Myanmar business mood darkens amid Rakhine outrage
Myanmar is stepping up efforts to attract foreign investment and spur economic development. A diplomatic offensive to improve the country's tarnished international image is part of the campaign, but western companies are not being swayed.
Local businesses, meanwhile, are growing disillusioned with the government's efforts to spin the unspinnable when it comes to explaining the military's savagery in Rakhine state. As foreign investment plummets, they believe the country is approaching an increasingly desperate future.
"The situation is increasingly hopeless," said Moe Kyaw, the head of Myanmar Marketing Research and Development Company (MMRD) and a leading member of the Union of Myanmar Chambers of Commerce and Industries (UMFCCI).
"With the plummeting kyat [against the dollar], increasing redundancies and spiralling tax bills, we're facing an ever bleaker future," he told Asia Focus last week.
His views represent the general feeling among the business community as the gulf widens between its perceptions and those of the government.
"Myanmar is now definitely open for business," the new chairman of the Myanmar Investment Commission (MIC), Thaung Thun, told a group of foreign businessmen in Yangon recently.
State Counsellor Aung San Suu Kyi delivered a similar message last month to an international audience of government officials, academics, businesspeople and students in Singapore, and later at a meeting with top executives in Nay Pyi Taw.
She made similar comments earlier this month to an elite audience at the World Economic Forum in Hanoi. But the only thing the world remembers from that appearance was her seemingly cavalier dismissal of criticism of the jailing of two Reuters journalists for reporting on the Rohingya crisis.
"Our journey is not a simple one; it is an adventure into an unknown future," she said in Singapore. "We have many challenges to face, many weaknesses that we must address, but we have confidence, confidence in the ability and the capacity of our people to grow into these challenges."
"I'd like to invite entrepreneurs to invest in our young people and in research, on which we currently spend very little," she said in Hanoi. "Unless you work with people, you cannot help a country to achieve sustainable development."
"With the people, for the people" has become a mantra of sorts for the Nobel laureate, but it is only a slogan, with no substance or commitment, says Zaw Naing of Mandalay Technology.
"There is an acute lack of leadership and management on the part of the government," he said. "They need to bring in new blood at the ministerial level: a younger generation, more dynamic, more energetic, with more initiative."
There are only two ministers under the age of 50, with most in their 70s and 80s
But the real problem, said Zaw Naing, is that the government -- and Aung San Suu Kyi in particular -- is not listening to anyone, and certainly not the business community. In fact, according to Moe Kyaw, she avoids the business community almost entirely. Access to her is restricted, and she leaves dealings with businesspeople to her economic team, especially Thaung Tun.
The MIC chief has highlighted new measures intended to make doing business easier, attract investment and reduce bureaucratic delays. He also cancelled the use of landing and departure cards in an effort to improve tourism, which has stagnated. But such confidence-building attempts have fallen flat, according to Moe Kyaw.
The UMFCCI has been monitoring sentiment through quarterly online surveys of its 31,000 members since the National League for Democracy (NLD) took office in early 2016. The latest survey results reveal a strong decline in business confidence.
The number of respondents expressing confidence in the future has been declining steadily for two years, and in the last three months it fell by more than 10%. Forty percent of businesses now say they are pessimistic about the future.
Only 16% of businesses reported that they were doing well, a fall of more that 50% in the last three months -- there has been a threefold decline since the NLD took office.
"There was incredible euphoria when Aung San Suu Kyi won the elections," Moe Kyaw said. "There was so much hope then, but that has quickly given way to despair and hopelessness. The vast majority of businesses said they were stagnating."
With elections two years away, government ministers understand the future of the country is in jeopardy if they cannot get economic development moving. Changes have been made to coordinate and improve economic planning, partly in response to the business community's frustration with the lack of government direction and policies.
The Companies Law that came into effect three months ago is one of the few significant developments the government can point to. It will eliminate layers of bureaucracy and streamline the company registration process, creating greater investment opportunities, especially for foreign businesses.
The new law will also permit foreign investors to trade on the Yangon Stock Exchange (YSX), but officials have cautioned that this will take more time.
"It's a game changer," said Aung Naing Oo, director-general of the Directorate of Investment and Company Administration (Dica). "It will support the momentum of economic growth and provide a major impetus for foreign investment, by making it much easier for foreign investors."
But even with regulatory improvements, investing in Myanmar carries risks in light of weak rule of law, inadequate infrastructure and a shortage of skilled people.
"We see that many Norwegian -- and other Western companies -- have entered the market without a good strategy and understanding of the business environment," said Ola Nicolai Borge, a Norwegian lawyer and business consultant who has been based in Myanmar for many years.
"Those businesses have often failed, while businesses that have done their homework have had very good commercial success. So I guess the message is: 'Do your homework.'"
Meanwhile, international unease over events in Rakhine continues to cast a long shadow over the investment climate. Only Asians appear interested at the moment.
"We cannot expect investment from the West in the near future, not for two or three years at least," Aung Naing Oo of Dica conceded in an interview with Asia Focus. "I totally underestimated the impact of the Rakhine crisis on foreign direct investment from the West. We don't expect it to change in the near future."
Now Myanmar faces further problems as the European Union is considering a tougher response to events in Rakhine beyond sanctions of a few generals.
What the country fears most is a possible loss of benefits under the Generalised System of Preferences (GSP), which the EU restored in 2013 after a gap of 16 years. Tariff exemptions under GSP are meant to help reduce poverty by expanding exports from poor countries.
Intense discussions about these privileges are under way in European capitals, and withdrawing them seems more likely than ever, according to diplomatic sources.
Any change in the GSP would hit exports hard, especially in the garment and fishery industries. The EU is Myanmar's biggest export market for textiles. More than half a million jobs in textile factories could be in jeopardy, said Myint Soe, head of the Myanmar Garment Industries Association.
The fisheries sector is already reeling from a ban on fish products from Myanmar by Saudi Arabia, a significant importer.
Meanwhile, currency depreciation -- nearly 20% in the last three months -- has hit many companies, and layoffs are increasing. Moe Kyaw said MMRD had to release around 15% of its workforce, and that he might have to let even more workers go. The weak kyat was the main reason given by UMFCCI survey respondents for worsening business conditions, and it remains their biggest concern for the future.
Zaw Naing, reflecting the general sentiment, predicts that nothing meaningful is going to happen until after the next elections in November 2020. "We have no choice but to carry on; it's about survival," he said.