British expertise can support direct investment, including capital investment, technology through exports and technology transfer to make Myanmar an economic power house

10 พฤษภาคม 2561

Myanmar should tap into British expertise and experience to leapfrog its capital markets, schools and regulatory frameworks, while no financial sector in the world is more relevant to Myanmar’s development than London’s.

Given the mounting political difficulties, only with sufficient foreign investment can the country move the economy towards revival and rebirth against all the odds. In this regard, the backing of UK businesses and transfer of skills and knowledge are essential and imperative. 

The UK’s Department for International Trade organised an outward mission to the UK in March, led by U Kyaw Myo, deputy transport and communications minister. The delegation included senior officials and 27 private sector representatives. The visit provided a platform for stakeholders and investors from the two countries to explore commercial opportunities.

Subsequently, The Myanmar Times interviewed senior officials from the Directorate of Investment and Company Administration (DICA), Myanmar Trade Promotion Organisation, British Department for International Trade as well as experts on the current challenges and priorities for UK-Myanmar economic relations.

“The UK can provide support in all four sectors by providing direct investment including capital investment, expertise and technology through exports as well technology transfer.” - Douglas Barnes, UK Department for International Trade

British expertise in capital markets

U Thura Ko Ko, founding partner of YGA Capital, argued that British expertise, as a leader in services, is exactly what Myanmar needs.

The UK, “being a leader in the overall capital markets development in Europe and liberalising the capital markets back in the 1980s”, has a lot to offer the country.

“Britain is also a leader in privatisation, setting the framework of public utilities”, starting off in Europe and beyond, he went on. The Philippines, for example, kicked off its privatisation framework pretty much in the same line as the British model.

There is a lot of technical know-how and experience to capitalise on, such as establishing independent watchdogs, privatising state-owned enterprises and airports. For instance, British Rail underwent privatisation, a process which began in 1994 and concluded by 1997.

“[For] a lot of models and frameworks, Myanmar can almost take off the shelf. That kind of expertise and advisory services can well play an important role in the country’s economic reforms,” he remarked.

While there is clearly a huge demand for investments, there is in fact “a significant amount of capital which is equally interested in being deployed in Myanmar” - not just foreign or regional capital, but also local capital. There’s a lot of stored wealth in the country.

The challenge is how to channel these capital and stored wealth to where they are needed. The Central Bank of Myanmar has begun to establish an early stage of bond market, sovereign bond, and might set up corporate bonds in the future, U Thura Ko Ko explained.

To develop a strong capital market requires “a fair amount of time” and prerequisites: good regulators, central bank with capacity, a strong stock exchange commission, transparent private sector and sound legal and accounting practices.

“All of that ecosystem needs to develop. Fundamentally, the private sector needs to find a way to be more transparent in its results ... for ordinary investors to understand both the upside and the risks,” he went on.

“People are afraid to talk about risks, whether they are risks a company faces, a country faces or a market faces. People are nervous about sharing one’s risks and explaining one’s risks.” But not sharing risks puts investors off. It is only when investors have the information about the risks can they price it and make a judgement.

Four major sectors prioritised

Douglas Barnes, DIT director in Myanmar, told The Myanmar Times that his department prioritises four sectors -  education, energy, financial services and infrastructure.

“We feel that with the right legal and regulatory frameworks in place in each sector, in Myanmar, the sectors would help to drive the country's GDP growth. The UK can provide support in all four sectors by providing direct investment including capital investment, expertise and technology through exports as well technology transfer.”

The UK government is willing to share its knowledge and experience to help Myanmar develop the policy, legal and regulatory frameworks in those sectors through G-to-G dialogue and capacity building, he added.

For example, the UK are currently targeting a number of commercial opportunities predominantly in the infrastructure sector. This involves investment as well as the acquisition of technologies, goods and services. “Their success will lead to hundreds of millions of pounds investment into the Myanmar economy by UK businesses,” Mr Barnes said.

But there are other sectors, notably healthcare and automotive, which are also attracting British businesses. Investors are “keeping a close eye on the continued economic reform” Nay Pyi Taw is carrying, especially the soon-to-be implemented Companies Law and liberalisation of the education market.

“Once these Laws are implemented, you will see a greater number of UK investors and businesses in general playing a more proactive role within the bilateral trade and investment relationship between the UK and Myanmar.”

Apart from having clear policies, less red tape as well as sound legal and regulatory frameworks, it is important that the market presents foreign investors with a level-playing field to do business vis-a-vis domestic firms.

“In short, no financial sector is more relevant to Myanmar's desire to reintegrate into the truly global economy than that of London.” - Sean Turnell, State Counsellor’s economic adviser

Bilateral trade and DFID support

U Aung Soe, director general of Myanmar Trade Promotion Organisation (MyanTrade), stressed that long-standing UK-Myanmar economic ties are important for the country and bilateral trade have scaled up over the years.

“The total [bilateral] trade volume reached US$360.77 million in 2017-18, with the export of garments, agricultural products and import of machinery, pharmaceuticals, construction materials and so on.

“The UK is an important market for Myanmar in Europe,” he stated.

U Aung Soe said the government valued London's efforts to support product development in textile and garment sectors, promote private sector development and other DFID-funded reform programmes.

“We have a good relationship with DIT in Myanmar to promote trade and investment, in cooperation with department and association concerned,” the director general continued.

In addition, MyanTrade has undertaken export and investment promotion initiatives in different states and regions with the support of UK-funded DaNa Facility. This development assistance ensures that economic opportunities are shared across the country beyond major cities, so those living in remote and rural areas can benefit from growing prosperity.

It’s all about finances

For Sean Turnell, who advises the National League for Democracy-led government on economic policies, Myanmar’s undeveloped financial services sector can tap into British expertise to fulfill the increasing demand in the sector. London’s powerhouse financial services are crucial for Myanmar to leapfrog its banks, monetary systems and institutions.

“Britain is by a large margin home to the most sophisticated, robust and experienced financial sector in the world. This is especially the case for trade instruments, and all the many varieties of finance of use for developing and transition economies such as Myanmar. Likewise, the UK is the leading global force in the great ancillary professions, law, accounting, fintech, and so on,” he noted.

London's financial markets, in addition to its banks, are the great clearinghouses for government debt. Its insurance markets underwrite the financial management of global risk.

“In short, no financial sector is more relevant to Myanmar's desire to reintegrate into the truly global economy than that of London,” the adviser explained.

Dr Turnell also defended the government’s record, saying that the administration has been less than effective at communicating its reforms, but it is not true that they are lacking in substance.

“Right now Myanmar's banking sector is being transformed, and regulations designed to turn the country's banks into the institutions the country needs to aggregate, allocate, and properly price risk and capital are being vigorously implemented. Likewise the state-owned banks are about to be restructured, mobile financial services are growing at near exponential rates, and the net of financial inclusion is expanding rapidly.”

“Yes, Myanmar continues to have problems on the politics side, [but] we also need a great deal of support and engagement to move the economic agenda forward.” - U Thura Ko Ko, YGA Capital

Politics and crises

Many foreign investors have been taken aback by the political events in the country, not least the humanitarian crisis in northern Rakhine. The Myanmar Times asked Dr Turnell if he has a message to those investors concerned.

“Of course, political issues in Myanmar are challenging, as they have always been, but now people know about them. This has an effect on sentiment, although business is usually [for better or worse] more robust in the face of this than commonly supposed.

“Myanmar remains a place of great opportunity - both in terms of economic returns and, in my judgement, as a place in which good economic reforms will surely demonstrate their utility in other ways, including the political,” the economist replied via email.

U Aung Naing Oo, director general of DICA, emphasised that the Rakhine crisis only happened in one part of the country.

“Even if you go to Rakhine State, the area is peaceful. The area is willing to accept more investments into the region,” but he acknowledged that the reputational risks are strongly felt among foreign investors.

“Whenever we went abroad in the last 3-4 years, a lot of members of the audience asked me about the rules and regulations, investment law and opportunities in the country. But nowadays whenever I go abroad, they ask me questions about Rakhine.”

The director general insisted that the government is “trying its best” to work with the international community and domestic communities in order to resolve the political problems. In addition, conflicts, such as those between the Kachin Independence Army (KIA) and the Tatmadaw, are geographically limited and do not affect the rest of the country.

Looking ahead, U Aung Naing Oo is now encouraging foreign investments into remote regions and the government is speeding up infrastructure development to make those areas more accessible for investments.

Similarly, for U Thura Ko Ko, the reputation of Myanmar as an investment destination “has taken a knock for sure”. It remains important to “acknowledge the concerns of the international community”.

Yet, despite the politics and crises, “the long-term trajectory of Myanmar remains fairly solid.”

“Those who are genuinely interested in Myanmar are of course concerned about human rights and politics. But equally they are also aware of the bigger picture.”

He said the debates in the UK business mission were mostly economic, focusing on policies, barriers and progress in reforms.

“Yes, Myanmar continues to have problems on the politics side, [but] we also need a great deal of support and engagement to move the economic agenda forward. These two are interlinked – you cannot solve long-term political issues without a thriving economy,” he observed.

 

 

(The Myanmar Times: https://www.mmtimes.com/news/british-expertise-key-making-myanmar-economic-powerhouse.html )