201511.06
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Myanmar’s election a lose – lose for business

Tractus Asia's Myanmar expert and Country Manager, Joshua Brown, meets with Aung San Suu Kyi.

Tractus Asia’s Myanmar expert and Country Manager, Joshua Brown, meets with Aung San Suu Kyi.


By Joshua Brown and Martin Jancik

Myanmar is abuzz with excitement and, perhaps, nervous anticipation ahead of Sunday’s general election. The event is a major and crucial milestone in Myanmar’s march towards democracy and its reintegration into the broader international community. It is hugely important for Myanmar’s social and political evolution.

But what does it all mean for business?

Regardless of the election result you forecast, three of which have been detailed by Myanmar expert Erin Murphy at Inle Advisory, no outcome holds the promise of improved operating conditions for business.

Myanmar’s shifting political landscape is somewhat of a black box even to the more well-informed country watchers and geopolitical analysts. A commonly held conception of Myanmar as a dichotomy – the Lady versus the generals – has devolved into a pluralistic environment. Forces from all corners of civil society, religious groups, varied factions in the military, a plethora of political parties, non-state armed rebel groups name just a few of the political forces gyrating around the nucleus of Myanmar’s November 8th general election.

Tractus Asia is not a political risk-specialized firm but three years on the ground advising on market entry and direct investment strategy and implementation has provided extensive insight into the workings of Myanmar’s system.

A National League for Democracy (NLD) landslide victory

Expectations run high in the event of a landslide performance by the NLD, reflective of the party’s performance in 1990. Securing 67% of the seats in the joint houses of parliament would put the NLD in a position to elect the next president and potentially start proceedings to amend the constitution, which bars party leader and global democracy icon Aung San Suu Kyi from the presidency.

But an NLD government would face twin obstacles. First, the party would be immediately confronted with the colossal difficulties of governing, compounded by wildly unrealistic expectations of the electorate. The party has come under fire for the dictatorial style of its leader and its inability to manage fractions within itself. While the party has managed to remain together, thanks in part to its revered leader and the mutually recognized importance of the election, governing one of the world’s least developed nations will present new and daunting challenges.

Secondly, even with a landslide victory, it is unlikely opponent groups in both the military, which holds 25% of parliamentary seats by appointment, and current ruling power base will do much to clear a path for a new NLD administration. Indeed, many have predicted that an eroded military class could stir up trouble across multiple fronts – with Myanmar’s warring non-state militant groups or through divisive religious conflict for example.

All of this would detract from the ability to conduct business within Myanmar. A new administration is likely to be focused on reconciliation, transitionary politics and firefighting as it manages the new normal.

A divided legislature

Elected in the 2010 by-elections, Aung San Suu Kyi was removed from her pedestal as democracy icon and cast into the murky waters of opposition politics. She has had to take positions that have at times isolated members of her base and generated fractures in her party.

Ethnic parties have also seized upon new political space to maneuver and will represent critical swing votes in states populated by ethnic minority groups. As much as the NLD may lose seats to the ruling Union Solidarity and Development Party (USDP) candidates, it will also be contesting against strong ethnic followings for votes.

The mix could mean a more pluralistic, multi-party democracy with no one party holding a clear majority.

This could lead to legislative gridlock and horse-trading over the introduction of new legislation and the much needed reform of outdated laws, many of them important to improving the environment for business.

Such absence of a clear majority may diminish the prospect of Myanmar’s continued market liberalization.

Corruption at the polls

In 1990, a landslide victory by the NLD was annulled by the military in what was seen as a massively stolen election.

There is a sliding scale from generally well-run election practices to outright corruption at the ballot box. While some complaints are going to inevitably be raised about Election Day practices, what is critical, is that the election be generally acceptable to the Myanmar public.

While the election so far has been generally viewed as being free – if not fair – excessive tampering with election results could tip the scales of acceptability and kick off social and political unrest. Today’s Myanmar is more open and freer. Greater numbers of people could end up on the streets if the election is deemed unacceptable either domestically or internationally.

In a worst case scenario, we could see a dramatic backslide and a re-imposition of military control and with it, a likely re-imposition of international sanctions on trade, finance and investment.

Long term

While these results do not hold particular promise for the prospect of improving the business environment in the short-term, none of these facts detract from the significance of this election to the Myanmar people. The election represents a critical step towards the promotion of a free and pluralistic society and towards greater stability across the country. Even though the next 18-24 months are surely going to be bumpy, the path ahead leads to more openness, better application of the rule of law and ultimately better conditions for both people and business.

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