Myanmar under the NLD: an investor's view
In the eyes of investors, Aung San Suu Kyi has one pressing priority after the stunning victory of her National League for Democracy party in Myanmar's Nov. 8 polls: clarifying her party's economic reform program, including its position on foreign investment under a NLD-led government that takes power next April.
Scores of foreign companies, many of which have been in a holding pattern over the past year, are eager to see how the NLD will continue, or not, the wide-ranging reforms launched or under development by the government of President Thein Sein. So far, both the NLD and its leader have been scarce with details.
In the run-up to the elections, the NLD outlined five broad economic priorities: fiscal prudence, lean and efficient government, revitalizing the agricultural sector, monetary and fiscal stability, and creating functioning infrastructure. Suu Kyi's campaign rhetoric tended to focus on grassroots issues such as labor rights, promoting local businesses, micro finance and fighting corruption.
These are noble aims, but investors have been left wanting for details on how the NLD means to attain them. The party has also had little to say on how it envisions Myanmar's engagement more broadly in the global economy, including its strategy for extricating the country from the remaining U.S. sanctions which continue to deter investment.
A clear articulation of the NLD's commitment to continued economic reform would strengthen Suu Kyi's credibility as a leader, both at home and abroad, particularly if she pragmatically prioritizes nation over party by continuing the Union Solidarity and Development Party's more effective policies.
Good start to reform
In his term that began in early 2011, Thein Sein promoted an ambitious reform agenda that ushered in an unprecedented period of economic growth, investment and regulatory progress. As a result, the Myanmar economy has expanded significantly in recent years, with growth jumping from 5.9% year-on-year in 2011 to 8.5% in 2014. Reported foreign direct investment in 2014 was $8.1 billion, nearly 25 times more than the year before the USDP came to power. The NLD will be under considerable pressure to deliver similar results, if not better.
To meet these expectations, the NLD should continue ongoing efforts to improve Myanmar's regulatory framework for the business sector. This includes ensuring the promulgation of several draft bills that remain pending in parliament, such as the new Investment Law, which aims to create a level playing field by providing the same incentives and benefits to foreign and domestic investors; and the revised Myanmar Companies Act, which will serve as the main legislation for all companies incorporated in Myanmar. Other important bills that need to be passed are the Road Transport Law, the Banks and Financial Institution Law, and the onerously named Law Amending the Mining Law.
Progress on these bills, among many others, stalled in the lead-up to the elections. Pushing them through parliament -- either the final session now or the new session early next year -- would be a quick win for the NLD to boost investor confidence amidst concerns that the change of government may delay, or even reverse, the legislative reform process.
Equally important as passing new legislation is developing the proper regulations for implementing a set of reform bills that have already been passed. Many of these bills, though pointing in the right direction, have yet to translate into tangible changes lower down in the bureaucracy. This should be done through, among other means, more active and structured dialogue with the business community to solicit input into the implementing regulations at the drafting stage.
The change of government may also prove to be an opportune time for the NLD to push forward bureaucratic reform, particularly by reinvigorating anti-corruption efforts. Corruption remains prevalent in Myanmar at all levels of government, to the point that it is often considered a regular part of doing business in the country. Recognizing that corruption is a major deterrent to foreign investment, Thein Sein established the Anti-Corruption Commission in 2014. The commission is still a long way from being an effective tool in the fight against graft (it has only taken up three out of an estimated 600 cases so far), and is in dire need of stronger government support and better resources.
The next six to 12 months represent a critical transition period for Myanmar. The NLD will need to shift from its long-standing role as the voice of the opposition to that of ruling party in order to deliver on the high expectations of those anxious to see the country's recent high growth rates continue. Nov. 8 may have been a milestone moment for Myanmar, but as election fever dies down, the hard work really begins.
Adam Schwarz is chief executive of Asia Group Advisors, a Singapore-based advisory firm.