Construction workers busy renovating the NLD headquarters in Yangon (Photo: Simon Roughneen)
YANGON — Business leaders in Myanmar are lining up to back the country’s new democratic administration despite its lack of a track record, predicting that recent strong growth and record investment will continue.
The International Monetary Fund estimates that Myanmar’s economy will grow by 8.4% this year — about the same as last year and well above the 4.3% average it is predicting for emerging economies as a whole. Foreign investment quadrupled under the previous government to $8 billion in 2014-15, though that is expected to drop to around $6 billion for 2015-16, according to Kyaw Win Tun of the government’s Directorate of Investment and Company Administration, who added that domestic investment is expected to rise over the same period.
Western sanctions have been mostly eliminated or suspended, and major companies such as Coca-Cola and GE, both of the U.S., and Telenor, the Norwegian telecommunications group, have established or re-established operations in Myanmar, which during military rule was synonymous with corruption, isolation and poverty.
“I’m confident that we have a bright economic future for our country,” said Win Aung, president of the Union of Myanmar Federation of Chambers of Commerce and Industry, the country’s main business lobby.
A surprise series of reforms began in 2011 under a quasi-civilian government led by former generals, and in November the once-repressed National League for Democracy won 80% of elected parliamentary seats in the country’s first free election in 25 years, reducing the ruling Union Solidarity and Development Party to a parliamentary rump.
The NLD-dominated legislature sat for the first time on Feb. 1 — although an NLD government will not take office until April 1 — amid growing speculation that party leader Aung San Suu Kyi is trying to cut a deal with the army to allow her become the country’s next president.
Suu Kyi is barred from the presidency because her sons hold foreign citizenship. With the army holding a veto-wielding 25% of seats in parliament, Suu Kyi requires military consent for the law to be changed to allow her to lead the country.
If she does not get her way, she aims to nominate a proxy president who will lead the government under her direction. Either way, it seems some of Myanmar’s wealthiest and most influential tycoons see her as the country’s de facto leader.
There has been criticism that the NLD — many of whose members spent years in jail during the latter decades of military rule — lacks governing credentials. However, Serge Pun, a prominent Myanmar businessman, told a Yangon audience of business people on Feb. 2 that “the climate for business will be improved and the economy will grow,” citing Myanmar’s plentiful natural resources and “frontier market” status among the reasons for his optimism.
“I have faith in Daw Suu’s ability to lead the party and this country during this momentous transition,” said Pun, who is chairman of First Myanmar Investment and Yoma Bank, using an honorific for the NLD leader. “I’m a firm believer that if we eliminate corruption and graft the economy will excel without bottlenecks,” he added.
Myanmar businesman Serge Pun speaking in Yangon on Feb. 2 (Photo: Simon Roughneen)
Khine Khine Nwe, managing director of a garment factory in Yangon, and head of the country’s main garment industry group, said that “for the new government, it is important that they keep the trust of the people.”
“People want to see job creation and incomes increase,” Khine Khine Nwe said.
Cabinet rumors
The key to the transition will be Suu Kyi’s choice of ministers in economic portfolios such as finance, planning, and tourism, though speculation about who will hold these posts has been put on hold as the country tries to guess who she will propose as president.
Controversially, Suu Kyi has backed a representative of the former ruling party for the position of deputy parliamentary speaker, and there is also speculation that some of the previous government’s ministers could be retained. Shwe Mann, the former speaker of parliament and a Suu Kyi ally, was on Feb. 5 offered a position as head of a parliamentary commission, despite losing his seat in the Nov. 8 election.
However, it is likely that NLD representatives will fill most ministerial positions when the new government takes power. Asked if any ministerial names had already been listed within the party, NLD central committee member Myo Myint said: “It will be decided by Daw Aung San Suu Kyi; I have no idea yet.”
Among the possible ministerial candidates is Thet Thet Khine, a businesswoman and joint secretary general of the UMFCCI business lobbying group, who was elected to parliament as an NLD candidate. Win Aung, the UMFCCI head, would not say whether he would like to see Thet Thet Khine named a minister, but said, “we are anxious to see a competent administration and cabinet.”
The UMFCCI is hoping to discuss the next government’s economic policy — and get a first hand look at the next administration — as soon as possible. “We need to have a sort of a formal meeting with the president, whoever will be the government,” Win Aung told the Nikkei Asian Review.
UMFCCI head Win Aung speaking to media in Yangon on Feb. 2 2015 (Photo: Simon Roughneen)
The NLD is already holding meetings with organizations keen to hear about its economic plans. “We have started engaging with them, we are in touch with them. We are discussing what they would like to do,” said Vivek Pathak, East and the Pacific director for the International Finance Corporation, a World Bank Agency that advises private sector businesses.
Budget deficit
Myo Mint said an NLD economic manifesto tabled before the election would form the basis of the incoming government’s economic plans. The NLD pledged to keep the budget deficit below 5% of gross domestic product; cut the number of ministries; 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 about 70% of the population lives in the countryside.
Myanmar has long been known as a daunting place to do business, with corruption widespread and large sectors of the economy hived off by army-linked companies and businessmen whose close ties with the generals won them lucrative concessions to exploit Myanmar’s natural resources.
However, even some of the country’s more questionable business people are seeking to redeem their reputations as foreign investors circle for potential partners. “Interestingly, we do get requests from some of these sorts of companies,” said Pathak.
The IFC signed an agreement with the UMFCCI on Feb. 2 to train Myanmar companies in corporate governance, but is not likely to be greatly helpful to business people with questionable records. “We prefer not to deal with companies that have gotten favors from government,” Pathak said, adding that the IFC was prohibited from dealing with businesses and individuals who have been subject to international sanctions.
Whether the NLD has the strength to tackle the country’s powerful vested interests remains to be seen, but the party says it plans change. “We are going to reform the government to be lean and efficient,” Myo Myint said.
With many old laws still in existence, and around a dozen business-related pieces of legislation left over from the previous parliament, the NLD will have its plate full. “The first thing they will have to look at is the legal framework: we still have a companies law dating from 1914,” said Khine Khine Nwe.
One of the new government’s first priorities will be to improve roads in rural areas, where most of Myanmar’s people live, and where farming is the main source of income. “We need a lot of infrastructure, otherwise we cannot reduce the transportation costs to make life better for rural people, to boost rural development,” Myo Myint said.
Reducing transport overheads will make doing business easier for Ruf Hou, owner of the Aung Min Thu Furniture Mart in Yangon’s Tamwe township, which depends on teak and other timber being trucked across Myanmar’s far flung road system to Yangon.
Since 2011, the year the army ceded power to a military-supported civilian government, Aung Min Thu has more than doubled its staff roster to “around 100 people,” according to Ruf Hou.
“Many companies come to us and offer to pay extra to have the tables, chairs done more quickly,” he said, discussing the impact of Myanmar’s recent economic growth, which he thinks will continue under a Suu Kyi-run government.
“I think that a lot of investor, a lot of company will come to build factories in Myanmar,” he said.
Furniture makers at work in Yangon’s Tamwe township (Photo: Simon Roughneen)
