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Business Sector Worried by Slow Economic Reform

The first 100 days of the new government ended in July 7 but no major policy statement on the economy was made. NLD identified its economic platform during the campaign period as anchored on the following: fiscal prudence to lower budget deficit, revitalization of the agriculture sector, monetary stability through an independent central bank and decreasing number of state-owned enterprises (SOE). These initiatives are aimed at enhancing the role of the government as a facilitator and a creator of a better environment for the private sector to grow.

This approach differs from what the previous government pursued, which is to maximize resources brought about by the opening of the economy. Foreign direct investments (FDI) drove the growth of the economy during Thein Sein administration with US$23 billion flowing into the country from 2011 to 2015. This was reinforced with a development plan anchored on growth corridors lined with industrial zones that will service the country’s more developed neighbors – China, India and Thailand.

Ordinary people however were wary that those who benefitted during the days of the military junta were the same people reaping the benefits of an open economy. Expectations were high during the last election that economic opportunities will be made available to more people, and economic development will be at the forefront of the new government’s to-do list.

Consolidating the grip on political power

The landslide victory of the NLD was seen as a unanimous mandate and a blanket authority for them to effect change. As the NLD took control of the government, its energy was focused on finding the right persons to fill positions in various ministries and government agencies. Treading slowly but forcefully, NLD pushed to make Daw Aung San Suu Kyi as the real ‘top guy’ by creating the position of State Counsellor sharing the power with President U Htin Kyaw. It has also decreased the number of ministries by dissolving and merging those with overlapping functions.

After ensuring all posts were filled-up, attention was focused on the issues of ethnic grievances and peace. Building up on the peace efforts of the previous administration, but taking a different track, the State Counsellor tried to replicate what her father did during the struggle for independence. She called for a summit of ethnic leaders in Panglong to discuss ending armed conflict in parts of the country where ethnic armed organizations (EAO) are operating. The 21st Century Panglong Convention (21CPC) to be held in August as the first step towards a lasting peace.

The recurring themes in the peace negotiations were autonomy and control of resources. As it was during the time of Bog yoke Aung San, federalism is the arrangement that would suit best the condition of the country. Moving towards federalism would require changing the constitution and make it inclusive to all ethnic groups in the country. And this is a task that would require astute leadership and more time

The balancing act to address the various and often conflicting interests of stakeholders can zap the energy of able leaders. Events would point to the tendency that the government is being sucked into the black hole of political concerns to the detriment of other equally important issues.

Spooking the business sector The business sector is bullish with the opening of the Yangon Stock Exchange (YSX) in March. The positive response motivated other companies to consider listing in the exchange. Now there are two listed companies with five more undergoing preparatory activities to list. In early May, the US partially lifted sanctions, taking out some people in the blacklist and generating interest among foreign business people to take a second look at Myanmar.

However, the positive developments in the business sector were tamed by actions of the government on several occasions. In May, the Lower House cancelled a $70 million project of Parkway Pantai to build a private hospital along the corner of the busy Pyay-Bogyoke Aung San streets citing the contract was disadvantageous to the government. The Yangon Chief Minister recently ordered the review of all high-rise construction in the region to check compliance with regulations. All activities in the affected construction projects stopped causing delays and unnecessary expenses to the companies.

These events, although aimed at ensuring all transactions are above board and has complied with regulations, question the government’s resolve to uphold contracts, especially those signed with government agencies. It can be recalled that last year, a land development near the Shwe Dagon Pagoda was suspended and then cancelled as a result of the lobby of various Buddhist organizations against the project.

A bleak global backdrop

Recent global events may slow down the growth momentum experienced by the country for the past several years. The government may not even be prepared to cope with the effects these events.

The decision of Great Britain to leave the European Union plunged markets around the world after the June 23 referendum. There will be adjustments both in the British and EU markets and its ripples will be felt in the country. Myanmar has to brace for a possible reduction of investments from Europe as uncertainty pervades.

In Asia, the slowing down of the economy of China, one of the main trading partners of the country will also be felt immediately. Related to this is the increasing tension in the Southeast Asian region as a result of the South China Sea conflict. The formation of the ASEAN Economic Community (AEC) may be stalled as political and security issues between China and members of the ASEAN are heightened. An unstable Southeast Asian region will also mean an unstable Myanmar. The oil and gas price slump continue to deny Myanmar with opportunities to maximize these abundant resources to its advantage. It may take some time for the country before the country benefit from this natural resource.

Where do we go from here? The silver lining in the gloomy economic horizon was the pronouncement made by President Htint Kyaw that an 11-member economic team was formed by the government. The committee is headed by Planning Minister U Kyaw Win and tasked with the functions of defining and coordinating economic policies and programs,particularly those relating to trade, finance, banking, investment, agriculture and forestry and industry.

The question remains, what direction will the government take? Will it continue to pursue the approach of the previous government, or will it explore new directions that will benefit majority of the people? The people expect economic policies and programs that would facilitate equitable distribution of the benefits of economic development. Addressing poverty should be one of the main considerations in any economic programs that will be initiated. This will require, among others, supporting the growth of small and medium enterprises (SME) and modernizing the agriculture sector.

Ending monopolies and privatizing state-owned enterprises (SOE) will contribute to a level playing field and will be attract more participation from the private sector and foreign direct investments. This may include easing foreign investment restrictions in the area of finance and real estate ownership. The impact of big industrial projects should also be considered in the first instance, not after the contract has been signed. Among the concerns to be addressed are pollution and other environmental impacts, displacement, labor issues and other social problems that come with industrial problems.

Political issues are important, but sidelining the economy will not work well with people who have suffered for a long time.