NLD’s one year anniversary: no systematic consultation dampens investor confidence

“Bliss was it in that dawn to be alive,” wrote William Wordsworth of the terrors of the French Revolution. The sentiment was not much different a year ago in Myanmar, where many were anxious about the transition, which was less tumultuous than one might anticipate. But the new government has yet to deliver effective changes.

MyanmarTimes, Mar 31, 2017 by:  Htin Lynn Aung

“Generally, the pace of economic reform has been slow and below market expectations … the Myanmar government realises the importance of accelerating this, although policy changes in this regard have so far also failed to match or exceed expectations,” William Greenlee, managing director of DFDL’s Myanmar office, told the Myanmar Times.

A return to darker days of law-making?

For many international investors, the Law Concerning Foreigners or the Foreign Workers Law, which are being redrafted at the moment, illustrate the problems of the government’s approach towards the private sector.

“An example is provided by section 12 of the Foreigners Act, which requires that prior approval must be issued for any foreigner wishing to travel for a period over 24 hours,” Mr Greenlee said, adding that a passage and implementation of this law would greatly hinder business travel and the importance of unimpeded mobility.

“I would be surprised if even a redrafted version is passed.  It [the foreign laws] should simply be scrapped,” he said.

The government has shown that there is no consistency in their approach. There have been open hearings to discuss the new Investment Laws and related rules. The government has also been inviting written comments on their draft rules from the private sector. A similar process is employed for the new Companies Act.

But nothing similar took place before the foreign laws were rushed to parliament, according to Eric Rose, lead director of Herzfeld Rubin Meyer & Rose, an American law firm.

“[The laws] were proposed by the Ministry of Labour, Population and Immigration. The first and only drafts were published in December, then they were rushed to the President’s Cabinet by the end of December, and sent to the Hluttaw Joint Bill Committee in January, with no public hearings, no comment period, or any effort to seek input from either the foreign or Myanmar investment community,” he explained.

“The result was a wall of opposition to these retrograde laws which were out of sync with the progressive steps towards encouraging investment taken by the rest of the Myanmar government.

“Nine foreign chambers of commerce objected, [together with] numerous embassies, UMFCCI members, as well as, surprisingly, members of DICA and MIC.

“Furthermore, the undemocratic process caught the eye of several members of the NLD’s central executive committee as a return to darker days of law-making in Myanmar,” Mr Rose said.

FDI and investor confidence

Figures have not reflected well on investor confidence: foreign direct investment (FDI) in this fiscal year is less than that in the previous year.

In the 2015-16 fiscal year, FDI amounted to nearly US$9 million. But for this year, the new FDI is only slightly above US$5 million.

More than US$6.611 billion of FDI poured into the country from April 1, 2016 to March 13, 2017. But, in fact, more than US$1.55 billion comes from existing investors who decided to increase their investments.

The new Investment Law coming into effect soon will be an administrative challenge for the government. From determining tax reliefs and exemptions based on industrial zones and sectors to coordinating regional investment commissions with the MIC, all these would require managerial acumen.

A systematic approach in administration is necessary for more FDI.

“Regions are given permission to do business as per current investment law, and it is necessary to stipulate regulations for work procedures, in addition to giving permission. Based on the regulations, they can decide what should be allowed, what decisions they can make, and when to make decisions.

“It is good to have all the regulations specified thoroughly. If not, it can cause hindrance to the investors, and investments can be affected due to delays,” U Aung Thura, an investment market expert, said.

Paying real efforts, not lip service, to support private sector

The new government has been reassuring investors and businesses that they are keen to promote businesses and boost the economy. Many ministers have time and again mentioned how important the private sector development is for Myanmar’s economic growth.

However, businessmen have pointed out that more changes are imperative for the private sector. The related ministries, together with the civil service, needs to be reformed.

In their first year, the administration has only made changes at the top level, while the professionalism and efficiency of the civil service have not improved. This administrative mismanagement is very frustrating for businesses to operate, according to many businesses.

“The new government has kept insisting that the country will only develop if the private sector develops ... Changing the bulk of the employees, including those at a lower level, is necessary for businesses to work.

“Corruption among lower level staffs, who’re in charge of operations, as well as the lack of real improvement in bureaucracy impede private sector development,” said U Ye Min Aung, who works in banking sector as well as the electricity and agricultural sector.

Although the new government chanted the term “change”, little has gone beyond rhetoric.

“The NLD government hasn’t improved on the performance of its predecessor, and to some extent has gone backwards when it comes to consulting systematically on draft laws, something which is essential if they want to improve the investment climate,” Vicky Bowman, director of Myanmar Centre for Responsible Business, told the Myanmar Times.

“With the exception of DICA, other ministries – and the parliament – still adopt laws opaquely, and consequently those laws are rarely fit for purpose,” she added.

In the meantime, high inflation, weak exports, lack of access to banking services, lack of autonomy of the Central Bank and the capacity of the civil service remain on the to-do list. Apart from the lifting of US sanctions, there are hardly any remarkable changes in the first year of office for Myanmar’s new government, whose economic policies are still unclear.

What is clear, though, is that, if the government wants the economy to gather steam, their second year can no longer be business as usual.

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