SOEs face continued criticisms for lack of oversight, revenues
INTERNATIONAL organisations, experts and civil society organisations call on the National League for Democracy-led government to address the lack of transparency in how state-owned enterprises (SOEs) use and deposit huge amounts of money in the so-called “Other Accounts” of the Myanma Economic Bank (MEB).
Experts argued that this policy should be reviewed while also putting proper scrutiny on the management of SOEs and whether those SOEs are the right way of doing business for the government.
“There needs to be a re-definition of what an SOE is. Some organisations that recognise themselves as SOEs are not being run like normal business entities. These cases must be reviewed. It they corporatise without proper review, it will take the form of an enterprise. These cases should be reviewed by bringing forward clear policies, regulations and law,” said U Arkar Hein, project coordinator of the policy think tank Renaissance Institute.
Andrew Bauer, senior economist at Natural Resource Governance Institute (NRGI), said SOEs have many moveable and immoveable assets when they are corporatised. Hence, they may not be entirely transparent as they try to retain their hold of those assets.
“Frankly, it might be better if the assets of the SOEs are dissolved and sold as they are not an efficient way of running such enterprises.
“On the other hand, in the jade trade, where the Myanmar Gems Enterprise oversees mining and tax collection, it makes no sense to undertake privatisation as the state will lose the revenue,” he said.
“Likewise, Myanmar Oil and Gas Enterprise holds shares in offshore oil and gas fields and collects taxes while in inland areas it collects taxes as well as extracts oil. This entity oversees and handles the whole oil and gas sector. Corporatisation in this case makes overseeing the oil and gas sector and collecting taxes a private enterprise,” Mr Bauer said.
Myanmar’s SOEs are notorious for their lack of oversight. The current State-owned Economic Enterprises Law (SEE Law), passed in 1989, did not establish a system of monitoring enterprise operations. Regulatory bodies like the Office of the Auditor General or Ministry of Planning and Finance do not have the mandates or manpower to dig into SOE finances and activities.
Crucially, 20 out of 32 SOEs in the country have opened “Other Accounts”. From 2012 – when SOEs were allowed to open OA at the state-owned MEB – to January 2017, SOEs deposited K11.5 trillion (US$8.5 billion at the time) in their OA, according to a report from the Renaissance Institute NRGI published this year.
Local expert U Min Min Oo said capital investment is needed for any company to grow and operate and the so-called Other Accounts were established for that purpose.
“Myanmar Investment Commission and the State-Owned Enterprises Development Committee have worked on overcoming these steps. After this work is completed, the process will finish soon. The authorities are likely to accept that SOEs which receive the highest income of the country are in urgent need of reform,” he said.
It is important to have the right solution for SOEs under individual ministries and sectors instead of a “one-size-fits-all” policy overhaul, U Arkar Hein added. Parliament is also conducting field investigations on loss-making factories.
“The root of the problem is weak management and loose supervision of SOEs. To find a solution, policies and laws related to them need to be made,” he said.
On the other hand, different approaches should be tried – for example, putting a stop to opening Other Accounts and/or classifying the different types of incomes, according to civil society organisations.
“Other Accounts are like savings and it is difficult to allocate to states and regions. For future projects, whether it is the property of an organisation or related to others is a political issue,” Myanmar Alliance for Transparency and Accountability representative U Win Myo Thu said.
“Fifty five percent savings by SOE may not be convenient under current situations of the country. So, how much are they allowed to save? But, if SEE mismanagement continues, Other Accounts should not be put under SOE,” MEITI civil representative Daw Moe Moe Tun said.
A recent report “State-owned Economic Enterprise Reform in Myanmar: The Case of Natural Resource Enterprises” found that the government has lost more than US$2 billion over the last 36 months because of the way state-owned enterprises are run in Myanmar. SOEs, including Myanmar Gems Enterprise and Myanma Oil and Gas Enterprise (MOGE), have placed cumulative revenue of K11.45 trillion (US$8.6 billion) in MEB without interest and in the national currency. As the kyat is depreciating in real terms (since early 2015, the kyatdollar exchange rate has weakened by more than K400) and the US$8.6 billion cannot be invested in interestaccruing foreign assets, these SOEs have lost more than US$2 billion in purchasing power over the last three years.
A solution on how to better manage this money would be by transferring a much larger proportion or even all of it to the treasury rather than earmarked accounts of SOEs in the MEB. That way Myanmar’s government can spend it according to the country’s needs and the Hluttaw and the public can have better oversight and accountability on how the money is being used.