Myanmar Times –Mar 29

BUSINESS leaders, in rare candour, have expressed strong reservations and wide-ranging criticism over the current government’s approach to the economy as it nears the end of its second year in office.

No doubt, some encouraging moves were made, notably the new Investment Law which came into effect almost a year ago, and the new Companies Law passed in December. These landmark legislative reforms spearheaded by Directorate of Investment and Company Administration (DICA) are expected to significantly improve the investor environment and are widely met with approval.

But these are pretty much the exceptions that prove the rule. Almost two years on, this government has been unable to come up with a coherent vision of the economy and get all the ministries on board to implement real changes.

When interviewed by The Myanmar Times, domestic and foreign businesses failed to hide their frustration. They said Nay Pyi Taw has yet to set out a proper position on the economic agenda and has failed to provide strong leadership in reforms. Protectionism continues to perpetuate the economy, business environment remains challenging, and few actions are taken to liberalise individual sectors.

Last month, Eric Rose from Herzfeld & Rubin PC (H&R), which shut down its Myanmar office, argued that the National League for Democracy-led government has not really done anything beyond “baby steps” in economic reforms. The departing lawyer’s uncharacteristically strong words resonate with many in the business community. Among them include Peter Beynon, chair of the British Chamber of Commerce, which is Myanmar’s largest international chamber.

“I wish it were not the case, but I fear that Eric Rose has it spot on. Even the much awaited new Companies Law which was launched in early December was almost immediately ‘pulled’ and will be made effective only from August 1, 2018.

He cited the decision to adopt a different fiscal year and the impact of poor communication over that policy as another example.

“Should the business sector change year ends? Will this affect the tax year… for income tax.. for corporate income tax? I am sorry, it is a shambles,” he went on. Businesses were sceptical of that policy, with Nishant Choudhary from DFDL and Melvyn Pun from Yoma Strategic arguing that multi-year budgeting would have been more effective.

But Mr Beynon stressed that businesses should not expect any different because this is a frontier market, “though I would expect those in power to look and learn from history and make sure the same mistakes were not perpetuated again.” That is not the case in Myanmar.

“In my view the government has lacked effective and communicative leadership at all levels and I have not spoken to any businessmen who feel differently,” the chair stated, responding to questions via email.

The major disappointment is “the total lack of a coherent vision for the country”, and “if there is one, it’s the fact that there is no effective communication to the public at large and the business community in particular”.

“The government lacks vision and personality. It is steeped in protocol and bureaucracy and, unless it is able to shed these burdens, does not deserve to be re-elected to serve the people again. It promised change in its manifesto but has delivered nothing to date. Time to deliver,” the British chamber chair stated.

Protectionism is a key area which this government fails to address.

“The government appears bogged down in protectionist doctrine espoused by ‘business and government’ elders who demand recompense for the sins of past governments which closed the doors of       Myanmar for decades on economic development. Protectionist thinking will only lengthen the time it takes for Myanmar to reverse its economic fortunes and reap the rewards the people of the country deserve today. Protectionism by its very doctrine protects the few and burdens the many. I have seen no economic textbook or practical economic example where protectionism has benefitted the many … it makes the rich richer and the poor poorer,” Mr Beynon added.

Pace of reforms too slow

Filip Lauwerysen, chief executive of European Chamber, agreed, saying the pace of economic reforms has been too slow for foreign companies in Myanmar.

Despite politicians and senior civil servants being very open to work towards solutions through consultation and engagement, the economic climate is not reassuring and a major change in the government’s approach is necessary, he suggested.

Myanmar was rated 4.8 out of 10 by European industry leaders in terms of the current economic development over the past year. Meanwhile, more than three quarters of European businesses rated the country’s business environment as “poor” or “needs improvement”, according to EuroCham’s business confidence survey released in December. “Clearly the companies are facing major difficulties,” Mr Lauwerysen said, “There is a re-launch of the economic agenda needed.”

      “The current economic agenda came in two years after the government’s mandate. Many things were discussed and most of us agreed Myanmar should have double digit growth, at least 10 percent,” the chief executive said. The economy is poised to secure just 7.7pc growth in this fiscal year.

“The Myanmar consumers still pay one of the highest prices in ASEAN for their goods… In the end, it’s the Myanmar consumers who will pay the price for all the current obstructions,” he commented. Economic nationalism in Myanmar negatively affected the majority of European companies, according to the latest EuroCham survey.

Lack of leadership, no action

The Australian chamber (AustCham) voiced concerns regarding both the overly centralised decision-making process in the government as well as the lack of strong leadership to tackle the economy.

“I have continued to comment on how I would like to see a decentralisation approach to government which, now in its second year of office, has still not occurred,” Jodi Weedon, chief executive of AustCham said, referring to both decentralisation from Nay Pyi Taw to states and regions as well as decentralisation from the cabinet to individual ministries and departments.

“I think business would really like to see a strong and empowered economic champion at the centre of government who could take up the cause of business reform and economic development internally and be a focal point for engagement with the private sector.

“There are some very able people working in these areas across the government but it would be great to see someone with clout at the very top,” said Chris Hughes, chair of AustCham. Recently , he also said the delay in implementing the Companies Law is a mistake and the government has to understand that passing new laws isn’t necessarily the solution to every problem. His law firm, Berwin Leighton Paisner (BLP) is leaving the country, though the lawyer will remain in Yangon.

For U Zaw Naing, managing director of Mandalay Technology, the government’s dialogue with private businesses has not translated into action.

“There is no effective implementtation of those meetings, except an attempt to secure tax amnesty in the 2018 tax bill, on the pretext of reviving construction and real estate industries. Even this did not succeed as the parliament rejected the proposal,” he said.

He said that this government has “no vision”, “no communication” and “no effective implementation” when it comes to managing the economy.

“Daw Aung San Suu Kyi started by talking about creating jobs and then later added the development of infrastructure, especially electricity and transport networks. But, there is no roadmap or implementation plan supporting those buzzwords such as ‘job creation’ and ‘infrastructure development’.

“I am very doubtful whether this government has a pragmatic vision for economic development for the short term, medium term and long term.

“They will soon need ‘quick-win’ projects to present to the country before the next [general] election. But, those projects will be for show and not for the real sustainable development,” U Zaw Naing remarked.

Echoing AustCham’s concern, he highlighted the overly-centralised decision-making progress. “Daw Aung San Suu Kyi changed the slogan from ‘Time to      Change’ to ‘Together with the People’. But, her cabinet is not delivering her slogan. Her cabinet ministers are waiting for her decision and making no progress in their respective areas of governance in terms of driving economic development,” he said.

Business plan stalled 

Another issue is not all ministries are fully on board with one reform agenda owing to the lack of direction.

“The big problem is that the government has not shown us [Japanese businesses] the direction they want to develop the economy. Because they have not shown the directions, even if individual ministries try to move forward, not all of their activities are aligned,” one Japanese businessman in Yangon told The Myanmar Times on condition of anonymity.

“There is a lack of coordination at many levels of the government. Hence, it’s hard for businesses to do anything related to the actual implementation of new policies and changes. Because of this lack of coordination, there are examples where different government entities block the reformed policies already announced to businesses by another entity.

      “The top leadership has not communicated to ministries and departments on how to liberalise the sectors. Many investors, including Japanese ones, find it increasingly difficult to sit on the fence and wait for the liberalisation because their business plan is stalled time and again,” the person said. (Katsuji Nakagawa, chair of Japan Chamber of Commerce and Industry in Myanmar [JCCM], could not be reached for comment by press time. He said last year that some industries are taking more time than expected to develop partly due to the government’s lack of clarity in regulations.)

U Aye Thiha, CEO of Thiha Group and Millcon Thiha Ltd, reckoned that this year, the pace of change has improved but remains insufficient.

“I must say that the pace has certainly quickened versus last year although it is nowhere near the pace of

Despite some success such as the Yangon Central Railway Development Project and the four new power plants, this may not suffice to revive a fledgling economy “which pretty much stood still for over one year and was affected by the Rohingya crisis”, according to the businessman.

“Sometimes not making a decision can be costly as the clock is ticking regardless,” he went on. In addition, the government approval process required for new projects has not been clear, though Myanmar Investment Commission (MIC) is doing “an outstanding job”.

Vested interests

One reason why the cabinet has not been delivering economic reforms is that it is entrenched in vested interests, according to U Pyi Wa Tun, head of Parami Energy and board member of CCI France Myanmar.

The way he sees it, the cabinet needs new and younger members as well as more female members in order to work.  “We need people in the cabinet to identify and address the issues without favour or prejudice.

“This government needs to get rid of the vested interests and favour within individual ministries before it can claim to be truly meritocratic, which isn’t the case right now.

“The ministers need to understand that their job is not only about prestige, it is about responsibility and accountability. They have yet to fully appreciate this point.

“I also wish to see that ministers could understand issues in Myanmar in a broader context, taking into account what is going on regionally and globally, and putting things into perspective,” Mr Tun remarked.

     Both U Zaw Naing and U Pyi Wa Tun argued that the government’s dialogue with businesses is not inclusive and only focuses on the likes of Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), therefore excluding the views of many entrepreneurs.

Dialogue open

Not everyone is negative though. U Ye Min Aung, UMFCCI vice president, emphasised that the two year-old administration has continuously worked on economic reforms and market liberalisation.

“Vice President-led senior government officials pay visit to the UMFCCI every month to listen to issues and challenges faced by private sector and find strategic ways to solve them… Previous governments did not do [hold the meetings] like this,” he replied in an email, adding that these monthly meetings, “if used effectively, will be very result-oriented”.

     The business leader reckoned the new legislative reforms and breakthroughs secured for international banks to support export financing for domestic businesses. Rice and fishery export volumes have achieved new heights. All these are taking place while political challenges, such as the Rakhine crisis, are dragging the economy, he noted, conceding that bureaucracy is a main obstacle.“Slow responses at the middle and low levels of administration have been a major disappointment,” he said.

Likewise, Mr Hughes from AustCham tries to strike a positive note.  “The government is making progress in important areas like public financial management, environmental management and better planning, dealing with land issues, access to finance, development of infrastructure and job creating industries like tourism and, importantly for business, investment law and company law reform,” he said.

He attributed the lack of anticipated investment boom to the short-term investment horizon of multinationals.

“It’s more to do with the more conservative, risk averse nature of a lot of big western business and a shorter term outlook than anything else. Successful implementation of the government’s reform agenda and continued attempts to bring political stability to the country will certainly improve sentiment,” the lawyer observed.