Long term economic improvement certain, strategy needed: U Win Aung
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.
The economy is expected to improve over the long term.
U Win Aung.