MSDP Invest Myanmar Summit

Myanmar 2.0 – Private Sector, the Engine of Economic Growth and Job Creation by U Min Ye Paing Hein, member of NECC

In August 2018, the Ministry of Planning and Finance published the Myanmar Sustainable Development Plan (2018-2030). The government’s master plan for the development of the country provides a framework for coordination and cooperation across all ministries, states and regions. In short, the MSDP recognises the role of the private sector as the primary engine of economic growth and job creation and it prioritises market-based solutions.

For investors, it is a useful guide to the government’s priorities and the opportunities that are likely to arise in the coming months and years.

The transcript of U Min Ye Paing Hein’s presentation follows.

Invest Myanmar Summit 2019

29 January 2019

 Myanmar Convention Centre 2, Nay Pyi Taw, Myanmar

Excellencies, esteemed participants of this Summit, I feel very privileged to be speaking at this Summit.

First, the sheer number of people who have registered for this Summit is a testament to the strength of our collective aspiration and hope for the economy. Second, the soul and spirit of the Summit, with its indomitable focus on the States and Regions of Myanmar, resonates deeply with the very fibre of the Myanmar Sustainable Development Plan, which I am honoured to be presenting to this very esteemed audience.

So one may ask, what is this Sustainable Development Plan (MSDP) that you speak of. To this, the textbook answer would be ‘It is an expression of our national development vision — a vision who would find global resonance in the Sustainable Development Agenda.’ In a way, the MSDP is Myanmar’s tailor-made answer to the globally pressing question of sustainable development.

As you can see from this picture, MSDP has three pillars, five goals, 28 strategies and 251 action plans, the architecture to which, I will revisit later.

So what is MSDP? It is a primary coordination advice for Myanmar to chart out our own national development path. We have a multitude of sectoral and Ministerial and sub-national plans, a body that is fragmented and disconnected. The MSDP will provide a framework for coordination and cooperation, so it is for the harmonious and coherent movement of plans under a single national strategy. At the same time, the implementation of the MSDP will require well-coordinat[ed] efforts between the world, the whole of government, private sector, civil society and development partners.

So when we roll the national development strategy that is MSDP, we thought about both internal and external coherence. For internal policy coherence, we looked to the 12-point economic policy of the government also to all the existing strategic documents that we can find at the sectoral level, ministerial level, and also sub-national levels.

We also learned from the past. We extracted lessons learned from other national strategic document including FESR, which is Framework for Economic and Social Reform Act, National Comprehensive Development Plan, etc. From the stockpile of over 40 national documents, we weaved together the fabric and framework of MSDP. Therefore, this document is simply an integration and distillation of existing plans and priorities.

Let me walk you through the exercise that we did to establish internal coherence. So for Goal Three:  Job creation and private sector-led growth, we looked into this list of documents from the Ministerial and Sectoral level.

So for Goal Three:  Job creation and private sector-led growth, we looked into Myanmar Agriculture Development Strategy, National Export Strategy, Myanmar Financial Inclusion Roadmap, Myanmar Industrial Policy, Private Sector Development Framework and Action Plan, National Strategy for Rural Roads and Access, SME Policy and Myanmar National Transport Master Plan. We closely reviewed and studied this document to construct this strategy phase under the Goal Three.

Similarly, we looked into the following list of master plans to construct the strategy phase for Goal Four: Human Resources and Social Development for A 21st Century Society. I won’t go into details and read out the entire list of the document but you can have a feel of the exercise that we did to reach that strategy space.

We have walked you through the exercise that we did to arrive at the strategy and action plan that you can now peruse the document that is in the MSDP. We have painstakingly combed through the existing documents to deliver and discover strategies for MSDP.

Once we establish the internal coherence, we look to establish the external coherence. For this exercise, we try to map our goals, strategy and action plan onto global and regional strategic documents. For example, we have worked very closely with the UN to systematically map the strategy onto global development agendas such as Sustainable Development Goals (SDGs). We also try to align MSDP with our regional commitment such as Greater Mekong Sub-region (GMS) Strategic Plan, and the action plan for ASEAN Economic Community. Now we need the extension of this document as it is very much a national product, meaning that it is a labour of love by a core drafting team that is mainly comprised of Myanmar nationals.

Please allow me to bring your attention to four cross-cutting themes in the MSDP. They are cross cutting because the design implementation of all initiatives under MSDP must be sensitive to these four dimensions.

First is Equity and Inclusion. This is to ensure that a greater number of populations, especially the marginalised population in lagging and remote regions in Myanmar can contribute to national prosperity and can also rightfully harvest the fruit of their contributions.

Second is the Sustainability in all its Forms. Recognising that our environment is a foundation from which our social, cultural and economic development shall be built and sustained for future generations to come. Therefore, it is important to mainstream an environment of consideration into design implementation of all initiative policies and projects under the MSDP.

Third element is the Conflict-Sensitivity. We have embarked on a journey towards peace and national reconciliation, therefore viewing economic development in the context of securing and maintaining peace and national reconciliation, and vice-versa. It is critical to bring conflict-sensitivity into the design and implementation of projects, especially in the area affected by conflict. Third is Democratic Principles. It is to recognise that being a democracy will bring economic dividends to the country. This is in the sense of development as a function of human freedom, and expansion of human choice.

So instead of walking through the entire architecture, line by line, I would like to focus my discussion to the reconstruction of MSDP vision of Myanmar’s economy embedded throughout the document. First, MSDP envisions an equitable and conflict-sensitive social and economic development throughout all states and region. It is because excess regional inequality can pose a challenge for peace and national reconciliation and inclusive economic growth. Therefore, we are systematically laying down [an] action plan for the strategic objective of peace and national reconciliation, including decentralisation and management of development activities, design and implementation of sub-national economic development plans, improvement of the scheme of intergovernment fiscal transfer, prioritisation of the flow of development assistance and investment into conflict-affected states and region.

Another one is promotion and prioritisation of inclusive growth and job creation in the conflict affected areas. We have another strategy to also help with the equalisation efforts, which is to introduce the revenue-sharing mechanism to support more equitable allocation of tax revenue across all States and Regions.

Another interesting pillar of interest for MSDP is infrastructure. MSDP envisions  infrastructure as a primary driving force in integrated domestic market, as well as integrating with the regional and international markets. According to the global infrastructure hubs, Myanmar has one of the lowest infrastructure stock and also highest investment gaps in the world, as our previous speaker has also spoken about this. Due to historical legacy, there is a need to remove physical barriers for integrating the domestic market from Rakhine in the West, Shan in the East, Kachin to the North, and Tanintharyi to the South.

With the focus on transport infrastructure, we can overcome constraints on mobility of labour for the goods and services economy. As such, we can decrease trade cost and inter-regional price gaps. As you can see from the tiny graph, on the right, you can see there is a huge price discretion in Emata Rice across the region and state. So, transport infrastructure might be able to reduce the gap between different Regions and States in the country.

Another one is to increase inter-regional and international trade. [The] third one is to achieve higher region economic growth and convergence in the economic growth rate of States and Regions across the country.

For that ambition, we have looked into identifying 4 relevant infrastructure-related strategies which will provide both momentum and velocity to achieve that objective.

That is Strategy 1.2.4: Strengthen social, economic and physical connectivity in lagging regions with growth and population hubs within Myanmar and regions beyond. Strategy 3.2.2: Enable stronger linkages between firms and markets, with a focus on rural areas. Strategy 3.6: Build a priority infrastructure base that facilitates sustainable growth and economic diversification. Under that, we have 11 strategic action plans with the focus on enhancing the role of the private sector in the provision of infrastructure. And Strategy 5.4: Provide affordable and reliable energy to populations and industries via an appropriate energy generation mix.

So, with a more inclusive and connected Myanmar we shall strengthen our connection to regional and global economy. For that, we have strategy 3.4: Further reform our trade sector and strengthen regional and international cooperation and linkages. It is an embodiment of our plan to strengthen international cooperation and linkages with the world. That will include simplification of trade and customs regulations and procedures, development of a comprehensive trade policy, and development and implementation of National Quality Infrastructure Roadmap. And Strategy 3.7.7, which is transition toward an inclusive digital economy, expanding connectivity and access to online services.

So once we identify the strategies and goals and plans, we need financing to achieve that goals and objectives. So now the important element of MSDP is optimisation of development and finance. That means we need to review and take advantage of all the other options available to Myanmar in financing our development needs. So these are the few sources of finance that we identified for MSDP. So we need to mobilise domestic public resource, develop and harness financial market for development, stimulate investment for both domestic and national, and establishing PPP mechanisms to systematically invite private sector financing, aligned with the flow of the official Development Assistance with the MSDP.

The first one: mobilising our domestic public revenue. As we all know, the Myanmar Tax Revenue currently amounts to approximately 8% of the GDP. This is the lowest in the ASEAN region. The former British Prime Minister William Gladstone once understood the significance of the tax revenue so we are trying to see the strategy that we can devise to increase the domestic revenuisation through a fair, efficient, transparent taxation system which includes administrative legal reforms, extensive usage of modern technology including electronic payment, and implementation of risk-based approach to tax administration. Another strategy is the Strategy 2.4: to strengthen public financial management to support stability and the efficient allocation of public resources.

So that is to increase overall budget transparency, enhance the capacity of national and sub-national public financial management, and encourage greater and more inclusive public participation in budgetary processes at all levels. These are not exhaustive. These are the few items that I selected just to give you the heuristics of the items that we have included in the MSDP.

So the same goes that finance industry is the stomach of the country, from which the other organs take their tone. MSDP encourages the formation of a vibrant and competitive financial sector in Myanmar, which is a strong and full stomach, for the country as its heart. In which a sector can accumulate and allocate funds to the most profitable investment opportunity possible. So these are the few strategies that we have identified for us to mobilise resources for the financial markets — allow authorised foreign banks to provide both kyat and foreign currency loans to domestic borrowers, and to engage in interbank lending with local institutions.

Another one is the financial inclusion agenda –  is to increase broad-based access to financial services and strengthen the financial system overall. To signal our sincerity in promoting the Rural Private Investment in National Development, MSDP prioritises the need to review and revise convoluted and protracted procedures for investment. H.E. U Thaung Tun and U Set Aung are the front and centre as our effort to rapidly revise and streamline SOP to make Myanmar even more attractive for foreign investment. So Strategy 3.4.5: develop a streamline efficient SOP for all services that investors can acquire from private sector entity and other strategy – Strategy 3.6.2: Promote PPP mechanisms which facilitate the development of commercially viable infrastructure projects through greater public-private sector collaboration. Our desire to move the country closer to becoming one of the most investor-friendly nation in ASEAN in the future.

Myanmar has been enjoying a greater influx of ODA where the net ODA received reaching USD $1.4542 billion in 2017. For that, Myanmar has developed a comprehensive policy guidelines known as Myanmar Development Assistance Policy to ensure development assistance is used as efficiently, effectively, accountably and transparently for the benefit of our people. MSDP, as an overarching strategic document also enabled the alignment of ODA inflow into the strategic priorities and projects that we have identified. The architecture of eight coordination and underpinned by 10 sector coordination groups as you can see in the picture offer a mechanism for us to closely align the flow of ODA with the strategy of priorities specified by the MSDP.

As the Goal One enshrines our national premium and priority for political stability, MSDP’s go-to is an articulation of our endeavour to maintain and manage macro economic stability. The government should have continue to exercise fiscal discipline with great prudence to maintain the fiscal deficit to no more than a certain percentage of the GDP. The high volatility of exchange rate is detrimental to growth of national export and FDI and overall economic growth. The government is determined to devise a strategy to effectively manage the volatile exchange rate, although with the view to maintain the competitiveness of the exchange rate as well. Another element in the MSDP economic mobilisation stabilisation strategy is price stability, which the country managed to enjoy for the last couple of years.

So one of the most important analytical constructs in the MSDP is the focus on structural transformation of the economy. As you can see from the structure of the economic output GDP, it has increased from USD $49.5 billion in 2010 to USD $69.3 billion in 2017 with annual robust growth rates. The agriculture sector, as we can see from the graph, has declined steeply from 2017 from 46.69% to 23.3% between 2005 and 2017 which is consisting of the global experience in economic growth and sectoral decomposition. However, the labour force participating in the agriculture has only declined from 57% to 50% in the same period, although the greater share of the economy labour force is working in the manufacturing and service sector.

So the structure of the economy, as illustrated by the share of labour by sector, is largely resistant to change despite robust economic growth. Therefore, MSDP is focusing on job creation in industries and services, especially in the forms of small and medium enterprises in the formation of creative industries. Therefore, MSDP is geared towards creating a momentum for the structural transformation of the economy.

Lastly, I would like to stress the primacy of the competitive market economy in the MSDP. With the recognition of  the private sector as the primary engine of economic growth and job creation, strategies in MSDP are synchronised and synergised to promote multi-based solutions for development to the greatest possible extent.

For Strategy 2.5: Enhancing the efficiency and competitiveness of State Economic Enterprises we have laid down many action plans to ensure that our state enterprises are competitive and efficient; for example, corporatisation, commercialisation, restructuring, privatisation of SEE to operate in competitive markets. And now the action plan is to prescribe and facilitate policy, regulatory, and broader good government action,  enabl[ing] greater investment and private sector participation in energy generation and provision. These are two examples that we have identified just to show the importance of the private sector and provision of public services as well.

There are two strategies also to this effect, which is to enable an environment in which standardised and transparent competitive international tendering for national significant projects is the norm, including but not limited to the enactment of procurement law. Another strategy is to develop relevant legal and regulatory framework in support of innovation, creativity and the spirit of entrepreneurship.

We would like to say that MSDP is a living document and a strategy with a heartbeat. That is to say that the progress towards MSDP completion will undergo a thorough review every two years from the date of issuance. First, we will measure the progress made in accordance with the established M&E framework then to recommend new strategies and action plans to be excluded, revised or to be removed.

As a coherent and consistent government, one true evaluation framework is critical in implementation of MSDP in terms of tracking, measuring its effectiveness, efficiency, sustainability and impact. MSDP’s many frameworks will be developed with a focus on a comprehensive results framework.

Central statistical organisations has made a leap in the work of the national indicative framework with the support of the UN. 264 indicators has been proposed by the 12 Task Teams, with the average of 11.5 indicators per MSDP strategy. 70 percent of the indicators proposed by the 12 Task Teams are national indicators — that is our own indigenous indicators — and 30%, which comprise of 80-something SDG indicators are also in the list.

So Development Project Bank itself is a realisation of one of the action plans under the MSDP, which is strategy 3.6.3: To develop a Project Bank of Public Investment Programs (PIPs). The purpose of the Project Bank is to strengthen the development of projects that will enable us to effectively implement the MSDP. That requires two elements by publishing government plans for the priority projects needed to achieve national development objectives in a predictable and transparent way; and second, by developing procedures to ensure that Projects are well coordinated and facilitated among the Ministry of Planning and Finance and the Implementation Government Agencies.

Now, it is time for us to move from strategy to action. For our journey forward, I would like us to find inspiration in this quote. “There are decades where nothing happens, and there are weeks where decades happen. Let’s make decades happen in the next few months.”

And that was going to my ending but like any good movies, we’d like to present an alternative ending. Alternative, yet funkier ending. So here, I would like to also recite a line from U.S. Senator Ron Paul:  “If you ever can bring revolution through changes, two things will be required. Young people would have to be involved and you would need music.”

So on this note, I would like to defer the floor to H.E. U Set Aung. Thank you.

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