10 things to look forward in 2018

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The year 2017 was annus horribilis for Myanmar with the ripple effect of the Rakhine crisis affecting the economy of the country.  Some institutions who granted awards to Daw Aung San Suu Kyi for her efforts in promoting peace and human rights withdrew the awards because of the perceived inadequate response to what happened in Rakhine. There were even efforts at re-imposing sanctions to ‘punish’ the government.   The start of 2018 will be a good time to focus on the issues that will define the rest of the year. Positive results of the recommended ten items will make this year a better time for Myanmar people and those residing in the country.

  1. More optimism and confidence in the local economy

A business survey conducted among UMFCCI members showed a decrease in investors’ confidence in the country.  The dip in the business confidence   were attributed to various factors, with government policies and the Rakhine crisis among the top issues.  With a clear manifestation from the business sector, the government should take a second look at how the issues expressed can be addressed, and respond to them as fast as possible.  Policy-making and promulgation of the needed laws should be prioritized to convince investors the government is serious in addressing their concerns. As for the Rakhine crisis, the government should continue to work with the international community in working out a solution, instead of looking at it as just an ordinary domestic problem.

  1. New telecom company will bring more benefits

Myanmar leapfrogged from analog to digital telecommunications in a short span of time. With three main players, telecom services became affordable allowing even those in the rural areas to have a hand phone. Smart phones are now a common necessary gadget, and with it potentials for online businesses.  The news of a fourth telecom company MyTel, was met with mixed responses. Many people expect the new provider will further make the market more competitive and that would  mean lower fees for services. There were also those who thought that the new player will only result to migration of clients from existing telecom companies to the new player, affecting the bottomline of existing telecom companies. Migration may actually happen if there is a perception that the services of the new player is more efficient, when in fact, it may be due to the initial small number of clients as it open its services in the country. If ever there will be decrease in the bottomline of existing telecom companies, it is hope that the services will not digress and the fees will not increase.

  1. Increased confidence in the stock market

Despite low trading volume, the stock market has consistently attracted companies to list. So far, there are now five listed companies: FMI, Thilawa SEZ, First Private Bank, Myanmar Citizen Bank and the latest company TMH Public Company. It is also noteworthy to consider that the listed companies are from various industries – banking, industry, telecom and a holding company. Opening up the market to foreign investors will not only induce more volume develop more trust to the market.

  1. Real estate to continue on its growth

The real estate sector is continuing to grow as the government focuses on urban development, high end properties and promotion of low cost housing. More laws are also providing impetus for the sector to be more vibrant. With the new Condominium Law, the sector is expected to attract more foreign investors and buyers.

  1. Improved facilities in tourism areas

Tourism is one of the main drivers of the local economy as tourist areas are spread out in various regions and states. People in tourist areas also benefit through the employment they generate and the related industries that supply the facilities in the areas.  As investments in tourist areas consistently flowed, the quantity and the quality of facilities also improved to the benefit of the tourists, resulting to the rise in the number of visitors. Another positive result is the reduction in price, where in some areas the price are closer to the level of neighboring countries like Thailand, Vietnam and Cambodia.  The quality of the facilities and the area makes tourism in Myanmar not only an enjoyable experience but a memorable one.

  1. Reliable urban transportation system

The liberalization of car importation increased the number of cars. Problems related to it also started to manifest, the buildup of traffic congestion. More cars, more idle time as traffic congestion is nearing the level of Thailand and the Philippines. Plans to have more roads and the improvement of existing ones have to be initiated to cope with the demand of the future.  Another concern is the right-hand driving with a left-hand traffic rules. For the commuters, there is a need to fix the operation of taxis – metering and ridesharing units like Uber.  Upgrading of the train system is also necessary to decongest the roads.

  1. More sustainable financing for SMEs

The missing middle becomes evident in Myanmar as banking regulations restrict access to finance of small and medium enterprises (SME).  Small livelihood types of economic activities are provided with financing from hundreds of microfinance institutions (MFI), while large enterprises are able to access from commercial banks. But the more than 90% SMEs in the country has nowhere to go. Policies on collaterals restrict the flow of funds to SMEs, making them prey to informal moneylenders who charge high interest rates. Some banks are pilot-testing guarantee programs and hope it can be mainstreamed in the near future.

  1. Kyats will stabilize in relation to the dollar

The Kyats has been down and continue to go down since the country opened up to the global market. The challenge is for the government to follow an economic program that will strengthen domestic production and focus on importing goods that will enhance the country’s production capacity. Other factors have to be addressed as well to stabilize the kyats.

  1. Reasonable wages for workers

Cheap labor is an advantage of the country, but as inflation eats up the value of the workers’ wages, the clamor for higher wages to cope with the cost of living will be heard. There will be a conflict of interest as workers fight for higher wages while employers will protect their profits and return on investments. There needs to be a balance where people can live with their wages and at the same time corporate income is assured.

  1. Poverty will be reduced

One third of the country is considered poor. As the country progresses, the people should also advance economically. No sector of the population should be left out.  As such, the benefits of development should not only trickle down to the poorest, but it should be sustainable. Government programs are in place and it is hoped that it will prevent people from falling into the pit of poverty. The business sector is also expected to share the burden through their corporate social responsibility (CSR) activities.

Originally published in Myanmar Insider, January 2018

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WORM’S EYE VIEW: THE YUNUS PERSPECTIVE

Yunus_Book_HomePagePhoto source: Yunus book homepage

In an emerging economy like Myanmar, how can development be hastened and reduce, if not totally eradicate poverty? Prof. Mohammad Yunus, Nobel laureate and founder of Grameen Bank shared his experience in a forum in Yangon organized by actionaid, an international NGO, the National Economic and Social Advisory Council (NESAC) and the Union of Myanmar Federation of Chamber of Commerce and Industry (UMFCCI). He emphasized financial inclusion and entrepreneurship as among the most important elements in developing small and medium enterprises (SME) in the country. The gist of his talk:

It was not a pleasant experience to witness people dying of hunger. Coming back from the US to teach at the Chittagong University, seeing widespread poverty in his country was life-changing. He asked himself how he can be of help to improve the lives of people. His reflections made him to conclude that most of the things you learn in the classrooms clashes with reality.

As we get educated, we “fly” higher and observe the world from a distance. We call this the bird’s eye view, where we see wide and thought we have seen everything. We see a lot but not much and lead us to do sweeping generalizations which made the problem harder to address. This perspective detach us you from reality.

At the ground level, it is different. As we go to the communities, we set eyes on individual persons. We know them and feel their sufferings and see their struggles. This is what we call the worm’s eye view. This is more powerful because we catch a glimpse of tiny little bits of the problem. Tiny in the sense that it refers to individual persons. We see the life of an individual which is easier to address because it is only one.

The worm’s eye view allowed him to view things in a different perspective. He saw loan sharks controlling the lives of the people, a cruel system draining the energy of the poor. He was happy to lend them himself until it grew to where it has to be done in a more organized manner. The worm’s eye view allowed him to develop a methodology different from those with bird’s eye view perspectives.

The approaches developed were considered unconventional.
• They loaned money to people without money, when traditional banks lend only to people with properties and money to pay back;
• They loaned without collateral, when loans must be secured;
• They brought banking services to the doorsteps of the clients, when standard bank services require clients to go to bank premises to be served;
• The clients owned the bank, when commercial banks are reserved only for those who have money.
These approaches developed the Grameen Bank in Bangladesh which now served 8.4 million borrowers, 97% of whom are women lending more than US$8 billion. It has turned the banking service upside down and became the model of microfinance in many countries.

After building the institution that provides financial services, building up enterprises that provides employment is the next agenda. Entrepreneurship is inherent in all of us especially the poor. However, entrepreneurial spirit is pushed down inside of the person and comes out after the person is inspired to do so. This happens when the system around us does not encourage entrepreneurial spirit to thrive and flourish.

Grameen Bank has involved in social businesses that have also promoted entrepreneurship among its members. Some of these are:

• Technology. In partnership with Telenor, Grameen Phone was launched where the village telephone lady provided service for everyone who wanted to call. It has since then become the biggest phone company in Bangladesh;

• Health services. Ultrasound and consultation through tablets to reduce death during pregnancies. Now an app for ECG to be installed in the cell phone is being considered.

• Energy. Distribution of solar home systems. Since 18 years ago, now the company sold 1.5 solar home systems.

• Food. To address malnutrition, we partnered with a company to produce yoghurt with vitamins and minerals.

Other ideas are being considered the Social Business Fund is being set up. In the universities, students were now taught to have options – to make profits or to make people happy by doing social businesses that help improve living conditions. This is the continuing effort that each one should pursue.

From the experience of Prof. Yunus and Grameen Bank, it is imperative that financial infrastructure should be developed first. Facilitating access to financial services will empower the poor as they will generate income and consume products and services that will increase demand. It is in this context that the further strengthening of microfinance institutions and other community-based organizations like cooperatives and self-help groups should be prioritized.

Notes on the QSEM

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The Qualitative Social and Economic Monitoring (QSEM) is a study conducted annually by Livelihoods and Food Security Trust Fund (LIFT), a multi-donor platform, to look at the changes resulting from the development interventions in various parts of Myanmar. The Round 4 of the QSEM conducted from March to May 2014 involving 1,474 respondents was recently released by LIFT and World Bank, highlighting the trends and transformation happening in the rural areas of the country. It covered 54 villages from the following states where LIFT has concentration of projects: Ayeyawardy, Chin, Magway, Mandalay, Rakhine and Shan.

Round 4 results have shown positive developments in the rural areas. The main findings were summarized as follows:

1. Villagers experienced better returns on their livelihoods than in previous years, though underlying structural constraints persisted;
2. Non-farm diversification and migration increased;
3. Certain poorer households were not able to benefit equally from such positive trends; there were risks of inequality; and,
4. There were small but important shifts in how people interacted with local government officials.

The results are important in a way that showed the effectiveness of the development efforts in Myanmar and the receptiveness of the people in the development efforts. Among the other noteworthy issues raised in the Round 4 report and discussed during the presentation last February 5, 2015 included the following:

1. Labor migration is increasing. As development is felt in key cities, people from the rural areas are moving to the cities particularly Yangon and Mandalay looking for more opportunities. Migration outside the country is also observed. Because of this, labor for agricultural production may be affected in the future although it is not yet felt at present. It was also observed in some areas that during peak seasons like planting and harvesting, there are no enough farm laborers to hire. Inversely, during non-peak season, there is no work for labourers, pushing them to find work in the cities.

2. Diversification of income source. The increasing number of non-farm activities rural people to move away from agricultural production. This may be an issue for food security if people stay away from agricultural production activities.

3. Increasing influence of village tract leaders. This is an additional layer in the bureaucracy. We not only deal with village heads and township officials but also with the village tract leaders. This may also be an opportunity in area where the village heads are uncooperative, with the village tract leaders may be an alternative source of support.

4. Social capital and institutional development. Most of the people’s organizations were formed for mobilization. There is a need now to transition these organizations to do economic activities and provide them with capacities and skills in managing not only organizations but enterprises as well.

5. Connectivity is promoted by cellphones. The use of cell phones for development initiatives has yet to be maximized. With apps for mobile money, market information and other updates, the community can benefit much from utilizing it as a tool for development work.

Myanmar Microfinance Updates

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The Microfinance Working Group is an informal network of microfinance institutions in Myanmar who regularly meet every two months to share updates and discuss issues affecting the industry. The first meeting for 2015 was hosted by BRAC Myanmar in their Yangon office. Among the challenges discussed during the meeting are the following:

  • Most of the MFIs are not yet ready for the integration of mobile money in their operations. As Paul Luchtenberg of UNCDF stated, it is not an issue of the MFI saying yes or no, but a matter of when. As the telecom companies and the Myanmar Central Bank is working on the regulatory framework, the banking and MFI sectors seemed still not ready for it.
  • Access to funding is still a concern for most of the MFIs. A regulation was issued in the latter part of 2014, covering the subject of accessing funding local institutions accessing international funds and international institutions accessing local funds. Two MFIs applied to check on the process.
  • Limited available local staff with skills. The manpower pool is limited, which lead to the hiring of staff from outside the country, more particularly for supervisory positions. MFIs who wanted to expand faster has to work on how to have more experienced staff to field in newly opened areas.
  • Alien staff mobility. Related to the hiring of staff is the issue of permission to move around the area of operations. Alien staff has to work on its permission to stay and the permission to go around the village, the quarter, the village tract and the township. Dealing with the different local authorities have become tedious and repetitive to some and has become a major work in terms of doing paperwork and meeting with local authorities.
  • Communication within the industry has become a problem as it was observed that Yangon-based institutions get updates from government agencies while those based outside of Yangon were sometimes not updated. The Working Group is looked upon to be the communication hub, but its informal nature does not allow it to maintain a secretariat. Microfinance Association, the supposed industry organization has not been active in the area of coordination.

Participants to the meeting are still comfortable meeting regularly since the Working Group provides the much needed industry updates. Among the latest updates are as follows:

  • There are now more than 250 registered MFIs, with a number still waiting for their licenses;
  • The cap on loan amount is now equivalent to $5,000;
  • LIFT is supporting the conduct of an impact assessment of the microfinance industry.