Minister on a mission

Minister on a mission

Soe Win shows signs of delivering on goal to get Myanmar's economy moving again.

Soe Win has been in his post for less than two months, but already there are significant signs that Myanmar's new finance minister is ready to deliver on the government's commitment to boost economic growth.

The veteran financial professional is determined to revitalise economic policies and ensure they are carried out effectively, according to government insiders.

The long-awaited new Companies Law will take effect next month, and the government hopes it will rejuvenate efforts to attract foreign investment. The economic committee structure that oversees policy is also being revamped.

As well, the governor of the Central Bank of Myanmar is expected to have his contract extended for three years, in the interests of stability and to ease fears of a financial crisis and a potential bank crash.

For months the business community had been complaining that the government has shown no leadership, amid general economic stagnation and plummeting business confidence.

"The government needs to urgently deal with corruption, bureaucratic inertia and the lack of constructive policies," KK Hlaing, a prominent businessman and political commentator, told Asia Focus.

"The government's economic policies, up to now, have been like a rudderless ship," added Maung Maung Lay, vice-president of the Union of Myanmar Federation of Chambers of Commerce and Industry.

"It's time for the plane to leave the runway."

Soe Win's appointment has been widely welcomed. "He's a breath of fresh air," said KK Hlaing. "He's had international experience, understands the business community and is completely clean."

Soe Win is 80 years old but age is not seen as an impediment. What he may lack in energy, according to someone who knows him well, he more than makes up for with experience, intelligence and management skills.

The managing partner of the professional services firm Deloitte in Myanmar, he was already a member of the National Economic Coordination Committee (NECC) before his appointment.

Soe Win began his career in 1961 with the State Commercial Bank. He trained at the Bank of England in 1976 and was appointed general manager of the Myanmar Foreign Trade Bank in 1993, before leaving to join Pricewaterhouse in 1996. Since then, he has worked in the private sector. In 2003, he founded Myanmar Vigour, which became a member firm of Deloitte in 2015.

"Soe Win's appointment is a clear sign of intent (on the part of State Counsellor Aung San Suu Kyi)," Sean Turnell, an Australian economist and adviser to the state counsellor, told Asia Focus. "The elevation of the economic coordinating committee, coupled with the installation of the new, highly capable and reform-minded finance minister, augurs well for the country's economic reform programme."

The NECC is being given greater authority and provided the administrative leadership that has been lacking since the National League for Democracy (NLD) took office more than two years ago.

"This is a body -- as its name suggests -- meant to coordinate the government's economic reform efforts, but also to drive them, ensure their implementation -- the real challenge in Myanmar -- and assess the outcomes," said Mr Turnell.

The finance minister chairs the committee, which includes other economic ministers, central bankers and members of the NLD economic committee. It generally meets once a month and state counsellor attends when her schedule permits.

The Myanmar Investment Commission (MIC) has also been restructured and new members added, precipitated by the resignation of former finance minister Kyaw Win, who used to chair it. It approves investment applications, especially for joint ventures, and spearheads efforts to attract foreign investment.

Thaung Tun, the Minister for the Office of the Union Government Minister and National Security Adviser, was recently appointed chairman of the commission. This is a break from tradition, as generally the finance minister chaired the body. In part the aim is to free the finance minister from having to fly to Yangon from Nay Pyi Daw every week for meetings.

An experienced former career diplomat and a fluent English speaker, Thaung Tun is a perfect fit for the MIC job, said Zaw Naing, the managing director of Mandalay Technologies, who accompanied Thaung Tun to Hong Kong last month for a Belt and Road Summit. "He's an inspired choice -- articulate, erudite and confident -- well positioned to promote trade and investment.

"Myanmar needs to aggressively and actively attract investors. Investment promotion, especially in infrastructure, and a government development strategy are sorely needed at this point."

The government is simultaneously preparing a public investment pipeline -- or "project bank" as it's called locally -- to coordinate investment in infrastructure.

The project bank consists of a list of prioritised projects, intended to avoid random selection as well as introduce rationality and transparency into the selection process, according to Mr Turnell. They are ranked according to socio-economic impact, availability of finance and contract terms -- whether government-funded, with overseas development assistance, or public-private partnership.

While the country desperately needs foreign direct investment (FDI), the current outlook is bleak. In the first two months of this financial year, in April and May, FDI was only US$200 million compared with $700 million for the same period last year, according to Aung Naing Oo, director-general of the Directorate of Investment and Company Administration (Dica). Most of this came from Asean, China, Korea, Japan and Hong Kong. Singapore was the top investor, though most of the funds originally came from China.

There is no doubt that the trouble in Rakhine state that has led to the exodus of hundreds of thousands of Rohingya Muslims -- and widespread international condemnation -- still casts a long shadow over the investment climate, Aung Naing Oo admitted. "And we cannot expect investment from the West in the near future," he said.

There is nevertheless strong interest from many foreign companies, especially from Europe. Every day three or four international business groups visit Dica, inquiring about investment regulations and procedures, he said.

Aung Naing Oo is optimistic that the Companies Law could significantly improve the situation.

"It's a game changer," he told Asia Focus. "It will support the momentum of economic growth and provide a major impetus for foreign investment, by making it much easier for foreign investors."

Under the law, foreign investors can secure up to a 35% stake in a local firm. "This is a very exciting prospect that will be of mutual benefit."

Registration procedures and regulations are being simplified. "Everything is being done online: it's a clear and simple process that significantly reduces the regulatory burden and compliance costs of companies," said Aung Naing Oo.

In the meantime, insiders say the government has decided to extend for three more years the contract of central bank governor Kyaw Kyaw Maung, who was due to retire at the end of this month. His reappointment is expected to be formally announced soon, but it is by no means a popular decision.

Many reformers within the NLD will be disappointed. He is seen as having obstructed or delayed some liberalisation measures, particularly in the financial sector. But it seems that Aung San Suu Kyi has opted for stability and continuity, amid heightened speculation that has led to volatility and deprecation of the kyat.

"While Myanmar's financial sector indisputably requires deregulation, any truly prudent reforms must respect the autonomy of the Central Bank of Myanmar under the current governor," said Felix Haas, an independent public sector consultant based in Yangon. "Sincere reform to create a stable financial sector requires the [central bank] to untie the hands of undervalued Myanmar banks carefully to support the growth of sound SMEs through tailor-made financial products."

Taken together, all these changes indicate the government finally has acquired a sense of urgency about delivering economic results in the lead-up to the elections in November 2020.

"This is the government we wanted, but sadly it has not delivered the result the people expected," said Zaw Naing.

"The ball is firmly in the government's court, and they need to make a difference in the next few years," added Maung Maung Lay. "Results need to be achieved much faster. If not it will undoubtedly affect the NLD's vote in the 2020 elections."

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