UMFCCI Vice President blames global trends, poor infrastructure, low tax participation for lagging national growth; sees improvements in trade, potential in privatisation
U Ye Min Aung, vice president of the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry, told the Global New Light of Myanmar his views on Myanmar’s economy in an exclusive interview.
Q: Please tell us about the current economic situation in Myanmar?
A: At the present period, global economy continues to decline, with world’s leaders trying to boost the sluggish economy with global cooperation through Group of 20 (G20), the Organisation for Economic Co-operation and Development (OECD) and Association of Southeast Asian Nation (ASEAN) using different methods. China is also putting forth concerted efforts to improve the economy through its One Belt, One Road programme. Our country is also suffering the effects of global recession in international trade. For the time being, Myanmar’s economy is operating at a slow pace, as we know. This is due to the country’s political change, policies and legal reforms of the current government and integration of ministries. Our president said at an economic development forum that the country’s economic growth is between six and seven per cent and we all accept this. I openly say, currently, the country is experiencing sluggish economic growth.
Q: Please tell us your view on the cause of slow economic growth? What sectors need to develop to boost the country’s economy?
A: Development of electricity, infrastructure and agriculture play a very important role in the country’s economy. The country’s electricity sector has not reached the development level which the public expected within the last year and a half. For example, authorities wish to set a new price for electricity as the sector is operating at a loss of over Ks300 billion per year. In this case, the authorities need to announce their plan to the general public first. Then they need to revise the details of the plan in order to introduce new higher prices without hurting the people because it will have a negative effect for low-income households if the authorities increased rate rises suddenly. To develop more road transport infrastructures in the country, the sector is required to have effective plans. Agriculture development is also vital for the economic growth. A close collaboration is required among Union government, regional government and private entrepreneurs to improve the country’s farming businesses. The country’s monetary system should help small and medium-sized enterprises get soft loans with low interest rate from domestic banks. The government needs to work to get international loans as quickly as possible when local banks face difficulties to disburse loans to SMEs. At the present time, the government prepares to start paying two-step loans provided by the Japan International Cooperation Agency (JICA) over the past two years. We know that the loan disbursement works need a lot of time, and we hope the government will carry out the work as fast as it can for economic development. It takes a long time to get foreign loans because the government can’t take loans without parliamentary approval. The government needs to set a direct link between international lenders and private entrepreneurs to support the country’s businesses. Traditionally, businesses can’t expand without investment. The fall in the business development in all sectors is directly associated with weak investment. The last point I want to say is about the tax system. The government needs to decrease tax rates and increase the tax base. The sector requires an increase in the number of taxpayers more than in the tax rate. Revenue authorities should increase awareness programmes, not only in commercial cities like Yangon and Mandalay, but also in other big cities such as Mawlamyine and Taunggyi, to educate and sensitize people about the importance of paying tax.
Q: What sectors meet economic development in recent years?
A: I am gratified by the policies and performance of the trade sector. The agriculture sector in the last fiscal year saw a slight increase of over US$300 million when compared with the previous fiscal year. I am also glad there is more development in international markets. However, I am unsatisfied with the country’s trade negotiations with China. The financial sector is also seeing more progress during this current government. We can easily improve international money transfers now that the US has removed trade sanctions against the country.
Q: What sectors need changing to ensure the smooth flow of commodities?
A: Gateways include major points of commodity flow. Currently, Yangon is a main gateway to trade and investment that creates traffic and urban problems. Yangon is located between the port and industrial zone. The town’s geographical condition has an impact on trade. It is clear that we cannot transport three million tons of rice through Yangon Port, only. Plans are underway to implement the Yangon chief minister’s deep sea port project within next five years. It needs to increase connections across the country’s gateways. In Myanmar, Yangon and land ports of entry are major gateways to transport commodities. We transport goods through our borders by trucks. Coastal areas including Pathein, Sittway, Kyaukpyu, Dawei and Mawlamyine are suitable places to enhance ports of entry to promote trade by sea. Banks as well as customs are also required in these areas. We should practice the way of ‘start small, grow big’ to solve the problem with slow economic growth. Laboratories for international quality standards are required to be built under the supervision of the government in order to make our exports more marketable. We usually spend lots of money to do laboratory testing for products in Thailand because of lack of quality labs in our country.
Q: May I know current situation of foreign investment in the country?
A: From businesspeople’s point of view, international companies are showing greater interest in Myanmar. However, it is difficult to get robust investment due to the country’s inadequate electricity supply and poor transportation. When compared with international practices, some systems being practiced in the country need to change. As an investor, he first thinks about access to electricity and land prices in the country. The country’s land price is higher than that of land in industrial zones in neighbouring countries. Industrial development helps promote the country’s manufacturing sector and economy as well as creates more employment opportunities for citizens. Land disputes have also occurred across the country. We understand that these problems are rarely resolved quickly. The country requires a strong land policy to allow use of land to help foreign investors start their investment projects as quickly as possible. This is one of challenges we face.
Q: How we improve economic sector?
A: The country has to concurrently develop import substitution as well as export promotion. The country’s export revenues reach more than 10 billion per annum while neighbouring Bangladesh earns about 50 billion in export revenues.
This means that our country needs to set up a target to get at least 25 billion export revenues per year, requiring strategies, policies and master plans to raise export income from respective segments, including agriculture, fisheries, mining and garment sectors. The government has to encourage the private sector by assigning appropriate duties, smart intervention, strong policy, financial supports and technical assistance. Government to government negotiations are sometimes necessary. The government should carry out promotion of trade and elimination of smuggling imports at the same time, followed by more FDI for import substitution, to replace foreign imports with domestic production, by inviting foreign manufacturers to the country. It also needs to increase exportation of local products and reduce imported goods. Export of agriculture, fisheries and garment products are high on the list of priorities. The important thing is to exert efforts to increase productivity of as many marketable products as they can. It is also important to establish growth policies to increase fisheries and agricultural exports by 15 percent each year. We can meet these trade targets through these plans. In the trade sector, everything is possible to successfully run a market oriented system led by the private sector with facilitation by the government. My next point is a move toward privatization of government-owned enterprises which are running at a loss. It is necessary to conduct corporatization and privatization as soon as possible. With respect to this issue, I don’t accept the argument that the private sector will make easy profits on privatized enterprises. It is not easy to generate profits in unprofitable enterprises. The government currently operates these businesses at a loss. The private sector will face challenges attempting to make profits with these businesses, although the sector can reduce government regulatory obstacles. Regarding establishment of public utilities, it is necessary to invite international expertise to participate in important entities like including Yangon Electricity Supply Corporation, Mandalay Electricity Supply Corporation and Myanmar Agricultural Development Bank instead of being managed by ministries. Corporate governance is essential in this process.
Q: How do you think the government and private sectors should cooperate for economic development?
A: In my opinion, a results-oriented approach is suitable for economic cooperation between the government and private enterprises. There is a need to increase trust between the government and the private enterprise. The private sector needs to be able to trust the government and to follow guidance provided by the authorities. We don’t like the government’s interference in market economy. However, a smart government intervention is needed including regulation, deregulation and re-regulation. To stabilize the macro-economy, finesse is required to control the exchange rate and inflation as well as implementing monetary policy and fiscal policy.
The main point I want to make is that we must analyze the weaknesses and strengths of the country in order to promote international trade, with targets to improve our “doing business” ranking from our current position to a higher level. This is also related to the government’s proposal review process. The current system takes a long time to scrutinize proposals within three or four departments. One stop services are needed to reduce waiting times for government approvals. This is one difficulties businesspeople are facing. changes in private sector working practices are also needed. For example, private businesspeople need to prepare a perfect project proposal and tell the government what kind of help they need. The sector needs to reduce corruption and make efforts to end special privileges granted by the authorities. The country will see more economic development as the government and private sector implement reforms.
Q: May I know legal barriers to doing businesses in the current time?
A: There are laws restricting agribusiness. Permission is needed to substitute one crop for another on the same farmland. It is also difficult to shift to livestock breeding from cultivation. From my point of view, the process of amendment of laws and procedures needs added momentum and should be completed this year.—Translated by Khaing Thanda Lwin, Edited by Solomon Moore