YANGON Aung San Suu Kyi, Myanmar's de facto leader, made a rare admission of fallibility in a televised address to the nation on March 30.
"We did what we could for the sake of our country and the people in the first year," she said in a speech marking the first anniversary of her civilian-dominated government. "We know that we haven't been able to make as much progress as people had hoped." That seemed an uncharacteristic acknowledgement of a sputtering economy under her National League for Democracy-led administration.
Key economic data suggest that "progress," as Suu Kyi herself conceded, has slowed. Approved foreign direct investment is estimated to have fallen by a third in fiscal 2016, which ended on March 31, from the record $9.4 billion achieved in fiscal 2015, the last year under the government of former President Thein Sein.
Annual growth in gross domestic product is expected to slow to 6.5% in fiscal year 2016, from 7.3% the previous year, according to the World Bank.
Observers have blamed the NLD government for the relatively lackluster performance, although that is only part of the picture. Even before the party swept to power in the November 2015 elections, it had faced criticism for an apparent reluctance to outline its economic policies. The party issued a brief pre-election manifesto and then published a vaguely worded 12-point economic plan in July 2016, but has failed to fill in the details or implement new policies since then.
"An overarching priority for the new administration is to further strengthen the clarity, communication and credibility of economic policies," the World Bank noted in a December 2016 report on the Myanmar economy.
One area that foreign investors consider a top priority is finalization of the long-delayed companies law which is expected to open the way for foreign investment in domestic companies. Together with the merging of foreign and domestic investment codes in late 2016, such changes could drive mergers and acquisitions and make it easier for foreign investors to play a part in Myanmar's much-needed infrastructure upgrade plans.
Expanding Myanmar's power supply and opening the insurance sector to foreign companies could contribute to what the World Bank expects will be a growth rebound of more than 7% annually by 2018, according to Sean Turnell, a Macquarie University economist and government adviser."I see financial service investment as particularly important in the short to medium run," Turnell said, adding that Myanmar can attract more labor-intensive manufacturing as China becomes increasingly expensive for investors. Planned banking reforms, meanwhile, will hopefully facilitate a much-needed injection of capital into farming, and in turn boost agricultural productivity, he noted.
TOUGH EXTERNALS The government is not solely to be blame for the reduced growth and investment. External factors have contributed to the problems, including a drop in global oil prices that has slowed investments and reduced revenues in Myanmar's energy sector.
According to the commerce ministry, natural gas income for the first 10 months of fiscal 2016 was $1 billion less than the $3.7 billion earned in the same period the previous year.
Slower economic growth in China and Thailand, which account for around 60% of of Myanmar's imports and exports, has led to reduced demand for Myanmar products. Other headwinds have stemmed from rising inflation -- which topped 11% in 2015 and will hover just below the 10% mark over the following two years, according to the International Monetary Fund -- fueled in part by a weakening kyat, the Myanmar currency, which pushed up the cost of imports and overall prices. The currency has fallen from around 960 kyat to the dollar in mid-2013 to 1,365 in early April 2017.
Political risk for investors has increased. The government faces possible international censure over allegations of crimes against humanity carried out by the army against stateless Rohingya Muslims in the west of the country, an echo of the pariah state policies of Myanmar's pre-2011 military junta that put the country off-limits to many Western companies.
The lingering impact of devastating floods in late 2015 and the resulting recovery costs have hurt productivity in farming areas. Agriculture is the main source of income for two-thirds of the country's population of about 54 million. But productivity is already low compared to its neighbors. On a rice farm, for example, "one day of work generates only 23kg of paddy (unthreshed rice) in Myanmar, compared to 62kg in Cambodia, 429kg in Vietnam, and 547kg in Thailand," the World Bank said in a recent report.
Boosting productivity "could significantly raise rural incomes and reduce overall poverty and malnutrition," according to Adam Kennedy of the International Food Policy Research Institute, but "doing that will require large amounts of investment by government and private agro-enterprises of all sizes."
The need for "large amounts of investment" underscores the magnitude of the government's challenge in transforming one of Asia's poorest and least-developed countries as it tries to build on reforms launched by the previous administration from early 2011.
Only about 30% of the population has regular access to electricity, and, according to the Asian Development Bank, Myanmar's road density is a mere 2km per 1,000 people, less than one-fifth of the average across the 10-member Association of Southeast Asian Nations. The government hopes to lay over 30,000km of road and extend rail networks in coming decades, a massive investment that, if realized, will make it much easier to send goods to markets across a country that is bigger than France and England combined.
BUILDING ON FOUNDATIONS Much of the bedrock for economic reform was laid from early 2011 by the Thein Sein administration -- changes that were seen as revolutionary in contrast with the previous five decades of harsh, secretive military rule. New investment laws were drafted and sectors such as telecommunications were opened to foreign investors. Political reforms, such as allowing greater press freedom, resulted in Western countries dropping economic sanctions.
The result was an economic boom. Growth surged throughout the term of the Thein Sein government from an annual 5.5% in fiscal 2012 to 7.3% in fiscal 2016. In 2013, the awarding of telecom licenses to Norway's Telenor and Qatar's Ooredoo proved transformative. Millions of people were connected to mobile networks and the internet for the first time, while the granting of the licenses contributed nearly $3 billion to Myanmar's foreign investment by the end of fiscal 2015.
The Thein Sein government also enjoyed feverish foreign interest in Myanmar's oil and gas sector, which accounted for the vast majority of FDI approvals until early last year. "In those days, many extractive businesses were allowed, plus [recently] there were few applications [for energy-sector investments] due to falling oil and gas prices," said Maung Maung Lay, vice chair of the Union of Myanmar Federation of Chambers of Commerce and Industry, the country's key business group.
The heady days when Myanmar was touted as the world's newest frontier market are not completely over. But much of the "easy" growth has already happened, meaning that the NLD will have its work cut out in addressing Myanmar's multiple and complicated economic challenges, including electricity, infrastructure and educational shortfalls.
"We lack vocational training, [and] no investment was made," said Maung Maung Lay, adding that the NLD government is "spending more on education, on health, but there are huge challenges."
Pleading for more time to meet those challenges, Suu Kyi said in her March 30 address that "one year is not a long time." Despite failing so far to prioritize economic reforms, she is surely well-aware that economic failings sparked the massive demonstrations against military rule in 1988 and in 2007.
Still, though she has acknowledged public frustration over the progress of her administration, the former political detainee and Nobel laureate continues to enjoy strong support. The NLD won nine out of 19 contested seats in national and regional parliamentary by-elections on April 1, retaining seats in its urban and central Myanmar heartland but losing in ethnic minority areas bordering Thailand and Bangladesh.
Gwen Robinson, chief editor, contributed to this report.