II THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR III ACKNOWLEDGMENTS This paper was prepared by Dr. Jared Bissinger. The author is grateful for comments and suggestions on earlier drafts from Lynn Salinger, Bruce Bolnick, and other participants in the Economic Reform and Growth Dynamics THE PRIVATE SECTOR Study workshop held at the PSDA office in Yangon, Myanmar on January 13-14, 2016. AND THE GOVERNANCE OF BUSINESS IN MYANMAR DISCLAIMER PHOTO CREDITS This document is made possible by the support of the American people through the United States Agency for The team would like to thank the following for the photos provided. International Development (USAID). Its contents are the sole responsibility of the author or authors and do not - Jeffrey Barth, Paula Bronstein, Tom Cheatham, Markus Kostner, Simone D. Mc Courtie, Nyi Zaw Moe necessarily reflect the views of USAID or the United States government. - Asian Development Bank - World Bank II THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR III ECONOMIC REFORM AND GROWTH DYNAMICS DISCUSSION PAPER SERIES LIST OF ACRONYMS In 2015, as Myanmar prepared for new elections, the United States Agency DAO Development Affairs Organization for International Development (USAID) commissioned a set of discussion DICA Directorate of Investment and Company Administration papers to review Myanmar’s economic status, benchmark its performance FY Fiscal year relative to other countries, and identify priority policy reforms, investments, GAD General Administration Department and institutional innovations to re-establish the country on a new, GDP Gross domestic product inclusive growth path. This effort has been led by Nathan Associates under ICA Investment Climate Assessment the Private Sector Development Activity (PSDA) and the Association IMF International Monetary Fund of Southeast Asian Nations (ASEAN) Connectivity through Trade and IRD Internal Revenue Department Investment project Economic Reform through ASEAN Integration program. JV Joint venture MCDC Mandalay City Development Committee Nathan Associates has a long history of providing economic analysis of MEB Myanmar Economic Bank the Myanmar economy. Originally headed by the economist Robert R. MEC Myanmar Economic Corporation Nathan, who helped develop the United States’ first national accounts in MGE Myanmar Gems Enterprise the U.S. Department of Commerce, Nathan Associates was founded in MoHT Ministry of Hotels and Tourism 1946 to provide applied economic analysis services to clients in the United MNPED Ministry of National Planning and Economic Development States and around the globe and started working in Burma in 1951 at the MOGE Myanmar Oil and Gas Enterprise request of the U Nu government. The latter sought “advice with respect MSIC Myanmar Standard Industrial Classification to various important aspects of the country’s economy and engineering MSME Micro, small, and medium enterprise problems and assistance in solving practical operating difficulties.” Nathan NLD National League for Democracy Associates worked in Burma until 1959 with two U.S. engineering firms to OECD Organization for Economic Cooperation and Development deliver this advice, initially with funding from the U.S. Technical Cooperation PSDA Private Sector Development Activity Administration (a predecessor to USAID) and later with direct support RC Revolutionary Council from the Burmese government. SEE State-owned economic enterprise In 1953, Nathan Associates, along with the firms of Knappen Tippetts SLORC State Law and Order Restoration Council Abbett McCarthy Engineers and Pierce Management, delivered to the U SME Small and medium enterprise Nu government an 8-year economic and social development program. The SPDC State Peace and Development Council comprehensive plan, “Economic and Engineering Development of Burma,” S/R State/Region laid out a strategy of economic and administrative policies to stimulate TDAC Township Development Affairs Committee growth in agriculture and irrigation, transportation, telecommunications, UMEHL Union of Myanmar Economic Holdings Limited power, and industry, along with an analysis of the country’s macroeconomic UMFCCI Republic of the Union of Myanmar Federation of Chambers of conditions. Unfortunately, what the report called a “golden opportunity” Commerce and Industry for rapid growth was lost, as many of the recommendations were set aside UNDP United Nations Development Program due to political developments in the late 1950s and early 1960s. UNESCAP United Nations Economic and Social Commission for Asia and the Pacific The present set of discussion papers is designed to revive the initiative UNFPA United Nations Population Fund begun more than 60 years ago, providing a careful analysis of conditions USAID United States Agency for International Development in Myanmar and recommendations on how the country can accelerate its USDP Union Solidarity and Development Party integration into the global economy and deliver growth and prosperity to YCDC Yangon City Development Committee all of the people of the country. Lynn Salinger, Principal Associate at Nathan Associates, has led the design and implementation of the discussion paper series in collaboration with Steve Parker, Chief of Party of the Private Sector Development Activity, and Tim Buehrer, Chief of Party of the ASEAN Connectivity through Trade and Investment Project. Daniel Swift has supervised the effort from the U.S. Agency for International Development Mission to Burma. IV THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR THE PRIVATE SECTOR AND THE GOVERNANCE OF BUSINESS IN MYANMAR V CONTENTS ILLUSTRATIONS Acknowledgment ..................................................................................................... II Figures List of Acronyms .......................................................................................................V Figure 1: UMFCCI Membership, by Sector, 2015.............................................23 1. Introduction ......................................................................................................... 3 Figure 2: Myanmar Government Structure ......................................................31 2. History of Economic Governance and the Private Sector in Burma .....7 Figure 3: Governance of the Private Sector .....................................................36 3. Profile of the Private Sector and Other Key Economic Actors.............13 Definitions and Context of Data ..................................................................14 Tables The Private Sector ...........................................................................................15 Table 1: Proposed Definition of Small and Medium Enterprises (Draft, 2015) ...15 Private Sector Associations ............................................................................22 Table 2: Current Classifications of Small, Medium, and Large Enterprises ... 15 State-Owned and State-Linked Enterprises ...............................................24 Table 3: Distribution of Businesses by Size and Registration (2013) ..........16 4. The Structure of Myanmar’s Government .................................................29 Table 4: Businesses Registered with DICA by Ownership Type (2013) .....16 Definitions of Administrative Decentralization .........................................30 Table 5: Distribution of Manufacturing Enterprises, by Sector and Size, 2013 .....17 Overview of Government Structure in Myanmar ....................................31 Table 6: Distribution of Manufacturing Businesses, by Location and Size, 2015 ........18 Distribution of Public Revenue .....................................................................40 Table 7: Geographical Distribution of Firms, 2014 .........................................19 5. Economic Governance and the Business Enabling Environment ...........43 Table 8: Number of Recorded Operating Firms and Employees of Operating Economic Governance at the Local Level ..................................................44 Firms per 1,000 people, by State/Region, 2014 ................................20 6. Potential Areas for Further Work ................................................................51 Table 9: Types of DAO-Registered Enterprises, 2015 .....................................21 Researching Government Budgets at the S/R and Local Levels ............51 Table 10: Tourism Sector Enterprises, 2014 .....................................................22 Aggregating and Analyzing Local- and Union-Level Business Operating License Data ...52 Table 11: Sources of Myanmar Government Revenue ...................................25 Survey Research ...............................................................................................53 Table 12: List of State-Owned Economic Enterprises and Parent Ministries, 2015 .....26 Understanding Non-Tax and SEE Revenue Sources .................................53 Table 13: Government Ministries in Myanmar, 2015 ......................................32 Documenting Administrative Barriers in Agriculture, Livestock, and Fisheries ....54 Table 14: State/Region Sources of Revenue .....................................................34 Documenting Additional Sources of Data ..................................................55 Table 15: General Administration Department Township Administrator Functions.....37 Investigating