Ways for Myanmar to make better headway

Chote Sophonpanich, deputy chairman of the ESCAP Business Advisory Council, outlined rules for achieving success at the recent Myanmar Business Development Week organised by UNESCAP. The following are highlights from his speech.

 

Leaders have to decide. But the important decisions are usually those on subjects in which they have little or no experience. To be able to make decisions soundly, they have to learn and understand successful models, and find ways to allocate resources to achieve what is possible. In this pursuit, simple issues will be complicated. Should one jump into Internet schooling or follow a traditional education system? As one delves deeper into an issue, one discovers more complexities. One needs to sort out priorities, the demands of various stakeholders, the availability and lack of resources, the need to maintain social harmony and conserve the environment. Deciding takes time and should take time. For it is a great responsibility.

Certain things a government has to decide upon and execute itself. Maintaining law and order, running the armed forces, providing financial supervision are examples. In these areas, the government has a monopoly. In other areas, however, the government should refrain, where private businesses can provide the best solution.  

Private businesses must compete to survive. The system creates firms who can do an excellent job in providing goods and services to the public at the lowest cost. So, refrain from subsidising those that cannot compete, and do not create monopolies. Instead, the government should provide and maintain a platform for private businesses to compete, so they can serve society rather than take from society. 

I congratulate the Myanmar government on the recent successful licensing of telecom services. Participants agreed it was a transparent process and the bidding was fair. This was an excellent example of separating “deciding” from “doing”. 

There is an old saying in sports: those who play should not coach, and those who referee should not play. It is better for the government to be the referee, and focus on becoming a good referee.  

Having said this, businesses are not good at doing everything. Here, I would like to mention non-governmental organizations. NGO members are passionate about their causes. Most are volunteers. They are more effective in many welfare functions because they follow their hearts and beliefs. They can perform roles that businesses are not equipped to.

After deciding, the government needs to measure, monitor and correct. Monitoring needs discipline and consistency, because people are adept at finding ways to break rules, discover short cuts and engage in distractions. 

This brings me to the second point. How to be successful. In any sport, to win, a capable team is a must. A good team needs to be compensated well. 

Decent pay is not a guarantee of good performance, but it is a good starting point. Lousy pay will guarantee losing. Low pay can lead to cheating, lying, cynicism and the unravelling of the moral fabric of society. We want our leaders to have dignity, to be fair and to provide good examples. This can only happen if leaders are paid well. 

You may ask how a poor country can afford decent pay. The answer is simple: a poor country cannot afford corruption. Corruption costs more than the amount of the bribe. Where the contractor is not qualified, the project will be delayed, cost overruns will occur, and there will be defects in the product. It is possible that losses from corruption are more than the total salaries of the government. If the police are corrup, there can be no law and order; if teachers are not committed, there will be no future for children; if leaders are not dedicated, the future of the country is left in doubt. 

By minimising corruption, we maximize the chance that government decisions will be based on facts and reason, on expected costs and benefits. Within our region, Singapore and Hong-Kong have applied this principle well. Their people have benefitted. 

People have told me they do not mind better salaries for civil servants if they do their job properly. I agree. We need to invest in capacity building, in training and building capability. Training gives the best return on investment. Teach, demonstrate and then practice under supervision. Then more practice. Practice. This is how the army turns fresh recruits into capable soldiers. This is how coaches develop athletes. 

The same method was used to train over a million American women to work in factories when the men had to join the military during the Second World War. In only a few months, the women became competent workers and helped America to win the war. 

The same method was adopted by Toyota to build quality, improve job relations, to lower costs and to become the most profitable motor company in the world. Sixty years ago it was one of the smallest, today it is the largest. 

My third point is on preventing economic crisis. My experience in Asia tells me that once a framework for economic development has been established, foreign investment, infrastructure investment, and increased employment and household income will create an economic boom. The question is: how to contain the boom?  

Demand will exceed supply. Inflation will rise and asset prices will increase quickly. There will be social discontent. This is the current experience. Do not add fuel to the fire by overspending or overheat the economy; do not engage in populist projects. They seldom increase supply and will worsen inflation. There is an old Chinese saying: When you give a man a fish, you feed him for a day. When you teach him to fish, he will never be hungry. 

Instead, plan to balance the budget. Focus on increasing supply and increasing productivity. Follow the telecom concession example. Technology, know-how, knowledge and training will work together. 

To prevent economic crisis, set up an independent central banking system to regulate and supervise banks, deter them from optimistic lending, prevent excessive inflow of foreign capital and prevent government overspending.  

One of the basic causes of the Asian financial crisis in 1997 was because most banks did not know how to properly appraise a loan application. Sound lending practice was known, but most banks did not practice it. The central banks also did not know how to supervise commercial banks. They believed what the commercial banks told them, that lending practice was an rather than a series of steps taught by institutes or bankers’ associations in developed economies. 

Ignorance and negligence were not only restricted to the Asian banks. The leading European, American and Japanese banks also rushed in to lend money to Asian companies and financial institutions without proper analysis. They caused huge capital flow into Asia. It was like pouring oil onto fire. 

In matters of money, greed and temptation are not far away. We need discipline, monitoring and auditing. An independent and respected central bank is essential. 

Once these basic approaches and frameworks are set and the basic proven procedures are followed, success will follow. I expect the GDP of Myanmar to grow more than 8 per cent per year for the next few years. More and in a sustainable way if the approaches mentioned are applied. 

 

Chote Sophonpanich is deputy chairman of the ESCAP Business Advisory Council and chairman of Green Spot Co.