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Despite top-down economic and political change enacted over the past five years, Burma’s economy remains largely defined by poverty and debt, backwardness and corruption. As Burma has moved from its status of international pariah to a now seemingly accessible ‘last frontier’ investment opportunity, hopes of rapid development abound. However, most of the foreign investment promised to Burmese business has been held up, as shy investors have waited for the results of the 8 November general election. Now that the vote has lived up to its seismic billing, DVB sat down with Professor Maw Than, a former director of the Central Bank of Myanmar to discuss how next year’s NLD-led government might continue the project of Burmese economic rehabilitation.
DVB: What changes must the NLD make to Burma’s economy and what are the obstacles to change?
Maw Than: The incoming government has a mandate for change issued by the Burmese people, they have their trust. However it will be a challenge for the incoming government to live up to expectations. In the economic arena, pressure will come from local forces, local investors and foreign investors. Foreign investors will be buoyed by the opportunity to work with this new government.
The government needs to raise revenue. Burma is blessed with natural resources. If the money earned from the sale of these natural resources is properly distributed, the government budget will get a major boost. Alongside this, the government must consider privatising government owned factories and businesses.
Local and foreign investment should be directed to balancing Burma’s trade deficit. Ideally, we might see a boost in local production and consumption and a concurrent reduction in imports.
Burma is a largely agricultural country; the vast majority of citizens depend on jobs in farming and the incoming government should respect that. The new government must look at ways in which to boost agricultural production and further job creation. We need to add value to commodities that we produce currently. The government should support and incentivise this sector in particular. The government should as much as possible direct incoming foreign investment to agricultural export businesses.
Remember, foreign investors were waiting for the election results to come in and they have made promises, but the money has not arrived yet.
DVB: Currently, foreign direct investment is not allowed in the agricultural sector. Why is this?
MT: Yes, this is a regulation that needs to change. It is vitally important to attract investment, with government support, to farming. The sector accounts for half of Burma’s GDP and satisfies 70 percent of the job market. Foreign investors come to Burma in the hope of profit; they should be supported to make their profit. There should be mutual gains for the benefit of them and our country.
DVB: Many of the people working in the agricultural sector are extremely poor, what is to be done about closing the income gap?
MT: If the country develops equally, the income gap will be reduced. A large number of programs are in place with the goal of poverty reduction. Unfortunately, at the moment these programs have been all noise and very little effect. These programs must be designed to promote economic development.
DVB: What do you think is the realistic extent of any boost to the economy that the new government might be able to bring about?
MT: I think the Burmese economy has the potential to grow by 75 percent of its current worth. The important thing is to maximise the benefits of local and foreign investment. The government projects must be streamlined, there are costs that can be cut. In my opinion, our country must be wary about accepting loan money from foreign donors. This is not free money, it needs to be paid back. What we have already borrowed must be effectively managed so to reduce the burden on future generations. There are many institutions that want to help our country. And, there are also foreign investors who come with the hope of making a profit. So, we will certainly be offered more and more money. This needs to be managed.
DVB: How will the new government handle the banking and financial system?
MT: Think of the financial system as the blood circulating around the body of the country. In Burma we have private banks, foreign banks, and state banks. The state banks, managed by the ministry of finance and revenue now must perform if they seek to profit. The level of competition in Burma, now heightened by the licensing of nine foreign banks, will certainly develop the sector. Private banks need to compete and they will be forced to be more compatible with each other and with the international financial system. I am confident however that the local banks have at least one comparative advantage over the foreign banks. They know how to serve Burmese customers. This is their home field advantage. So I hope they will compete admirably.
As for the state banks, they may need to streamline their services and expenses. They need to be a bit leaner if they are going to be fully competitive. They will need to offer a range of new products as well. One thing that they have in their advantage is the trust of the people. They have the upper hand in that regard.
DVB: Many government businesses are currently failing to compete as the marketplace expands. How should the new government deal with this?
MT: This is of course not just a Burmese problem. Take France for example, where there is actually very effective management of the government sector, there are still losses being made.
The answer to this is privatisation. The government businesses should be sold at a market rate. To ensure that they should be formed as corporations with private shareholders, they actually ought to be corporatised as opposed to fully privatised. The government’s work is not to act as merchants. The job of the government is to govern. It is not natural to have businesses in government hands. We need to see the introduction of good corporate governance to these companies. In turn, we will see potential shareholders benefit.
DVB: What are the priorities for the new government in the development of the private sector?
MT: We need infrastructure development, including human infrastructure. We need to produce skilful workers who can boost businesses. Immediate attention also needs to be given to the provision of electric power. It is extremely debilitating for a factory to be forced to run on its own power generators when there are electricity cuts. The government should prioritise the provision of a reliable electricity network. It is not that our country doesn’t have electricity. We are selling large amounts of electricity to other countries. That must change.
DVB: That in no small part is due to the fact that the Burmese economy is in the hands of people we refer to as ‘cronies’. How will the new government deal with these people?
MT: These cronies have become extremely influential by cooperating with those in power. The new government can not challenge these people, instead they must manage them. It is certainly not good that Burma’s entire economy is controlled by a rich and powerful few. But these people have enormous capital and further to that, they are wily businessmen. They got to where they are by acting cleverly. They worked with people in power and got special opportunities. The new government must be very tactful in dealing with them.