Clearer picture

Clearer picture

Businesses in Myanmar hail moves to improve investment transparency, but question whether they will work in practice.

Thaung Tun, Minister of Investment and Foreign Economic Relations
Thaung Tun, Minister of Investment and Foreign Economic Relations

The Myanmar government has begun a major overhaul of its procurement and contract procedures in an effort to strengthen the transparency and competitiveness of major development projects.

The changes will revolutionise the way infrastructure programmes are selected, planned and funded, say their supporters. They will not only cover government-funded projects, but will also include private initiatives, joint ventures and public-private partnerships.

The new approach, it is hoped, will help modernise the way Myanmar does business. It will transform the habits of the past -- secret deals, the use of "brokers" to open doors, and networks of contacts and introductions -- that have put the brakes on the full realisation of the country's potential.

But given what is at stake for some incumbents and their networks of cronies, the government is facing resistance to reforms that are intended to speed the transition from a state-planned economy to a liberal free-market economy.

Through the development of a "Project Bank", the government hopes to regulate all investment projects, both solicited and unsolicited, and ensure they are consistent with the country's needs and development priorities.

The project bank is part of a more comprehensive government approach based on the Myanmar Sustainable Development Plan (MSDP), which was introduced last year. The main goal is to bring an element of consistency and planning to projects, as opposed to the previous random and ad hoc approach.

"The main purpose of the project bank is to bring strategic direction, proper costing, transparency and sustainable financing to Myanmar's infrastructure sector," the government's leading economic adviser, Sean Turnell, told Asia Focus. It will also bring a measure of rationality to investment decision-making, he added.

This could prove to be a body blow to the country's old-style economic elite -- the tycoons or cronies -- who prospered enormously under the old military regime. It is also meant to effectively integrate the rapidly growing private sector, which includes many players who have benefitted from international business education and training.

The new approach has been in incubation since the National League for Democracy (NLD) government took power in April 2016. Many government officials admitted privately that it has been a long and drawn-out process, but that the final result was worth waiting for.

"It may have taken a while to emerge," Thaung Tun, the minister of Investment and Foreign Economic Relations, told Asia Focus during an investment forum in Bangkok recently. "But now we're putting the finishing touches on a comprehensive and innovative approach that will promote a more favourable, friendly and predictable investment enabling environment, offering investors a fair and level playing field."

For the economic tsar, this is all part of his mission to promote investment in the country. "We are seeking to attract the right type of investment that creates jobs and opportunities for the Myanmar population as a whole, which will sustain growth and spread prosperity," he said.

The project bank is making use of technology to centralise information in one place. It aims to bring a measure of coherence to the procurement process. Everything will be online within about two months, according to government officials working behind the scenes to get the website operational. The information will include the government's wish-list of projects -- culled from the respective ministries' project plans -- as well as unsolicited projects from interested international investors.

"Projects will be ranked according to their socio-economic returns, and by prioritising them on this basis, the project bank aims to smooth the path for foreign investors," said Mr Turnell. The process will be predictable, open and accessible via arrangements that amount to something of a "one-stop-shop", he added.

Information will be centralised and transparent, and project selection will be carried out through a competitive procurement process -- in contrast to existing practises.

But some local businesses are suspicious of the changes, while many senior bureaucrats are downright hostile. Apart from the bureaucrats' inherent resistance to change and their desire to remain in their comfort zone, the reforms will substantially reduce the opportunity for corruption.

"The project bank is primarily an educational tool to rationalise public project selection in line ministries, and to enforce a deeper understanding and awareness of the need for commercial viability and project sustainability," said Felix Haas, an independent business consultant based in Myanmar.

Myanmar's investment decisions in the past, especially those involving large-scale infrastructure, have been made in ways that are ad hoc, arbitrary, and often with an eye to granting special privileges and concessions to a well-connected elite, said Mr Turnell.

"Such practices are not only unjust, but undermine Myanmar's journey toward genuinely inclusive growth and development. The project bank is designed to eliminate such past practices to the extent that can be achieved by good institutional design," he said.

But not all foreign investors are as enthusiastic, though they acknowledge the intended benefits of the changes are very positive.

"A well-executed project bank should be very beneficial in providing a consistent, centralised process for major public infrastructure and procurement," said Mark Livingston, managing director of the Yangon-based law firm Livingstons Legal. "However, the development process for the project bank has already caused delays in progressing proposed government-related projects.

"There is also still some lack of clarity around how the project bank will operate in practice -- in particular around how its processes will relate to those of the Myanmar Investment Commission.

"If not implemented reasonably soon -- and reasonably well -- there is also a risk that the project bank could have a significant adverse effect on major public infrastructure and procurement by further slowing down approval processes that are already slow and inefficient," he warned.

But government officials remain undaunted by the lukewarm attitude of some businesses and investors. They have been conducting an extensive publicity campaign for the project bank. It is now central to the government's drive to attract foreign investment, especially from within the region.

"The project bank, the land bank and the MSDP -- as well as a range of other essential laws and policies -- reinforce that the private sector serves as the engine of environmentally conscious and socially responsible economic development in years to come," Thaung Tun told an audience of businesspeople and investors in Singapore last week.

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