The exclusive interview with U Aung Htoo, Deputy Minister of Commerce of the reform programme undertaken by the government and the improvements of starting up business in Myanmar

15 Oct 2019

Deputy commerce minister U Aung Htoo spoke to The Myanmar Times in Nay Pyi Taw about the National League for Democracy-led administration’s latest efforts to improve the country’s business environment.

U Aung Htoo is the senior official in charge of improving Myanmar’s ease of doing business ranking. In an extensive interview, he explained the reform programme undertaken by the government, such as improvements in starting up a business, access to electricity and credit, obtaining construction permits, and dealing with insolvency.

Myanmar was ranked 171st among 190 countries by the World Bank’s Ease of Doing Business Ranking 2019. The country aims to be among the top 100 countries by 2020-21 and among the top 40 by 2035-36.

“The vice president [U Myint Swe] made a commitment that during this five year term, the ranking of Myanmar will be improved from 177 [in 2014] to under 100. This is a big job,” he told this paper.

“Improving the Ease of Doing Business Ranking is like a race. Other countries are also trying to improve. If you can run faster, you can be ranked higher,” he added. To that end, Yangon City recently introduced a new digitalised construction permit scheme in an effort to improve the efficiency. The pilot project involves an automated, paper-free system which aims to reduce the processing time from an average of 95 days to 49 for about 90 percent of the 4000 construction permits submitted annually.

The minister said the new Companies Law will improve protection of minority investors and is hopeful that the draft Insolvency Law could be passed this year.

The government is currently drafting the Secured Transaction Law and setting up a credit bureau, he added.

Another significant change will be the government’s plans to establish one-stop service centres for foreign investors in states and regions beyond Yangon and Mandalay.

“When the next [ease of doing business] result comes out on October 24, we are hoping to improve the ranking a bit… We are committed from the highest level,” U Aung Htoo said.

Below is an excerpt of the interview with the deputy minister.

The Myanmar government has pledged to improve the ease of doing business in Myanmar. What are the major initiatives that the commerce ministry or your team is undertaking?

We are improving the ease of doing business ranking, started by the World Bank in 2004. Myanmar joined this endeavour in 2014 under the former government. Vice President U Myint Swe is in charge of the private sector development committee. The committee had five pillars - I was responsible for trade and investment promotion sub-committee. One of our tasks was to oversee the ease of doing business. 

In 2016, the Vice President took the initiative to continue our commitment to improve Myanmar’s ease of doing business ranking. We have been under the military government, and then the quasi-civilian government. We are changing it into a market economy, which involves transformation from the informal to the formal economy, and a command economy into the market-orientated system.

The Ministry of Commerce [MOC] promotes trade, but if you look at the name - in Myanmar language - it can literally be translated into “the Ministry of Economics and Commerce.” But, it is not directly related to economics and closer to business and commerce.

We have two tasks. One is to promote trade, domestic and international, and the other one is to realise the fully functioning market-oriented economy based on market forces. Our economy was not like this before and we have to transform it. We have to improve the business environment of a market-oriented economy. 

In the past, there were cases of corruption, illicit trade, and we have a lot of red tape in government services and procedures. We also had illegal levy: for example, if you go to the border area you had to pay an illegal fee, which includes the creatively named “peace tax” or regional development tax to the armed groups along Muse-Mandalay Road and Kayin State. 

In addition, government officials had ‘rent seeking behaviours’ as they had the authority and would like to transform that into monetary gain. In order to transform our economy to a truly market-oriented one, there must be rule of law and we must eliminate corruption and illegal levies, and reduce red tape.

The World Bank’s ease of doing business ranking involves these elements such as reducing red tape. The aim is to reduce the time and cost for government services. For example, it used to take 95 days to get a construction permit, now the duration has halved. When you register your company, it used to cost a lot - half a million kyats and it took many days to start. In order to improve government services, we need to do focus on the ease of doing business. If a country does not improve the ranking, few investors will come. 

The Vice President made a commitment that during this five year term, the ranking of Myanmar will be improved from 177 to under 100. This is a big job. When we look to our neighbouring countries such as Indonesia, they were above 100th but then jumped to 70th.

It is possible for us to improve our ranking as we are receiving a lot of assistance and advice from the World Bank and International Finance Corporation [IFC] in improving ease of doing business. They said that in addition to major medium term reforms it’s important to reap the low-hanging fruit. You can improve small things and then a big difference can be made. 

The Vice President said we have to improve our ranking to be within the top 100. He asked us to make reforms to reach the goal. All the supporting units should be or are headed by a director-general level member instead of low-level officials. 

There are ten supporting units [Indicator Support Groups], one for each Doing Business indicator. In addition, I lead the supporting teams.

Our unit is holding regular meetings with IFC fortnightly with the aim of reassessing our works and planning the future steps. We realised that we are very weak in public awareness about the ease of doing business index. Improvements must be made here, as only a few people can understand its workings. 

Firstly, we have tasked the units to map out the steps of each government service such as the requirements in applying for a construction permit. These procedures must be transparent and uploaded for the public on the website [hyperlink: http://www.myanmardoingbusiness.org]. Our ranking did not improve initially - we’re at 171. 

We have made some improvements last year in areas such as the company administration. Registration for firms has been reduced from K1 million to half a million and now to K150,000. In addition, we’ve digitalised the process and you can register your company online with Myanmar Companies Onlineto eliminate waiting time. We are also trying to use the unique identification number for companies. All the companies will have a unique number. That number will be used for paying tax, social security, and applying for export/import and other licences. If you have to get a construction permit for the businesses, we have reduced the time 95 days to 35 days. We have set up recently at the City Hall a one-stop service centre. 

There are still some weaknesses in our infrastructure, mainly access to electricity. For normal households getting electricity is easy but for a business entity, you have to go through a lot of procedures. The related ministries have been making improvements to such matters, including the Yangon City Electricity Supply Corporation, which has started to announce the frequency and duration of the power cuts, and provide information to the public. 

Another weakness we’re facing is matters related to insolvency, we don’t have a good insolvency law and we need to draft one as soon as possible. As far as I’m aware, the insolvency bill is currently at the parliament and I hope it can be passed within this year. 

The fourth difficulty we’re experiencing is obtaining credit. As we do not have a credit bureau and credit record secure transaction systems, we are preparing for the Secured Transaction Law, for the credit bureau and are working with Singaporean companies to cooperate with the bureau. We’re trying to improve our government services which in turn will improve the ranking.

The penultimate goal for us is to use the e-government platform, as people are afraid to go to the office due to bureaucracy. We are trying to improve all the indicators and last year we have made good progress.

When the next result comes out on October 24, we are hoping to improve the ranking a bit. Ease of doing business is very important to our economy, especially in attracting foreign investments, so we need to make improvements. We are commitment from the highest level. 

After this, our next target would be the business sector. The reforms of the government must be felt by the private sector. The World Bank has sent a questionnaire to the private sector, which will be answered by the accounting office and legal office of the companies. One of the things we noticed is that some of the businesses are not being operated by themselves. They have an agent or law firm, or accountancy firm. Sometimes the information is not getting to the private sector. For example, a survey we conducted on getting import licence will cost around US$200 but we never charge that amount of money. However, companies who take the survey with a middleman or an agent, will have to pay the agent a fee of $200 to get an import licence. 

We would like to stress again that public awareness is important and has caused many headaches for us. We have to draw up a communication plan on what we will do. For more people to be aware of our works, we have conducted TV interview with MRTV [state-owned media] and published ease of doing business in the newspaper. In the future, we will publish a book on how we try to improve our ease of doing business index. These are the steps we’re taking to make improvements as well as [to secure] some of our achievements. We will see how we will fare on October 24. 

Looking back in the past three year under the current government, which reform programmes do you think are the biggest change in terms of ease of doing business?

The most improvement we’ve made is in starting up a business. The registration fee has been halved from K500,000 to K150,000. The duration has now been shortened to take only two days.

Construction permits are also another difficult matter, as it requires several consents and documentations. Now the government is experimenting a pilot project at the Yangon City Development Committee, which could in the future transformed into online registration, which can be done at home with the need to pay a visit to the Yangon City Hall.

Getting electricity is also much easier now and information has been more transparent. The Yangon City Electricity Supply Corporation has started to announce the frequency and duration of the power cuts and provide information to the public.

For property, the land record department is carrying out improvement by digitalising its services.

We are also trying to pass the Secured Transaction Law in parliament and the Ministry of Planning and Finance is drafting it with assistance from IFC.

Protecting minority investors is also an issue we are focusing and in the new company law there are provisions enforcing this.

Tax payment is a system we’re trying to improve and we are now using the self declaration system.

Another thing is the insolvency law. The IFC is asking us to pass this law and we are working on it. I hope that we can adopt the law within this year. 

Improving the Ease of Doing Business Ranking is like a race. Other countries are also trying to improve. If you can run faster, you can be ranked higher. As a focal for improving the ranking, our commerce ministry needs to set up a permanent secretariat to drive the change. We would like to create an institution, which aims to improve the ranking.

‘When the next [ease of doing business] result comes out on October 24, we are hoping to improve the ranking a bit… We are committed from the highest level.’ - U Aung Htoo, Deputy Minister

The government recently said it has plans to set up an arbitration body to deal with business disputes and foreign investments. How is the progress and who will be in charge of the body?

The Arbitration Commission has to be accredited by the Union Supreme Court. They had already promulgated an arbitration law. Anybody who would like to set up an arbitration centre can do so as the authority is with the Supreme Court. The first arbitration centre is established at the Union of Myanmar Federation of Chambers of Commerce and Industry [in August].

Our ministry would like to encourage the establishment of arbitration centres, and we are working with lawyers with international arbitration experience in Hong Kong and Singapore to set up such a centre.

If private sector lawyers would like to establish an arbitration centre, the MOC will provide a place. 

Recent surveys suggest that the business community remains concerned about the lack of transparency in the regulatory environment, while a Myanmar Times investigation reveals some problems in the enforcement of the Myanmar Investment Law. How does the government plan to address these concerns?

In the past there were only two bodies – the Directorate of Investment and Company Administration [DICA] and Myanmar Investment Commission [MIC] – but they are not for solving problems.  If there is a problem, you have to go to the Private Sector Development Committee headed by the Vice President [U Myint Swe].

If we receive complaints, then the Trade and Investment Promotion Working Committee have to solve these. However, this is mostly focused on domestic companies. As many foreign companies are here, we have to think of how to handle issues raised by them. We need to think about a platform for them. 

We have set up an informal group last month with foreign chambers. At these meetings three ministers-commerce, MOPF, and investment and foreign economic relations- will meet regularly every three months. The chambers can present their problems and difficulties, which will be channelled to the Vice President. The Ministry of Investment and Foreign Economic Relations is also going into investment promotion and investment protection. They will sign about 11 foreign investment protection agreements. Foreign investment promotion committee should work aggressively in the future. We will try to aggressively address foreign investment and at the same time protect it as well.

Businesses say the proposed single-window investment system has the potential to significantly improve the business environment, while critics highlight the risks in relation to the implementation. When do you expect the system to go into operation?

We are trying to replicate One-Stop Service Centre [OSSC] from Thilawa Special Economic Zone to other areas. The next step will be at DICA, OSS for foreign investment. We are trying to energise this service in DICA as it’s not that active right now. We will replicate not just in Yangon or Mandalay but also in other regions and states. 

In the past, there were no foreign investment offices in the states and regions but now we have director-level offices, which are given some degree of autonomy. These offices can give permission right away to investment proposals of up to $5 million. For proposals involving more than that amount, they will have to go through the MIC.

The interview has been edited for length and clarity.

 

(The Myanmar Times: https://www.mmtimes.com/news/we-have-made-good-progress-minister-points-improvements-business.html )