BANGKOK - Myanmar's military rulers are
planning a major economic-reform program, expected
to be rolled out this year. The plans involve
opening large sections of the economy to foreign
investors, privatization of state-run enterprises,
and major structural reforms for the collapsing
banking system and misaligned fixed-exchange-rate
regime.
A top-level committee of senior
military officers and prominent local businessmen
has recently drawn up a list of suggested reforms
that await final confirmation from the country's
top two generals, Than Shwe and Maung Aye, before
the formal implementation process begins.
Previously this year, Yangon announced
that 11 government-run
businesses, including beer,
bicycle, cosmetics, glasses, soft-drinks, textiles
and paint factories in Yangon and Mandalay, would
be privatized and re-established as joint
ventures, with the government holding 51% and the
rest of the shares sold to the private sector.
"The value of the shares in these
companies, currently worth 1 million kyat each,
will be adjusted every year," Industry Minister U
Aung Thaung recently told a group of Myanmar
entrepreneurs. Private investors, he said, would
have the rights to run the firms for a decade, and
the buyers would be allowed to resell their shares
or transfer ownership.
Moreover, the
government plans to establish a Privatization
Commission to oversee the sales. Nearly a thousand
state-owned enterprises are slated to be partially
privatized or sold off in the coming year,
according to government officials. Some 200
different government-operated businesses,
including cinemas, hotels, rice mills and
sawmills, were privatized by the end of the last
financial year, which ended in March, according to
a senior government official who spoke to Asia
Times Online on condition of anonymity.
"The military regime wants to boost
industrial production, increase industrial
efficiency and attract foreign investment," the
official said.
At present, the government
intends to lease or auction off the businesses and
set up joint ventures with the eventual aim of
trading shares on a yet-to-be-established stock
exchange. "The government is planning to develop a
stocks and shares market to help strengthen the
growth of the country's private sector," a
prominent Myanmar businessman with senior-level
government contacts told Asia Times Online.
Myanmar's broad privatization plans were
originally launched more than 10 years ago, but
were soon shelved when the country's top military
rulers got cold feet about foreign penetration in
the economy. The plan's recent revival is intended
to develop the country's lagging industrial
sector, which has stagnated badly in recent years.
Rising global fuel prices and US-led economic
sanctions on trade and new investments in the
country also have hit hard.
The new reform
plans have been prompted by the military
government's desperate need to raise new funds,
especially to finance the building of the new
national capital, which was abruptly established
last November about 400 kilometers north of the
old capital Yangon. The economy is also racked by
widespread shortages and chronic inflation of
crucial food staples. The Chinese
model Behind the scenes, Chinese advisers
are pushing the regime to privatize the country's
state-owned enterprises and undertake other
structural economic reforms. It's not the first
time that Beijing has given the junta economic
advice. During the 1997-98 Asian financial crisis,
Beijing supplied the junta with emergency
low-interest loans to bolster the kyat against
speculation. In exchange, China was granted
various natural resource concessions and free
passage for its cheap manufactures, which have
subsequently flooded the country's markets.
The new joint-venture formula that
apparently will soon be implemented is clearly
modeled on the Chinese approach to economic
development, another senior Myanmar businessman
told Asia Times Online on condition of anonymity.
"[Myanmar's] military leaders have been studying
the Chinese and Vietnamese approach to industrial
development and feel comfortable that this
strategy will help boost production and attract
foreign investment while maintaining tight
government control," he said.
Analysts say
the current privatization and reform push is
largely motivated by the country's mounting
economic and financial crisis. Prime Minister Soe
Win launched a probe into the state of the economy
last December, and the investigation's results
reportedly weren't pretty.
The joint
committee set up to review the government's
economic policies has already reported back to the
cabinet and, apart from advocating a comprehensive
privatization program, the group also suggested a
more serious approach to company accounts, a more
effective and systematic collection of taxes,
including both corporate and personal income
taxes, and drawing up new legislation that would
allow foreign investors to repatriate their
profits more easily.
The committee also
radically suggested opening up the country's media
sector to outside commercial investors. In that
direction, the Information Ministry is considering
allowing private investors to launch a daily
newspaper and a new television channel. The
current foreign partner of the English and
vernacular weekly newspapers, the Myanmar Times,
has recently been approached by Information
Minister General Kyaw Hsan about the possibility
of establishing a new solely private-run daily
newspaper, according to sources familiar with the
situation in Yangon.
The new television
channel is further along in the planning stage,
according to an industry source, who says it is in
talks about receiving investment from the
Thailand-based Shin Corp. The committee also
suggested that the government had to tackle
lingering problems in the banking system and the
country's wildly misaligned fixed-exchange-rate
currency regime before the economy could attract
more foreign investment.
Myanmar's
official fixed exchange rate is pegged at 9 kyat
to the US dollar. On the black market, however,
the exchange rate fluctuates to nearly 1,000 kyat.
"Most significant commercial transactions in
[Myanmar] are now done in dollars," said a
prominent local economist. "The greenback is
effectively the country's currency."
The
reform committee has also suggested that the kyat
be floated or at the very least pegged directly to
the US dollar. The government has, at least
partially, moved in that direction by recognizing
the black-market rate as the "semi-official" rate.
All transactions between government ministries are
now conducted at a value closer to the
black-market rate than to the official fixed rate.
An International Monetary Fund inspection
team that recently visited Myanmar was reportedly
impressed by some of the reforms the regime had
put in place, including allowing the black-market
exchange to function without restrictions or
impediments, according to Yangon-based diplomats
who were briefed at the end of their visit.
Economic analysts and businessmen inside
Myanmar all agree that without thorough monetary
and exchange-rate reforms, any attempt to boost
the economy and attract foreign investment is
doomed. "Only reform of the currency exchange
rates will boost business and investor
confidence," said a businessman in Yangon who goes
by the name Maung Maung. "Anything less will only
distort the economy, discourage investment -
especially from abroad - and prevent real economic
development."
Meanwhile, the government is
in the process of reviewing and monitoring the
country's banking system, especially the private
banks, which were in open crisis in 2002. The
regime is now reportedly bent on restoring
consumer confidence in the financial system by
forcing banks to become outwardly more effective
and efficient. Most significant banking
transactions, especially foreign remittances, now
go through the so-called hun die system -
an informal arrangement for transferring funds.
The hun die system accounts for more than
90% of financial transactions in Myanmar,
according to officials.
A few months ago,
the police Bureau of Special Investigation was
asked to examine the hun die system and
explore ways to manage these transactions through
the normal banking system. Investigators
reportedly sought the advice of a number of the
country's top economists; however, it is still
unclear what advice was given and what conclusions
the authorities drew from the discussions.
Optimism, pessimism Businessmen
involved in advising the government are optimistic
that the military regime is serious about its
economic-reform plan. One of the key players,
respected octogenarian accountant U Hla Tun,
recently told colleagues that the government was
planning some major economic reforms that would be
rolled out before the end of the year.
Other senior analysts, however, are less
sanguine. Vested interests are so entrenched that
it's impossible to introduce real economic reform,
a senior military intelligence officer said when
asked about the prospects of broad-based,
deep-reaching economic reforms. Former prime
minister General Khin Nyunt - who was ousted in an
October 2004 putsch and was subsequently convicted
of economic crimes - tried a few years ago but was
rebuffed by strong vested-interest resistance, the
intelligence officer confided.
Some
economic analysts, both inside the country and
abroad, believe the situation is no more favorable
to reform now than it was then. "Myanmar's leading
corporations are mostly owned and operated by the
regime's cronies - mostly serving and retired
military officers," said Sean Turnell, a former
Australian central banker and expert on the
Myanmar economy. They rely on rent-seeking as the
only reliable way to make money, and that system
will be hard to dismantle, he said.
Leading activist Zaw Min said, "The
privatization program of the ruling SPDC [State
Peace and Development Council] is another of the
regime's hoaxes. They are selling the country's
assets at [bargain] prices to their cronies to
keep them happy."
Considering those
sharply opposing perspectives, how far the regime
will go with its privatization plans and
economic-reform program remains difficult to
predict. The country's top general, Than Shwe,
apparently still needs to be convinced of the
program's details, and to date there is no
indication that he has signed off on all the
liberalization measures.
The military
leader's well-documented xenophobia would appear
to make him suspicious about opening up the
economy and relying more on foreigners for the
country's economic progress. In the end, however,
it may be Chinese advice and support that
convinces him that Myanmar has no other option if
it wants to avoid further and, perhaps in the
future a more spectacular, economic implosion.
Larry Jagan previously covered
Myanmar politics for the BBC. He is currently a
freelance journalist based in Bangkok.
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