When Myanmar began its transition to democracy from military rule in 2010, it came with grand aspirations to restore its long lost status as a vital player in the Asian economy. A decade later, with de facto leader Aung San Suu Kyi poised for re-election, those plans remain largely unfulfilled.

Under former President Thein Sein, Myanmar’s military-backed government began expanding political freedom and loosened economic controls while pushing mega projects that underscored the country’s ambitions. Among them was a $1.1 billion international airport just outside of Yangon, its biggest city, and a special economic zone in southeast Dawei with aspirations of being one of the biggest in the region.

Suu Kyi and her National League for Democracy swept to electoral victory in 2015 and sought to capitalize on the enthusiasm of foreign investors eager to get in on the ground floor in Myanmar following decades of isolation. The U.S. and European Union lifted sanctions, and the country saw a swift influx of bankers, lawyers and other investors looking for opportunities.

But reforms were slow to come. And then came accusations of a genocide against the country’s Muslim Rohingya population that damaged the image of Suu Kyi, who had won the Nobel Peace Prize while under house arrest during a military regime that effectively cut Myanmar off from the world. Her government has denied the charges.

Suu Kyi’s first year in office saw foreign direct investment hit $9.4 billion, a record. That dropped down to $5.5 billion in the last financial year that ended on Sept. 30, just as COVID-19 slammed the global economy. Economic growth fell to 2.89% last year from 5.75% in 2016, according to World Bank data. The airport has yet to be finished, and Dawei is also still in the planning stages.

“The excitement and momentum of 2015 are certainly gone,” said Dereck Aw, lead analyst for Myanmar at Control Risks. “The hype died down when it became apparent that a country can’t just step out of decades of international isolation and transform itself into a prime investment destination overnight.”

Economic woes

The ruling NLD is expected to easily win a second mandate in Sunday’s polls thanks to Suu Kyi’s enduring popularity. On the campaign trail, she has touted her economic accomplishments, saying in an Oct. 26 speech that Myanmar has reached 98% of its FDI target for this year despite the pandemic.

“We could say that this is quite a performance,” she said. “Most of the neighboring countries have faced worse situations.”

The opposition has disputed that, blaming her economic team for failing to drive growth.

“What is lacking in this government is experience and human resources,” said Nandar Hla Myint, the spokesman for Myanmar’s main military-aligned opposition, the Union Solidarity and Development Party. “And this led us to the economic fallout in the past years.”

Myanmar's State Counsellor Aung San Suu Kyi casts an advance vote at a polling station in Naypyidaw ahead of the general election on Sunday. | AFP-JIJI
Myanmar’s State Counsellor Aung San Suu Kyi casts an advance vote at a polling station in Naypyidaw ahead of the general election on Sunday. | AFP-JIJI

The country’s first civilian-led government in more than five decades has delivered on some reforms, including liberalization of the banking, insurance and education sectors. It’s also managed to solve the country’s yearslong inflation problem. But about a third of the population still lives in poverty, businesses still face lots of red tape and the Rohingya crisis shows no signs of ending.

“The first phase of economic reforms have gone a long way towards establishing much needed macroeconomic stability and providing a basis for sustained economic growth,” said Myo Thant, chief economist at Myanmar-based think tank, Parami Roundtable Group. But he listed a range of ongoing problems, including a lack of support for small businesses, low productivity, limited intergovernmental collaboration and poor quality of agricultural products.

As the sole land bridge between two regional giants — India and China — Myanmar has the potential to tap into global supply chains at a time when Western businesses are more wary of Beijing. But they’ve been hesitant to bankroll projects due to the ongoing Rohingya crisis.

That’s forced Myanmar to increasingly turn to its northern neighbor to fill the gap. China is Myanmar’s most important trading partner, accounting for about $12.8 billion in trade in 2019, almost double the next nearest nation, Thailand. Asian countries occupied the top eight spots, data compiled by Bloomberg shows.

Of the country’s three special economic zones, only Thilawa — located on the outskirts of the former capital Yangon — has attracted foreign investment, Commerce Ministry spokesman Khin Maung Lwin said. He said 121 companies from 21 countries have gotten approval, noting the majority were in the manufacturing, infrastructure, services and logistics sectors.

At the same time, discussions between Myanmar and Thailand have resumed on the development of the Dawei special economic zone along the Andaman Sea, involving the construction of a two-lane road to the Thai-Myanmar border with a loan of 4.5 billion baht from Bangkok. Negotiations are also underway with Japan, he said. There has, however, been no sign of the project getting underway so far.

Aung San Suu Kyi delivers a speech in September 2017. | REUTERS
Aung San Suu Kyi delivers a speech in September 2017. | REUTERS

In Rakhine state, the government has signed an agreement with the Kyaukphyu zone’s Chinese developer, and also given the green light for a construction agreement, Khin Maung Lwin said.

Still, with other Southeast Asian nations including Thailand, Vietnam and Cambodia also building special economic zones, Myanmar’s lack of infrastructure hinders its competitiveness.

“Only if industrialization develops, then the economy will develop,” said Myint San, vice chair of Dawei SEZ management committee. “The lack of infrastructure is one of the challenges we are facing. Heavy industries do not grow much here in Myanmar.”

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