U Set Aung Invest Myanmar Summit 2019

The Myanmar Sustainable Development Plan and the Project Bank by H.E. U Set Aung, Deputy Minister of Planning and Finance

On Day Two of the Invest Myanmar Summit 2019, H.E. U Set Aung, Deputy Minister of Planning and Finance spoke about the Myanmar Sustainable Development Plan, the Project Bank, and how both are relevant to Myanmar’s private sector and business community.


Invest Myanmar Summit 2019

29 January 2019

 Myanmar Convention Centre 2, Nay Pyi Taw, Myanmar

Excellencies, distinguished guests, ladies and gentlemen.

This presentation is going to focus particularly on MSDP and the Project Bank, and how the MSDP and Project Bank are actually linked together, and how they are to be linked to other processes, and how the MSDP is going to be implemented, how the Project Bank is going to be implemented. And the most important thing is that how this is going to be relevant to the private sector.

Once the MSDP came out a few months ago, we’ve received a lot of questions from the private sector. Some of the questions are actually something to do with “[How] is this MSDP relevant to the private sector?”.  Some of the questions are like “We’ve got the kind of, the similar kind of policy documents [and] directions in the past and but however, their comprehensive implementation was not very visible. So how is this going to be different from the previous times? And how is it going to be effectively implemented?”

So these were the questions bombarded to us from the very beginning. And at the time when MSDP came out, all the international organisations, especially our development partners, had immediately recognised that this is the greatest achievements we have made and immediately they have started taking serious actions to get their work plans and policies, and also their action plans to be aligned with the MSDP in accordance with the Paris Declaration and Busan Principles.

But however, the private sector was not really aware of it. And these questions actually came to us because this is actually something unprecedented, and the private sector also seems to be quite skeptical how this MSDP can be implemented.

What I’d like to tell you is that the previous policy documents are also very good policy documents. But the only thing that is actually different is the previous documents did not actually have a very detailed implementation matrix. Without having a policy implementation matrix, comprehensive implementation is not possible. So all the implementations that different government agencies try to implement are never going to be comprehensive and they can be very ad-hoc. So that is why we try to make sure that this implementation mechanism and implementation matrix is actually developed and they are all embedded in the MSDP.

Now, what I am going to tell you is about the current situation, which is actually like the scenario in the recent past, and how this scenario is going to change in the future. So, under the current scenario, the government agencies normally came up with their own sectoral plans. So, they actually came up with sectoral plans and then the sectoral plans are particularly to be based upon, in identifying projects for which they ask for the government budget. So that’s a very usual budget re-process that most of ministries and the government agencies have to go through. So, at the time where the projects who are identified, they are actually supposed to be based upon the sectoral plans the Ministries have drafted.

But however, a majority percentage of the projects that have been identified are not found to be really relevant to the sectoral plans they have drafted by themselves. But some are relevant, but majority are found to be not very relevant. And when the sectoral plans actually came out, because these sectoral plans are normally drafted by different ministries, and different departments – that these sectoral plans in any other countries can become easily become silos.

So, what is really important is we need to have some kind of coordination between all these government agencies. This coordination cannot really be easily enforced or enhanced simply by coordination committees because these coordinations have to be enforced by the systems – the system being the strategic planning. This is the current system that the government agencies normally draft their own sectoral plans – they identify the projects based on the sectoral plans (that some are not), and then they ask for the government’s budget.

And there is another parallel exercise. The parallel exercise is that the government agencies, they try to identify the projects in collaboration with the development partners. So the development partners sometimes – not sometimes, most of the time – they don’t really know what are the strategies of different Ministries and different department agencies. So they have to go to different departments, go to different ministries, they have to talk to different officials and ask them questions about what is the strategy. So different departments, they have come up with their own strategy.

So, these strategies which are actually identified by different departments, by different officials, can be very important for that particular department but they might not be considered strategic at the national level. So that time, these projects that are identified by the government agencies with the development partners are also not very much even in line with the sectoral plans.

And at the same time, as a parallel exercise, the private companies are also coming up with different unsolicited proposals to develop some projects, and they are all submitted to different ministries and different departments. And they don’t really know what is actually the sectoral plans that each ministry has already drafted. We are talking about different parallel practices – different parallel processes, and they are found to be not very transparent. So we’ve got information transparency issues because most of the people don’t really know what are the projects that the government plan to develop with the government’s budget and most of the people don’t really know at all what is it that the development plan development partners are actually preparing the projects to be developed, funded, by the development assistance. And most of the private sectors don’t really know; they have come up with a lot of unsolicited proposals coming to the different ministries and different departments.

And there is a weak strategic direction because we don’t really know what actually is our strategy. It is not because the departments don’t really have their strategy – they do have their strategies. But we have to understand that the department-level strategy is not necessarily the strategy that should be adopted at the national level. So we need to have a comprehensive and coordinated strategic plan that all the departments and government agencies and ministries are supposedly aligned to.

And at the same time, they have different monitoring systems. We have different monitoring systems for the projects that are funded by the government’s budget, we have PAPRD – that is the department related to project appraisal. They are actually doing their own monitoring mechanisms, and at the same time, the ODA projects are also monitored in a different light with different mechanisms and we don’t really have any monitoring mechanisms for unsolicited projects. So how this situation is to be improved is really important and very strategic for the nation.

The Project Bank is actually the one-stop project information centre. It is all to be based upon the strategic action plans. And these strategic action plans are the action plans that have been identified by the MSDP (Myanmar Sustainable Development Plan). So, all the projects are actually to be identified based on the strategic plans that have been identified in the MSDP. And once they are included in the Project Bank, and we have to come up with different categorisations like the projects that are to be budget-financed, the projects that are to be ODA-financed, and projects that we seek private investment to develop. And then we are going to have standard monitoring and evaluation mechanisms.

When the private companies are coming up with their unsolicited proposals, they have different choices. If they like to do the project development by themselves, they can actually go through the other investment mechanisms. But if they’d like to do some PPP mechanisms in collaboration with the different government departments – if they’d like to get some kind of support from the government – they can be added in the Project Bank and after that, they are going to be categorised, depending on different sources or financing mechanisms, and then implementation mechanisms is going to be different depending on different financing sources. So that is why the MSDP is something to be based upon: for the implementation of the Project Bank, as well as development of the identification of projects, and implementation of each and every project.

Since Ko Min [U Min Ye Paing Hein] has already mentioned about the MSDP, I’m not going to touch a lot on MSDP. But MSDP is actually based upon five goals[i]. The first goal is particularly relating to peace and national reconciliations, so this is something to do with political stability. And the second goal is something to do with economic stability. And without political and economic stability, nothing is going to grow. And goal number three is much more directly related to the private sector because this is about job creation and the private sector development. And goal number four and goal number five are particularly relating to the social development and environmental protections.

So although it is actually termed as Myanmar’s Sustainable Development Plan, this is not a copy of the SDGs. You can actually find that these goals and many action plans identified under these goals are very country-specific. I can actually tell you that there are many action plans for instance, in Goal Number Two. Goal Number Two is particularly to strengthen our macro-economic environment, and particularly to strengthen our economic stability. And all the action plans identified under this Goal Two are not really relevant at all to the SDGs. So for each and every action plan, we have reference to very particular, specific SDG targets. But in Goal Number Two, all the action plans we have identified to strengthen our economic stability do not really have any reference to the SDG targets.

So what you can actually see is that all the action plans are very specific to Myanmar, since this is the National Development Plan. However, we do have some referencing, direct and indirect referencing to the SDGs at the global level. And it is actually, it has three pillars – the first pillar is Peace and Stability, the second pillar Prosperity and Partnership, and the third pillar is People and Planet. And it has got 28 strategies, and 251 action plans.

I’m coming back to the current situations. Each and every year, the ministries and the government departments, they have to prepare the books like this. A yellow book, and a blue one[ii]. The yellow book actually is the combination of all the sectoral plans. So we actually see what is the yellow book like – you can see the contents. You can see the contents, and the contents are actually categorised based on different Ministries. And each Ministry has to write something about their policies, and about the objective and about the action plans and for that particular year, what’s going to be the priority actions. So these are something that each and every Ministry have to write, on a yearly basis, and they are actually combined to become a yellow book. Since they are actually categorised based on different ministries, so they are actually based on different economic sectors. So this is considered as sectoral plans.

Then when we actually look at the blue one, the blue one also is [about] projects that each and every ministry will have to write and ask for the government’s budget. So in the blue one, most of the projects are not really relevant to the sectoral plans that they have drafted. So now, what the MSDP and Project Bank is going to do is to strengthen these coordinations and linkages.

We are going to have the first-phase implementation, and the second-phase implementation to follow. In a first-phase implementation what we are actually looking forward to having is that this yellow book is going to change. Each and every ministry, whenever they write something about their sectoral plans, their sectoral plans have to be in line with each and every action plan that have been identified in the MSDP. That is a first-phase implementation.

And in the second-phase implementation, the whole contents of the yellow book is going to change. The contents are not going to be based on different sectors or different ministries, the contents are going to be based on different action plans and how different ministries will have to coordinate in order to implement a single action plan at a line.

So, the first-phase implementation is we are asking all the ministries to develop their sectoral plans – still, it’s going to be a sectoral plan system but the sectoral plans have to be aligned to the strategic plan, the strategic planning. And after that, in the second phase, the whole sectoral plan concept is going to disappear and then the whole strategic planning practice is going to be applied.

And in the case of the blue book, you can actually see that in each and every ministry, they actually ask the government’s budget for the project identified, which are supposed to be based on their sectoral plans developed. And they actually categorised these projects into these two: the first one, the projects and under the projects, there are like 2 sub-categories – existing projects, and the new projects. They identify all the existing projects and the new projects and ask for the budget. And the second category is actually asking budget for office equipment, furniture, and vehicles. And how we are going to change this one , for the time being,is to come up with one additional category which is actually called ‘Strategic Projects’. So, they have to identify the strategic projects and then they have to include them in the project bank. Then only that particular project is going to be entitled to be included in this particular category, and they ask for the government’s budget.

So, we can actually monitor which ministry is focusing on the strategic projects by how much percentage and which ministry is not actually focusing enough. It’s the kind of monitoring mechanism that can actually be conducted at the same time. So, this mechanism is going to enhance the coordination between the government agencies, and it’s going to be transparent, and predictable policy directions are actually developed.

As I mentioned, very specific implementation matrix is already embedded in the MSDP, and the compilation of all the national strategies and countries’ commitment that Ko Min has already mentioned in his presentation.

 It was drafted a while ago and after that we did consultation meetings – very comprehensive consultation had gone through. The consultation with all the Ministries and with development partners were actually conducted by the Ministry of Planning and Finance, consultations with Parliamentary and Parliamentary members and the private sector, civil society organisations at different States and Regions who are actually conducted in collaborations with the MDI, and the Renaissance Institute.

And after that, all the comments were collected, and the draft of the MSDP was actually revised. I still remember when I talked to all the development partners and they have come up with some comments, and at the time when we received the comments from all the development partners, all the comments have become more than 200 pages. So, we had to revise all these comments based on the comments from all different States’ and Regions’ headquarters and then it was revised and then it was published a while ago.

Then after the publications, this is now the time for implementation and the monitoring mechanism. How are we going to do this implementation? As I have already told you, the projects are to be identified. The ministries and the government agencies have always been very reactive in the past. So they always wait for unsolicited proposals, proposed by the private sector. But now we are changing this scenario and then all ministries have to be more proactive. They have to identify the projects and these projects are not only particularly with the single source of financing as a government’s budget; they have to identify the projects with multiple sources of financing. So, these projects have to be identified based on different screening processes. The first screening process is particularly to identify whether or not these projects are relevant to our strategic planning. And the second process is particularly to find out whether or not they are considered a priority.

And after these projects have gone through the two processes, especially the screening processes, and they have to go through the project categorisation process. Some of the projects that are commercially viable are considered to be PPP-able so they are actually to be categorised as the PPP projects. And some are to be categorised at the ODA, ODA-able or the development assistance funding is going to be needed for some projects so that all the development partners don’t necessarily have to go to different ministries, different departments asking about their strategies, asking about projects whatever they’d like to do and stuff like that. They can just come to the Project Bank, they can actually see all the project information that they can actually fund.

And we will also have different mechanisms – the Blended Finance Mechanisms also is going to be practised in order to develop these projects. Then after the project categorisations, they are to be included in the Project Bank. Once they are included, then according to the category we have already categorised, and the budget process, some of the budgets are actually transferred to the normal budget process, and some are actually transferred to the DACU (Development Assistance Coordination Unit), especially for the projects that are to be funded by the development assistance. Some of the PPP-able projects are to be transferred to the PPP Centre. Then once they are in the PPP Centre, other transactions going to follow like whether it’s going to be a Swiss Challenge, whether it’s going to be a bidding process…we are creating a transparent environment for these projects to be developed.

We have already developed more than 300 indicators – The impact indicators, outlook indicators, output indicators, outcome indicators, process indicators and input indicators; these indicators are actually developed in order to monitor and evaluate the process of the development of these projects.

Now I would like to ask a question to ourselves. How is this MSDP relevant to the private sector?

MSDP has got five goals with different action plans. And all of them seem to not be very relevant to the private sector. But actually they are either directly or indirectly relevant. So Goal Number Three is particularly to do with private sector development so it seems to be very relevant directly to the private sector. But how about other goals?

We have Goal One ensuring political stability, Goal Two ensuring economic stability and we can’t actually have the private sector grow without having the economic and political stability. So, they are also very relevant to the private sector. Then how about Goals Four and Five? Whenever we talk about development, we can’t actually concentrate our development only on economic development. We have to strike the right balance between economic development, social development and environmental protection in order to have that development to sustain. So, the Goal Number Four, something to do with social development, and goal number 5, something to do with environmental protection which are also very relevant for the private sector to grow sustainably.

Another question actually came up. How could the private sector predict what’s going to happen based on the MSDP?

If we actually have a look at only Goal Number Three, you can actually see all very detailed and specific action plans already outlined. The first action plan is the Strategy 3.3; that is to provide secure, conducive investment-enabling environment and under this strategy 3.3, we have action plans and these action plans include: to change the procedures, to develop the SOPs (standard operating procedures), and to eliminate restrictive policies. Now the Union Government office has already instructed – the official instruction letter has been already received by the Ministry of Planning and Finance, and the Ministry of Investment and Foreign Economic Relations – that all the procedures of different government agencies will have to be changed.

We did actually try to develop a lot of SOPs, but the problem is that we actually forgot about sequencing. When the SOPs (standard operating procedures) are developed, these SOPs are supposed to avoid centralisation and they are actually supposed to facilitate. So, they are supposed to encourage decentralisation, they are supposed to relax central control, and they are supposed to facilitate, especially investment, facilitate investment transactions, not only investment but all the business transactions.

But however, if these standard operating procedures are based on the existing procedures, then these SOPs are not actually called SOPs anymore. So, after that, we’ve come to realise that these SOPs are not actually to be called SOPs. In order to have proper SOPs, all the existing procedures have to change.

So, instructions came from the top that all the procedures being practiced by different government agencies have to change and have to be streamlined in order to properly develop SOPs. And these SOPs have to be, in such a way, applicable to the online application systems. So that is why the two Ministries, the Ministry of Planning and Finance, and Ministry of Investment and Foreign Economic Relations, we have been trying to collaborate discussing with different government agencies, especially these government agencies, are – you know – they have their own different licensing process and permit processes. These processes are to change, and we are discussing with different agencies to change all the processes in order to develop proper SOPs which we would like to have. So, this is actually in weeks’ time, in months’ time, the private sector is going to feel different.

The second thing is strategy action plan 3.5.4[iii]. In each action plan, we will have further breakdowns into different implementable projects and programmes. So in this action plan 3.5.4, we could actually see that this is to continue liberalisation of the banking sector, and action plan 3.5.9 is to allow foreign banks to take equity positions in domestic banks.

We can see that strategy 3.5.4 is already happening. The Central Bank has already announced that foreign banks are actually provided more relaxation and most of the restrictions placed on the foreign banks have been relaxed very recently.

And we will see what’s going to happen with strategy 3.5.9 that is to allow foreign companies, foreign banks to have a chance to participate in terms of equity positions in the domestic banks. When exactly and how long it’s going to take for these strategies to happen, it is something we will have to see.

And strategy 3.5.10 is to restructure the state-owned banks. The MoPF has already collaborated with the World Bank and we are in the process – the process has already started, that these state-owned banks are to be restructured. And we will see in weeks’ time, in months’ time, how the restructure and process is going to look like. Which state banks are going to be merged, which state-banks are going to stand alone and these strategies are going to be visible to the private sector in a week’s time or in a month’s time.

And strategy 3.5.15 is to further liberalise the insurance sector. You have already seen it that the MoPF has just very recently, has already announced the insurance sector to be liberalised. 100% [foreign-owned] insurance companies are to be allowed to practise in this country. And you can actually see the strategy 3.6.1 is to identify the priority infrastructure projects; 3.6.2 promote PPP mechanisms which facilitate the development of commercially viable infrastructure projects and 3.6.3 is to develop the Project Bank. So you can actually see that this MSDP – all the very specific action plans in the MSDP – actually serve as a prognosis.

It is a kind of prognostication of what’s going to happen in a week’s time, in a month’s time. So you can actually see that the MSDP action plans as a fortune teller. It tells what’s going to happen, it tells what policies are going to be adopted by different ministries and by different agencies in the near future. That’s how it is relevant to the private sector.

And since the Project Bank is a one-stop project information centre, it is prioritised strategic projects at one place, at one click. It is going to be at the data bank, it is going to be in terms of online database systems so it’s going to be transparent to everybody.

So transparency is going to be enhanced, and competition is going to be encouraged, and it will also be a part of state-owned enterprises restructuring. So it’s going to be included especially for state-owned enterprises to go through the corporatisation process, to go through the equitisation process, to become a PPP enterprise.

So in a summary, MSDP and the Project Bank are very relevant to the private sector.

It indicates the future policy directions to the private sector. And through the Project Bank, it identified the projects that the ministry are proactively identifying to work with the private sector. And the most important thing is that we have to make these PPP projects to be commercially viable, that they have to be more PPP-able and they have to be bankable.

In many countries, PPP projects are not very successful at the time when the government doesn’t really know a lot about how the risk can be properly shared and allocated between the private sector and the Government. If the rest is not really shared, then these PPP projects are not going to be commercially viable and bankable, then these PP projects are never going to be successful.

So whenever we make a PPP process to be very successful, we need two things. The first thing is to have a proper competitive procurement system. The second thing is the proper allocation of risk to the private sector government. So this Project Bank idea is to make not only all the project information to be centralised – I’m not talking about project centralisation, I’m talking about project information centralisation. It’s going to be transparent, accessible to everybody in the private sector and at the same time, we make all these PPP-able projects to be more PPP-able and bankable so that it’s going to be more beneficial for the private sector and for the nations.

So with that, this is going to be the direction towards a peaceful, prosperous and democratic country, which the private sector will greatly benefit.

Thank you very much.

END


[i] Refer to page three of MSDP + Project Bank by H.E. U Set Aung, Deputy Minister of Planning and Finance.pdf, available for download at https://investmyanmar2019.com/the-agenda/library/      

[ii] Refer to page four of MSDP + Project Bank by H.E. U Set Aung, Deputy Minister of Planning and Finance.pdf, available for download at https://investmyanmar2019.com/the-agenda/library/

[iii] Refer to page nine of MSDP + Project Bank by H.E. U Set Aung, Deputy Minister of Planning and Finance.pdf, available for download at https://investmyanmar2019.com/the-agenda/library/

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