When Aung San Suu Kyi’s National League for Democracy steps into power in Myanmar on April 1st, it will have solid successes to build on, but there are many challenges ahead.
The November 8 elections marked a milestone in the country. Following four years of peaceful transition, a new Parliament was chosen and one political party, the National League of Democracy, now holds a majority of seats. At the same time, Myanmar’s economy has also been undergoing transformation, growing at seven percent a year – among the fastest in East Asia.
There is little evidence today of a country that has endured decades of Western-led sanctions. It is a thriving Asian emerging market, with American food chains and modern air-conditioned malls.
Thriving Country
There is little evidence today of a country that has endured decades of Western-led sanctions. It is a thriving Asian emerging market, with American food chains and modern air-conditioned malls. Small boutique hotels stand alongside multi-storied structures in the largest city of Yangon and there are over 100 ethnic groups living within a population of over 54 million.
With only one month to go before she takes office, one of the big questions facing Suu Kyi is how far the Nobel Laureate’s party will go to improve human rights in the country. About a third of the population still lives in extreme poverty. Almost three quarters of children in rural Myanmar grow up in homes without electricity and only 29 percent of the poorest children graduate from secondary school.
Myanmar, formerly Burma, is already one of the world’s fastest-growing nations. According to the International Monetary Fund, its economy expanded by close to 8.5 percent in the year ending this March. 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. Europe and the United States rewarded the tentative transition at the time by easing sanctions.
It is now up to Suu Kyi to sustain a strong pace of growth and she must do so through a diversified economy that can create good jobs in higher-productivity sectors, such as agriculture which employs 65 percent of the country’s labor force, but suffers from low productivity. The average rice paddy yields 2.5 tons per hectare, only half the amount of other exporters in the region.
Investment in infrastructure is another area that can spur private sector job growth while supporting more productive and labor-intensive economic activities such as manufacturing and textile production.
Upgrade Banking
On Suu Kyi’s agenda are plans to develop the financial system. The local currency, the kyat, has already been floated and foreign firms have won licenses to explore for oil and gas. The banking sector is being slowly pried open with the government setting special economic zones and launching the Yangon Stock Exchange.
But there is more to do in that sector. Although U.S. dollars are still widely used, people remember the unrest during the banking crisis of 2002 to 2003 and most prefer to put their savings in gold and property – one reason real estate prices in Yangon are so high. When needed, small businesses must borrow at loan shark-style rates of interest and even large foreign investors struggle to hedge currency risks.
Subject to Global Volatility
Myanmar, which borders on India, Bangladesh, China, Laos and Thailand, is not exempt from global economic volatility. Low energy prices put pressure on the government’s export revenues, while investors are starting to move away from emerging markets. Myanmar already has a high current account deficit and its limited foreign reserves make its economy tenuous. Years of underinvestment in education have left large parts of the population ill-equipped to implement many changes.
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. But at 70, with the power in her hands, the “lady” must seriously consider succession. The nation’s junta-drafted constitution is still in force and by its rules Suu Kyi is barred from holding the position of president because her children are foreign citizens. If the generals won’t agree to amend the constitution, she may have to instate a proxy who would follow her orders but that would cause confusion at formal state business meetings and foreign visits and create longer-term uncertainties. Finding a viable solution to this problem should be of high priority once she takes office.
The transfer of power to Suu Kyi is scheduled to take place between now and April 1st after the new Parliament meets and votes on a new president, along with two vice presidents. Despite the NLD's landslide victory, most analysts agree it will be almost impossible for it to govern without the support of the military establishment which by law still controls a quarter of the seats in Parliament, giving it veto power over all constitutional amendments and a grasp on all key security portfolios. The future of the country seems to ride on Suu Kyi’s ability to handle this problem.