Myanmar Government Prioritizes Economic Recovery

Myanmar Government Prioritizes Economic Recovery as Pandemic Infections Decline Amid Return of National Stability Ahead of Preparations for Multi-Party National Elections

Nay Pyi Taw, Dec 7, 2021 - (ACN Newswire) - The Myanmar Government said today that it has largely restored national stability after recent civil unrest and is now focused on increasing vaccination rates to reduce COVID-19 infections and attracting local and foreign investments to jump-start economic growth and job creation.

The Ministry of Information (MOI) and Ministry of Investment and Foreign Economic Relations (MIFER) said in a joint statement that with the restoration of stability, economic recovery was now a top priority as the Government prepares for multi-party elections to be held by August 2023.

The Union Election Commission has reviewed weaknesses, fraud and malpractices in the 8 November 2020 elections. It has held 3 consultations with political parties between February and November 2021. A fourth consultation will be held this month to discuss the Proportional Representation System. To update data and to prevent voter fraud, joint inspection teams led by the Commission have started audit of membership, funding, premises, business dealings and election expenses of all political parties.

Preparations for elections are taking place amid a significant rise in domestic applications for investments. Upon approval, domestic investments are expected to increase by over 50% in 2021-2022 (November to October) compared to 2020-2021. The Government is aware of concerns among foreign investors and is addressing issues of business travel, health and safety of staff, and apparent pressure from some quarters of the international community.

The two Ministers, on behalf of the Myanmar Government, announced that:

i) Gross Domestic Product (GDP) in 2020-2021 is likely to contract by single digit - less dire than forecasts of some international economists. The single-digit contraction is due to the combined impact of the pandemic and civil unrest. Myanmar Government expects recovery to positive GDP growth in 2021-2022.

The economic recovery is due to the combination of lower rates of pandemic infection amid increased vaccination rates, return to national stability, and increasing investment commitments, especially domestic investments.

ii) The Health Ministry is assessing new COVID-19 variants such as Omicron before announcing business travel protocols including vaccinated travel lanes.

iii) MIFER expects domestic investments (Myanmar Citizens Investments, or MCI) to increase by over 50% in 2021-2022 compared to 2020-2021. MCI will rise further in 2022-2023, based on applications received. To increase Foreign Direct Investments (FDI), MIFER is actively engaging the international business community. It is also addressing issues related to investments in certain sectors such as port development and telecommunications.

iv) The so-called 'National Unity Government (NUG) Bond' is deemed illegal as it has not been registered with relevant authorities. Myanmar nationals involved in funds transfer to transact it will be considered to have broken the law. Based on monitoring by Myanmar financial authorities, there is little local interest in this so-called bond, which appears to be a possible channel for terrorist financing from external sources.

National Security Situation

Civil disturbances earlier this year appear to be related to the 1 February 2021 Proclamation to declare a State of Emergency. The Proclamation followed failure to settle the issue of voter fraud list related to the 2020 elections, and subsequent postponement of Parliament sessions. On 2 February 2021 the State Administration Council (SAC) was formed.

Providing an update of civil unrest, MOI said that since the 1 February 2021, civil disobedience and terrorism activities carried out by the outlawed People's Defensive Force (PDF) had led to:

- 198 administrative officials from various Government and State agencies being killed and 148 other injured; the deaths of at least 12 Buddhist monks;
- damage or destruction of 397 roads and bridges, 565 Government offices, 409 telecommunications towers and 444 schools or colleges; and
- Damage to branches or offices of 26 state-owned banks and 41 private banks, amongst others.

However, civil unrest has declined significantly since early November 2021 as indicated by the resumption of most schools and normal commercial activity. Nonetheless, security forces remain on the alert.

International Collaboration on Enforcement Against Crime and Terrorism

To prevent rising cross-border cybercrime and terrorism, Myanmar Government has increased collaboration with police and public security officials from the international community.

A Myanmar delegation led by Deputy Minister for Home Affairs Lt-General Than Hlaing participated in the INTERPOL General Assembly held in Istanbul, Turkey, from 23 to 25 November 2021. The delegation held discussions with Mr Kim Jong Yang, President of INTERPOL's Executive Committee, and Mr Jurgen Stock, INTERPOL's Secretary General, as well as senior police or public security officials from China, Russia, India, Vietnam, and the United Arab Emirates.

"Despite earlier civil disturbances, the situation in Myanmar has clearly stabilized recently. This is due to efficient law enforcement and the collective wish of most Myanmar citizens to return to normal social and economic life. They are tired of the destruction of lives and property, and of other disruptions. Myanmar Government is committed to holding multi-party elections by August 2023. National stability is a pre-requisite for this important political event," said Minister of Information Mr Maung Maung Ohn.

Update on Economic and Investment Matters

The Myanmar Government estimates that in the last 23 months (coinciding with the COVID-19 outbreak in the country), 222 factories (many of them from the garment sector) were temporarily closed, 63 were permanently shuttered, and 181 had to reduce their workforce - all largely due to the pandemic.

In total about 185,324 garment workers are estimated to have lost their jobs, mostly in Yangon, Bago and Ayeyawady where most of factories involved in making, garments, shoes and bags are located.

To overcome the challenges of the pandemic, economic uncertainty and domestic issues, and to promote job creation, Myanmar Government has in recent months announced multiple economic stimulus programmes, stabilization of the kyat and assistance to the agriculture sector and small and medium enterprises.

The Government will also announce in the coming weeks the Myanmar Economic Recovery Plan (MERP). Covering the 2021-2022 to 2023-2024 period as a medium-term plan, the MERP will facilitate post-COVID-19 economic recovery ahead of the next election. It will contain 30 goals, 165 outcomes and 430 action plans to accelerate job growth and value-added economic activities. It will include reform of rules, regulations and procedures covering tax, banking, finance, trade, development of digital economy, transport and supply chains, tourism development, and agriculture, livestock and fisheries as well as energy sector and protection of the environment.

MIFER has to date received MCI applications totaling 1,795.36 billion kyat (USD 1.0 billion) for 2021-2022, a 51% increase compared to 1,171.8 billion kyat (USD 660 million) in 2020-2021, the period most affected by the pandemic and civil disturbances. MCI applications received thus far for 2022-2023 stood at 2,107.7 billion kyat (USD 1.18 billion). If approved, MCI investments for the latter period would have increased by nearly 80% compared to 2020-2021.

MIFER believes that the higher MCI, a substantial portion of which is for manufacturing, is due to: i) stabilization of the kyat; ii) increasing national stability; iii) tax incentives; iv) introduction of the Government's one-stop service for speedy business approvals; and v) relaxation of a requirement that at least 1 director must reside at least 6 months of a year in the country.

Since 2 February 2021, MIFER has approved 18 FDI projects valued at USD 3.3 billion. Approved FDI in 2020-2021 from 49 business enterprises amounted to USD 3.89 billion. The sectors that attracted most FDI were energy/power, followed by manufacturing, transport, telecommunications and real estate.

"Declining pandemic infection rates and the return of national stability have contributed to the increase in domestic investments. We have also received substantial interest in recent months from Russia and Asian countries for various economic activities. Business confidence has improved significantly. Our priority is to facilitate safe travel with appropriate health protocols and security within the country so as to generate investments, trade and jobs rapidly to expedite economic recovery," said Minister of Investment and Foreign Economic Relations Mr Aung Naing Oo.

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