Brigadier General Zaw Tun on Burma's Economy

[BurmaNet adds-This translation of an unpublished report was circulated on mailing lists on August 10, 2000. The original speech was on July 7. The comments attributed to Gen. Zaw Tun indicate a frankness and grasp of economics not generally displayed by a ranking member of the regime.]

Brigadier General Zaw Tun, Deputy Minister for National Planning and Economic Development, delivered a speech at the "Seminar on Myanmar Economy" held in the Padamya conference room of the Department of Management Studies, Institute of Economics, on 7 July 2000. The seminar lasted over 3 hours from 9:00am to 12:15pm.

Addressing the economic situation in the country, Brig. Gen Zaw Tun said, "the population of a country is important when calculating its economic growth rate. The Senior General [Than Shwe] himself took charge of the matter and made the decision. Foreigners and the intelligentsia were very interested in and asked questions about the GDP Growth Rate increasing from 5.8 in 1998-1999 to 10.9 in 1999-2000. Leaders of the country also said that it was necessary to maintain a double digit GDP growth rate for about four or five years. But, to tell you the truth, the GDP did not grow [to that extent]: The real growth rate was only about 6 percent. GDP Growth Rate is calculated on the bases of production, expenditure, and income but the figure we arrived at was calculated only by taking the production method into consideration since the other two methods could not be brought into the computation. We could have arrived at a more accurate figure had we taken the other two methods into consideration. On top of that, we included in our calculations agriculture previously produced from farmlands in reserved forest land which was not part of the computation before, we included as industrial production rice produced from manually operated threshers, and we even added coconut production in that calculation."

He said, "The five factors that are vital to boost the GDP growth rate are:

(1) The potential derived from natural and human resources must be efficiently utilized. The potential has been there for some time but we have not been able to make effective use of it. GDP growth rate can be increased if we do.

(2) Separate efforts should be made by regions--divisionally and state-wise--to increase the GDP; a division like the Tenasserim Division has a lot of potential for success.

(3) According to the nature of economics, the economy must recover after a period of downward trend but the process would not be as easy here as in the other Southeast Asian countries.

(4) One factor that contributed to an increase in the production of the agriculture sector this year is good climatic conditions.

(5) Reclaiming wetlands and fallow land into cultivatable acreage by allowing the private sector to invest in them was the primary factor in boosting production and that perhaps may contribute to the growth of the GDP by double digits.

With regard to key economic factors of the country, Brig. Gen. Zaw Tun discussed (1) investment, (2) trade policy, (3) taxation, and (4) currency issues.

Investment

He said, "The investment situation is unsatisfactory. A lot of money is being invested in Che Hti (underground betting on lottery numbers). A lot of investment opportunities will be there if we opened up the capital market and stock and share markets, which conform to the frame of mind of the Myanmar people. But my superiors are fixated with a belief that a currency crisis would be caused by speculators. I have not been able to convince my superiors up to now even though I have been telling them that governments in Southeast Asian countries did not close down the capital markets because the markets benefited the countries greatly even though it is said that capital market speculations caused the currency crises. The MIC [Myanma Investment Commission] is too protective by nature and needs to be reformed to become investor friendly. It is also not appropriate to force tourists to change their currencies into FEC's [Foreign Exchange Certificates] because they may end up spending more than those amounts.Human beings by nature abhor anything forced against them.

Trade Policy

Brig. Gen. Zaw Tun said, "there is no consistency in the trade policy. The Trade Minister, together with entrepreneurs close to him, selects the commodities that would be opened to the market and after some time they close it down again. The other people suffer as prices fluctuate depending on the whim of the leaders. For example, when the Senior General went on a tour, he heard about the rising onion prices and enquired about it. When told it was because onions were being exported, the Senior General said, 'export only when there is a surplus, let the country consume first.' The Trade Ministry therefore issued a directive stopping even the onions being loaded onto ships for export. Onions already given export permits were also prevented from being shipped. Ministries are only required to lay down policies and control their own sectors. But, under the current situation, the way work conducted by them is not correct. A planned economy is being pursued because we have not succeeded in promoting a free market economy. Economic plans are not needed in the United States and the economy is left uncontrolled. Just like that martial arts style using a bamboo stave mentioned in the books, the 'invisible hand' [of the market forces] keeps things working . Of course, certain key elements have to be in place so as to control the economy. We must try to emulate them.

Taxation

The budget has constantly shown a deficit since the previous government. We have been printing money to carry out reforms, development, and constructive tasks. The necessary revenue to run the government is not there and there are no back-up or reserve funds. Although we are aware that we are heading for inflation, we continue to focus on infrastructures because we believe they are needed. But, building new dams without budgetary provisions to maintain the old ones is in fact a waste, like pouring water in the sand. We have gas to sell for foreign currency but since the other country is not buying, we do not earn any foreign currency. The Myanmar Government is not in the position to buy and use that gas. Although there were options, it is about two years late now. Instead of looking at suitability of conditions when making agricultural policies, we laid down principles from a security point of view, and we ended up growing rice in Chin State, which turned out not to be cost effective.

Currency

Three different exchange rates are being applied in the currency market,. The official rate is 6 kyats to 1 US dollar, the rate for collecting custom duty is 200 kyats to 1 US dollar, and the market rate is 370 kyats to a dollar. Although I don't know when and how the exchange rate will be reformed, I suggested to my superiors to deregulate and float the currency before 1996-1997 when the market value was between 150 to 200 kyat per dollar. Had this been done the value would have declined to around 300 kyat per dollar. If we do it now, the value would decline to about 600 kyat and the lower rung of society would not accept the situation. I have also reported to my superiors about the need to submit our custom tariff rates to the WTO [World Trade Organization] in two years. But the financial sector has done nothing to prepare for reforms or change. Although I have said it would be too late to change only when a Capital Market and Stock and Share market is introduced, there has been no response or reform. It looks like changes will be made only when it happens. Local and foreign entrepreneurs only try to engage in a joint venture with the [Myanmar Economic] Holding Company because they enjoy more advantages. Although the price of edible palm oil has dropped in foreign markets, the local price has not dropped because of monopoly practices. Presently, import permit for edible palm oil is granted to applicants quoting the lowest selling price in the country, and the practice is gradually hurting the entrepreneurs who work with the Holdings company. The price of electricity has risen which is killing small and medium enterprises. Though the policy has been to help foster these enterprises the true situation is quite the contrary to that policy. I will discuss the matter when opportunity arises.

Open Discussions

Participants at the Myanmar Economic Seminar also took part in the discussions and raised questions to Brig. Gen Zaw Tun. Entrepreneurs said it was not economically feasible to continue working as electricity costs for a business located in industrial zones had risen to 500,000-800,000 kyats per month and production costs were too high. They could not compete with people who were in effect stealing electrical power and lowering their production costs by setting up businesses within military compounds to raise military welfare funds on contract. They would rather invest in cars trading and other similar trendy businesses. Suggestions were also made for the inclusion of provisions in the Investment Law to ensure adjudication of courts are independent so that investors will be protected when disputes arise between them and the Ministries.

When a question was raised about preparations being made for the AFTA [ASEAN Free Trade Agreement] unit as all goods are to become tax free by the year 2005 under the AFTA Agreement, Brig Gen. Zaw Tun said no preparations have been made yet, and added Myanmar was only there on paper and when that time comes, Myanmar is bound to suffer because it will not be in a position to produce any goods. Goods from abroad will only flow in. "There is no way, Myanmar with a GDP of only one billion US dollar can compete with Thailand which has a GDP of 55 billion dollars. There is a lot we have to do to catch up with them.

When a question was raised about Myanmar doing a market survey to see how feasible it would be to import Thai and Chinese goods to resell them to Bangladesh, India, Pakistan and other BIMST-EC countries, Brig. Gen. Zaw Tun said our country is not in a position to do that under the present conditions. He jokingly said that previously, when he was in the Army he could discuss things openly when he met with the Senior General but that he was now somewhat afraid of losing the monthly salary of a Deputy Minister which is 100,000 kyat while a minister's salary was 150,000 kyat. On education, he said, "...It appears that the higher up generals know nothing about what is happening. From the advertisements by overseas private educational institutions, they found out that the costs [of education] were in the hundreds of thousands, and only then they put a stop to the advertisements. But in reality that was a fact and being a parent with children of my own, there was a real need to tackle the issue." The deputy minister said he has asked for information about those costs. As a policy maker, he said, "Sometimes when you chop, the blade cuts into an unintended place. We have now allowed tax-free markets to reduce costs but the markets only have about four, five or 10 chickens for sale at 350 kyat [per viss or 3.6 pounds] and edible oil is being sold at 10 ticals [0.36 pounds] per person at controlled prices. These cannot be taken as indicators of the true prices. The good intentions cannot be realized."

Bank Interest Rate

He said, "Investments have not increased even though the interest rate has been reduced to 10%. Privatization is growing only in the cinema industry. The Ministries seem to be afraid of losing the state enterprises even though they are not profitable, and I don't know the reason why. Maybe we should imitate Czechoslovakia. It might be a good idea for the leaders to walk down the street and pick out the factories randomly to decide who will work that factory. The important thing is for the government to exercise transparency and practice consistency. "It looks like whoever takes over the Trade Ministry needs to be sacked regardless and it will be lucky for anyone to last until pension age. It looks like  anyone who continues to work there do so only because there is a great reluctance to do something drastic. Business owners always seem to find a way of making money just like oil finds a way to seep out from a hole regardless of the directives issued." Brig. Gen. Zaw Tun, used an English phrase, "Killing me softly with the system," to describe the situation. On news and information when a question was then raised why weather reports were no longer covered in the newspapers despite its importance for agriculture, the deputy minister said there must have been more important news than weather reports that needed to be published.

"The activities of the ministers had to be screened on television so that the Senior General would know what they were doing. Once the Senior General remarked that although the activities of the Ministers was shown nightly on TV the people did not really seem to know what they were doing. I was in the Army then and I jokingly said I wanted to tell the Senior General something truthful, that he could scold me, berate me, and beat me but that he should not sack me for it. The fact is people turn off the TV when the news is shown and turn on their videos or do some other work. Only after the news hour they switch the TV on again to view Chinese movies, that.perhaps it was only the Senior General who may be watching the news on TV."

Conclusion

He also said, "Some who are holding responsibilities in the country lack proper 'awareness'. Divisional Commanders who have been told to compile the figures for the GDP included income derived from such things as confiscated properties from drugs to levies at open markets and distorted the value. So the data were not correct. Efforts have to be made to make them understand. Some thought that their promotion would be assessed on GDP figures, and included levies at open markets. Once, two weeks after a monthly divisional commanders meeting, one of them called me by phone to report that the GDP in his division had risen five times."

He said he was satisfied with his meeting with the MBA (Myanmar Business Association) and would like to meet with them again time permitting. He could be contacted by phone at 252250 at any time and jokingly said that they should not abuse him.


[This article was published on 24 Aug 2000 on BurmanetNews, posted by the All Burma Students's Democratic Front]