TODAY

Presented at the “Myanmar in Transition” seminar during the 50th anniversary of the Institute of Economics, Yangon, 30 November, 2014.

Than Tun (aka) Ashok Nath
Senior Research Fellow,
Centre for Economic and Social Development,
Myanmar Development Resource
Institute.

The goal of IMPROVING DOING BUSINESS IN MYANMARis to improve the standard of living of the common man.

This presentation is divided into four sections:

I. Business is the engine of growth
II. Foreign Business is the engine of the engine of growth
III. Three ways to make Myanmar Business “competitive”
IV. Nine things we need to do to overtake our neighbours

As we go through these sections, let’s keep reminding ourselves of the goal: “For the good of the common man”.

We start with a major premise: business is the engine of growth and foreign business is the engine of the engine of growth. Then we discuss how to make doing business in Myanmar more attractive and competitive.
Even if we become competitive, the gap between Myanmar and other countries will remain, because they are not staying still.

If that is so, then much like in business, we need to find our USP and our competitive nicheas a Nation. We can learn from Sun Tzu in the Art of War, “He will win who knows when to fight and when not to fight – where to direct how much pressure …”. The final section explains how we can close the gap, catch up with and overtake our neighbours by developing our competitive advantage in NINE key areas.

I. BUSINESS IS THE ENGINE OF GROWTH

The starting point is to remind ourselves that business is the main engine of growth. Consider what business does.

• It hires workers – pays salaries
• It trains workers, then retrains them
• It buys equipment
• It buys raw materials
• it buys cars and trucks
• It pays rent
• It builds buildings
• it develops residential communities
• It entertains
• It pays taxes
• It pays people who then pay taxes
• It imports what we need
• It exports what others need
• It gets what you need to you
• It expands and hires more people
• It distributes goods and services nation- wide …
• It utilizes resources efficiently .. Or else!

To be clear, there must be an enabling policy environment, essential public goods and services, proper regulatory controls, ensuring free and fair competition by the government, politicians, civil society organizations, and international community to ensure business can do these things. Business cannot do these by themselves.

Still, it is the hundreds of thousands of small, medium and big business that is the engine of growth. Nations who support business, move ahead. Nations who don’t, invariably lag behind.

II. FOREIGN BUSINESS IS THE ENGINE OF THE ENGINE OF GROWTH

If business is the engine of growth, then foreign business is the engine of the engine of growth. Consider what most successful foreign busi-ness has over us!

• 100’s of times more capital than us
• 50+ years of experience over us
• Much more efficient than us 
• Trains and retrains, more staff, better than us
• Track record and proven marketing acumen
• Superior knowledge on how to compete with the best
• A much finer and better understanding of export markets
• Superior knowledge of where to import what, from who
• Far superior productivity and skills
• Extremely better at efficiency, cost and quality amnagement
• Advanced management skills

NOTA BENE:

(a) If business makes a profit, it is because it is satisfying its customers with needed goods and services. So (arguably) the more profit it makes, the more it is meeting the needs of society.

(b) Foreign business is “forced” by competition to reinvest in Myanmar. They cannot survive by expatriating all their profits. In fact they usually need to keep investing to remain competitive. So why should we be afraid of the foreigner? In fact shouldn’t we welcome foreign business?

(c) There is no economy in the world that can progress without foreign capital and know-how. Not even leading economies like the U.S., Germany and Japan. Competition after all brings out the best in us.

(d) The easier it is to do business in the country, and the more welcome foreign capital and foreign business is, the more developed the country.

(e) In a very small country like Singapore, every major multinational operates there – and in a big way. And yet Singapore is for Singapo-reans, and is run by Singaporeans. The foreigner does not threaten the political or cultural fabric of Singapore. In a way we can say that Singapore has “allowed” the foreigner to make Singapore well-off.

III. THREE WAYS TO MAKE MYANMAR BUSINESS “COMPETITIVE”

Since business is the engine of growth, coun-tries worldwide, take all kinds of measures to encourage business both local and foreign. These measures can be broadly categorized into three traditional approaches.

(1) Encourage FDIs
(Foreign Direct Investments).

(2) Make Doing Business Easier

(3) Support for SMEs

(1) Encourage FDIs. Myanmar is doing very well in attracting FDIs. It ranks 61 worldwide as can be seen below, from an UNCTAD report.

There are many and varied measures countries take to attract FDIs. These are abundantly available in the literature. Essentially countries offer:

Low corporate tax and individual income tax rates

• Tax Holidays
• Special Economic / Export Processing Zones
• Investment subsidies
• Loan guarantees
• Free land use or land subsidies Infrastructure subsidies
• Derogation from regulations
• FREE TRADE agreement / open markets

NOTA BENE:

Every year, countries keep im-proving their FDI incentives. Myanmar cannot get ahead by doing what everyone does. While we must offer FDI incentives to remain competitive, doing so only maintains the gap between us and them. Saya U Myint, Chief Presidential Advisor on Econo-mics has pointed this out.

We need to do more than what Singapore, Malaysia, Philippines, Thailand and Indonesia for example are doing. We need to do bold things that highlights our competitive and comparative strengths. These are outlined in the last section.

2. Make DOING BUSINESS easier: The second way countries attract foreign business or support local business is by improving regulations for doing business in their country.

The 2014 World Bank Doing Business Report ranks Myanmar 177 out of 189 countries, based on a set of criteria defining the ease with which business is conducted in each country. This is shown below.

Myanmar is up from rank 183 in 2013 to 177 and 2014. No doubt this is an improvement. No doubt also that we have some ways to go.

The World Bank report as well as other literature gives details on the criteria used and the methodology. Essentially what countries do to make “doing busi-ness” easier is a combination of the following:

Online application filing and streamed lined approval and reporting

• Database of information on credit and properties
• Reasonable fees –paid online
• Pre court mediation / Out of Court settlement processes
• Simple export procedures***
• No minimum capital requirement
• A One-stop shop to help new business
• Clear and easy building rules
• Electronic database for encumbrances
• Online cadaster

NOTA BENE:

The World Bank says: “… since 2009 all regions of the world and economies at all income levels have improved their business regulations”. So improving Myan-mar’s business regulations, is necessary. But it does not give Myanmar a competitive advantage since everyone is doing the same thing. It does not close “THE GAP”.

Below is how Myanmar ranked on various “doing business” measures in the World Bank report. It is clear that we need to do better than others. This should be done in a way that focuses on or gives us competitive and com-parative advantages. These are outlined in the last section.

3. Support for SMEs: The third area that countries pay attention to has to do with support for Small and Medium Enterprises or SMEs.

Support for SMEs are in the form of either Financial Incentives and/or Service Incentives. Once again, the literature is plentiful in what nations can and are doing in this regard. In summary the Financial Incentives for SMEs take the form of:

• Loans given below cost
• Subsidies
• Cash grants
• Tax breaks
• Research Funding
• Productivity Funding
• Educational subsidies
• Access to Finance

On the other hand the Service Incentives for SMEs take the form of government assistance by way of:

• Credit verification system
• Business Search infrastructure
• Export Promotion
• Market access
• Market research
• Educational and training centers
• Support for start Ups
• Technology and Innovation
• Capability and management development
• Website support
• Virtual Office
• Part timework pools
• Collaborative Industry projects
• Productivity Calculator
• Consultant Search

NOTA BENE:

In many countries, SMEs comprise about 80 to 90% of the business sector – and 50% or more of investments and employment. As such SMEs are encouraged in every country.

Myanmar has to do all of the above but it wont close “THE GAP”. Myanmar has to define its competitive niche and focus. We need to find out where our comparative strengths are or should be.

To be continued…