Post-election investment stability in Myanmar is unclear

Post-election investment stability in Myanmar is unclear
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A date has been set for historic elections in Myanmar, but post-election political instability remains high. Business is advised to adopt a long-term perspective.

Myanmar has announced the date for its historic elections, ending months of speculation that it might be delayed. Set for 8 November, the day the Myanmar people will go to the polls to elect their representatives and set the agenda of the country for the next five years.

Labelled as a historic election, the November election will put Myanmar’s democratization progress to the test, after more than six decades of military rule that ended in 2011. Aided by an overwhelming number of domestic and international election observers, this election is considered to be the freest and fairest election in 25 years.

Since the quasi-civilian government took power in 2010, it has introduced a series of political and economic reforms that bring the country out of international isolation. The once-closed economy has seen its foreign direct investment reach $8 billion this year. GDP is predicted to grow at 8.2 percent.

However, political uncertainty around presidential candidates and post-election development remains high.

Who will run for president?

President of Myanmar is not directly elected, but nominated by the House of Nationalities (the Upper house), House of Representatives (the Lower house), and the military, one from each side. Then all the MPs vote on a president, with the one with with most votes taking the highest post and the losers becoming vice presidents.

The military-backed ruling party Union Solidarity and Development Party (USDP) has yet to identify who to appoint as a presidential candidate. The current post holder, President Thein Sein, has not ruled out the possibility of running in the election or seeking another term as a president. President Sein, however, who is a favourite among the armed forces, has a troubled working relationship with the leading opposition, National League for Democracy (NLD).

Another probable candidate is the influential parliamentary speaker, Thura Shwe Mann, also the party leader of the USDP. Presented himself as a reformist, however, he is distrusted by the NLD and has earned hostility from the armed forces for supporting legislation that aimed to reform the military.

Opposition NLD Aung San Suu Kyi, the most popular politician in Myanmar, has confirmed her party and that she will run for the elections, but the party leader is constitutionally barred from presidency. However, the party has no obvious contender and may have to back a non-NLD candidate.

While the new president is likely to be a result of intense political negotiation and compromise, commentators worry this might be a compromise that leaves no one happy and see the post-election period as “perilous“.

Will the election outcome be accepted?

The NLD is expected to perform well in the election, and could see itself playing a lead role in the governing the country. Should this happen, this would be a sign of progress towards democratization.

However, this will depend on how the armed forces respond to the reduced representation in the parliament and (yet again) the reality of their unpopularity.

The military is unhappy about its diminishing influence and being increasingly subject to domestic and international scrutiny due to a range of political and economic reforms introduced by the quasi-civilian government, that have allowed greater freedom of speech, media, assembly, and access to information.

Recent incidents of imprisoned journalists and beaten student protesters are a proof of such sentiment. The failure to pass the constitutional reform that aimed to end the military’s veto power in June this year further confirms the military’s reluctance to relinquish power.

The military had previously refused to recognize the election outcome in 1990, when the NLD won a landslide victory. Aung Sun Suu Kyi has expressed her fear that history is repeating itself. President Sein, who has initiated a range of democratic reforms reintegrating Myanmar into the world economy, is likely to accept the election outcome, like the way he accepted the NLD’s sweeping victory in 2012 by-election.

However, senior generals might not be so willing to do so – especially if the NLD comes to power.

Investors to have long-term commitment

Political uncertainty and the military’s firm grip on power have raised concerns about the business environment in Myanmar. Financial magazine Euromoney said its survey experts “have remained consistently cautious over the country’s investor prospects.” The Economist magazine said foreign investors have adopted a wait-and-see approach.

However, business experts advise that investors must take a long-term vision of the Southeast Asia country. Thomas Klotz, an expert at Roland Berger consultancy, said “don’t underestimate the importance of building a relationship, of being there and being part of it”, adding that relationship building with the government can take a while.

Sectors like telecommunications, manufacturing, and financial services have benefited from the opening up to foreign investment. Myanmar is in a good position to compete for foreign funding, but this depends on the next administration’s commitment and capacity to continue liberalizing and improving socio-political stability.

Categories: Asia Pacific, Politics

About Author

Qingzhen Chen

Qingzhen is a GRI Senior Analyst and a research analyst for an international information company. Her research focuses on China and the Asia Pacific. Previously she was a market researcher for PwC. She has gained regional knowledge from internships with the UNDP, China Policy, and the Royal United Services Institute. She holds a BA in Politics and East European Studies and an MSc in Security Studies from University College London.