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Despite Low Rating, Business Climate Improving: WB

For a country rolling out economic reforms at a startling pace, Myanmar’s lowly ranking among the likes of Eritrea and Chad for ease of doing business might set off alarm bells for would-be foreign investors.

The good news for firms seeking to tap the country’s natural resources, tourism potential and urgent infrastructure needs is Myanmar is making progress in preventing the rampant graft, bureaucracy and cronyism that under military rule made it one of the world’s riskiest places to do business, according to the International Finance Corp (IFC), the private-sector arm of the World Bank.

“For the first time, this year’s Doing Business report measures regulations in Myanmar, a country that has started to open up to the global economy after years of isolation,” said Kanthan Shankar, country manager of the World Bank in Myanmar.

“The data show that there is considerable scope for reform, and efforts are under way to improve the country’s business regulations. By removing bottlenecks to firm creation and growth, governments can signal the emergence of a more business-friendly environment, as has already been done in a large number of economies in the region.”

The report, Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises finds that since 2005, 22 of 23 economies in East Asia and the Pacific have made their regulatory environments more business-friendly. Among the region’s economies, China made the greatest progress during that time in improving business regulations for local entrepreneurs.

Myanmar’s inaugural ranking of 182 from 189 countries covered in the World Bank’s annual Doing Business report on Tuesday should not be taken at face value, said Charles Schneider, the resident IFC representative in Yangon.

“All the indices point towards corruption, but with increased transparency and increased use of tendering they have taken a lot of question marks out of these processes,” Schneider said.

Since replacing a military regime in March 2011, Myanmar’s quasi-civilian government has introduced a wave of economic, political and social reforms, which convinced Western countries to restart development aid and suspend most of the sanctions that for two decades prohibited trade and investment.

Under the junta, Myanmar’s investment climate was considered high-risk for firms, with many put off by the its reputation for corruption, limited legal safeguards and opaque deals struck largely without tenders.

In an effort to create urgently needed jobs and infrastructure in one of Asia’s poorest countries, Myanmar has sought help in drafting new legislation and setting up panels led by technocrats to try to improve the investment climate.

Myanmar, however, was still far behind Southeast Asia’s biggest economies according to the report, with average time taken to set up a business 72 days compared with 2.5 in Singapore, 27.5 in Thailand and 6 in Malaysia.

For procedures involved in acquiring construction permits, there were eight in Thailand, 11 in Singapore and 16 in Myanmar. Gaining electricity access took an average 113 days in Myanmar, compared to 34 in Malaysia and 35 in Thailand, the study showed.

Schneider said Myanmar had started from a low base and still had a long way to go in areas like regulation, licensing, and dispute settlement mechanisms.

But new banking and micro finance laws and parliament’s passing of an investment bill last year offering tax breaks, long land leases and foreign participation in most sectors were signs of its commitment to attracting businesses.

“The government is way ahead of the curve on many of these reform programmes,” he said.

“A better business climate can enable entrepreneurs and investors to create more job opportunities for the people of Myanmar,” he added.

“Measuring regulations and other indicators of a business-friendly environment in Myanmar is a great step forward for Myanmar’s economy. As a new entrant to Doing Business, Myanmar now has a good benchmark for measuring the results of its reform program.”

A break from the past was the holding of an auction for telecoms licences, he said, which passed heavy scrutiny. Telecoms is seen by many economists as one of the most important development areas in Myanmar and a sector, that like many, was monopolised for years by a state-run firm.

Qatar’s Ooredoo, and Norway’s Telenor won the rights to provide telecoms services in June.

“It’s a couple of years … Myanmar can easily be at the stage where they are doing as well as other AEC members,” Schneider said, referring to the ASEAN Economic Community, which will come into play in 2016.

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