Amid Myanmar’s Reforms, Unresolved Issues Remain

Amid Myanmar’s Reforms, Unresolved Issues Remain
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In reaction to political reforms, Myanmar’s once-hefty sanctions have been lifted by both the EU and US, and investors from around the world have stampeded into the market. Often being likened to the Wild West, companies such as Ford and Nissan have seized the opportunity, and FDI has erupted since 2011.

Myanmar has had an exceptionally troublesome past. Over the years, ethnic turbulence and an oppressive military junta have created diplomatic, humanitarian, and economic turmoil, causing the country to be labeled a black sheep in the region.But all of this seemed to be swept away rather quickly and easily when President Thein Sein began pursuing historic reforms in 2010. Amongst other outcomes, Nobel Peace Prize laureate and symbol of democracy Daw Aung San Suu Kyi was released from house arrest, and she even became part of the new political system as leader of the opposition.

Thus it is understandable that many are hopeful for Myanmar’s future. But while optimism is justified, there remain a few significant obstacles to confront. First of all are various structural inconveniences. As a country that has gone from being heavily sanctioned to one embraced my global investment, there are obviously a few changes to be made to accommodate the influx of activity.

One immediate problem is the surge in housing prices that can make economic activity cumbersome. This is especially true for players that have yet to enter the scene, including many American firms. Another problem is lagging legislation, such as a prominent mining law that prevents outside investment. These issues need to be addressed soon, and the government has a lot of thinking to do concerning its specific long-term goals.

Second are the ongoing religious and ethnical tensions. Struggles between the Buddhist majority and Muslim minority have made headlines once again last weekend, and a ceasefire between the numerous militias in Myanmar is described as both feeble and incomplete. In general, these disputes serve to deter investment, and have long been a factor in how the international community views Myanmar. This is perhaps why Myanmar’s statement at the UN General Assembly focused so much on ensuring that they would end as soon as possible.

And finally, perhaps the largest source of political risk is the remaining discontent with the political system. Regardless of the extensive changes having occurred already, it is not quite possible to call Myanmar ‘free’, with e.g. Transparency International ranking them 172nd out of 176 countries on their corruption index in 2012.

A lot of attention is being placed on the 2015 general elections, where Aung San Suu Kyi has declared her candidacy for president. In the event that she wins (a probable affair if you look at the results of the by-elections in 2011), she would still be ineligible for the position. This is because according to the current wording of the constitution, no citizen with foreign spouses or children may become a country leader. Considering a constitutional amendment requires 75% parliamentary approval, the direct decisions of the government become crucial if full democracy is to ever enter Myanmar.

In a worst-case scenario, if Suu Kyi, a grand image of democracy, is blocked from becoming president it may result in renewed sanctions from the international community. Apart from the obvious implications this will have for investment, sanctions will do very little to help the ongoing ethnic/military tensions either, further fueling disapproval from the rest of the world.

The main question in this situation would be: how much will investors’ interests play a role? One cannot consider future policies towards Myanmar without taking into account the extensive and growing international economic interest. Indeed, the fact that China and other Asian states are leading the investment trend in Myanmar means it will be very unpopular for the US and EU to completely disqualify themselves from the competition. As such, economic sanctions are unlikely to go back to being as harsh as they once were.

Nevertheless, the government of Myanmar has a lot to ponder over in the next year. Their comportment and reaction to internal and external pressures will have significant ramifications for Myanmar’s foreign relations and the investment environment. Optimists like to think that the government will be influenced by the acceptance of the international community and investors alike, and continue to progressively meet these challenges with further reforms. But there are also many reasons why they cannot or will not do this, and so readers will do well to monitor developments in the country, and keep the 2015 elections in mind.

Categories: Asia Pacific

About Author

Karl Sorri

Karl has gained global experience working at the Transparency International Secretariat in Berlin, the Political/Economic Section of the U.S. Embassy in Helsinki, and as a freelance journalist. Karl holds an MA in Politics from the University of Glasgow and an MSc in International Relations from the London School of Economics.