Myanamar reforms GATHER PACE
Observers optimistic that energetic new President Win Myint can get underperforming government moving on crucial improvements.
Myanmar has reached a critical crossroads with the start of a new financial year as the National League for Democracy (NLD) government enters its third year in office. But concrete plans for accelerated economic and political reform are in the pipeline. They mark a return to the NLD’s traditional, populist principles, stressing land rights and economic fairness but with an emphasis on economic liberalisation.
“In the coming year we will adopt programmes that will bring real benefits to the citizens,” State Counsellor Aung San Suu Kyi told the nation in a televised speech last week.
“The government understands that it’s time to launch the second wave of reforms that will genuinely transform Myanmar’s economy, and deliver the freedom from poverty that the people deserve,” the government’s chief economic adviser, Sean Turnell, told Asia Focus.
Most analysts and commentators agree this is a make-or-break year for the NLD government, which is understandably beginning to look ahead toward the next elections, due in 2020. The change in approach was also signalled by the election of a new president — Win Myint, the former speaker of the Lower House.
Compared with predecessor Htin Kyaw, he is an experienced political activist and lawyer, and is expected to take a more active administrative role, even though Aung San Suu Kyi will continue to call the shots. He is certain to shoulder more responsibility and be actively involved in cabinet deliberations.
There is also likely to be a major cabinet shake-up in the coming weeks, involving both union ministers and regional chief ministers, said Thet Aung Min Latt, head of the local consultancy Diamond Intelligence.
“When he was sworn in as president, Win Myint clearly outlined his approach, including the need to monitor underperforming ministries,” he said.
“To make this transition process smooth and successful, it is very important for our peoples, government employees and civil servants to change their dogmatic mindset and habits,” Win Myint said in his inaugural speech.
But it is the lack of policies as well as underqualified personnel and their attitudes that have prevented the government from effectively grappling with serious economic issues, say business leaders.
“Daw Aung San Suu Kyi’s government has no vision, no strategy and no effective implementation when it comes to managing the economy,” said William Aung, an independent financial analyst based in Yangon. “There is no clear policy and this government seems to have simply adopted the policies, procedures, processes and systems it inherited from the previous regime.”
Mr Turnell begs to differ. “The NLD government inherited an economy beset by many problems when it took office two years ago, and has done well in improving and stabilising Myanmar’s macroeconomy,” he said.
When the NLD took office in March 2016, the economy was severely overheating: inflation, the budget deficit, the balance of payments deficit and the exchange rate were all getting out of control, he said. The government’s main task was fixing these problems.
As a result, he said, economic fundamentals are now sound and economic growth impressive, especially over the last 12 months. The International Monetary Fund (IMF) estimates that Myanmar’s economy grew by 6.7% in fiscal 2017-18, and it expects similar figures or higher in the next two years.
Inflation has been brought under control and is now under than 5% — a third of the rate at the end of President Thein Sein’s rule. The budget deficit is also a third of that it was. The current account deficit has narrowed by more than 20% since March 2016. And the exchange rate has not only stabilised, but in real terms the kyat has actually appreciated against the US dollar and other major currencies.
But as Mr Turnell readily admits, more can and should be done to spur economic development, and ensure that the majority of the population — who live in the country’s rural areas — benefit.
“We also need to improve the socio-economic life of farmers, improve the lives of workers and ensure that students gain access to higher education,” Win Myint promised when he was sworn in.
“Improving Myanmar’s many infrastructure bottlenecks will remain a key priority in the years ahead, but ensuring reliable and adequate electricity is the government’s top priority,” said Mr Turnell. But doubts remain as to whether the government has the capacity, resolve or strategy to get things done.
Most businesspeople complain of the highly centralised decision-making process and cumbersome bureaucracy. Cabinet ministers wait for Aung San Suu Kyi to decide everything before they act. This outdated hierarchical approach has to change, said William Aung.
“Above all, government involvement in the economy needs to reduced or eliminated altogether,” he said, adding that inefficient state owned enterprises should be privatised. Over 100 of these are already being audited, according to government insiders and private investors being sought to take them on.
The state-owned banks are also due for reforms and restructuring. “This will be important, not least for farmers, many of whom have long had to depend on the state-owned rural lender, the Myanmar Agricultural Development Bank,” he added.
Lack of policy clarity under the NLD has deterred foreign direct investment (FDI). However, FDI was 25% higher in the last financial year compared with the previous year, topping $6 billion and exceeding the target, said Aung Naing Oo, the secretary of the Myanmar Investment Commission (MIC).
He expects foreign investment to grow even more this year as large-scale infrastructure projects — including electricity generation, rural roads, rail lines and port facilities — come onstream.
While most foreign businesses remain cautiously optimistic about economic development in the coming years, they warn that the government must do more to improve the business environment. “From an investment perspective we do see the situation in Rakhine making some foreign investors more cautious,” Ola Nicolai Borge, a Norwegian lawyer and business consultant who been based in Myanmar for many years, told Asia Focus, referring to the anti-Rohingya purges that have driven 700,000 refugees into Bangladesh.
“Myanmar’s government needs to make the commercial terms more attractive for foreign investors. My impression is that many currently consider Myanmar to be a high-risk destination with too low rewards — especially in the oil and gas sector — compared to other better options, even in the region.”
The government hopes its Draft Myanmar Strategic Development Plan, introduced earlier this year, will address those concerns. “This is the centrepiece of the government’s reform and liberalisation strategy,” said Mr Turnell. “It brings coherence and energy behind a programme that, while advancing hitherto on a number of fronts, lacked a central narrative.”
Most people in Myanmar now hope the government can finally address the country’s economic needs in a coherent and strategic manner. Foreign and local businesses are pinning their hopes on the new president helping to galvanise the bureaucracy and ministers.
“I think the NLD government is still learning on the job, and it’s a steep learning curve,” said Mr Borge. “They’ve come a long way since they took over, but more needs to be done for Myanmar to realise the country’s enormous potential. With Win Myint’s impressive track record as speaker — he seems decisive and able to get things done — and if he can continue this as president, the development of Myanmar will surely pick up the pace.”
I think the NLD government is still learning on the job, and it’s a steep learning curve. They’ve come a long way since they took over, but more needs to be done for Myanmar to realise the country’s enormous potential” OLA BORGE Myanmar-based lawyer and consultant