Mon 11 Jun 2012
Filed under: Business / Trade
Singapore—Myanmar wants to privatize its state-owned enterprises as much as possible to create jobs, but some control mechanisms may be needed to protect local residents, an economic adviser to the country’s president said.Winston Set Aung also said in an interview Friday that the government might impose conditions on foreign investment in some strategic sectors, such as power and energy. But it is aiming to make those policies as transparent and predictable as possible, and they wouldn’t apply to the average foreign manufacturer, he said.
He added that Myanmar’s authorities were working very closely with the International Monetary Fund and others to prepare it for an expected influx of capital as the country opens up. A currency-intervention mechanism is one policy lever being considered, dependent on the size of its reserves being adequate, he said.
Speaking earlier in the day at a forum in Singapore, Mr. Set Aung noted that Myanmar’s industry minister had said in a speech that in the very near future there would be no state-owned enterprises in the country.
Myanmar’s SOEs have a reputation for being inefficient and corrupt, and analysts say that privatizing them should give the local economy a boost.
“The government really wants to get the private-sector involvement. Possibly even [if] 100% private-sector involvement is there, the government is going to be happy. But there are some sectors or industries that the government has to be a bit more cautious [about], especially related to public goods,” he said in the interview.
For example, a private company could charge unrealistically high fees to use roads it had constructed, he said. As such, some “constructive controls, especially for the economy and for the people,” may be necessary.
Mr. Set Aung added that the authorities had yet to identify which areas this would apply to, whether there would need to be a minimum degree of government ownership in such cases, and if so how much.
Companies around the world have been reassessing their business plans on Myanmar since the Southeast Asian nation undertook political and economic overhauls, leading to a rolling back of sanctions.
That should allow much-desired investment in the country. But at the same time, it raises the risk of potentially destabilizing capital flows, which could fuel inflation.
Mr. Set Aung said Myanmar and the IMF were very concerned about the issue.
“For the time being, we can’t actually say we are fully prepared, but we are working on this,” he said, expressing confidence that suitable solutions would be found.
He added that the opening up of the country should also see some existing flows with its neighbors being brought into formal channels, and, therefore, becoming more manageable.
Myanmar’s new foreign-investment law is due to be completed in July, although further adjustments are likely in future, given it hasn’t been amended in more than a decade, Mr. Set Aung said. He said it is on track to offer a longer corporate tax holiday and set a minimum percentage of local workers to be employed.
Anxiety has been expressed by businesspeople in Myanmar that they won’t have the firepower to compete with foreign companies.
Mr. Set Aung said the authorities shared those concerns, and they would come up with policies to help smaller companies develop. Those could range from the provision of credit to technical assistance, he said.
“We can’t control foreign investment anymore, because we want to open up, we want foreign investment, we want their financial capital, we want their technology,” he said, noting the move would ultimately benefit local businesses.
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