Fri 29 Jul 2011
Filed under: Business / Trade
Men walk past containers stacked at Yangon Port earlier this month. Business leaders are calling for a further reduction in export tax for value-added products.
BUSINESS leaders have described the new government’s progress on economic reform as “sluggish” but say they remain hopeful that President U Thein Sein can turn the situation around, particularly on taxation.
This week will mark four months since the president delivered his inaugural speech on March 30, shortly after the State Peace and Development Council transferred power to a civilian government.
The proposals U Thein Sein outlined in his address impressed many, but while some positive steps have been taken, business leaders say they are looking for an “acceleration” of reform.
U Myat Thin Aung, chairman of the Hlaing Tharyar Industrial Zone Management Committee, said the country was moving forwards, albeit at a slow pace.
The government had made three major policy changes that have garnered much attention in business circles, he said. In recent months the government has made pensions uniform, reduced export tax from 10 percent to 7pc and started issuing import and export licences twice a week, rather than bi-monthly.
“We appreciate that the new government has done something for the business sector already. Raising pensions was the best news – it was a kind of cash injection to the public at a time when people are struggling,” he said.
The business community was looking forward to further progress on tax reform in particular, he said.
In the first week of July, officials from the Internal Revenue Department invited members of the Union of Myanmar Federation of Chambers of Commerce and Industry and other businessmen to give suggestions on how the tax system should be adjusted.
“To modernise the tax system and other regulations … we met with government officials and told them what we want to see changed and how this would fit in with the country’s new policies,” he said.
He said export taxes should be removed from labour-intensive industries to support job creation.
“In my experience, other countries usually only collect import tax, not export tax. We want the government to tax exports of raw materials, such as unworked teak and jade, but remove export taxes on value-added products, like some foods, clothing and other items,” he said. “The basic point of a sound economic policy is to prioritise new job opportunities for ordinary people, especially in the industrial and agriculture sectors.”
U Ko Ko Htwe, chairman of Taw Win Family Construction, said while the president’s speech was “positive” and had touched on many important issues, implementation of policy changes had proven difficult.
“We believe that the president can implement what he said in order to develop our country. I would say that in the first 100 days we have seen some positive movement but the speed is sluggish,” U Ko Ko Htway said.
He said it was important the government consulted widely with experts from the relevant sectors and developed a “master plan” for implementation, he said.
“They should seek out different ideas and take those suggestions. It’s important that we speed up the forward movement in a way that is transparent and fair,” he said. “To do this the most important thing is having a master plan,” he said.
However, economists were divided over whether progress had been made to date.
U Hla Maung, a retired professor from the Yangon Institute of Economics, told The Yangon Times last week that there had been no obvious change but U Khin Maung Nyo, editor-in-chief of World Economic Journal, said the government seemed to be paying more attention to the public mood.
“What I’ve noticed is that the government is trying to listen to the voices of the public moreso than the former one,” he said.
He added that tax reform was an important issue. “The tax system needs to become clearer, simpler and easier.”
One palm oil trader from Lanmadaw township said he expected change to come gradually.
“How can we change things overnight that have been our habits for many years?” said the dealer, who has been trading palm oil and beans and pulses for about 10 years.
“The upper level gave instructions to make fast changes but it did not happen smoothly because the lower level sticks to the old ways. Although the government has committed itself to removing [trade] barriers, nobody is putting its policies into practice properly. Lower-level staff sometimes create problems for traders, such as refusing to issue a permit for seemingly no reason.
“Only if the policy is formulated correctly can we move forward at high speed,” he added.
While he welcomed the tax cut for exporters, he said not everyone would feel the positive effects immediately.
“That tax reduction is positive for exporters but because it is not yet harvest time for beans and pulses the farmers won’t enjoy the benefits yet. They will have to wait until next season.”
Agriculture expert U Tin Htut Oo, a former director general of Ministry of Agriculture and Irrigation, cautioned that it would take time for proposed agriculture reforms – aimed at alleviating rural poverty – to bear fruit.
He said implementing new agriculture policies would require significant “restructuring” in both the public and private sector.
“Organisations in the agriculture industry will have to change so they can go down this route … work patterns from the former system have to be changed and restructured according to the market economy,” he said.
He said a holistic approach to the agriculture sector was needed and simply aiming to increase yields would not be enough.
“Instead of looking at each individual tree, we need to start taking a bird’s eye view of the forest as a whole.” – Additional reporting by Ko Ko Gyi