Myanmar ranks very close to the bottom in both global and regional indexes in “The Commitment to Reducing Inequality Index (CRII) 2018” report.

Myanmar ranks 138th out of 157 countries globally, and 20th out of 23 countries in East Asia and Pacific region.

Thailand stands much higher than its neighbour, ranking 74th globally and sixth in the region. The index ranked countries for their policies on social spending, taxation, and labour rights – three areas that Oxfam sees as critical to reducing inequality.

It found Asia lags behind much of the rest of the world, with the majority of the region’s countries in the bottom third of the index and none in the top 10. Most governments across Asia have failed to improve health and social protection spending, labour policies, workers’ rights and minimum wages, and women’s rights.

Mustafa Talpur, Oxfam’s inequality campaign lead for Asia, said in an interview that Myanmar should strike a good balance between tax collection and public spending so that it could close the huge inequality gap between the rich and the poor. “Myanmar relies on indirect taxes that hurt the poor more and create inequalities. It collects less overall revenue, and spends less on education, health and social protection than Thailand,” he said.

According to Talpur, Myanmar’s tax revenue is about 4 per cent lower than in Thailand, and relies more on non-tax revenue of about 11.2 per cent compared to Thailand’s 4.6 per cent. Thailand’s tax revenue is 17.8 per cent, more than double that of Myanmar, which is at only 7.5 per cent.

“If you compare Myanmar with high income countries in terms of public spending and taxation, you will find a major difference. For Myanmar to expect a higher ranking in the years to come, the commitment of your government to reducing inequality is very critical,” he said.

According to the index, Myanmar ranks at the bottom in terms of the commitment to social spending in the region, and is also considered the world’s second-least committed country for enhancing social expenditures, he added.

Globally, European countries are the most committed to improving social spending, as nine out of the top 10 nations are members of the European Union, with Japan the only Asian country in that list as well as topping the regional index in that |category.

In terms of social spending, Thailand stands fourth in the top 10 countries in the region, ahead of South Korea and China.

Talpur said the government must dramatically improve its efforts on progressive spending, taxation and workers’ pay and protection. He suggested creating a national plan to lay out how inequality would be reduced. Spending on public services and social protection also need to be increased, he said.

“Protection of the workers is really important. Labour rights and minimum wages are as dominant as the progressivity of tax policies,” he said.

Another suggestion is to work together with international institutions to rapidly improve data on inequality and related policies, and to regularly monitor progress in reducing inequality. Talpur also advised analysing the impacts of any proposed policies.

He called for greater investment in analysing the impacts of policy directions.

The index shows Singapore is now in the bottom 10 countries in the world at tackling inequality, ranking 149th despite being among the world’s wealthiest nations. This ranking is driven by a new indicator on the extent to which a country’s policies enable corporate tax dodging. Singapore also lacks a minimum wage for its workers, except for cleaners and security guards.

The second edition of the Index improves on the methodology used last year by including new indicators on tax dodging and violence against women, and by relying on more up-to-date sources of data.

Another interesting finding is that China spends more than twice as much of its budget on health than does India, and almost four times as much on welfare spending, showing a much greater commitment to tackling the gap between rich and poor.

The agency expects to invite around 50 international startups per year to set up base in Thailand.

Pun-Arj Chairatana, executive director of the National Innovation Agency (NIA), said that the Bangkok CyberTech District area will provide privileges to both domestic and international startups. The collaboration will also set up a Startup Thailand centre with 200 square metres area to provide facilities to Thai and foreign startups.

He said the agency expects the Bangkok CyberTech District to attract startups from countries such as Singapore, Japan and China. The agency expects that Thailand will have 1,000 startups and develop more than 5,000 professionals and experts by 2021. The government will spend a budget of more than Bt30 billion by 2021.

Minister of Science and Technology Suvit Maesincee said the district will be a game changer in driving Thailand’s new economy and support the global platform. A collaboration of public private partnership and Startup Thailand Centre could create area-based innovation in the country.

The district is expected to facilitate long-term economic development and productivity.

Thanasorn Jaidee, president of True Digital Park, said the district is a part of True Digital Park, which aims to create a startup ecosystem in the country.

Moody’s believes the new mortgage-lending rules announced by the Bank of Thailand (BOT) are credit positive because they will help to reduce speculative buying and require banks to focus on borrowers with better credit quality.

The ratings firm expects the measures to improve the asset quality of banks’ newly originated mortgages, it said on Monday.

The BOT on October 4 announced measures to tighten credit underwriting standards in mortgage loans.

Under the new rules, the maximum loan-to-value (LTV) ratio will be restricted to 80 per cent on new mortgages for homes worth more than Bt10 million.

The same LTV restrictions will apply for the purchase of a second home, irrespective of the property value.

Banks will also be prohibited from providing advances that exceed the value of a property.

Moody’s said that amid Thailand’s prolonged low interest-rate environment, property prices had been rising steadily.

According to the Bank for International Settlements, residential property prices in the Bangkok area have increased 49 per cent in the past 10 years. Nevertheless, the increase in condominium prices has been sharper at about 78 per cent during the same period.

In addition, banks’ credit underwriting standards for mortgage loans have deteriorated because a greater proportion of newly originated mortgage loans have higher LTV and lower debt-servicing capacity.

TCRB EXPANDS REACH IN MICRO-BANK SEGMENT

Thai Credit Retail Bank (TCRB), a specialist in the micro-bank segment, is gearing up to elevate its brand profile and expand its reach to a greater number of customers.

TCRB offers innovative products and services designed to meet the needs of small businesses and entrepreneurs throughout the country under its vision of being “The Best Micro Bank in Thailand”, chief executive officer Winyou Chaiyawan said on Monday.

Managing director Roy Agustinus Gunara said TCRB was now gearing up for greater growth by reaching out to even more underserved customers across Thailand who can benefit from the bank’s approach.

TCRB has over 300 branches and will expand its network to more than 500 by the end of next year.

Last week, foreign investors were net sellers of stocks worth about US$2.26 billion in all Asia emerging markets (India, Indonesia, Malaysia, the Philippines, South Korea, Taiwan, Thailand and Vietnam). Taiwan suffered the most with foreign sale of $987 million, followed by South Korea’s $887.8 million and Thailand’s $270.5 million.

Selling spree came after return of emerging market concern due to:

1 Worries over likely acceleration in inflation and current account deficits in emerging-market countries after WTI crude price surged by 12.8 per cent in four consecutive weeks to US$77 per barrel, a 4-year high;

2 US Dollar Index’s appreciation by 1.7 per cent in five straight days and US 10-year bond yield’s sharp rise by 10.5 bps to a 7-year record high of 3.185 per cent from strong US economic figures – ISM, US employment and Fed chairman’s statement;

3 Fed Chairman Jerome Powell’s saying on October 2 surprised emerging markets and strengthened US dollar, stating “Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral,” “We may go past neutral. But we’re a long way from neutral at this point, probably,” and “The practical way we can navigate between moving too fast and moving too slow is to move gradually.”

These concerns will disturb emerging markets consistently in 4Q18 with USD and crude prices as the key impact factors.

If both rise continuously, there could be concerns over attacks on EM currencies again.

Thailand is expected to weather limited impact due to its status as a safe haven. But we need to be careful of market sentiment which could pressure the SET Index.

Other factors to follow-up are: 1) US President Donald Trump’s twitter on the Fed’s US rate hikes and crude price direction; 2) Interview of regional Fed chairmen; and 3) FOMC Minutes which will be released on October 18. Most FOMC members are expected to support gradual US rate hikes. – Prakit Sirivattanaket, Vice President, Kasikorn Securities

VIEW ON PROPERTY

The Bank of Thailand’s planned regulations on property loans will have direct impacts on the property sector, particularly developers who earn a high proportion of their incomes from high-rise units (condominiums) as most of the buyers do so for investment purpose or as a second residential unit, and depend on loan: ANAN and LPN.

The regulations are expected to take effect from January next year.

Property developers selling high-priced residential projects at over Bt10 million/unit usually have customers with strong financial status and most of them pay cash. We expect limited impact on property developers like LH, our top pick. Another top pick QH should not greatly affected as its incomes mainly come from low-rise projects with prices ranging from Bt3-Bt7 million.

The other one is AP which could see limited impact from the BOT regulation. Although AP has high-rise residential projects, a certain portion of its sale comes from foreigners who pay by cash.

Their stock prices have dropped and now is a chance to accumulate these stocks, given their attractive dividend yields. – Research Department, Trinity Securities

At AMRO’s first-ever press conference in Myanmar on Friday afternoon, Hoe said the growth would be driven by expanding public spending and exports as well as a pick-up in agriculture and manufacturing activities. He considers garment and tourism as the most promising sectors in the long run.

“We see the conflicts in Rakhine State as ‘pretty localised’, although it may have some impacts on the business sentiment,” he said.

Yet, he did not underestimate potential impacts of the international pressures on the government. If the European Union decides to withdraw its trade preference, then it will be a big blow for Myanmar’s economy, as garment is currently the main driver of Myanmar’s growth, he said.

“Myanmar is still very competitive thanks to its low wages. Even if you lose your preferential access to Europe, it is possible for Myanmar to find other markets where you can export garment products,” he said.

“Another important sector is tourism, which is booming everywhere in Asia, thanks to the rise in Chinese and Korean visitors. Asia is where the middle-class people are spending very rapidly, and they are the main consumers of tourism services.”

Additionally, Hoe sees high potential for sustainable growth in Myanmar but he urges to mobilise the resources, increase revenue and gross domestic product (GDP).

“Low revenue and GDP ratio could be the constraints for the government. Weak fiscal revenue continues to be a challenge owing to slow-growing tax revenue. And SEEs [State economic enterprises] are shrinking,” he said.

According to Hoe, enhancing tax revenue, optimising the use of fiscal resources, adhering to medium-term fiscal discipline, strengthening the public debt management framework, pushing forward SEE reforms and encouraging the private sector would help strengthen the nation’s fiscal position.

“Gradual liberalisation of interest rates should enhance policy effectiveness in the medium term. The implementation of new banking regulations will enhance the soundness and resilience of the financial system in the medium term,” he said.

He urged implementation of the new banking regulations, and to build up international reserves through flexible management of the exchange rate. He also recommended developing a market-based economy, upgrading the key infrastructure including electricity and logistics, strengthening the education system with an emphasis on vocational training to provide talents, improving business sentiment and investor confidence, facilitating foreign direct investment, and strengthening the rule of law.

“What you really need to grow is the private sector. More importantly, you need to focus on growth areas. Among the SEEs, the loss-making ones should be growing,” he said.

“Myanmar urgently needs to do structural reforms. It is a hard work but it should be done.”

Hoe stressed the importance of creating more jobs by pointing out that there are thousands of Myanmar citizens working in Thailand and Malaysia due to the lack of jobs in the country.

“Going overseas [to work] is not bad. For example, the Philippines usually get a large number of remittances from their people working in other countries. But, creating more jobs is really important for Myanmar to grow further,” he said.

Hoe said Myanmar could take advantages of the goodwill of other nations in the region, driven by the rise in intra-region investment.

Though Myanmar’s political situation is quite complicated, it still can expect the relocation of investment from bigger countries like China and Korea.

He urged improvement in infrastructure and regional connectivity to attract more investors. “A lot of infrastructure projects are not commercially viable. So, funding has become an issue. You need to ensure low concessional rate for implementation of infrastructure projects. Even debt is not enough,” he said.

Hoe lauded the reforms undertaken by the government over the past few years. However, he thinks it will take time for the government to improve the business sentiment.

“Over time, investors will recognise that the government is really serious about reforming the economy and that will help improve the sentiment,” he said.

“In the short run, there are issues that need to be addressed and some legacy problems you have to deal with. You need to make the financial system more sound and viable. I am glad that the officials are committed to doing it.”

Jae Young Lee, group head and lead economist at AMRO, urged the country to focus on tax administration including tax revenue mobilisation, broadening the tax base, reforming the tax regime with an emphasis on consumption tax and income tax.

Hoe said AMRO had discussed with Myanmar officials to create room for improvement of the private sector by providing them with opportunities to expand more.