Myanmar’s Development Agenda – Opportunities and Challenges

31 Aug Panel discussion: Myanmar's development agenda - opportunities and challenges

I was fortunate enough to participate at the recent Myanmar Development Summit held in Yangon on the 10th of August 2014. I participated in a panel discussion on the opportunities and challenges for Myanmar’s development agenda.

 

Panel discussion: Myanmar's development agenda - opportunities and challenges

Panel discussion: Myanmar’s development agenda – opportunities and challenges (L-R: Dr Thet Thet Khine, U Aye Chan, U Kyaw Tin, Dr Maung Maung Lay, Reza)

The panel was moderated by U Kyaw Tin, Chairman of the Myanmar Institute of Certified Public Accountants and I shared the panel with Dr Maung Maung Lay, Vice President of the Union of Myanmar Federation of Chambers of Commerce and Industry, UMFCCI, Dr Thet Thet Khine, Secretary General of the UMFCCI and U Aye Chan, CEO of IMA Group.

Developments to date

Over the last few years as Myanmar has opened up economically and politically, there have been some major strides made in a number of areas:

1. Social and political reforms:

Politically we have seen a greater freedom of speech, improved press freedom and broader steps towards national reconciliation. The ongoing dialogue with armed groups in a number of states is also a step in the positive direction.

In the last three years government spending on education has more than trebled (it was increased by 30% in the last year alone) and government spending on healthcare has almost increased five-fold (it grew by 78% in the last 12 months alone).

The government has also implemented a strategy for greater public financial management reforms to enhance efficiency and transparency of government spend.

 

2. Improved monetary policy and central bank independence

The monetary policy has improved starting with the unification of exchange rates (there used to be a time where the official kyat to US dollar rate was 8 kyat to a dollar whilst the market rate was closer to 800 kyat to a dollar!).

The regulations governing central bank independence have also been brought more in line with international best practices, granting the central bank greater independence and autonomy.

 

3. Improved tax collection and reforms

With support from the World Bank, Myanmar is also embarking on a series of ambitious tax  reforms to strengthen revenue administration, which will increase the effectiveness of tax and non-tax revenue mobilization.

This was further supported by the passing of the Union of Myanmar Revenue Law of 2014 and four other tax bills in March this year.

 

4. Improving business, investment and trade climate

Approved FDI has increased to US$4.1 billion in 2013/2014 (almost 300% from 2012/2013 when it was only US$1.4 billion). The investment has also been distributed across a diverse range of sectors from manufacturing (45%), telecommunications (30%) and hospitality hotels (10%). This will prove beneficial in the long term as it will increase employability whereas investment primarily in the resource sector would have not necessarily created sufficient job opportunities. The investment has also come from unlikely trade partners including Ooredoo of Qatar and Telenor of Norway (both in the telecommunications sector).

This improved business climate has come on the back of passing of the Foreign Investment Law (FIL) in late 2012 which provided better clarity for international businesses seeking to do business in Myanmar along with the removal of restrictions and barriers to foreign investment. The highly efficient Directorate of Investment and Company Administration (DICA) have also reduced the time for businesses to establish operations in Myanmar (this is also on the back of my own personal experience as we established our operations in Myanmar).

 

5. Progressive financial sector developments

The government is working very closely with industry stakeholders as Myanmar seeks to establish its first stock exchange in Yangon – the Yangon Stock Exchange (YSE).  This is following the passing of the Securities Exchange Law last year.  Japan’s Tokyo Stock Exchange (TSE) and Daiwa Securities Group, a Japanese investment company will supporting Myanmar in delivering the YSE by October 2015.

A microfinance law was also passed last year to improve access to finance for small and medium sized firms and to increase the level of liquidity in the market.

Banks are also being held to more stringent regulations and are required to improve their capital adequacy ratios to be more in line with international best practices.

 

Some key facts to consider:

  •  GDP growth was 7.5% in 2013 (forecasting 7.8% in 2014).
  • Agriculture provides jobs for over 50% of Myanmar’s workforce.
  • Government budget for 2014 was US$ 19.5 billion (a third of Myanmar’s GDP)
  • Inflation has been creeping up and is expected to increase to 6.6% in 2014 from 5.8% in 2013. This is as a result of the weakening of the kyat vis-à-vis the US dollar, increasing wages (both in the private and public sector), a real estate boom/bubble and increased credit.
  • According to McKinsey, Myanmar has the potential to achieve a GDP od US$200 billion per year by 2030 (it was just under US$60 billion in 2013).
  • The average productivity of a working individual in Myanmar is currently only US$1,500 per annum (which is 70% less than other Asian economies including Thailand, China, Indonesia, India, Vietnam, etc). This low productivity also results in the low GDP per capita.

 

Key areas of focus for sustained development and progress:

Below are seven areas I view as critical for Myanmar’s continued development and progress. The achievements to date remain delicate and can be easily derailed if some of the below trends and developments are not addressed sufficiently.

 

1. A need for harmonious development.

One of the biggest perils faced by rapidly emerging economies is a severely widening income gap. It is vital that Myanmar addresses the issue of income inequality by providing broader employment opportunities and increase the number of middle-class Burmese.

It is also important that Myanmar’s leadership resolves on-going ethnic and sectarian tensions and friction in the country. This can severely destabilise the country and reduce the quality of life for Myanmar’s people. There has to be greater social and religious tolerance. Persistent incidences of communal violence between the Buddhists and Muslims are exacerbating the tensions. The government should support further initiatives by centrist leaders of the Muslim and Buddhist communities and support greater dialogue between the various communities. There needs to be greater efforts to reform education starting with the primary levels, to encourage greater tolerance for the different ethnicities and religions in the country.

The role of the military is still not entirely clear and this ambiguity needs to be resolved for a greater entrenchment of democracy taking root in the country so as to produce the optimal opportunities for further growth.

 

2. Improving access to education and creating educational opportunities for all.

Myanmar’s investment in education has increased significantly over the last three years but it still has one of the lowest averages of schooling the world at just four years. The universities and institutions of higher learning remain chronically underfunded and after four decades of neglect, do not yet have adequate infrastructure. However, this is slowly changing with the likes of Yangon University, Yangon University of Economics and Dagon University striking up partnerships with other top universities and organisation. This will help improve the teaching faculty and also provide greater exposure for the students and staff of these universities which will in turn improve overall performance.

A good national education is also essential for enhanced social mobility. The notion of social mobility is critical in helping people move out from the cycle of poverty and in increasing the middle class segment of a nation. Social mobility can only take effect if the right opportunities and education is provided to the people. As Myanmar continues its growth and development, the educational institutions will need to prepare Burmese youth with the right skills and capabilities so that they can gain meaningful employment and support Myanmar’s development.

 

3. Improving employability, productivity and efficiency

For growth and development to remain inclusive and sustainable, it is important that investment continues in the areas of labour intensive industries and sectors such as manufacturing.

The majority of the population still live in poverty (GDP per capita based on purchasing power parity is about US$3.60 per day)

The government is focusing on an export-led growth supported by productivity gains in agriculture and industrial development. President Thein Sein’s ‘Framework for Economic and Social Reforms’ launched in 2011 emphasised the need for a market-driven economy to support economic growth and to provide jobs and opportunities for Burmese.

There must be greater support provided to farmers and the agricultural sector (which as I’ve stated above provides employment for more than half of Myanmar’s working population) to introduce modern practices and improve productivity. Over time, this ensures greater food security for Myanmar and it also helps to boost the export-driven economy which Myanmar is gearing up towards as food production increases. Myanmar’s agricultural sector is also endowed with the 25th largest arable land in the world and has ten times the per capita water endowment of China and India. This gives the opportunity for Myanmar to be a true powerhouse in agriculture and help feed the world’s growing population.

 

4. Increasing access to finance

As Myanmar’s banking sector continues with reforms, increasing access to finance for smaller and medium sized businesses will help increase further growth, productivity and employment. There isn’t sufficient liquidity in the market and SMEs in Myanmar do not yet have the same impact as SMEs in other ASEAN countries. Part of this is due to a lack of sufficient access to finance which will allow for Myanmar SMEs to compete with their regional counterparts.

On an individual level, more than half of Myanmar’s population have no access to financial services, 30% are using unregulated services and only 20% have access to regulated financial services. The limited access to regulated financial services not only impose significant costs on poor people given interest rates of up to 240%-a-year compared to up to 36%-a-year for regulated services, but informal mechanisms also offer individuals limited protection, less choice and lower returns.

 

5. Sustained commitment to reforms and global standards.

Myanmar has adopted international standards in a number of areas. They adopted the International Financial Reporting Standards (IFRS) along with the International Standards on Auditing (ISA). The government, in an effort to boost transparency and greater fiscal control and management have also adopted the International Public Sector Accounting Standards (IPSAS).

Myanmar is also currently reforming the Companies’ Act which is still loosely based around the 1914 Burma Companies Act! This will ensure greater clarity for enterprises operating in Myanmar and also improve business and investor confidence and sentiment.

Myanmar has also recently become a signatory to the Extractives Industries Transparency Initiative (EITI), a global anti-corruption scheme that requires member governments to disclose payments earned from oil, gas and mineral wealth. Burma’s EITI arrangement could also be expanded to include hydropower and forestry.

Such initiatives will support Myanmar’s reform efforts and development and pave the way towards strong frameworks that support sustainable and inclusive growth.

 

6. Greater transparency, accountability and robust governance

President Thein Sein set up an anti-corruption committee to weed out corrupt public officials. Corruption poses one of the most severe threats to Myanmar’s reforms and development. Crony capitalism exacerbates issues of income inequality and social discontent and the government will need to continue to act to curb corruption.

He also implemented various initiatives to improve administrative reform and cutting red tape.

Though efforts have been made to establish a stronger rule of law, the daily papers recount stories of land grabs, ethnic and sectarian conflicts and corruption and the pervasive conflicts of interests across all levels of government and business. There needs to be grater efforts in the areas of establishing an independent judicial system that will allow for a stronger implementation of rule of law. A clear and robust rule of law improves public confidence, enhances investor sentiments and paves the platform for sustainable growth.

 

7. Capacity building with an eye on sustainability

Myanmar has to undertake sufficient capacity building – both in terms of people capacity as well as physical capacity.

Myanmar’s current physical infrastructure is not adequate to meet future growth demands needs. Massive infrastructure investment in the areas of power, water, rail, road are being planned both locally and with foreign investors’ assistance. However, as Myanmar builds more roads, more railway tracks, better power grids and improved water systems, it will be important that there is effective and well-managed town planning and resourcing. We already are witnessing severe traffic congestion and delays, particularly during peak periods, and it this continues, Yangon’s traffic issues could well rival Jakarta’s or Bangkok’s and this becomes a huge social and business cost. Investment in technological upgrades and telecommunications must also continue as Myanmar’s telecommunications and Internet infrastructure still lags that of the rest of ASEAN.

These infrastructure improvements must also consider the wider impacts on sustainability (including social, human and environmental). Myanmar’s decision to suspend the construction of the Chinese-backed Myitsone Dam in Kachin state due to environmental concerns was a step in the right direction. It is important that Myanmar’s leadership consider the longer term impacts over the possible short-term benefits when making infrastructure plans and decisions.

Physical capacity building must be matched by sufficient human capacity building too. As has been described earlier, there needs to be appropriate educational, training and development opportunities for people to ensure that they have the right skill sets, aptitudes and capabilities necessary to support Myanmar’s development. People and physical infrastructure development go hand in hand and a holistic approach needs to be taken to ensure longer term, viable and sustainable development for Myanmar.

Ultimately, it is vital that the right implementation approach is taken to the policy developments taking place in Myanmar. Policy must translate into action or inclusive growth, economic and social progress and sustainable development will merely remain a pipe dream for Myanmar.

 

References:

  1. Myanmar Economic Update, Asian Development Bank
  2. Myanmar’s Moment, McKinsey
  3. Myanmar:  Between Economic Miracle and Myth, Institute of Southeast Asian Studies (ISEAS)
  4. Sustaining Myanmar’s Transition, Asia Society

 

The Ice Bucket Challenge – a rudimentary cost-benefit analysis

26 Aug

 

Roughly 1.5 million video shares of the Ice Bucket Challenge (mostly US based and not including out of US video shares).

The UN states the average person needs 50 litres of water per day (in Africa – they do with 20 litres – with a billion people with little or no access to water)

An average small bucket holds about 10 litres of water.

On a low estimate (ignoring group ice bucket challenges), roughly 1.5 m X 10 l = 15 m litres of water has been used (the Washington Post estimated 5 million gallons or roughly 18 m litres of water used till 13 August)  across the videos.

Which translates to the water usage of 750,000 individuals in Africa for one day.

The ALS has raised about US$80m as a result of these challenges (they raised US$2m the same time last year).

I’m not sure whether the costs and benefits add up necessarily here.

Don’t want to pour cold water on good intentions though…..

 

Some interesting reading:

http://www.un.org/africarenewal/magazine/october-2007/bringing-water-africa%E2%80%99s-poor

http://thewaterproject.org/water_stats

A review of Prime Minister Lee Hsien Loong’s 2014 National Day Rally

19 Aug

It was an interesting National Day Rally session by Prime Minister Lee this year. The Pioneer Generation was saluted, challenges were outlined, the government’s responses to the challenges were highlighted and there was a strong call to action to not forget the past and to reflect on the successes made by Singapore over the last five decades.

Below is a graphic illustration and personal take on the overall session and some of my own interpretations and thoughts. (Please click on image if it doesn’t appear clearly on your browser)

A summary of key messages (and some personal interpretations) of the 2014 National Day Rally by PM Lee

A summary of key messages (and some personal interpretations) of the 2014 National Day Rally by PM Lee

There was an interesting statement on the need to be ‘hard-headed’ in order to be ‘good hearted’ in relation to the need for economic growth to create opportunities. It remains to be seen what these hard-headed options are that are required for economic growth.

The PM’s take on the need to go beyond just academic qualifications and to also focus on relevant skills and qualifications is also an important one. This is what will support the employability agenda eschewed by the government which in turn addresses issues of social mobility and in the process go some way to resolving the widening income equality within the country.

Whilst the emphasis on the ‘Pioneer Generation’ (or PG) is important, it will be vital to support the upcoming ‘Frontier Generation’ (whom I have classified broadly as falling into the 18-35 group) and allowing them to fully explore their passions which are as important as the determination and resolve the PM highlighted in his speech.

On the whole, a thoroughly enjoyable rally with a rousing finale!

Leadership and management lessons from the first men to reach the South Pole

4 Aug

As I was watching Eight Below on HBO this afternoon (great film by the way), I started reading up on the first men who went to the ends of the world and was thoroughly impressed with the feats of the men who sacrificed life, limb, wealth, friendships, family and sanity in an era that was also considered the Heroic Age of Antarctic Exploration.

As I started reading more about the various principal characters involved, I became particularly intrigued by two individuals, Roald Amundsen and Robert Falcon Scott. Both these men vied with each other for the title of being the first person to reach the South Pole. Amundsen ended up with the honour of being the first to get to the South Pole. Scott got there later but met with a tragic end and never returned back to his camp after reaching the Pole.

There are numerous accounts about their journeys and the historical reactions and developments about both Amundsen’s and Scott’s achievements. However, I want to touch on some of my own observations on what businesses and leaders can learn from Amundsen’s trip to the South Pole:

1. Clarity of mission
2. Clear leadership
3. Attention to detail
4. Constant preparation
5. Always find subject matter experts (and avoid arm-chair experts!)
6. Luck – is what you make of it

 

Amundsen-Early-Exploration

1. Clarity of mission

Amundsen was very clear that his primary objective was to be the first man to reach the South Pole. He expended his energy, his thoughts and his efforts to this one single endeavour.

On the other hand, Scott’s agenda was never very clear and he wanted to conduct scientific research, exploration and also reach the pole but nothing was clear defined. One example was when Scott and his team were returning from the Pole, defeated and already running low on supplies, he decided to stop at the top of the Beardmore glacier and deemed it fit to ‘geologise’ and subsequently add more than 15 kilograms of rock to their loads, which slowed them down further and precipitated the crew’s sad demise.

Amundsen was very clear about what his expedition’s objectives were and what his own ambition was and set out to dispassionately attain it.

 

2. Clear leadership

Scott was a product of his times and was extremely formal, conventional and hierarchical and this is what the English establishment demanded this of anyone who was leading an official British mission.

Amundsen on the other hand was an extremely competitive, relentless and focused individual who was also hugely innovative and was ruthlessly direct in his leadership.

As an example, most of Scott’s team (which was made up of sixty five men) was was picked by various external parties. Within that team included a Captain Oates with whom Scott clashed with on numerous ocassions. Oates was never silent about his conflict with Scott either which only served to undermine Scott further.

Amundsen on the other hand handpicked 19 men for his lean Fram expedition. In his team was a Hjalmar Johansen who was a noted explorer too. However, there was an incident where Amundsen made a mistake in setting off for a trek too early. This mistake almost cost the life of one of the men and Johansen publicly berated Amundsen in front of the other men. Amundsen dismissed Johansen from the expedition to preserve the unity and integrity of the team.

One may argue that Amundsen could have taken a different tact or approach. Ultimately, for an expedition into a great unknown, there has to be absolutely clarity and trust. Constant undermining of leadership would have led to mistrust and confusion and in the end cost lives.

As the National Geographic  puts it very eloquently, “Amundsen was also a man of towering ambition, prey to the same dangerous dreams and impulses that drive all explorers to risk their lives in wild places. Amundsen’s greatness is not that he lacked such driving forces but that he mastered them.”

 

3. Attention to detail

The clarity of the big picture is important. For any project or mission to succeed, the attention to detail, regardless of how minute, is also crucial.

In the case of Amundsen, he had a laser-like focus on every aspect of the Fram expedition – from the food chosen to the mode of travel to the choice of clothing.

Amundsen knew that in order to travel the distances they were targeting, they had to be able to get around quicker than if they were to do so purely on foot. To this end, Amundsen spent considerable time perfecting their ski equipment and footwear. This was something Scott’s team did not do sufficiently and towards the later stages of Scott’s expedition, this proved to be fatal.

Amundsen also spent considerable time with the Inuits and adopted fur suits along with their windproof outfits. The Inuits also wore their clothing loosely to reduce sweating (which helps retain body heat and also prevent freezing of clothes).

Even the way the fuel cans were sealed played a big role in the Antarctic expeditions. Scott had used incorrect washers for the fuel cans which led to evaporation of the fuel – which is a critical component in turning ice to water for drinking. Amundsen had worked this out earlier and had ensured that the cans were sealed properly to prevent any loss of fuel.

Food was an important component in the expedition which Amundsen paid a great deal of attention to. Amundsen, following his time with the Innuits, understood that an exclusively meat diet consisting of penguin and fresh seal meat was vital to remaining healthy. Although this wasn’t understood scientifically then, fresh seal and penguin meat provided enough Vitamin C to prevent scurvy (an ailment that afflicted sailors in those days and which was fatal in the long run if not treated).

On the other hand, a number of historians have indicated that the lack of good nutrition was one of the many reasons for Scott’s failure. They also tended to overcook the penguin and seal meat  (to remove the ‘fishy’ taste) which destroyed the Vitamin C present in them. Amundsen’s indifference to palate meant that his expedition ensured that they ate very unappetising biscuits (made from oatmeal, yeast – with enough Vitamin B, beef fat and pounded dried beef!) and which provided them with essential roughage. Again, this is something the British expedition team chose to ignore.

As Geir Klover, director of the Fram Museum in Oslo, explains, “”Amundsen had a tremendous reputation. He was a meticulous planner, easily the best organised explorer of his generation.”

The attention to detail, especially for major campaigns, is absolutely critical in not only determining the success or failure of the campaign, but between life and death.

 

 

4. Constant preparation

During the winter months, Amundsen and his team spent the days optimising their equipment, their clothing, their logistics and working to improve their efficiency. It was an extremely focused team with a clear view of what needed to be done to achieve the task at hand.

Scott’s team spent the time engaged in a series of meetings, lectures and reading. This led to missed opportunities for the team to review their practical and operational needs and performance.

A clear vision, decisive leadership and attention to detail are matters which determine how well a team is prepared for a mission.

 

5. Always find subject matter experts (and avoid arm-chair experts!)

Amundsen had one of Norway’s skiing champions in his team (despite the fact he wasn’t an explore or mountaineer). He also ensured that he had canine experts and dog handlers to choose the best dogs for his journey. (Scott chose not to use dogs – which he thought was more noble). This was also counter to the prevailing view in Britain in those days that dogs were of dubious value as a means of Antarctic transport (which was subsequently proven to be false).

On the other hand, Scott had instructed a member of his team who knew nothing about horses to choose the ponies for the expedition. The ponies chosen were of poor quality, age and condition and which only served to hinder Scott’s expedition.

 

6. Luck – is what you make of it

Amundsen summed it up best when he said:

“I may say that this is the greatest factor—the way in which the expedition is equipped—the way in which every difficulty is foreseen, and precautions taken for meeting or avoiding it. Victory awaits him who has everything in order — luck, people call it. Defeat is certain for him who has neglected to take the necessary precautions in time; this is called bad luck.”

 

Quote

A paradigm shif…

16 Apr

A paradigm shift in organisation structures?

Being a Lean Matrix Organisation: a sophisticated multi-function, multi team, multi-reporting structure but without the organisational bureaucracy.

A beautiful eulogy to a dog (or any pet!)

16 Feb

I came across this very interesting closing argument made by George Graham Vest in 1870 to a jury whilst representing a client whose hunting dog (named Old Drum) was killed by a farmer. Vest’s client was suing for damages for $50 but in the end the story goes that he was awarded $500. This closing argument may be the reason why:

“Gentlemen of the jury: The best friend a man has in this world may turn against him and become his enemy. His son or daughter that he has reared with loving care may prove ungrateful. Those who are nearest and dearest to us, those whom we trust with our happiness and our good name, may become traitors to their faith. The money that a man has, he may lose. It flies away from him, perhaps when he needs it the most. A man’s reputation may be sacrificed in a moment of ill-considered action. The people who are prone to fall on their knees to do us honor when success is with us may be the first to throw the stone of malice when failure settles its cloud upon our heads. The one absolutely unselfish friend that a man can have in this selfish world, the one that never deserts him and the one that never proves ungrateful or treacherous is his dog.

Gentlemen of the jury: A man’s dog stands by him in prosperity and in poverty, in health and in sickness. He will sleep on the cold ground, where the wintry winds blow and the snow drives fiercely, if only he may be near his master’s side. He will kiss the hand that has no food to offer, he will lick the wounds and sores that come in encounters with the roughness of the world. He guards the sleep of his pauper master as if he were a prince. When all other friends desert, he remains.

When riches take wings and reputation falls to pieces, he is as constant in his love as the sun in its journey through the heavens.If fortune drives the master forth an outcast in the world, friendless and homeless, the faithful dog asks no higher privilege than that of accompanying him to guard against danger, to fight against his enemies, and when the last scene of all comes, and death takes the master in its embrace and his body is laid away in the cold ground, no matter if all other friends pursue their way, there by his graveside will the noble dog be found, his head between his paws, his eyes sad but open in alert watchfulness, faithful and true even to death.”

The Google Toothbrush test

3 Feb

Google’s toothbrush test for new services (introduced by Larry Page):” Will everyone use it at least twice a day?” Services such as Google Search, Google Mail and Android certainly pass the test. #innovation

This should be what firms think about as they create new products (I suppose we will need to think how we can move products which have passed the floss test – where people know the product/service is important but don’t use it enough – and push it on to pass the toothbrush test!!)

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