- By Aung Naing Oo
Section 35 of the Constitution of the Republic of the Union of Myanmar states, “The economic system of the Union is market economy system.” After adopting basic needs of the market economic system with frameworks of laws, rules and organizations step by step, the government implements the market economic system.
While discharging duty of director general of the Directorate of Investment and Company Administration, I faced questions raised by friend businesspersons from economic sector. They frequently asked me that the government should extend businesses in the nation or allow private sector to do so. I would like to clarify my opinion with regard to that question.
Why does the government do so?
Participation of the government in some businesses can be seen not only in developed countries but in developing ones. If we analyze why the government operates businesses, we can see that the government operates businesses-
(1) At a time when the government can carry out the tasks with higher capabilities and better trust in commodities and services which are needs of the people than that of private sector
(2) In a situation which is not suitable for the private sector to do any business without comprehensive market rules and regulations
(3) At a time when the government should participate in a sector for implementation of the strategic plan for serving the national interest.
State’s economic policy
No 2 point of economic policies adopted by the government for shaping State economy mentions that “to make state-owned economic enterprises more successful, to privatize some possible state-owned businesses and to support small and medium enterprises which support job opportunities and economic growth”. In reviewing it, it can be seen that State-owned economic enterprises would be placed under reform process while preparations would be made to privatize some businesses. Hence, it can be reviewed that some State-owned economic enterprises would be handed over to the private sector with reducing participation of the government in businesses in line with the State’s economic policy.
Myanmar Sustainable Development Plan-MSDP
The Myanmar Sustainable Development Plan-MSDP adopted by the government in August 2018 set aims that “the government shall re-identify State-owned economic enterprises depending on their types, reform financing system, make these businesses skillful in management and operations, enhance supervisory tasks and transparency, equalize the businesses which can promote economic functions of the State or privatize them.” Strategy 2.5.2 of the Goal-II of Pillar-I of the MSDP was adopted “to corporatize, commercialise, restructure, or, where appropriate, privatize SEEs which operate in competitive markets.” That is why conclusion can be drawn that the government would carry out corporatization, equalization and privatization for the State-owned economic enterprises. On one hand, it is obvious that the government would gradually withdraw its participation from the businesses.
Myanmar Private Sector Development Framework and Action Plan
The government approved the Private Sector Development Framework and Action Plan in April 2016. It mentions the Pillar Four: Restructuring the State’s Role in Business Enterprise and Service Delivery. The provisions under the aforesaid pillar state that “while the transitions of Eastern and Central Europe, Viet Nam, and other socialist economies are instructive, Myanmar can also benefit from the experience of developed, market-based economies and their approach to state-owned enterprise (SOE) restructuring, privatization, and public-private partnerships,” “to choose monopolized farms among State-owned economic enterprises to be halted step by step, build capacity under rules and adopt procedures of transparently competitive bidding and tender systems for privatization and services for infrastructures,” and “the type of State-owned economic enterprises has basic weakness. Whenever the State holds the majority of shares, the government may interfere in companies under political trend. So, decisions which do not base on economy would be adopted. Consequently, loss of investments of the people would appear.” In line with the Private Sector Development Framework and Action Plan, plans are underway to reduce the role of State-owned economic enterprises and expand the private sector.
State-owned economic enterprises law
In the time of the State Law and Restoration Council, the State-owned economic enterprises law was enacted in 1989. It was a law to privatize some sectors of the economy of Myanmar under the socialist economy system practised before 1988. The aforesaid law defined that the government shall operate extraction and sale of teak, establishment of forest plantations, exploration and production of oil and natural gas, production and export of pearl, jade and gems, production and breeding of fish and prawn at the lakes set for conducting research by the government, postal and telecommunications, aviation, rail transportation, banking and insurance, broadcast and telecasting, mining and exporting, electricity generation, and production of security and defence equipment.
The private sector was allowed to operate remaining sectors. Section 4 of the law stated that if it is beneficial to the State, it shall allow to operate the tasks set for the State as joint venture with the government or as private-run ones. Hence, it can be seen that the tasks restricted under the law are being operated by private sector freely.
However, the above-mentioned law was out of date in comparison with the current period. So, it cannot support enhancement of capacity for State-owned economic enterprises.
The law is just a line between the government and the private sector in the economic sector. It does not consist of management, procedures for operating businesses, corporate management, adoption of strategies for businesses, disclosure and transparency of company conditions, transparent matters and capital management similar to that of State Owned Enterprise Law being practised by other countries. The majority of countries abide by company laws relevant countries and avoid enactment of the laws which will prioritize State-owned economic enterprises and separate rights. Three companies laws of Myanmar include corporatization for State-owned economic enterprises to private companies.
Yellow Pages Rule
What is the notable system being practised in some countries is Yellow Pages Rule. It means it is rules for the government not to participate in the Yellow Pages of relevant countries similar to business directories such as Yangon Directory and Mandalay Directory in Myanmar. It defines that if the government operates remaining businesses expressed in the Yellow Pages, the government needs to withdraw from the businesses. For example, the government exactly enacts the Yellow Book Rules in the Entrepreneurial Code of 2015 in Kazakhstan.
According to the law, if any private company operates same businesses of the State-owned economic enterprises engaging in production, works and services except some restricted businesses, the State-owned economic enterprises must be privatized or operated as joint venture with the private company before withdrawal from that sector. Despite lack of capacity to exercise the Yellow Pages Rule now, Myanmar should consider to abide by such rule in the future.
In reviewing the aforesaid points, I believe the readers may know the answers of the question “Is this government or private sector?” The word government means participation and investment of the government in the businesses in addition to standing as beneficiary owner. It is important that the privatization law should be drawn and enacted systematically for privatizing the State-owned economic enterprises, and it should not do the process hastily. For example, if privatization is implemented without enactment of firmed laws, original purposes would not meet the goal.
If so, it will mean selling of State-owned resources to private sector only. On one hand, State-owned economic enterprises should not monopolize the private sector but lead to partnership to the private sector and benefit the citizens. That is why it needs to emerge a State-owned economic enterprises law meeting international standards.
All in all, I would like to conclude my presentation that if one asks government or private sector, only private sector must take a leading role in the economic arena while the government should emphasize four pillars as easing for development of private sector, undertaking of easy and smooth processes, assistance for development, and disciplinary control.
Translated by Than Tun Aung
1. Constitution of the Republic of the Union of Myanmar
2. Myanmar Sustainable Development Plan-MSDP
3. Private Sector Development Framework and Action Plan
4. State-owned economic enterprises law
5. Policy Maker’s Guide to Privatization, OECD @ 2019
6. OECD Guidelines on Corporate Governance of State-owned Enterprises 2015
7. Myanmar Commercial Law Framework—Reform Priorities White Paper, OPADE PARTNERS