Myanmar's new economic blueprint

Myanmar's new economic blueprint

While many express frustration with the lack of detail in the policy outlined by the NLD government, they agree the overall focus is right.

Agriculture still contributes 40% of Myanmar's gross domestic product, while employing 70% of the labour force. Photo: Reuters
Agriculture still contributes 40% of Myanmar's gross domestic product, while employing 70% of the labour force. Photo: Reuters

Threadbare on details and containing mainly sweeping statements of principle, none of them new, the much-anticipated new economic plan outlined for Myanmar by the National League for Democracy (NLD) has disappointed academics, analysts and business leaders.

Most businesspeople still believe the government is on the right track, but they need more convincing that vague policies are not simply an excuse to do nothing.

"We know the importance of investment, energy and infrastructure, so we will issue detailed policy papers [on those] in due course," State Counsellor Aung San Suu Kyi said when she announced the policy two weeks ago.

The policy stresses her government's commitment to the principles of a comprehensive "market economy" and promoting a level playing field for businesses by ending monopolies. It also promises to cut red tape and make doing business easier, shifting more government functions online and making significant efforts to create jobs.

As well, there are broad plans to reform the financial sector and state-owned enterprises, increase access to credit, encourage foreign investment, and develop infrastructure.

There is a general consensus in the business community that the policies as set out in the three-page document are basic principles rather than comprehensive plans, which are expected later.

"The government is clearly on the right path," said Dr Maung Maung Lay, vice-chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). "But we haven't heard the exact policies or details yet -- and we need that to have a full picture of what the government's priorities are, the direction they are going and how they are planning to accomplish this."

Bankers are even more disappointed. Soe Thain, deputy general manager of the Asia Green Development Bank, is particularly dismissive: "It's too general," he told Asia Focus. "The public and the country's businesses expected far greater detail, after four months in office."

The document also has echoes from the past -- a centralised approach, he mused. "What's missing is the strategy to accomplish their stated objectives -- how are they going to achieve these?"

But some observers believe the direction is clear. "It's far deeper than it appears," said Luc de Waegh, founder of West Indochina, which has worked with and advised Myanmar businesses for more than 20 years. "It sets out the direction; now the details need to be developed. It concentrates on creating stability, which is exactly what local and international businesses and investors crave."

It is a clear of statement of intent, according to Vicky Bowman, who heads the Myanmar Centre for Responsible Business (MCRB). "The most significant aspect of the policy statement is that it shows how national reconciliation and economic development are being merged; and how economic policies are to be used to bolster national reconciliation," she told Asia Focus. The government's first priority, according to the policy document is a "just balancing of sustainable resource mobilisation and allocation across states and regions".

This is broader than simply supporting the peace process, and is focused on fighting inequality and poverty nationwide. This is also a bone of contention with the country's many ethnic minorities -- many of which have been fighting for autonomy because of their suffering.

"The increasing polarity in this country needs to be tackled immediately, especially between the rich and poor, as the gap between them has been growing. If it's not tackled, it could derail our long-term quest for democracy," said Maung Maung Lay.

Some see the policy paper as little different from what was pursued under the previous administration of Thein Sein. "The difference is we'll implement it, unlike the previous government," said Hanthar Myint, an NLD economic adviser and a member of the new national economic coordinating committee under the president.

The policy document includes a commitment to develop a skilled workforce to fill the jobs created in the manufacturing and services sectors. To support this goal, the government plans improvements in healthcare and education, especially vocational training. "The country's human resources and capacity is very weak," said Maung Maung Lay. "We desperately need to develop more vocational training."

This is the key to future economic development, according to Zaw Naing, CEO of Mandalay Technologies and founder of the Myanmar Business Executives Association. Vocational training centres are urgently needed to produce engineers and craftsmen -- electricians, carpenters and plumbers -- and hotel management schools, according to Zaw Naing.

"While we cannot compare with Singapore and its service-oriented training, we can provide technically trained people to support the growth of the manufacturing sector," he said. "More software development is both essential and feasible in Myanmar," he added.

Ironically, when Singapore Prime Minister Lee Hsien Loong visited Nay Pyi Daw recently, he offered Singapore's help in developing vocational education -- one of the city-state's strengths. But Aung San Suu Kyi reportedly rebuffed the offer, according to diplomatic sources, preferring Singapore's help to set up "hawker areas" instead.

But the government is committed to vocational education, according to sources close to the education minister. Various options are being explored. And a white paper -- with specific and concrete proposals for vocational training -- is being drawn up, along with plans for the overhaul of the education sector in general.

At the same time the economic ministries are working hard to formulate concrete plans for all the economic areas outlined in the strategy. The State Counsellor -- who effectively chairs the new economic coordinating committee, headed by Planning and Finance Minister Kyaw Win -- told its first meeting in June that the top priority would be creating jobs, according to Hanthar Myint.

"We have to create jobs to absorb the unemployed workers, especially those laid off recently from the suspended construction projects," he said.

The need for jobs is even more important in light of plans to encourage thousands of Myanmar migrant workers in Thailand to return home as the economy improves.

Another part of the job-creation scheme is to push on with the Special Economic Zones established under the previous government.

Attracting foreign investment is also crucial, said Hanthar Myint,, mentioning the garment sector in particular. But he conceded that labour unrest and strikes, which seem to be on the increase, may discourage some investors.

But the country is still struggling to attract large, responsible western businesses. China, Thailand, Singapore, Hong Kong and Korea are the top five investors in Myanmar -- and they are set to expand their economic interests. But US businesses -- especially the top names -- are largely absent.

"Until the US sanctions are completely lifted, major international banks will shy away from investing in Myanmar. Without their active involvement the development process will not reach its full potential," Luc de Waegh told Asia Focus.

Many of the Myanmar business organisations, especially the UMFCCI, are campaigning vigorously to convince Washington to remove the remaining sanctions. "This would be the most constructive move the US government could make to help Myanmar help itself," said Maung Maung Lay.

Many businesspeople hope Aung San Suu Kyi will ask the Obama administration to do just that when she visits Washington in September. But sources close to the president's office say that is doubtful.

The government understands that much has to done to improve the country's infrastructure -- roads, bridges and power generation -- which in turn will help improve the business environment and remove some obstacles to investment.

"But these infrastructure projects need to be seriously reviewed before being implemented," Hanthar Myint told Asia Focus. "For example, dams shouldn't be the priority: they make the cost of water too high; more efficient use of water needs to explored."

Many of the economic rejuvenation plans centre on agriculture. "Improving agricultural productivity is a priority," said Myo Myint, another senior member of the economic team and a former Finance Ministry official under Ne Win. "This would involve granting the country's farmers their land rights, creating greater and easier access to credit, and ensuring seeds, tractors and milling equipment are available, as well as enhancing market access."

Food security needs to be guaranteed as soon as possible, according to the government's economic policy. The agriculture sector still contributes 40% of the country's GDP, while employing 70% of the labour force. This has to be rectified as quickly as possible, says the NLD economic team.

"Seventy percent of the people in Myanmar are poor. Only if we create a living for them can we develop the country," said Kyaw Win.

The government's second priority is "to make state-run businesses more successful, to privatise some state-run businesses that can be changed, and to support small and medium enterprises (SMEs) that will improve the economy."

But many economists believe these are flawed objectives. Most state-owned enterprises (SOEs) are so weak they should be dissolved altogether, according to the banker Soe Thain.

There is no use trying to privatise them, he said, as they are unable to compete with the private sector. But to do this, decisions first need to be made on what to do with the employees -- transfer them to other government offices, offer them retraining or make them redundant.

"These problems are not easy to solve," he said. "A proper detailed policy paper needs to drawn up before any privatisation or corporatisation is implemented."

Many businessmen though believe helping SMEs is the most effective way of increasing economic growth quickly, one which the NLD seems to accept in principle.

"Supporting SMEs is critical for Myanmar to quickly boost economic development, create jobs and increase incomes," said Maung Maung Lay. "By necessity they need to be innovative, resilient, flexible and strong."

The importance of SMEs in generating manufacturing and boosting economic growth can be seen in the economic development of China, Thailand and Vietnam in the past three decades, he added.

For now, though, the main thrust of government policy seems to be to ensure stability, a modest start.

"It's easy to say stability," Soe Thain said, "but the real trick is to have economic policies -- fiscal and monetary -- which help the economy grow and the country develop in an inclusive and equitable fashion."

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