Thursday, August 17, 2017

NLD adviser defends govt’s economic management

Sean Turnell, an economic adviser to the NLD-led government, said that the administration spent the first year stabilising the economy and that the economy would take off soon.

He also defended the government’s management of the economy, which saw a drop in foreign direct investment, during the Myanmar-EU Economic Forum organised in Nay Pyi Taw last week.

“Myanmar is like a plane running on the runway in 2016, but it is ready to take off in 2017,” Union Minister U Kyaw Win of the Ministry of Planning and Finance told local and foreign businesses who attended the Myanmar Investment Forum last week.

The new government – which took over in the late 2015 – has finished the transitional phase and has already set up measures to address the budget deficit, trade deficit and inflation, he added.

The NLD adviser agreed with the runway metaphor.

“It is actually quite a good metaphor. It’s a pretty simple one but a good one.

“The first year was really spent in stabilisation. We knew that when the new government came in, the budget was completely blown out.

“The new government had a really bad budget deficit. The current account deficit or trade deficit is blown out as well. Inflation is at the rate of 16 percent and, on top of that, some bad loans are added during very last days of the [previous] government.

“In some way, the economy was overheating. And it was a difficult legacy to inherit,” he explained.

The adviser was keen to highlight that stabilisation, not growth, should be the new administration’s priority.

“When you have the new government, the first thing have to do is to stabilise things.

“Make sure there’s no crisis; make sure the budget deficit does not completely blow out. The current account is completely blown out and inflation goes through the roof.

“One of the things is inflation and that does more damage to poor people,” he said, adding that “So stabilising becomes important and the government effectively achieved that. There was also negative part of that if you are stabilising, that means you are not spending – all of the planning they have about big infrastructure projects, and dramatic increase in spending for health and education.

“As people expected the new government to be modest, health and education and public services couldn’t be done. They have to engage the issues in the first year just to keep things stable,” he added.

“It is important, particularly for a new government like this, when they came from a democratic movement.

“When a new government came in from the very popular government, they often engage in big spending, because they want to reward all the people who have suffered but this couldn’t be done because they have to stabilise the economy in the first year. That’s the sort of stabilisation period,” he explained.

Mr Turnell believed that now is the time to move the focus from stability to growth. He highlighted the new investment law which marks a departure from the old ways. The new investment law and the related rules reflect the actual situation and deal with issues which affect businesses, the adviser noted.

“It is an incredible opportunity now which is to throw the switch to growth, to accelerating the growth. In this sense, as the minister said, the plane is running along the runway stably on solid ground.

“So you change the policies then investors and businesspeople have to see it and they have to start acting on it.

“The new investment law and the rules actually clarify and make clear the government’s priority areas for the businesses, for example, labour-intensive industries that should get special treatment.

“Obviously, over the last year you did not see the effect because foreign investors are just waiting for the new government,” he defended.

“Even now, there are still lots of problem along with the positive things.

“But what the government did effectively is instead of dramatic increasing in spending, they did what people really wanted. By putting the stable period in, what they have done is effectively building the runway for the plane to eventually take off.

“I am quite confident about the economy and that things could pick up,” he said.