Bank takes re­form steps

The Myanmar Times - - Front Page - thanhtoo@mm­ HTOO THANT – Trans­la­tion by Emoon and Thiri Min Htun

Myan­mar Agri­cul­tural De­vel­op­ment Bank will move to the Fi­nance Min­istry as part of a state-owned en­ter­pise re­form agenda.

THE govern­ment will place cash­strapped state lender Myan­mar Agri­cul­tural De­vel­op­ment Bank (MADB) un­der the Fi­nance Min­istry’s con­trol, and plans to cor­po­ra­tise the bank as part of an econ­omy wide in­ves­ti­ga­tion into state-owned en­ter­prise re­form.

The govern­ment is pre­par­ing to move MADB from un­der the Min­istry of Agri­cul­ture, Live­stock and Ir­ri­ga­tion and place it un­der the Min­istry of Plan­ning and Fi­nance, Agri­cul­ture Min­is­ter U Aung Thu told par­lia­ment this week.

The agri­cul­tural lender – the only af­ford­able source of fi­nance for Myan­mar’s farm­ing house­holds – strug­gles to stay prof­itable, and re­lies on loans from fel­low state-owned en­ter­prise Myan­mar Eco­nomic Bank (MEB) and the coun­try’s Cen­tral Bank. Agri­cul­tural in­dus­try of­fi­cials have roundly crit­i­cised the bank for the small size, slow speed and low vol­ume of its lend­ing.

Deputy Min­is­ter U Maung Maung Win at the Min­istry of Plan­ning and Fi­nance told The Myan­mar Times that the govern­ment’s Eco­nomic Com­mit­tee had al­ready agreed to the pro­posal to move the bank un­der Fi­nance Min­istry con­trol, but only on the con­di­tion that MADB moves to cor­po­ra­tise.

Cor­po­rati­sa­tion is the process of im­pos­ing a cor­po­rate struc­ture on a state en­tity. This usu­ally in­volves in­tro­duc­ing a board of di­rec­tors, man­age­ment and share­hold­ers, which can be a pre­cur­sor to full pri­vati­sa­tion.

The govern­ment’s next step is to con­duct a fea­si­bil­ity study into how cor­po­rati­sa­tion will work, which is likely to take sev­eral months and will in­clude analysing the bank’s fi­nan­cial po­si­tion, U Maung Maung Win said.

The deputy min­is­ter said MADB was one of the first en­ti­ties be­ing tack­led as part of a re­view the govern­ment launched ear­lier this year into which state en­ter­prises it would re­form, cor­po­ra­tise or leave un­der state con­trol. Re­duc­ing waste­ful spend­ing and pri­vatis­ing “ap­pro­pri­ate” state-owned en­ter­prises (SOEs) was the first pil­lar in the Na­tional League for Democ­racy’s eco­nomic strat­egy, which it pub­lished ahead of last year’s elec­tions.

Many SOEs are a huge bur­den on the state’s bud­get. MADB bor­rowed K800 bil­lion from MEB and K400 bil­lion from the Cen­tral Bank in the 2015-16 fis­cal year at in­ter­est rates of 4 per­cent. U Myo Tint Tun, agri­cul­tural min­istry deputy per­ma­nent sec­re­tary, said this fis­cal year MADB’s bor­row­ings had risen to K1.2 tril­lion from MEB and K500 bil­lion from the Cen­tral Bank.

MEB, mean­while, has its own is­sues with prof­itabil­ity. That lender has been op­er­at­ing at a loss since 1990 – and K79 bil­lion of the state bud­get was used to prop up the bank in fis­cal year 2013 alone, ac­cord­ing to a 2015 re­port from Ger­man de­vel­op­ment agency GIZ.

In the medium term MADB will have to con­tinue re­ly­ing on MEB loans, U Maung Maung Win said. The bank has only K9.5 bil­lion in cap­i­tal, but is aim­ing to pro­vide K1.7 tril­lion in agri­cul­tural loans in 2016-17.

But in time MADB’s own­er­ship and fund­ing struc­tures will be al­tered, po­ten­tially al­low­ing for shares to be is­sued to the pub­lic, he added. The fea­si­bil­ity study into MADB’s cor­po­rati­sa­tion would also ex­am­ine whether some of the bank’s debts will have to be re­struc­tured, U Maung Maung Win said.

But the shift to the Min­istry of Fi­nance and Plan­ning will also in­volve ef­forts to im­prove MADB’s abil­ity to pro­vide loans to farm­ers in the short term, he added.

Be­cause MADB first has to seek fund­ing from MEB and the Cen­tral Bank, this cre­ates ad­di­tional steps in the lend­ing process and makes it hard for MADB to turn the state fund­ing into agri­cul­tural loans in time, said U Aung Thu.

The agri­cul­tural bank’s move to the Fi­nance Min­istry will place it un­der the same min­istry as MEB.

“We pre­dicted the sys­tem would have to change,” said U Aung Thu. “I want to in­form the pub­lic that we are carrying out [the re­form] un­der Eco­nomic Com­mit­tee scru­tiny to make sure that the same is­sues do not hap­pen again in the fu­ture.”

Since the new govern­ment took of­fice MADB has come un­der in­creas­ing fire from MPs an­gry at the bank’s slug­gish de­liv­ery of agri­cul­tural loans.

“It’s get­ting worse and worse,” said Pyithu Hlut­taw rep­re­sen­ta­tive U Nyan Hein (NLD; Than­byuza­yat) on Septem­ber 2. “Even though [MADB] was launched to help farm­ers they are not get­ting loans that cover cul­ti­va­tion ex­penses, and re­cent loans were only de­liv­ered on Au­gust 10 which isn’t in time to help with the sow­ing pe­riod [in June].”

Pyithu Hlut­taw rep­re­sen­ta­tive U Myint Oo (NLD; Thanat­pin) said that farm­ers in his con­stituency were de­nied agri­cul­tural loans de­spite hav­ing farm­land own­er­ship cer­tifi­cates and no out­stand­ing debts to the state bank. U Myint Oo said MADB had is­sued a di­rec­tive for Bago Re­gion with­hold­ing loans from farm­ers that had started the ap­pli­ca­tion process this year.

U Aung Thu said that the min­istry had re­leased no such di­rec­tive, and would be dis­burs­ing loans to all farm­ers that had ap­plied. “As we aim to lend to farm­ers in full, we will dis­burse loans to all farm­ers [that ap­ply],” he said.

Photo: AFP

Women plant seedlings in a rice field.

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