British Ambassador: Burma is an interesting prospect but should investors worry about political risk?

Inle Lake in Myanmar (also known as Burma)

Inle Lake in Myanmar

British Ambassador: Burma is an interesting prospect but should investors worry about political risk?

15/01/16

By Andrew Patrick

Burma’s election on November 8 was the culmination of five years of remarkable reforms. As the country went to the polls many observers were concerned about disenfranchisement, about the risk of fraud, and even of violence. In the event while there were problems, in particular that a sizeable group in Rakhine state were unable to vote, and the military retains a 25 per cent block in parliament, the voting went well. EU observers characterised the poll as a “remarkable achievement”.

Significant economic reforms have already taken place. The country has moved up 10 places in the World Bank’s Doing Business rankings, albeit its position is still rather lowly and it remains at 167th position in those rankings just above Nigeria and Bangladesh.

Some major British companies are already established in Burma: Unilever has two factories; Allen & Overy and Herbert Smith Freehills have offices; Standard Chartered and Prudential too have a representative presence.

Others have been deterred by the very real obstacles: poor infrastructure, an unreliable power supply, red tape and gaps in Burma’s education system. Some of these will take years to fix fully.

There are other more political problems however. There has been little progress on the difficult situation in Rakhine state.  Around 140,000 Rohingya Muslims were displaced from their homes in 2012 and remain in camps. Significant human rights abuses continue in parts of the state.  There is also the continuing conflict in the border areas where Burma’s 50-year long civil war has yet to be fully resolved. A ceasefire involving some but not all of the main groups was signed in October 2015. 

Despite these problems, Burma is in my view worth a thorough look. A McKinsey forecast in 2013 suggested that Burma’s economy could quadruple by 2030.

That may be ambitious, but there have been impressive growth rates in the last few years (8.5 per cent or so in 2015).

Burma is rich in natural resources, and is in a dynamic region. It is an interesting prospect – but should investors worry about continued political risk?

One hears two main concerns from visiting business delegations: either that the victorious party, the National League for Democracy (NLD), which has never been in government, is not equipped to run the country, or that the military will at some point call a halt to the democratisation process, and plunge the country back into isolation.

On the first point opposition leader, and election winner, Aung San Suu Kyi has said that she plans to reduce the number of Ministries, and that she will draw on talent from outside her own party, as well as from within it, to form the Cabinet. She makes clear that while she believes a great deal of reform is needed, she will not, she says, be tearing down the good parts of what has been built up over the last administration.

On the second point, the military and the existing President have stressed their commitment to respecting the election results. The outgoing President Thein Sein and Daw Aung San Suu Kyi have met, and have established committees to ensure the handover of responsibility is smooth. Daw Suu has also secretly met former dictator, 82-year-old Senior General Than Shwe, who kept Suu Kyi under house-arrest for much of his 19-year-rule and current Army Commander Senior General Min Aung Hlaing.

The public statements from all of these meetings have been positive.

What should follow next is that the Parliament that was elected on 8 November will meet at the end of January, and, as one of its first points of business, elect a new President. The President then has two months to form his or her administration, assuming office in late March or early April.

One area of controversy in the military-drafted constitution is the article which prevents Daw Aung San Suu Kyi from becoming President because her sons hold foreign (British) citizenship. While she campaigned for it to be changed in 2014 – with UK and other international support – her recent public statements suggest she is not going to make amendment her first priority in government. Initially she will instead rely on a trusted ally, who has yet to be named, to become President.

Other parts of the constitution serve to protect the military’s role, reserving 25 per cent of the seats in parliament and awarding them control of three Ministries – Defence, Border Affairs and most importantly Home Affairs. This last controls not only the police, but also the local administration in much of the country. In other words the constitution was written precisely for the situation where the elected government was not loyal to the military. Unless and until the constitution is changed any government will require successful cohabitation between the military and the newly-elected civilians. The issue is not so much whether the military will halt the transition to democracy, but in the first instance whether cohabitation can be made to work.

It is worth remembering  however that the military launched the reform process in 2011, and while it is of course possible it will derail, I think commentators are right to say they will be loath to put at risk the benefits the process has won for them: unprecedented economic growth, a surge in foreign investment to $8bn in 14/15, and a much wider group of international friends.  No doubt there will be many areas of disagreement, but it is in the best interests of everyone to stay the course.

Andrew Patrick took up his current post as British Ambassador to Burma (also known as Myanmar) in September 2013. His previous diplomatic assignments include Additional Director South Asia at the Foreign & Commonwealth Office (FCO) (2009 – 2013); Deputy Head of Mission to Kabul (2007 – 2009) and Deputy Head of Mission to Pretoria (2004 -2007). Mr Patrick joined the FCO in 1988.

 

Editor’s Note

Asia House added the links to this article.

Burma calls itself Myanmar as do many other countries, but the British Government continues to refer to the country as Burma. Internationally both names are recognised.