources in Nay Pyi Taw.

If confirmed, the scheme would raise fresh questions in the run-up to November’s general elections over the National League for Democracy (NLD) government’s willingness or ability to reform a vast and powerful bureaucracy which has had a reputation for opacity and been accused of corruption under decades of military rule.

Association chair U Aung Win estimated that about 100,000 of permits would be issued if the NLD government pressed ahead with the plan.

Granting potentially 100,000 tax-free licences runs counter to the government’s stated priority to boost tax revenues, which was its justification for its recent legalisation of illicit alcohol stocks.

With two months before voting, the timing also suggests that the licences could represent an attempt by the ruling party to win over bureaucrats with a “carrot and stick” approach, implying a combination of reward and punishment in their reform agenda. Since taking office in 2016, Daw Suu has cracked down on corruption and outlawed the practice of businesses gifting to officials. Yet, “facilitation payments”, locally known as tea money, remain pervasive nonetheless.

In 2014, Daw Suu publicly pledged not to roll out such schemes in government. Her party’s election manifesto released this month reaffirms that the NLD will practice “good governance” which will be “free from corruption”.

The scheme also goes against the ministry’s policy to encourage local production of cars as the permits would allow cheaper imports without tax, and only benefit a selected few importers instead of local showrooms and car dealerships, U Aung Win said.

The commerce ministry first devised the car licence scheme in January. Officials eligible for the scheme are director generals and “senior government officials”, including deputy director generals and “government employees with 25 years of work experience and those who received ‘Good Civil Service Award’,” according to a ministry memo.

The vehicles imported would be exempted from custom duties, income tax and road tax, bypassing car dealers and showrooms. No limits were set by the authorities in regard to the number of cars one permit could import.

The proposal was suspended in the face of widespread criticism from the public and the corporate community. Among the concerns were a loss of business for local car makers if officials are allowed to import at will.

Myanmar currently buys around 25,000 cars annually, meaning the domestic car assembly industry, as well as dealerships and showrooms could lose business to these permits for years, U Aung Min said.

The NLD administration automotive policy, published last year, specifies “the encouragement of Semi-Knocked-Down kit [SKD] system with defined taxation scheme for assembling and production”. SKD is used to manufacture vehicles in Myanmar. The policy was meant to draw more investors to set up factories in Myanmar and create jobs.

EuroCham Myanmar declined to comment on the protest letter sent to the ministry. However a spokesperson criticised the import licence proposal, citing its loopholes and difficulties in regulating the scheme.

“We fear the measure, in its original form, could favour single brokers who have made no investments in terms of human resources, facilities and training,” the spokesperson said. “We strongly support the creation of an official framework where all stakeholders could discuss and identify fair solutions in a transparent way.”

The business chambers had already voiced their opposition in a January press conference but said that the authorities had not responded to the concerns raised. U Aung Win had written to Minister of Commerce U Than Myint by then, calling for the plan to be scrapped and replaced with an alternative policy. U Than Myint is a member of the NLD.

The commerce ministry did not respond to written requests for comment by this newspaper.

But the ministry has ridden out previous controversies. It stalled efforts by the Myanmar Investment Commission to open up the retail and wholesale market and was accused of drafting an interventionist trade law and setting up a toothless competition watchdog. Ministry officials rejected these accusations.

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Source : Myanmar Times

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