YANGON — One of the tropes the National League for Democracy will have to address before it takes office next April is the view that the party is light on concrete policies and untested in government.
The latter is unavoidable, given that the army did not allow the NLD to govern after it won 80% of seats in the country’s flawed 1990 elections. As for economic policy, the party has a few ideas. “We have a plan, and we presented it in the early stages of the campaign,” said Soe Win, a member of the NLD’s central executive committee, referring to the election manifesto the party published in September.
The NLD said it will keep the budget deficit under 5% of gross domestic product, cut the number of ministries and attempt to curb corruption in the bureaucracy, crack down on tax evasion, increase the independence of the central bank and focus on boosting agricultural productivity — a particularly important step given that around 70% of the population lives in the countryside.
To some analysts, it will be at least as vital to attract the kind of industry that spawns jobs for the tens of millions of unemployed or underemployed citizens. In a 2014 paper published by the Institute of Southeast Asian Studies, visiting fellow Stuart Larkin noted that for broad-based development, Myanmar “needs to diversify its economy away from dependence on agriculture and resource sectors and target labor-intensive manufacturing exports for growth.”
According to the World Bank, the proportion of workers employed in industry in Myanmar is low — only 12% of the national total — compared to neighboring countries at similar stages of economic development. Cambodia’s figure is 16%, while Vietnam’s is 21%.
Unemployment in Myanmar may be even higher than the numbers suggest, given the World Bank’s “rough estimate” that the informal sector accounted for 73% of the total labor force in 2010. Excluding agriculture, the figure still came to 57% — although there are signs that these numbers have diminished thanks to the economic reforms implemented by the outgoing Union Solidarity and Development Party government.
The NLD manifesto mentions pulling in more foreign investment, something that Aung Tun Thet, an economic adviser to President Thein Sein, describes as the “key challenge” for the incoming government.
“There is a foundation from the last five years to be built on,” he added, referring to the Thein Sein administration’s record in overseeing a near quadrupling of inward investment. The tally grew from $1.9 billion in fiscal 2011-12, Thein Sein’s first year in office, to more than $8 billion worth of approved investments in fiscal 2014-15 ended in March.
“We need not only to sustain the momentum, but to accelerate this,” Aung Tun Thet said.
Part of that foundation features a new trade promotion regime headed by Commerce Ministry official Aung Soe, set up earlier in 2015. Aung Soe is optimistic that the incoming government will focus on fostering and improving commerce between Myanmar, which was long closed to Western investment due to sanctions against the military dictatorship, and the outside world.
“I think the new government will continue to promote trade and development,” he said. “It has the opportunity but there will have to be better cooperation within Myanmar, as we are still moving toward a market economy system.”
Before the election, NLD leader Aung San Suu Kyi announced that any government she ran would keep what it deemed worthwhile from the Thein Sein administration’s economic framework. But one sector that the NLD did not discuss in its economic plan is tourism, which, like foreign investment, has seen impressive growth — from a low base — during Thein Sein’s term.
Myanmar’s visitor numbers have jumped from a few hundred thousand to almost 4 million per year and could reach 5 million this year, according to Htay Aung, the country’s tourism minister. “We can be proud of what we have achieved since 2011,” he said.
Myanmar’s countless temples, sweeping valleys, pristine beaches and much-debated heritage buildings all make the country a prime destination — albeit one with relatively poor infrastructure, and a long monsoon season during which many beachfront hotels are forced to close.
Highlighting the knot of opportunities and challenges in the tourism industry, Htay Aung called the sector “broad and complex,” and suggested the incoming administration will need “to improve the standard of our hotels, to better market and promote Myanmar, and to conserve our natural and historic heritage.”
In its economic plan, the NLD also pledged to reduce government involvement in the economy by cutting the number of state-owned enterprises — now thought to number more than 2,000 factories alone — but made no mention of the army’s vast network of businesses or its opaque, massive conglomerates.
Also not directly mentioned were Myanmar’s array of “cronies” — big business owners who flourished under the old junta and who largely remain under U.S. sanctions for illicit practices or connections. There are widespread expectations that any NLD-led administration will look less sympathetically on the crony tycoons, according to a Western private equity investor who has so far taken stakes worth a combined $2 million in local businesses.
“That means we can expect also to see some business tycoons associated with the old regime — including the military junta before Thein Sein — selling off their businesses to pre-empt investigation,” the investor said, “or even just because they can see the writing is on the wall for their old cozy ties to military and government.”
One such tycoon, Khin Shwe, just lost his seat in parliament’s upper house and is among a handful of wealthy businessesmen-turned-politicians who were crushed by the NLD electoral juggernaut. Nonetheless, he was sanguine about his prospects under an NLD government. “I am not a real political man, I am a businessman,” he explained.
“America, the EU, they all respect Daw Aung San Suu Kyi, so I expect more investment,” Khin Shwe added. “Before, they didn’t fully respect the previous government, so many just came to look only.” He said he voted for the NLD in the Nov. 8 election, even though he ran for the governing USDP.
Full slate for a “lame duck”
Before the NLD takes office, a final session of the current 2011-era parliament is underway — with Suu Kyi representing Kawhmu, a seat she retained in the general election.
Having the old parliament sit for a final session may seem strange to some, with the term “lame duck” being bandied around. But many businesses still want to see the passage of legislation that has been stuck in limbo, including a new investment bill that would reconcile foreign and domestic investment laws — applying similar incentives, such as tax concessions, to both international and local companies.
Myanmar has made enormous strides in improving the business environment, but there is still a great deal of work to do. “The last session of parliament closed without addressing bills like the revised foreign investment law and the companies law, which are important to foreign investors, [and] will either have to be addressed in the lame-duck session or in the new year,” said Anthony Nelson of the US-ASEAN Business Council, a trade association featuring companies that have established operations in Myanmar since 2011, such as Coca-Cola, Caterpillar and Visa.
Another crucial bill is the Banks and Financial Institutions Law of Myanmar, which will set ground rules for banks and nonbank companies and give the green light for innovations, such as the planned launch of a mobile payments system. In all, there are around 50 outstanding bills, many relating to the economy, due to be discussed and possibly passed into law in parliament’s last session, while the inauguration of Myanmar’s first stock exchange is set for the second week of December.
Some observers have expressed concern that it is too early to launch an exchange, with few Myanmar companies prepared — and qualified — to list. However, Deputy Finance Minister Maung Maung Thein, who has overseen plans for the exchange and is also chairman of the new Securities and Exchange Commission, confirmed on Nov. 14 that the plan was on track. Earlier, in an interview, he insisted the time is right for Myanmar to open a bourse.
A handful of securities companies have bid to be underwriters, and at least one has met all the requirements needed to start providing services, he added. Companies will list on a staggered basis — possibly at a rate of one a month — starting in January, Yangon Stock Exchange officials said.
First Myanmar Investment, the flagship of a group of companies run by local tycoon Serge Pun, is likely to be among the first to list. “We’re optimistic and excited by the future,” said Melvyn Pun, the magnate’s son and chief executive of FMI’s Singapore-listed sister company, Yoma Strategic Holdings.
A spokesperson for the British Chamber of Commerce in Myanmar said “the business community wanted to see credible and transparent elections and is pleased that this is what took place.”
Nelson said that American businesses have been reassured by the NLD’s apparent focus on improving transparency, “which will help U.S. companies feel confident in finding local partners to work with.”
“We also appreciate the statements by the NLD that they will continue to open Myanmar’s financial sector,” Nelson said, “which we hope will include sectors like insurance, which are necessary for a modern economy.”
By Simon Roughneen and Gwen Robinson (NAR chief editor)