Myanmar’s lady faces challenge of a lifetime

Myanmar doesn’t look like a country that has endured decades of Western-led sanctions. Visitors to Yangon encounter a bustling Asian emerging market, where wealthy locals eat at KFC and shop for Calvin Klein products in air-conditioned malls. Taxi drivers own smart phones. Small boutique hotels serving high-quality French food can even be found a bumpy six-hour drive away from the country’s biggest city.

Myanmar is already one of the world’s fastest-growing nations. The economy probably expanded by 8.5 per cent in the year ending this March, the International Monetary Fund reckons. Outgoing President Thein Sein’s semi-civilian government ushered in a wave of reforms after taking over after almost 50 years of military rule in 2011. At the time, Europe and the United States rewarded the tentative transition by easing sanctions.

New entrants in the mobile telecom sector offer vivid evidence of change: Norway’s Telenor and Qatari operator Ooredoo have plastered the country in blue and red advertising. The local currency, the kyat, has been floated. Foreign firms have won licences to explore for oil and gas. The banking sector is being slowly prized open. The government has established special economic zones and launched the Yangon Stock Exchange.

Meanwhile, Myanmar is shrugging off a history of censorship and state control. Some private media outlets are now regarded amongst the most vibrant in Southeast Asia, especially as authorities in nearby countries like Malaysia and Thailand clamp down on free speech.

Yet Suu Kyi still has plenty to do in a country where per-capita GDP last year was less than $1,300 (Bt46,500) – similar to Bangladesh, and well behind other Asian economies like Vietnam. Her National League for Democracy wants a less corrupt society and a fair judiciary. The agricultural sector needs modernising and infrastructure requires urgent attention: Many roads become impassable when it rains and less than one third of the population is connected to the power grid.

Suu Kyi also wants to develop the financial system. US dollars are still widely used and memories of the banking crisis of 2002 to 2003 remain vivid. Most people prefer to put their savings in gold and property – one reason real estate prices in Yangon are so high. Small businesses can only borrow at loan shark-style rates of interest and even large foreign investors struggle to hedge currency risks.

To make progress, Suu Kyi will need to work with the military, which holds one quarter of the seats in parliament – enough to block any changes to the constitution. The army also retains influence over a swathe of the economy through large conglomerates as well as its alleged links to the country’s lucrative, conflict-ridden jade trade.

Yet her first big act may be one of defiance. Under the junta-drafted constitution, Suu Kyi is barred from holding the position of president because her children are foreign citizens. If the generals won’t budge, she may install a stand-in who will follow her orders. That would complicate formal state business such as foreign visits and create longer-term uncertainties.

Myanmar is not immune to global economic chills. Low energy prices will squeeze the government’s export revenues, while investors are cooling on emerging markets. Myanmar’s already-high current account deficit and minimal foreign reserves make its economy fragile. Years of underinvestment in education have left large parts of the population ill-equipped to implement many changes.

Yet the world desperately wants Suu Kyi’s civilian government to succeed. Her elevation should see a further easing of sanctions, enabling more capital to flow in. With external sovereign debt estimated at around 15 per cent of GDP, there’s scope to borrow more from abroad. That would help Myanmar become less dependent on investment from China, its largest trading partner, but one which many citizens resent for continuing to do business with the military during darker days.

Perhaps most crucially, Suu Kyi is seen as the only political figure with the power to bring lasting peace to a land that has suffered conflict since its independence from Britain in 1948. A ceasefire with the various ethnic armed groups would make more of the country accessible and give Myanmar a chance to take full advantage of its position wedged between China and India, the world’s two most populous nations.

But now that power is within Suu Kyi’s grasp, she must also consider succession. Even those who are hopeful about how the 70-year old might improve Myanmar’s prospects worry about the lack of any clear replacements. Filling that leadership vacuum should be high on the lady’s long to-do list.