Name : U Win Shein
Position : Finance Minister ( 2012 – 2015 )
[paypal]
MI: Sean Turnell, the foreign economic advisor to National League for Democracy (NLD) government (and supposedly the expert) said the followings:
a. The current administration saved the country from bankruptcy.
b. Wasteful increase in government spending has pushed the country’s budget deficit to 4.5 % of Gross Domestic Product (GDP).
c. These spending were funded through money printing, which caused the inflation to be as high as 16% in October 2015. How would you respond to these accusations?
For point A, we have to see the facts objectively. Just like a coin, there are always two sides to it. Instead of praising the current government and at the same time, blaming the previous government, would it not be better to identify the root causes first before speaking out like this? The current government term is just over one and half year. A lot of its actions are a continuation of the actions of the past administration. It’s impossible in economic sense to bring about the results on its own merits in this short time horizon.
Professor Shaun Turnell was saying point B has led to point A. When U Thein Sein government came into power in 2011, we have to take over the power from then previous military administration. Our fledging country has to stand on its own two feet, under the heavy weight of sanctions and lack of any tangible foreign investments. We inherited that and have to do everything possible to emerge out of the situation where close to everything was not up to international standards. We can start benchmarking and governing in accordance with these international standards only from 2011 onwards. We walked the path of democracy from then onwards, from reconnecting with the outside world to getting waivers on billions of yesteryear debts from friendly countries. We tried our very best in the five years and deliver a significantly better Myanmar to the NLD government. Just like we have to take over all the good and bad from the previous administration, the incoming NLD government has no choice but to take both the good and the bad legacies. One cannot simply say that enlarging budget deficit is leading the country into bankruptcy in FY 2015-2016. We do not accept this point. It is right that in FY 2015-2016 there was a budget deficit situation. There was an increase in government expenditure compared to the previous years. In the past, the budget preparing and guidelines do not follow international standards. When we came into power, where I was responsible for the finance ministry, we got the help of World Bank, International Monetary Fund (IMF) and Asia Development Bank (ADB) to establish Public Finance Management (PFM) framework. Under this, MTFF (Medium Term Fiscal Framework) was set up to support efficient, accountable, and responsive delivery of public services through the modernization of Myanmar’s PFM reforms and strengthening institutional capacity, including financial reforms and budget reforms. This framework, supported by all these organizations, set Myanmar budget deficit to a maximum of 5% of the GDP, in accordance with international standards. All the experts from these organizations agreed that a country like Myanmar couldn’t achieve a balance budget without compromising on the economic growth in the medium term. The ministry, the finance committee and eventually the Parliament approve the entire budget, spending and the deficits. Even though there is deficit, we always have the ultimate aim of achieving the balance budget through the reduction of the deficit and acted accordingly. First the income – The incomes come from mainly, State Economic Enterprises (SEEs), first, from gas, mining and forestry. The second is through tax collection. With increasing economic activity and FDIs we have collected more taxes over the years. We also received income through licenses fees from FDI, e.g., Telenor, Ooredoo, etc.
As the country grows, we also need to spend more to further encourage economic growth. We have to increase spending upon taking over ASEAN chairmanship, for hosting of the SEA games, etc. We have so far spent within our means without going over the deficit criteria. In the recent parliament session, the deficit for the last year in question was acknowledged as 4.16%, somewhat less than the figure stated by Shaun Turnell. We knew that after 2015, we have to transfer the administration to a new government and we consciously put in effort to transfer the finances in good shape. While controlling such deficits as much as possible, in 2015, we faced the unfortunate natural disaster of heavy flooding across the country. This affected the rice production and rice exports went down significantly. Combined with the triple whammy of lower global gas prices, restriction on logging exports and mining licenses, caused the national incomes to drop significantly, while having to spend money on rescue and rehabilitation efforts due to floods.
70-75% of our total expenditure is on current spending, i.e., civil service salaries, operating expenses, etc. The other 25-30% is the lump sum or capital expenditure. While we evaluate the need to spend meticulously, there are many items in the current expenditures that we cannot touch such as salaries and operating expenses. While assessing the capital spending, we also have to balance between short term and long term. Even though we may save some money on the short term, the saving may affect the country negatively in the long run. E.g., capital spending on infrastructure has good positive effects on future FDIs. Even Shaun Turnell comments included our focus on growth. Yet, we have never been negligent in our spending. And Myanmar was certainly not heading for bankruptcy immediately and even for a country near bankruptcy, it is quite impossible to rescue the country immediately.
For point C, the inflation part, the program much publicized by the current government of selling bonds and bills in order to reduce the reliance on quantitative easing, was actually started by us. Yes, initially borrowings from the central bank funded the deficit. From 2015 onwards, we started the sale of debt instruments first to private banks and later to public. First bills and later on bonds. From the start of U Thein Sein term, we acknowledged in the first parliamentary session that the printing of money to fund the deficits is not the right approach and together with the World Bank, IMF and ADB, we developed plans to start the bond sales program since then. So, we are fully aware of the negative effects of printing money and acted accordingly to control inflation.
You also have some working relationship with Sean Tur-nell during the previous administration. How would you evaluate him?
Sean Turnell came to Myanmar with George Soros during the previous administration, as an economist expert from one Australian university. I had met him before. But we had not work with him previously nor had we taken any advice from him, personally or for the ministry.
Many people talked of the loss in momentum for economic growth, after the change of power. What do you think are the major causes of this loss of momentum?
During the handover of power from U Thein Sein administration to NLD government, we witnessed a number of delayed responses, weak responses and some unnecessary actions. When we received both the good and the bad legacies of previous government, we just have to work our utmost best within these bounds. One cannot simply say all things done by the previous government were bad. We can continue the good works, while at the same time, reviewing and optimizing on the works that need improvements.
A good example would be if we are building Yangon – Mandalay Highway and we were already at 38-mile marker, it would be unwise to start afresh from zero mile all over again.
If I were to give specific examples, me being in finance ministry, previously finance and national planning were separate ministries. Focus on the economic growth is handled by ministry of national planning whereas the finances are handled by ministry of finance. The two ministries typically co-operate and co-ordinate on various matters.
If I evaluate purely from finance side, there are so many projects that were stopped. One specific example would be the stopping of construction projects; some projects may require temporary stoppage for review, yet the stopping of all projects may be totally premature. Eventually, all were allowed to continue anyway.
What rating would you give to the current government economic performance from a scale of 1-10? Why?
I would rate the current government economic performance as average. It’s impossible to simply achieve explosive growth right away. They have to rely upon momentum from the previous
five years to propel the country into new heights.
Do you believe Kyaw Win is the right person to be entrusted with the country’s economy? Why not?
This will depend on the time and results achieved. At the same time, I would like to highlight that both ministry of planning and ministry of finance are very large ministries. Long time ago, it was kept together as one ministry, but the responsibilities to manage both are enormously large. It got even larger as we have to handle ASEAN responsibilities, economic growth, country’s finances, country development, international trade and co-operation. In essence, the two ministries are of critical importance to the country and the economy as a whole. If we combined these two, the combined ministry would be one gigantic ministry to manage efficiently and effectively. So expertise and experience are of critical importance for someone managing this combined ministry; expertise in terms of qualifications and experience in terms of actually having the experience of managing and leading a large organization. Even though it is a political appointment, the leader (i.e., the minister) needs to be fully aware of the functions, present situation and operations of all the departments.
This is a situation unique to Myanmar. In foreign countries, there is the continuation of the professional civil service work force, even after the change of government. With Myanmar being isolated for so long, civil service lacks the professional and quality skill set that would allow it to function without leadership guidance. Leadership skills are crucial.
One thing I would like to mention is that when managing the country’s finances, the objective should not be about scoring political points or results. Instead of just saying how much we will do or we can perform much better under the new administration, the statements should be supported by facts and figures.
The NLD supporters have been telling general public that, there was economic growth under U Thein Sein government, due to the sale of natural resources. How much truth is there in that statement?
It cannot be denied that our country economy has to rely largely on natural resources, especially when the country is rich in natural resources. Not only Myanmar had the economic sanctions imposed by the West but also it was an isolated country just a decade ago. Our country was also facing a shortage of skilled labor, lack of capital and technology.
I acknowledge that when using these natural resources to generate income for the country, there are weaknesses across all areas. Yet, all resources rich countries generate income through their natural resources. What we need in fact is selling finished or value added products, instead of raw items.
During the term of the previous government, we initiated the project to join the Extractive Industries Transparency Initiative (EITI) as a member. We are joining EITI to increase transparency and accountability in management of extractive industry data, revenue, and impacts and support to the multi-stakeholder group (MSG). The objective was to correct mistakes of the past. We started the project to join the EITI in 2013 and finally summited the first proposal to the EITI in 2015. With EITI membership, we could manufacture natural resources based upon global standards.
Almost every single economic indicator has deteriorated in the last two years. Is it a question of leadership or mismanagement?
If I were to put myself in the shoes of the current government, I would have realized a lot of weaknesses. There are lots of outstanding issues and loads of things to act upon, amidst inadequate resources. We need leaders in every single ministry to navigate through these. In addition, there are external factors at play, such as peace and political stability. They all have impact on the economy. Even the recent Rakhine unrest is going to have a negative impact on the economy one way or another.
The government in power would struggle to push Myanmar forward on the economic front. Both leadership and management are important here. And at the same time, we need the ability to view the situation with a sense of practicality. We have been through the same situations so we do understand. There is no doubt that the current economic situation needs much improvement.
Peace first or economy first Why?
Frankly speaking, both peace and economy are important for the country. At the same time, if you think about it practically, you would know how important is the income to cover the cost of living. Whether you talk about a household or a country, the economic wellbeing is of utmost importance.
Yes, it is correct that without safety and security, economic wellbeing would be difficult to achieve. At the same time, if you look at the peace and stability situation that Myanmar is in right now, you can determine what should be prioritized in the short term and what for the long term.
I view the current peace and stability situation as within controllable boundaries, that can be slowly improved upon. Immediately, we have to focus on the economy and economic development. You can still continue to do for peace. But achieving peace and stability nationwide takes time. We cannot afford a slowing economy. The economy must be addressed immediately
Myanmar government ministers and representatives have been missing at the global and regional investment forums such as Davos or Mekong Investment Forum. Why do you think this is the case?
During our five years, government officials participated in major conventions, events and forums such as the one you mentioned, the largest of it being the World Economic Forum. Some ministers participated as panelists. Our ministers were also attending in regional forums and speaking at some of them and at almost all business forums held within Myanmar.
Initially, we are all somewhat reluctant to participate. As we attended more and more, we realized our presence at these forums enhanced Myanmar brand name and created many opportunities for us. Yes, the present ministers and officials also should participate in these. These events also contributed to capacity building of the nation. We have been isolated from the world for so long and these forums encourages co-operation with fellow countries and sometimes, gave a chance to show our leadership to the outside world.
How would you do differently on the economic front if you were in power?
If I were to be in charge (of the economy), I would first try to understand and evaluate the current situation very well. We will then set up Macroeconomic Management Policy Framework that fits the current environment. Based on that framework, we will set up and implement laws, policies, and guidelines to improve the economy. The three ministries of national planning, finance and commerce, will jointly lead to generate FDIs and increase trade flows. The actions would be further divided into those requiring immediate implementation and those for the longterm economic growth.
At the same time, we need to explain to the public why we need to take such actions. That part, we were also deficient during our time of governing too.
[/paypal]
