Thursday, August 27, 2015

Political shuffle sends wrong signals to global investors

Myanmar Times   |   Wednesday, 26 August 2015

The surprise political shuffle of Thura U Shwe Mann sends the wrong signal to the international business community during an already uncertain period, according to experts.
While there have been concerns that the reform process is slowing down ahead of the elections, the ouster of parliamentary Speaker Thura U Shwe Mann from the head of the Union Solidarity and Development Party on August 12 may be making foreign investors wary ahead of the November 8 election.

There was also concern among depositors in local banks last week following the purge.
The Central Bank of Myanmar subsequently took to state media to reassure deposits, in an effort to protect confidence in the banking sector.

“I think all of this reflects a broader nervousness,” said Sean Turnell, an expert on the Myanmar economy at Australia’s Macquarie University.

Institutions such as banks rely on trust, and often acutely feel political and economic instability.

Myanmar has also embarked on an ambitious reform process, though some of the tough choices may be delayed until the election.

“As the year moves into its last quarter the effects of the reform slowdown, even retreat, are now really being felt. These, coupled with the recent political developments, have undermined confidence and trust I think,” said Mr Turnell.

Besides the banks, Thura U Shwe Mann-linked Cherry FM was taken off the air for a few days, though later returned.

Two journals linked to the Speaker have also suspended publication, and have not returned.
Mr Turnell said the banks and other enterprises are in effect the “canaries in the coal mine”, as they are the first to be impacted by uncertainty and the risk adversity this promotes.
With the world economy skittish and uncertain, it is important to make sure the internal environment does not follow.

“Time to pull together,” he said.
Some opposition politicians have linked current economic concern to policies pursued to the ruling parties..

U Phyo Min Thein, an NLD parliamentarian and member of the hluttaw’s Bank and Monetary Affairs Development Committee, said the current economic situation is volatile, with budget deficits and exchange rate fluctuations coming as a result of government policy.

“Tranquility is the main thing for the pre-election period,” he said. Foreign investors are surely watching Myanmar’s performance, but may think the reform activities have now stopped.

U Phyo Min Thein also pointed to the International Monetary Fund’s Article IV consultation mission to Myanmar in late June. The fund’s officials met with senior government officials, suggesting tighter monetary and fiscal policies to prevent downside risks in trade and currency, he said.

“Forcing business closures without any reason may be normal in Myanmar, but it affects the government’s reputation,” said economist U Hla Maung.

“Foreign investors could become reluctant and are watching their step even before the election has arrived.” Several USDP officials declined to comment for this article.