Quarterly Business Magazine

What are your opinions about the economic reforms in Myanmar and its future direction?

Posted :
Wednesday, October 15, 2014

Winfried Wicklein
Country Director
ADB Myanmar

The breadth and depth of the reform agenda is impressive. The economic reforms have put the country firmly on a path towards becoming a modern economy. But there are many challenges ahead. Myanmar is still one of the poorest countries in Asia. To create a foundation for broad-based growth, for an economy that creates opportunities for all parts of society to participate, the country needs to strengthen macroeconomic and fiscal management; invest in its people and help them develop relevant skills to find and keep jobs; build institutions that can effectively deliver public services; modernize and expand infrastructure; and find lasting solutions to ethnic and sectarian conflict. This is big and highly complex set of challenges. It will take time to fully address them.

It is important to show progress and maintain the positive momentum over the medium and longer term in order to reap the fruits of reform. The goal is to improve peoples’ living standards. People are bound to be impatient, they want to see rapid change – this is normal. But change of the scale required in Myanmar is a process and it won’t happen overnight. It takes time, persistence, knowledge and funding to effect change successfully.

Change is happening in so many areas. It will be increasingly important for the Government to ensure it has a clear guiding vision and a strong understanding of how the reforms interact with each other. Consistent and collaborative coordination among ministries is critical. Change takes time and persistence. It will also be important to communicate clearly about the reform process and manage the expectations of the people of Myanmar and international partners.

As the influx of investors shows Myanmar offers many great opportunities. Entering the market early may bring about early mover advantages to investors. In a frontier market like Myanmar it is important for international investors to carefully chose their local partners, and to do thorough due diligence prior to investment.

 

H.E. Andrew Patrick
British Ambassador to Myanmar

Three years ago Myanmar embarked on some remarkable changes. A key test of course will be the elections next year – these are always challenges in a transition. It is vitally important that the people of this country see those elections as credible – that their votes have actually made a difference. The UK is engaging with the government to encourage further democratic and economic reform, and to sustain a credible peace process.

I can assure you that there is no lack of interest from British businesses in this market. Events held here, in London and the region, are always over-subscribed with companies from many sectors eager to learn more about the country. The British business presence in country goes from strength to strength with over 125 members in the recently-formed British Chamber of Commerce. Of course there are challenges. British businesses raise electricity and roads, skills, and the price of land and worries about corporate governance and corruption as key concerns.

Sustainable economic growth will be dependent on responsible investment by companies. This means investments which strengthen the regulatory system; which help, rather than hinder, local communities; and which create long term employment. Responsible investment will help alleviate poverty; improve livelihoods and help transform the Myanmar economy. UK companies operating here are committed to the same vision.  For example, JCB has established a fee-free training centre and are looking to roll out a full vocational training programme. Standard Chartered Bank is investing in the local community to strengthen financial literacy for women and micro, small and medium-sized enterprises across the country. British energy companies, successful in the recent awarding of on and off-shore oil and gas blocks, are working with the UK-funded Centre for Responsible Business and local institutions to increase the country’s geological study capacity.

 

 

Tami Overby
Senior Vice President, Asia
U.S. Chamber of Commerce

The progress over the past couple years has in fact been remarkable, but many challenges remain. The U.S. Chamber’s annual “ASEAN Business Outlook Survey,” released in Nay Pyi Taw at the end of August, identifies a number of these challenges:
• inadequate infrastructure
• housing and office costs
• lack of trained personnel
• corruption
• laws and regulations
• difficulty moving products through customs

Moving forward, reform will be much more challenging. For example, opening up and reforming the banking and financial system is crucial to longer-term economic growth, but is politically sensitive and fraught. The 2015 elections and questions about constitutional reform loom as significant uncertainties. It is therefore crucial that Myanmar maintain the momentum of reform built up over the past three years.

We would recommend that Myanmar continue to develop and strengthen the legal framework to encourage greater investment in the country. Myanmar’s challenges are not insurmountable, but it is vital to establish investor confidence in the market. Companies must see that potential returns will outweigh the risks of investing.

 

Japan International Cooperation Agency (JICA)

Myanmar government is so far doing very well. However because it is still at the transition stage, we have to look their activities very carefully about this economic reform. Myanmar has already turned to the right direction and necessary preparations are being made to start to drive that said direction.

For example, in order to invite foreign investments, Myanmar government has put much effort for the development of SEZ. SEZ is a kind of catalyst to invite foreign investment. Because Myanmar economy is at transition stage, it lacks transparency, law (regulation), infrastructure, and human resources. Because of above reasons, generally speaking Myanmar is not ready to invite foreign investment. However it is possible to invite foreign investors, in order to develop International level’s soft and hard infrastructure for small area and privilege investors in SEZ. Also SEZ can create many employments and it will benefit Myanmar people. Therefore Myanmar government’s policy of SEZ development is reasonable.

JICA would like to emphasize three points.
• Firstly, the government should properly prepare long-term and mid-term strategy based on the goal and the needs of the people. For sustainable development of Myanmar economy, the government should focus on not only the short term benefit or urgent needs but also long term benefit.
• Secondly, the government and the investors should pay attention on urban development together with rural development. Agriculture can be profitable business as well so investment shall not be assembled only in urban areas.
• Thirdly, human resource development, especially higher education and vocational training should be put more efforts. More and more skilled labor is necessary for Myanmar economy and these skilled labors will be valuable personal property for Myanmar.

 

Cyrus Pun
Executive Director
Yoma Strategic Holdings Ltd.

In the longer term, for the real estate market to grow in a way that supports a healthy urban development, there needs to be a coherent master plan of urban areas and comprehensive zoning laws that ensures that land is efficiently used for construction of buildings. Sometimes this necessitates the amalgamation of small plots that are individually owned. Clarity in property laws and ownership rights are thus required to protect and encourage land owners to collaborate and invest, and would also help spur foreign investment. Laws and regulations to ensure equitable compensation for relocation of residents in dilapidated urban dwellings should also help to release more urban centre sites for redevelopment, which would be an important part of a city’s rejuvenation. Also, investment in new infrastructure, such as roads and utilities will be critical to the growth of suburban areas, which should be another component of a city’s urban planning.

Patience, empathy and perseverance are key traits that will help foreign investors trying to navigate Myanmar. As with any frontier market, frustrations with bureaucracy and challenges with an inadequate legal framework are commonplace. What needs to be recognised is that there is a genuine desire and will in many quarters of the bureaucracy to improve and facilitate investment and growth, and foreign companies have a part to play in bringing international best practices and conducting businesses in a responsible and socially conscious manner. This is the best way to build trust and good will for the benefit of the longer term.

 

Edwin Vanderbruggen
Partner
VDB Loi

Given the resources that PTD has, it is doing a tremendous job. Don’t forget how quickly this country is transitioning. Two years ago, there was nothing. Now we have 400 pages of Telecoms Rules. We have Telecoms Law. Issuing laws is just a click of the button. But developing resources within the government to apply and implement the rules, you need to find people and train people. It is no secret that the government as a whole has limited resources, and they need to do a lot at the same time. Two new foreign operators are coming in—with a new domestic operator right behind them. The existing state-owned operator is bringing in a whole new company and a new corporation. Suddenly, there are interconnection, new networks all over the place, new technology, and mobile money. We have to be a little bit patient with Myanmar. You cannot expect Rome to be built in one night. The rules are finished and nearly issued officially. There is clearly progress.

PTD is reviewing rollouts for new infrastructure. This is much harder to do for existing infrastructure because this is up to the operators. They do not need PTD approval in connection with existing infrastructure since it already had PTD’s approval. So, the operators have to talk with one another. However, when you have one plan for coverage and another operator comes in with another plan, very often, there are not a lot of similarities because operators have their own different technology. In other words, it is actually much harder to do for existing infrastructure than for new infrastructure. Don’t forget that MPT is also going through transition. They also have on their mind their network and the changes to that network. There has been a lot of discussion between operators with respect to interconnection and with respect to sharing infrastructure. Given the current situation in Myanmar, it is normal that there is slow progress.

My clients all seem to be very interested and they are committing a lot of resources. Communications is the basis for so much else. It is the basis for culture, financial inclusion, education, jobs, etc. So it will change Myanmar forever, in a good way. There is only one way where this is going. We need to be patient because not everything happens overnight.

 

Julian Rawle
Submarine Fibre Optic Expert

This is the second time I am here in Myanmar; the last time was the Myanmar Connect 2013. I can see great progress in many different sectors, especially Telecoms. We now have Ooredoo fully operational, Telenor is launching soon, and MPT has the opportunity to become a viable participant with the support of KDDI and Sumitomo. Infrastructure
development appears to have started but there is still a lot to do. Initial efforts to build metro and long-haul fibre networks need to scale up and additional redundancy is required for international connectivity, particularly via submarine cables.

For example, Myanmar has one operational submarine cable, (SEA-ME-WE-3) which is more than halfway through its warrantied lifetime. This connection will be supplemented by MPT’s participation in the SEA-ME-WE-5 cable consortium which should deliver additional connectivity by 2017. By comparison, the UK, which has a similar population size to Myanmar, has forty-three submarine cables connecting to Europe, North America, and Africa with more planned. Given the growth in demand that we are all expecting in Myanmar, two consortium cables will not provide enough redundancy or competition to ensure that the telecom sector prospers. This is why Campana Group is proposing to offer an alternative private open access submarine cable solution between Myanmar, Malaysia, and Thailand which we expect to be available before SEA-ME-WE-5 and which will help to further reduce the cost of international wholesale bandwidth in Myanmar.

As to the direction in which the Government is taking Myanmar, I think you are moving the right way. Once the Telecom Rules and Regulations, as well as the ISP Laws, are published, I believe that demand for Internet bandwidth will grow exponentially. The private sector now needs to step up and take advantage of the foundations that the government is creating. We should not expect the government to be involved in solving every issue if we want a competitive, open telecom market in Myanmar.

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