A new minister for Planning and Finance has raised hopes for better economic management after two years of lacklustre leadership.
By THOMAS KEAN, CLARE HAMMOND and HEIN KO SOE | FRONTIER
PLANNING AND finance is perhaps the most important ministry in the civilian government, after the President’s Office and State Counsellor’s Office.
Yet for more than two years, the National League for Democracy entrusted the minister’s position to someone who was widely considered ill-equipped for the role.
U Kyaw Win has been described as honest and reliable. More often, the words indecisive and incompetent are used. What is perhaps most surprising is that his resignation on May 25 was the result of a corruption investigation.
It has been clear to most since soon after the NLD took office in March 2016 that he was not the right man for the job, yet State Counsellor Daw Aung San Suu Kyi refused to heed calls for his removal.
His replacement, U Soe Win, the former head of the Myanmar branch of Deloitte, assumes the role at a time of apparent macroeconomic stability. Economic growth, inflation, the budget deficit and current account are all at their healthiest level in years.
But beneath the surface, all is not well. The private banks are teetering as they struggle to comply with new prudential regulations, while planned reforms and market liberalisation have stalled.
Two years of weak leadership have set the NLD government back amid an escalating struggle between a reformist faction of the party and entrenched business interests over the country’s economic direction.
In such a high-stakes game, how did it go so wrong?
Building 36 in C Block looks much like any other at Yuzana Garden City, a sprawling middle-class development in Dagon Seikkan Township on Yangon’s eastern fringe.
The staircases are dim and dirty, and rats scurry through laneways filled with trash. Most of the rooms in C Block are empty; it’s the least popular at Yuzana Garden City, because it’s furthest from the main road.
It’s also a long way from the corridors of power in Nay Pyi Taw, or the hotels and restaurants where the city’s business elite cut their deals and socialise.
But it was here that Kyaw Win lived with his family in a rented apartment for 17 years. He moved out in late 2015 after winning the seat of Dagon Seikkan in the election that November.
A few months later he would be appointed minister for finance and planning in the NLD’s first cabinet, and move into government housing in Nay Pyi Taw and on Yangon’s exclusive University Avenue, near Aung San Suu Kyi’s lakeside villa.
Since reports emerged in early May that Kyaw Win was under investigation for corruption, a stream of visitors have come searching for room 201, former neighbours at Yuzana Garden City told Frontier.
“I’ve talked a lot with many people who have come to see his room. Some people didn’t ask any question about him; they just sat and looked at his room for nearly a whole day,” said one neighbour.
Kyaw Win shared his apartment with his wife and two sons, the eldest of whom was a car broker and youngest was unemployed. He worked on and off, former neighbours said, but they were never quite sure for whom.
His official CV, released by the NLD shortly after the cabinet was announced, is brief. But it contains a number of potential red flags that the party either did not recognise or ignored.
Kyaw Win was a civil servant. Born in Ayeyarwady Region, he worked for 20 years in the planning department of the Ministry of Planning and Finance before moving to its finance department and serving as a tax official from 1992 to 1997, including in downtown Yangon.
Most of the NLD government’s ministers were former civil servants, but Kyaw Win’s relatively low rank made him an unlikely choice for such an important post.
“When U Kyaw Win was announced as finance minister, I couldn’t believe it,” said the owner of an import-export business, who asked not to be identified. “How could they think this guy was up to running the economy?”
The business owner should know: he had at one time employed Kyaw Win, after he left the tax office.
Another well-connected source from the foreign investment community said, “When he was initially nominated it was like, who the hell was that?”
It is unclear who proposed Kyaw Win for the role. NLD economic advisers said he was nominated at the last minute, after other members of the party had turned the position down.
He hadn’t even been sworn in when the first scandal broke. Within hours of the NLD posting Kyaw Win’s CV, it was revealed that his masters and PhD degrees were from a fake institution, “Brooklyn Park University”. In many countries a minister found to have lied about educational qualifications would have resigned or been sacked. Not in Myanmar: Aung San Suu Kyi stuck by her man.
Finally, there was his post-ministry career. Kyaw Win’s CV says he worked in the private sector for two decades, from 1997, but names no former employers.
However, his LinkedIn profile, which has not been updated since 2016, says he lectured at Myanmar Computer Company Training Institute and consulted for several years for Mottama Holdings Ltd.
A subsidiary of Mottama called Min Dhama is a member of a consortium chosen earlier this year for the massive Yangon Central Railway Station redevelopment, which has an estimated US$2.5 billion price tag.
A representative for Mottama, which is owned by Myanmar-Chinese entrepreneur U Yang Ho, confirmed that Kyaw Win had worked as an adviser for the company from September 2007 to December 2008 and again from August 2013 to October 2015.
Until late 2013, Mottama was known as Asia Metal Company. In December that year – when Kyaw Win was apparently providing business advice – the company was sanctioned by the United States Treasury Department for building work at a Tatmadaw factory at which US officials said about 30 North Koreans were working.
The fall of Godzilla
Some were willing to give Kyaw Win a chance, perhaps assuming that the NLD had vetted him properly. After all, bringing in an outsider is not without merit; for an economy in need of difficult, possibly painful, reforms, it might even be necessary.
Within months it was obvious that Kyaw Win lacked the leadership skills and authority to instil confidence in the business community. For a start, he rarely spoke to the media or investors; often, he seemed uncomfortable about appearing in public.
In June 2016 he met leading members of the country’s peak business group, the Union of Myanmar Federation of Chambers of Commerce and Industry, to hear their views and suggestions on economic management.
As Frontier reported at the time, the UMFCCI had arranged for the leaders of groups representing 18 business sectors to speak at the event, but the minister left after hearing the opinions of just six speakers. Reporters surrounded Kyaw Win as he left, peppering him with questions about the government’s economic policy. He said he couldn’t discuss it, as it was yet to be officially approved.
The same month, a visiting delegation from the American Chamber of Commerce in Singapore got the same treatment: Kyaw Win attended a meeting with the delegation at the UMFCCI, but did not speak and walked out midway. It was not the investment pitch the delegation was expecting.
As calls for clarity reached fever pitch, the government released a 12-point economic “vision”. The three-page document did little to address concerns over the lack of policy, and was even criticised publicly by members of the NLD economic committee.
The policy paralysis may be partly attributable to a much-discussed bottleneck in the State Counsellor’s Office, but those who worked with Kyaw Win described him as indecisive, even weak.
U Naing Ko Ko, a PhD candidate at Australian National University who studies corruption, cronyism and rent-seeking in Myanmar’s banking and public finance sector, said the past two years had been a “missed opportunity”.
“Myanmar was a ship that was sailing without a competent captain, team and clear direction,” he said.
Another problem was that Kyaw Win was out of the loop on many of the reform plans that had been outlined in the NLD election manifesto and then developed by the party’s transition team.
“I don’t think he was the right man, in that he was never really at the forefront of [policy development] before the government came into office,” said one person involved in NLD policy development.
When Kyaw Win did try to reassure investors, it often backfired spectacularly. His analogy that the economy was like an aeroplane taking off became a running joke. At one meeting, he told local businesses that Myanmar should not aim to be a lion, or tiger – a reference to the Asian Tiger economies. With hard work, Myanmar could be like … Godzilla. Before long, Facebook memes spread depicting Godzilla dressed in an NLD pinni (jacket) astride a jetliner.
The best that could be said, perhaps, is that he did not seriously obstruct the party’s reform agenda. The National Economic Coordination Committee, an 11-member body set up in June 2016 that was nominally led by Kyaw Win, ensured a degree of policy consistency and drove some fiscal reforms aimed at getting the budget deficit and inflation under control.
But without a leader, there was still confusion; where possible, there was a tendency to bypass Kyaw Win and instead work with his deputies, U Maung Maung Win and U Set Aung, who were regarded as competent.
One insider described the situation as a “headless chicken approach” and lamented the lack in the NLD government of a figure such as U Soe Thane, who spearheaded economic reform under the Union Solidarity and Development Party government of President U Thein Sein. “There is no general to marshal the economy under Aung San Suu Kyi,” the insider said.
Frontier understands several attempts were made to convince Aung San Suu Kyi to replace Kyaw Win, but she made clear that she considered him loyal and hardworking. It appeared likely he would serve the full five-year term.
But by the time the corruption allegations became public, Kyaw Win had few allies left apart from the state counsellor. The animosity was evident earlier this year when the ministry tabled a tax bill that included an amnesty for undeclared income.
Kyaw Win advocated for the amnesty, but many within the party were upset at what they perceived as a favour to businesspeople guilty of tax evasion. Others raised concerns that it would create opportunities for money laundering.
Following a parliamentary hearing, the tax amnesty was dropped from the bill. Kyaw Win’s credibility had been damaged even further; where he was previously considered ineffective, he was now perceived as dangerous.
“I think he lacked a little bit of judgement,” said one source. “He got too close to some significant private sector players and so I think that there was a perception that he played favourites.”
Less than two months later, Kyaw Win was under investigation for corruption, and his resignation would follow shortly after.
Competence over age
Enter Soe Win, who was sworn in on June 5. The managing partner for Deloitte in Myanmar, he was a member of the National Economic Coordination Committee alongside Kyaw Win.
He also sits on the board of the Renaissance Institute, an NLD-aligned think-tank that advises the government on economic policy, and is a member of the Yangon Bar Council.
Soe Win joined the foreign exchange department of the State Commercial Bank as a deputy manager in 1961, according to a profile of his career by the Renaissance Institute.
He trained at the Bank of England in 1976 and was appointed general manager of Myanmar Foreign Trade Bank in 1993, before leaving to join Pricewaterhouse Associates in 1996. Since then, he has worked in the private sector. In 2003, he founded Myanmar Vigour, which became a member firm of Deloitte in 2015.
Before Kyaw Win’s resignation, Soe Win had been a leading candidate for the Central Bank governor’s position, which will fall vacant at the end of July when U Kyaw Kyaw Maung ends his five-year term.
But Frontier understands that Soe Win, who is 79, had been reluctant to accept the governor position because he didn’t want to serve a full five-year term. Then the finance and planning ministry position opened up – a commitment of less than three years.
Many have welcomed the appointment, particularly within the NLD’s economic team. “He’ll be much more decisive, I don’t think there’s any doubt about that,” said Mr Sean Turnell, an economic adviser to the state counsellor. “I think [we’ll see] policy informed by evidence and good economics.”
Naing Ko Ko said the appointment was a “smart decision”, particularly for the future of the banking and financial sectors. Competence was more important than age, he added.
“His key strength is his empirical knowledge and theoretical experience of the banking and financial industry,” he said. “The biggest challenge he’ll face will be the regulatory mandate on fiscal and monetary affairs.”
Naing Ko Ko said he was concerned whether Soe Win would have the legal power and responsibility to control grey areas in Myanmar’s public finances, including off-budget spending and “other accounts” set up by state-owned enterprises.
U Henry Zaw Tun, the business development director of independent power producer Maxpower Thaketa, said he was optimistic about the appointment. Asked what the minister’s top priority should be, he said it was addressing the country’s chronic shortage of accessible, cheap financing.
“My expectation is to make finance the fourth pillar of the country, to make it accessible [to everyone],” he said.
Under this vision, SMEs would have access to capital markets, households to credit for a housing loan, and students would be able to get loans to fund their education at home and abroad.
“These are the things that are completely lacking,” he said.
A ‘golden opportunity’
In some sections of the private sector, though, the response has been more muted. Some told Frontier that they would have preferred either of Kyaw Win’s deputies. “I know both of them and U Set Aung is just somebody who wants results, who can be pushy, who cuts you off when he needs to get to the point, which I think a minister needs to do,” said one foreign business owner.
There may also be a degree of trepidation. Soe Win – along with most of the NLD economic team – is known to favour liberalisation of the banking and insurance sectors, which has been opposed by some powerful business figures.
He’s also a supporter of the Central Bank’s prudential reforms, with one industry figure relating how he told a roundtable last year that “we need to stop lying to ourselves” – meaning, the private banks to the Central Bank. “He has a clear understanding of the market and issues,” the source said.
Turnell acknowledged that there could be some confrontation, particularly with those opposed to market liberalisation.
“Some of the special pleading from business groups, that’s less about reform than getting government handouts,” he said. “But I don’t think he [Soe Win] sees his role as a policeman. He very much understands that business sentiment is low. He’s not going to come in with a mindset of punishing business. As long as business does the right thing, I think he’s going to be more pro-business.”
Soe Win could also upset vested interests by accelerating reforms of the four state-owned banks that fall under the Ministry of Finance and Planning portfolio, or ensuring closer scrutiny of state-owned enterprises.
As minister, he’ll also have responsibility for leading negotiations on key infrastructure projects, such as the Kyaukphyu port in Rakhine State, and foreign loans. Foreign investors have been lobbying the ministry for years to offer government guarantees to unlock financing for key infrastructure projects, such as power plants, roads and ports.
The government is at a crossroads, said one financial sector source. He said the change in leadership at the ministry and, soon, at the Central Bank, presented a “golden opportunity” to shape the direction of the economy past 2020.
“The question is will the old guard let this happen?” he said.
Dr Maung Maung Lay, a vice president at the UMFCCI, said he hoped the minister would be “pro-business”, which he defined as one who protects and works in the interest of small and medium enterprises. “The livelihoods of the grassroots should be raised and basic needs fulfilled,” he said.
Asked about Kyaw Win, he said the government should be “more transparent” and offered an apparent defence. “No one should be a scapegoat for a failed system.”
It was a point raised by several people interviewed for this article: changing one person, even two, will not fix everything. Results will require a mix of realistic policies, inclusive decision-making, checks and balances, and the buy-in of a wide range of stakeholders.
A common criticism of the NLD has been that it lacked a coherent reform roadmap and its response was to launch the Myanmar Sustainable Development Plan in February.
Deputy minister U Set Aung told Frontier that the strategic action plans in the document are “being further broken down into implementable projects and programs that will be time-bound and properly costed”.
Once this has happened, the projects and programs will go through a screening process after which they will be included in a “project bank”.
The political will to initiate and implement reforms will likely remain a challenge.
But perhaps what Soe Win can bring more than anything is respect, leadership and a sense of optimism. For the past two years, they are qualities that have been in short supply.