Myanmar: Businesses losing patience as dialogue does not turn into actions

Myanmar’s new government, one year on. Interview with Aye Thiha from the American Chamber.

For the private sector, dialogue with the new government has not translated into concrete actions. Foreign direct investment has dropped; various industries, such as the construction and real estate sector, have had a hard time; the ill-drafted foreigner laws prompted a broad backlash; Yangon’s plan to have a barge from Turkey to additional power for the impending summer fell through. The first year has hardly been plain-sailing.

With the new civilian-led government at the helm for a year, the Myanmar Times sat down with Aye Thiha, chair of government affairs committee at American Chamber of Commerce Myanmar, this week to discuss Myanmar’s new government, one year on.

Aye Thiha is the head of Thiha Group, which is involved in diversified industries such as power, food and services as well as trading and consulting services. He is partnered with Millcon Steel from Thailand in a construction materials business and with the RMA in The Pizza Company and Swensen’s outlets in Myanmar.

The NLD-led government has been in office for almost one year. What does the business community think about the new government? Has the government been listening to the concerns of international and local businesses?

First of all, a year has passed and, to be really honest, the pace has been really slower than we’d thought. We’d rather take six months for planning and then six months for laying out the plans but that hasn’t materialised. So I think we’re looking for more clarity in the direction of the policy.

Now we look at the scorecard, we ask: have they [the government] performed well? I honestly think they haven’t yet.

I’m not sure why they’re taking their time, but I think some people in the business community are getting more impatient.

In terms of listening to our concerns, we met with the state counsellor [Daw Aung San Suu Kyi] and U Kyaw Win the MIC chair starting in October and since then we’ve had a meeting every month with the MIC chair. Certainly they are listening to the concerns, but how we proceed from there has been more of a question mark.

The forum is there, the dialogue is there but the execution is a little bit lacking.

How has this administration performed compared to the previous administration? Was it easier dealing with the former regime than this one?

The previous government already had momentum. So they had the momentum and business was picking up, the new government still hasn’t gained their momentum yet, so we’re all looking forward for them to hit that tipping point and gain momentum.

We were quite familiar with the way that previous government worked so it was easier to work around it and get things done. Now it’s very unclear – the policies are not clear, the execution is not clear. A lot of the licenses and approvals are taking a long time and it’s a question mark for many things. As a result, things are not moving.

Is this uncertainty part of the reason why foreign direct investment (FDI) under this government has dropped compared to the previous period?

Yes. With any momentum you build up upon it. With this new government, during the first six months, people were very excited and they were ready to invest. Stepping into the seventh month, and eighth month, people were losing patience. When things were still not clear, they wanted to wait until things are clearer. So that has an impact, obviously, on the FDI.

I think we can do much better, right? And regarding certain sectors, we can easily invite and motivate for the investment, such as infrastructure – large-scale infrastructure projects that we locals cannot do – we should open it up.

How important are the infrastructure constraints? Has the government done enough to speed up infrastructure development?

Any infrastructure in any country, especially in a large country like Myanmar, is very important because when you open a factory or business, you want to focus on that specific business. You don’t want to deal with the headache around the infrastructure or the cost. So that has to come up – the infrastructure has to come up before more investment or factories and businesses come in. It’s quite important.

The new government, again, are trying to still get a grip on things, as a result they haven’t really come up with new, large infrastructure projects. They planned it, but haven’t executed.

Talking about the old government, under U Thein Sein, the government and the bureaucracy worked together. That doesn’t seem to be the case with the current government. How does that affect business?

It goes back to what I said earlier that when the policy and course of action are clear, you can work to execute it. When they are not clear, and when you have many ministers who do not have the experience, then it’s much harder to move ahead. And we’re seeing that today, things are not moving.

Ministers are not taking a call– deciding to the full extent. Things have become stuck without a clear direction.

In that case, how long do you expect it will take for new ministers to familiarise themselves with the process, speed up the process and gain momentum? Will it happen within this year?

Like any businessmen, we are optimistic. So we hope sooner than later. But we also have to be realistic: it would depend on the minister, and his capacity and experience. Not all of them will be the same. I’m confident that some are very capable, but they just need to run with it. For those who not capable, we have to think about alternatives.

The new Myanmar Companies Act will replace the Myanmar Companies Act 1914. How will this affect the investment climate?

I’m very optimistic on that act. I think it’ll be the most important legislative changes for this year that will attract FDI. And why do I say that? It’s because, in the past, if a company has one foreign share, that company is a foreign company.

Now they allow 35 percent foreign shareholding in a Myanmar company. So a lot of good Myanmar companies will end up selling part of the shares to foreign strategic players this year and beyond.

You have mentioned about the issues such as those concerning execution and lack of clarity. Apart from those issues, what are the top two or three other issues the government should urgently address within this new fiscal year?

They cannot do everything at once but one thing that I don’t agree with is heavily taxing the system. We’re coming up with a lot of new taxes today and taxes, by definition, hold back capital that could be invested in the system.

It may be wiser to have a more open taxation system in the beginning: let the economy grow and then tax the system. If people are making money, they will be willing to pay taxes. If the pie is not getting bigger, and you take away part of the pie, then I think it’d be difficult for everybody.

Are there any big plans for the American Chamber?

We have around 170 member companies today … and we have been more active since the US sanctions were lifted late last year. We are going to have more active dialogues with the government. We have done so with the Union government and now we are planning more dialogues with the regional governments. We are planning a trip to Mandalay in late May to meet with the regional government and local businesses in Mandalay and Sagaing area.

The American Chamber’s business delegation to Nay Pyi Taw last year was very successful. We brought leading executives from 30 companies and met 12 ministries … and we also had a dialogue with Yangon Chief Minister U Phyo Min Thein so we want to replicate that in major cities.