Long term eco­nomic im­prove­ment cer­tain, strat­egy needed: U Win Aung

The Myanmar Times - - Business - CHAN MYA HTWE chan­[email protected]­times.com

THE gov­ern­ment has come un­der pres­sure for its han­dling of the Myan­mar econ­omy, with stake­hold­ers lament­ing the slow­ing pace of eco­nomic re­form and in­vest­ment flows.

Dur­ing the first half of 2018, ap­proved for­eign di­rect in­vest­ments (FDI) to­taled just $1.7 bil­lion, com­pared to $4.1 bil­lion dur­ing the same pe­riod in the pre­vi­ous fis­cal year. Mean­while, GDP is fore­cast to slow from 6.8 per­cent in 2017 to 6.2pc in 2018, ac­cord­ing to the World Bank.

U Win Aung, chair of the Union of Myan­mar Fed­er­a­tion of Cham­bers of Com­merce and In­dus­try, is among one those un­sat­is­fied with the econ­omy’s progress. “We should not be con­tent with the cur­rent sit­u­a­tion. In my opin­ion, Myan­mar needs more growth as the coun­try’s needs are ris­ing,” he told The Myan­mar Times in an ex­clu­sive in­ter­view re­cently.

How­ever, with a good strat­egy to draw in­vest­ments and di­ver­sify its trade part­ners, the long term out­look for Myan­mar looks promis­ing, said U Win Aung, who also founded Dagon In­ter­na­tional, a Myan­mar con­struc­tion and tim­ber com­pany, with U Win Thein, who is from the Tat­madaw, in the 1990s. Here is an ex­cerpt of our in­ter­view, which has been edited for length and clar­ity.

On one hand, the gov­ern­ment says the econ­omy is im­prov­ing. Yet, busi­nesses say they are hav­ing a hard time in the cur­rent en­vi­ron­ment. Why is there a dif­fer­ence in opin­ion?

In Myan­mar, most busi­nesses are in the in­for­mal econ­omy. The gov­ern­ment’s growth fig­ures are based on the for­mal econ­omy and gov­ern­men­tre­lated busi­nesses, which are show­ing progress. The gov­ern­ment, World Bank and other in­sti­tu­tions have done their anal­y­sis, thus it can­not be said that they are wrong.

How­ever, it also de­pends on the con­fi­dence lev­els of busi­nesses across the var­i­ous sec­tors. Some sec­tors may be do­ing bet­ter than oth­ers. We can­not ne­glect the views of the busi­ness com­mu­nity, which are de­vel­oped in the course of their daily op­er­a­tions.

There­fore, stake­hold­ers for each sec­tor of the econ­omy, in­clud­ing the gov­ern­ment, must de­velop a level of trust and co­op­er­ate for fur­ther devel­op­ment.

What should the gov­ern­ment do to help the weaker ar­eas of the econ­omy?

The econ­omy is re­lated to the en­vi­ron­ment. We need po­lit­i­cal sta­bil­ity and there should be both in­ter­na­tional and lo­cal in­vest­ments. Even in de­vel­oped coun­tries, in­vest­ments are im­por­tant. We should able to at­tract the most ben­e­fi­cial in­vest­ments for our coun­try. We need to know which in­dus­tries are most es­sen­tial and we should pri­ori­tise and of­fer more in­cen­tives to those sec­tors.

We need to for­mu­late smart poli­cies based on Myan­mar’s needs and ca­pac­ity to im­ple­ment them and not just on plans and meet­ings. There should be peo­ple who are able to ex­e­cute the poli­cies, not just aca­demics ca­pa­ble of pro­duc­ing the lit­er­a­ture.

One-stop ser­vices should be pro­vided to help busi­nesses in ev­ery busi­ness sec­tor.

The Myan­mar In­vest­ment Com­mis­sion and the gov­ern­ment ad­mit that there have been less for­eign in­vest­ments en­ter­ing the coun­try be­cause of Rakhine. What should be done to at­tract the funds needed for the coun­try’s devel­op­ment?

There was eco­nomic devel­op­ment and in­vest­ments in 2011, 2012 and 2013 dur­ing U Thein Sein’s gov­ern­ment. But this has cooled since 2014 and con­tin­ues to re­main so. Every­one knows the rate of growth has slowed in the con­struc­tion and prop­erty sec­tors. It is a cy­cle with peaks and troughs. It is the same in ev­ery coun­try. In Myan­mar, we have faced sim­i­lar cy­cles in 1997-98.

Cur­rently, there is an over­sup­ply in the con­struc­tion sec­tor. At the same time, there is also a huge mar­ket for af­ford­able hous­ing. Re­ports show that mil­lions need homes how­ever af­ford­abil­ity is the other fac­tor. To at­tract fur­ther in­vest­ments, we need time to make ar­range­ments such as hous­ing loans so that peo­ple can own homes.

An­other im­por­tant in­dus­try for the sus­tain­able devel­op­ment of the coun­try is man­u­fac­tur­ing. It is nec­es­sary to reg­u­late the spec­u­la­tive buy­ing of in­dus­trial lands to keep the land costs sta­ble for small and medium en­ter­prises so they can in­vest more eas­ily with a rea­son­able amount of cap­i­tal.

Spe­cial priv­i­leges should be given to in­vestors if the in­vest­ments are ben­e­fi­cial for the coun­try. For ex­am­ple, in­vestors in ru­ral ar­eas are given 5 or 7 years of tax ex­emp­tion since we also have to com­pete with other ASEAN coun­tries for for­eign funds.

It is nec­es­sary to pro­vide in­vestors with bet­ter in­cen­tives de­pend­ing on the type of busi­nesses and the ben­e­fits they ren­der to the coun­try. As far as I know, such a pro­gram will be car­ried out very soon. In­vest­ments will surely come if the pro­gram can be im­ple­mented at the ear­li­est pos­si­ble date.

We should not only en­cour­age ex­port-ori­en­tated but also im­port sub­sti­tu­tion in­dus­tries. This will also help us utilise our man­power and in­crease the em­ploy­ment rate.

The gov­ern­ment has es­tab­lished a Project Bank list­ing all the avail­able projects in the coun­try. This is re­ally ben­e­fi­cial since in­for­ma­tion is read­ily ac­ces­si­ble and trans­par­ent. Both lo­cal and for­eign in­vestors can in­vest in any of the projects based on their ex­per­tise.

Bor­der trade with China and In­dia has not been sta­ble and re­li­able. Myan­mar has long been dis­cussing trade quo­tas and bi­lat­eral agree­ments with these coun­tries but there have been no re­sults. What can be done?

Suc­cess of such ne­go­ti­a­tions de­pends on the tim­ing and sit­u­a­tion. The state is work­ing with trade as­so­ci­a­tions to ne­go­ti­ate the best gov­ern­ment-to-gov­ern­ment agree­ments for our prod­ucts to be ex­ported fairly. We need to have an enor­mous mar­ket sup­ply to gain lever­age dur­ing ne­go­ti­a­tions. If we have to de­pend on a sin­gle coun­try for ex­ports, in­sta­bil­ity in trad­ing will con­tinue.

The im­port­ing coun­try will con­sider their needs and pro­tec­tion­ism. Al­though we are the largest pro­ducer and ex­porter of beans and pulses to In­dia, there is no value-add to our prod­ucts. We had pre­vi­ously gone to In­dia to ne­go­ti­ate for bet­ter quo­tas for beans and pulses. But it is an on­go­ing process and will take time.

As for trade with China, when there is an over­sup­ply, China will force Myan­mar traders are forced to pro­duce more pa­per­work to the Chi­nese au­thor­i­ties. But when de­mand from China is high, pre­sen­ta­tion of nec­es­sary pa­per­work is not en­forced. This is un­pre­dictable and ac­tion can be taken on our traders any­time.

We must have the right strat­egy to pro­tect our own peo­ple. All stake­hold­ers have to par­tic­i­pate for the strat­egy to be suc­cess­ful. It is un­fair to say the econ­omy is trend­ing down­ward when one can­not do what he wants to do.

What are the prospects for trade and the Myan­mar econ­omy in 2019?

When we talk about econ­omy, both trad­ing and man­u­fac­tur­ing have to be in­cluded. The coun­try can no longer rely on in­come from the sales of nat­u­ral re­sources like tim­ber and min­er­als alone, as this is not sus­tain­able in the long run.

We also need to im­prove our pro­duc­tiv­ity and re­duce costs such as lo­gis­tics cost. This re­quires im­prove­ments to ex­ist­ing in­fra­struc­ture and can­not be done in a year or two. How­ever, we have re­ceived for­eign aid and loans for in­fra­struc­ture devel­op­ment, so the econ­omy will def­i­nitely im­prove over the long term. Dur­ing the con­struc­tion pe­riod, job op­por­tu­ni­ties will also emerge. If the process is im­ple­mented well, I am cer­tain that the econ­omy will pick up be­yond 2019.

Photo: Kang Wan Ch­ern

The econ­omy is ex­pected to im­prove over the long term.

Photo: Nyan Zay Htet

U Win Aung.

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