SOEs face con­tin­ued crit­i­cisms for lack of over­sight, rev­enues

The Myanmar Times - - Local Business - CHAN MYA HTWE chan­[email protected]­

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.

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