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Myanmar parallel government to challenge regime with $700m budget

Shadow Finance Minister Takes Aim At Military Generals On Economic Battlefield

Anti-coup protesters march in Mandalay on Aug. 8, the anniversary of a 1988 uprising. Myanmar's parallel government is preparing to subsidize 250,000 people who have joined the civil disobedience movement.   © Reuters

Myanmar's shadow National Unity Government has stepped up its revenue generation and fundraising efforts to channel hundreds of millions of dollars into opposing the military regime that seized power on Feb. 1. It is also tapping international supporters, including wealthy overseas Burmese, and lobbying to cut funding flows to the military regime, known as the State Administration Council, while pressing foreign investors to divest from military-linked businesses.

The NUG is preparing its first budget, which will amount to about $700 million and will be unveiled in the coming weeks, according to the group's economic advisers. The funds, held mainly in accounts outside the country, will support humanitarian relief, COVID-19 vaccinations and striking workers inside Myanmar, as well as the NUG's operations at home and abroad.

Although not directly comparable, the country's parliament last August passed a national budget of 34.1 trillion kyat ($20.7 billion) for the fiscal year through September this year.

Revenue sources range from international crowdfunding campaigns to a covert lottery that is expected to bring in about $8.4 million per month from domestic and international buyers, according to the group's calculations. A test run in early August of 250,000 tickets sold out in four days, generating 500 million Myanmar kyat ($300,000), of which 70% went to striking government workers, the NUG said. The rest was prize money, it said.

The group is also "making progress" in efforts to retrieve $1 billion of Myanmar's foreign reserves that were frozen by the U.S. after the military takeover. The body, which styles itself as a parallel administration to the military regime in Naypyitaw, is in the process of setting up an official international bank account to unify its treasury operations, NUG Finance Minister Tin Tun Naing told Nikkei Asia in a rare, recent interview.

"The truth is, we need a lot of money," Tin Tun Naing said, speaking by video link from an undisclosed location. "Even if we recover the $1 billion that the U.S. has frozen, given the scale of the problems that Burma is facing, it will still not be near enough."

A former businessman with degrees in electrical engineering and an executive MBA, Tin Tun Naing headed his own construction business in Yangon before joining the National League for Democracy and running successfully for parliament in 2015.

Like other NLD lawmakers, Tin Tun Naing went into hiding after the military takeover to form the NUG with representatives of civil society as well as ethnic and other minority groups. He has helped shape an economic team and a reform agenda and is taking aim at the military's failures in managing the economy and a virulent third wave of COVID-19. He is also taking a stand for human rights in a country in which more than 1,040 people have been killed and 7,740 detained by security forces since Feb. 1.

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Senior Gen. Min Aung Hlaing, commander-in-chief of Myanmar's armed forces, speaks at a conference in Moscow, Russia, on June 23.   © Reuters

The military regime is preparing a Myanmar Economic Recovery Plan that it says will help revitalize the battered, post-pandemic economy. The final draft, seen by Nikkei, makes little mention of the Feb. 1 takeover that triggered mass protests, strikes and near-economic paralysis which led to the temporary closures of businesses and banks.

Rather, the plan outlines numerous programs, from reducing corporate taxes and cutting imports to promoting tourism and foreign investment, listed under "five road maps, 10 action plans, 20 objectives and 407 action lines." Although largely based on economic programs of the ousted NLD government, the plan omits such key NLD goals as reforming state-owned enterprises and overhauling the tax system and project funding.

"The COVID-19 pandemic has indeed been devastating," the NUG finance minister said, "but it is the military's reckless coup and its consequences that destroyed Myanmar's economy."

"In short," he noted, the regime "is so bereft of ideas it has resorted to stealing some ideas from the original NLD reform plans. And it fails to recognize, let alone address, the issues of post-coup economic paralysis, the precariousness of the banking sector, an acute cash shortage, a lack of public and investor confidence, and the increasing risk of widespread internal conflict... The junta is directly responsible for these, as well as for the resurgence of the pandemic."

The NUG's own spending plans, he said, "must prove that we are a competent, reliable and inclusive government, and can help address urgent humanitarian and funding issues." To that end, the NUG is establishing a single, unified Treasury account. "We want a transparent, accountable spending process for a functional government," he said.

The NUG's first budget, initially set for early July, has been delayed due to internal debates over shifting priorities. Foremost is the question of support for the civil disobedience movement and COVID-19 relief efforts, particularly on supplementing the country's threadbare public health system amid strikes by medical workers and widespread hostility toward the regime's relief programs. The NUG has pledged to distribute at least 6 million doses of COVID-19 vaccines procured through multilateral channels in neglected areas of the country.

"Our priorities are to do everything we can to ease the hardship of the people most affected by the coup ... and disrupt the flow of cash and revenue to the military so that they do not have the staying power," he said. "These are the areas our administration is spending time and energy on, and to reinforce the legitimacy of the NUG's claim to be a functioning government."

On the question of people's defense forces, Tin Tun Naing said: "It is no secret we have a defense policy and a defense budget ... and that defense expenditure will make a substantial demand on the public purse. We need to balance this demand with other pressing needs."

Among the most urgent of these needs is the NUG's commitment to subsidizing at least 250,000 people, mainly government workers, who have joined the country's civil disobedience movement, or CDM. "To give an idea, just to sustain 250,000 people in the CDM will require many millions of dollars per month -- you can see the magnitude of the funding needed," the minister said.

Deposit holders line up outside a bank to withdraw cash in Yangon, Myanmar, on May 13.   © Reuters

Regarding corporate investment in Myanmar, Tin Tun Naing reiterated earlier NUG statements that it would not "recognize or honor investment agreements or approvals" made since the coup, although it will honor all contracts signed before then.

This also affects some deals that were being considered by the NLD government before Feb. 1 and are now being fast-tracked by the military regime, including a $2.5 billion LNG power generation project in the Ayeyarwady region. The plant is on the NUG's newly issued "black list" of projects approved by the junta-controlled Myanmar Investment Commission.

"This project is proceeding without the necessary environmental impact assessment or resolution of land compensation issues," Tin Tun Naing said. "Further reasons for refusing to recognize deals like those include their direct impact on ethnic nationalities in those areas. Under our principles of federalism, even the NUG must not make unilateral decisions, much less the illegitimate junta."

The minister contrasted the different investment decisions of foreign telecom companies in Myanmar.

Telenor of Norway, a key service provider, announced in July it had sold off its entire Myanmar mobile operations to Lebanon's M1 Group for a fire-sale price of $105 million. The deal has yet to receive official approval from the military regime.

Telenor announced in July it had sold off its entire Myanmar mobile operations to Lebanon's M1 Group for a fire-sale price of $105 million.   © Reuters

"We know that Telenor resisted military pressure to install intercept software and share user data. There is no doubt our telecom ecosystem was far better with Telenor than without. For that reason, we would have preferred they stayed. ... But we warn any new owners of Telenor's business that they have the responsibility to protect human rights according to international standards."

In contrast, Japan's KDDI remains a minority investor in state-owned telco Myanma Posts and Telecommunications. The minister questioned "whether the investment is still a responsible investment because the Burmese partner MPT has been using data of users for purposes that suit the military needs."

While Telenor was running as an independent entity, "KDDI is not in a position to say 'no' to what MPT does, and therefore it becomes increasingly difficult to defend the notion that this is an ethical investment."

Some Yangon-based executives told Nikkei that the NUG's call for businesses to withhold all payments to the state, including tax, is impossible for companies operating in Myanmar. "Many businesses don't like the junta but no company wants to be blacklisted by them," one executive said.

Tin Tun Naing understands the corporate dilemma but noted: "We ask those operating in Myanmar to ask themselves, 'are you perpetuating military rule, over the people?' ... If the answer is 'yes,' then they should be receptive to disengaging."