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Myanmar’s economic future hinges on reforming state-owned enterprises
7/28/2018 10:26:00 PM

Over the past two years, the Renaissance Institute and the Natural Resource Governance Institute have worked with the Ministry of Planning and Finance to identify concrete steps that the government can take to improve SOE performance and rationalise their finances. Through our research on natural resource SOEs, such as the Myanmar Oil and Gas Enterprise (MOGE) and Myanmar Gems Enterprise (MGE), we have discovered some remarkable facts.

For one, Myanmar’s SOEs are in many cases not SOEs in the sense they are understood in other countries. Some, like the MGE, are mainly regulators and tax collectors. Others, like Security Printing Works, provide a public service. Most have many, and sometimes contradictory, mandates. For instance, the MOGE is a passive revenue collector from offshore gas production, operates some onshore oil fields, and regulates oil and gas activities. And the Myanmar Economic Bank (MEB) is both the government’s treasurer — holding different government ministry and agency deposits — and a lender to the private sector.

We found that even some of the “profit-making” enterprises only show profits because they collect taxes and fees. In the case of the MOGE, the company seems to break even on its onshore production and may los

money on its pipelines and compressed natural gas production. However, these losses are hidden by the massive revenues collected from offshore production, which is carried out exclusively by foreign companies.

Regulatory enterprises are also underperforming. For example, less than a quarter of total transactions in the jade and gemstone sector are made through formal channels, and those stones that are price checked are only valued at 10-60 percent of their true value. In other words, if the MGE collected the taxes due on jade production, it would collect at a minimum K1 trillion more than it does now. To put these figures in context, that is more than the government spent on the entire country’s healthcare last year.

Huge unexplained expenses are also allowed to go unchecked. For instance, we found a K369 billion ($360 million) foreign exchange loss due to currency revaluation. Neither the MOGE nor the bodies meant to oversee it could explain where this money was transferred. This is not a problem specific to the MOGE; nearly all SOEs sign contracts and make payments without other bodies knowing why they were signed or made. While we do not think there was corruption in this instance, the mystery highlights serious weaknesses in SOE accounting systems.