Government efforts to lessen the economic damage of the Covid-19 pandemic are too weak, experts and business owners have told Myanmar Now.
Myanmar’s central bank has so far lowered interest rates by three percentage points, from 10% before the pandemic to 7% as of April 27, and announced plans to increase business lending for three key industries.
The government on March 18 also postponed income, commercial and export tax deadlines until the end of the fiscal year, in September.
But many say these efforts are underfunded and too narrowly targeted, and that they lack a vision for a post-pandemic recovery.
The Asian Development Bank (ADB) announced in early April that the Covid-19 outbreak could slow Myanmar’s economic growth by more than two percentage points, from 6.8% last year to about 4.2% this year.
The government plans a 100bn kyat (about $70m) loan scheme for three key sectors it says are particularly hard-hit by the pandemic: manufacturing, hotels and tourism and small- and medium-sized businesses. It will charge 1% interest on the one-year loans.
But several business leaders are calling the plan inadequate.
“A100bn kyat budget seems like a lot, but it’s nothing compared to the country’s GDP,” Union of Myanmar Travel Association chairman Naung Naung Han told Myanmar Now.
The figure is slightly less than 0.1% of the country’s GDP, which was just over $71bn in 2018, according to the World Bank.
In comparison, the US is spending $2.3tn, or about 10% of the country’s GDP, while Thailand is spending 1.5tn bhat, or about 8.9% of its GDP, and Singapore is spending SGD$6bn, or 8% of its GDP, according to an International Monetary Fund report on global Covid-19 responses.
“This is not enough,” Naung Naung Han said. “The country needs to be spending trillions (of kyat) in this situation... not billions.”
So far over 6bn kyat in loans have been approved for 88 businesses in Myanmar, and the government is still accepting applications, according to Aung Naing Oo, the secretary of a committee focused on helping businesses survive the pandemic.
The Union of Myanmar Travel Association told Myanmar Now it will take about 200bn kyat to keep the hotels and tourism industry solvent through the next three months, while virtually the entire industry is shut down.
“Neighbouring countries with large tourism industries like Thailand, Malaysia and Singapore will compete to regain market share (after the pandemic). They’ll reduce prices and offer attractive packages, and we need to be able to compete with that,” said Naung Naung Han. “If we can’t... it will be very difficult for us in the long term.”
With the industry now shut down for at least a quarter of the year, a one-year loan is not enough, said Myanmar Tourism Federation vice chairman Khin Aung Tun.
Dr Zaw Oo, executive director of the Centre for Economic and Social Development, said economic development grants that other countries have used offer a more effective long-term solution.
“It’s not about just lending money. There has to be a strategy for after all of this,” he said.
He said the government’s focus on just three sectors is too narrow to help stabilise the broader economy.
“It’s not enough just to focus on tourism and small- and medium-sized businesses. Covid-19 affects the whole economy,” he said.
He also described the current approach as short-sighted.
“Other countries have follow-up strategies for after grants and loans are given. I think we should have this too,” he said.
‘I don’t want to let any staff go’
Others, though, are grateful for the loans.
Myo Thant Swe, owner of the Mandalay-based tea seller U Kar Ka, said a government loan would be a lifesaver for him. He applied for one in early April and is still waiting for his application to be reviewed.
In March he was forced to stop exporting dried tea leaves to the US, Australia, the Czech Republic and several other western countries because of the pandemic.
Now he’s worried if he’ll be able to pay his staff.
“Trading has ceased almost completely. I don’t want to let any employees go - we’ve built this business together - but now I’m struggling to pay them,” he told Myanmar Now.
He said his more than 200 employees are still receiving their full salaries for the time being, and no one’s been let go yet, but it’s becoming more and more difficult. March is usually the peak of his sales season.
During Thingyan, with factories closed and everyone urged to stay home, the government sent out basic food items like rice, oil, salt and onions to help the poorest families, and it made the first 150 units of electricity free for every home and apartment.
Zaw Oo called this a “short-term solution” and called for a longer-term plan to ensure job and food security for the poor.
More than 1m tonnes of rice have been exported this year, with the country aiming to export 3m tonnes by December 31, according to the Myanmar Rice Federation.
On April 7 the commerce ministry’s trade department ordered rice exporters to sell 10% of their stock to a government-held national reserve, to ensure food security and price stability during the pandemic.
But economist Aung Ko Ko called for more, telling Myanmar Now the government should only export a few thousand tonnes for the time being, to keep prices and supplies stable domestically.
He also stressed the need for new jobs programs. “New investment is needed,” he said.
Early in April the Myanmar Investment Commission said it had granted 11 construction, manufacturing and service sector businesses licenses to begin operating in the midst of the pandemic, creating more than 3,200 new jobs.
The Asian Development Bank is offering loans of up to $20bn to bolster national economies in the Asia-Pacific region, including Myanmar’s, bank president Masa Asakawa announced early this month.
That’s triple the bank’s pre-pandemic lending for the region of about $6.5m.
It is unclear how much of the new loan money will be available specifically for Myanmar, but the bank announced last week a $50m ‘emergency’ loan for the country in response to the pandemic.
Lawmakers will discuss how to spend the loan when parliament meets next.
“We have to buy masks, reagents and other equipment, and we’ll need to buy these supplies as long as we are testing for Covid-19. The more money we have the easier this will be,” said MP Dr San Shwe Win, chairman of the health and sports committee.
Courtesy Myanmar Now