Warm welcome belies challenges in insurance and tax for U Soe Win

Myanmar Times June 26, 2018 by: THOMPSON CHAU

At the time of his appointment, the new Planning and Finance Minister U Soe Win was greeted with enthusiasm by business groups. But the new minister needs to quickly deliver reforms to liberalise the insurance sector and revamp the tax structure in order to show that the government is serious about the economy.

In his new role taking charge of the planning and finance ministry, 80-year-old U Soe Win will be closely watched by investors and enjoy broad powers in regulating the economy, not least because the minister supervises the Directorate of Investment and Company Administration (DICA).

His ministry carries the bulk of the responsibilities in implementing the National League for Democracy-led government’s 12-point economic plan, which aims to support competition and a robust private sector based on a market-oriented system by cutting down unnecessary red tape and expanding access to credit.

The ministry also regulates the microfinance companies. While there are some encouraging developments in financial inclusion and relaxation of regulatory restrictions in the microfinance sector, the pace of reform is running out of steam.

Confidence among domestic and foreign businesses has also plummeted, as surveys from the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), Roland Berger and the European chamber have revealed.

The verdict from business leaders is that this government, having been in office for more than two years, is still unable to come up with a coherent vision of the economy and get all the ministries on board to implement real changes. Tasked with regaining support from an increasingly frustrated business community, U Soe Win will have his work cut out for him.

Taking charge

He has already hit the ground running. After swearing in at parliament on June 25, the new minister stressed the need for ministries to work together to deliver economic reforms. He was spot on. The lack of coordination among government entities is among the top complaints from the private sector. The cabinet should make sure the authorities cooperate to implement the reforms, instead of competing with each other.

Meanwhile, there are two other priorities which U Soe Win needs to urgently deliver.

One is rebooting the reforms in the insurance sector, an area mired in discussion and inaction. The insurance sector was supposed to be liberalised in the first quarter of 2017, but more than 1.5 years have passed and nothing has happened to date. There are still no regulations paving the way for the much-needed products and put an end to state-controlled pricing over existing service provides. A timeline on how international insurers can work with domestic firms within a modernised regulatory framework remains elusive.

Liberalisation of the insurance sector is hugely significant for investors and has huge positive spillovers on other industries, such as health and logistics. Yet, foreign insurers have been limited to opening representative offices in Myanmar, which are not allowed to conduct business. The only liberalisation undertaken so far is to allow a few foreign insurance companies to trade in Thilawa Special Economic Zone.

Another priority should be to simplify and clarify the tax structure and broaden the tax base by including the informal domestic business community and bringing miscreants into the tax net. The ministry should also eliminate tax exemptions and special tax provisions which are offered exclusively to government agencies and enterprises which engage in commerce, and outlaw the regime of accepted non-compliance for favours and ex-gratia payments.

Warm welcome

So far though, members of the business community appear to have responded positively to U Soe Win’s appointment.

The Myanmar Institute of Directors, for example, was “thrilled” at the ministerial appointment and believes that the country will “benefit greatly from his contributions”. “The MIOD is ready to assist him where we can and in particular, with any new measures to promote greater transparency, stronger governance and compliance in both the private and public sectors,” an MIOD representative said when the appointment was announced.

Similarly, the British Chamber of Commerce Myanmar stroke a welcoming note. “With a reputation for stability, U Soe Win provides a ‘safe pair of hands’ for the role at a time of critical juncture for Myanmar’s economy, where conditions need to improve for development. He brings to the position a professional background from a reputable British consultancy, and having been trained by top UK financial institutions such as the Bank Of England, there is no doubt that his experience will greatly benefit this important role,” Chloe Taylor, BritCham’s chief executive, commented.

Eric Rose from New York-based Herzfeld & Rubin PC, who left the country earlier this year, said together with the late U Hla Tun, U Soe Win is the country’s “best known tax and accounting experts” who survived the several regimes since Ne Win’s, while “leading substantial private accounting and tax consultancies”. “This speaks volumes regarding their competency and survivability skills,” he said.

By tackling the insurance sector and reforming the tax structure, U Soe Win will be able to live up to the business community’s expectations that Nay Pyi Taw is serious about their concerns and needs.

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