September 30, Myanmar Times
As Myanmar prepares itself for historic elections in November, Daw Aung San Suu Kyi’s National League for Democracy (NLD) encourages voters to “vote for change”, a slogan that has left investors worried about what that would mean for their businesses.
The uncertainty about the NLD’s economic policy stems largely from a campaigning environment in which policies are not a priority and political parties tend to limit themselves to populist slogans, rather than explaining their plans for the future in detail.
In the political landscape in Myanmar, “success criteria are different from the US, and less policy-oriented”, said Michael Armstrong, director of Siward Newton, a frontier and emerging market investment consultancy.
He did, however, not think an NLD win would be much to worry about. “It will open the country a little bit more to foreign involvement because of Daw Suu’s orientation,” he said. While this is happening already to a certain extent, “her personality and her connections will accelerate that process slightly”.
An NLD policy document, in which the party states that it will encourage foreign direct investment, on condition of compliance with domestic laws and international human rights standards, is too vague to please many within the business community.
Investors want stability and a continuation of the current reforms, and concerns have mounted about how an NLD majority in parliament would affect existing priorities of deregulation and creating a better environment for foreign investment.
“From a pure investor’s view, a landslide victory by the NLD … may not be the best outcome,” said a businessperson at a Japanese trading company.
An NLD victory may lead to “protectionist policies and disruptions in the current government’s efforts for opening the country up”, he said.
Meanwhile, Myanmar businesses have been preparing themselves for what they hope will be a large influx of investors after the new government takes office.
This includes AYA Bank, owned by business tycoon U Zaw Zaw as part of the Max Myanmar Group of Companies. While the chair is still under US sanctions, he has been reforming the company, which found itself in second place in the Myanmar Centre for Responsible Business’s 2015 Transparency in Myanmar Enterprises report. A US waiver has also been issued allowing US entities to do business with AYA Bank.
U Sai Nanda Oo, head of foreign direct investment (FDI) at AYA Bank, said that while reforms are not yet going full steam ahead in Nay Pyi Taw, “the speed is picking up and the NLD understands that it needs to cooperate in order to keep up this momentum”.
He does not think a majority for the largest opposition party will bring significant economic changes. “I doubt there will be radical changes because the direction is fine. It’s a matter of how long it’s going to take and how we want to get there,” he said.
While foreign governments are applying pressure to Myanmar’s leaders about the need for free and fair elections, this seems less of a concern for local and foreign businesses who mostly fear instability and emphasise the importance of the continuation of current economic reforms.
“The business community in Myanmar would like to see continued reforms,” said U Tin Cho, senior adviser for Parami Energy Group of Companies. He stressed that further progress was needed, especially in terms of assurances for accountability and transparency. He said it was important that the benefits of reforms are not limited to only a select group, but refrained from naming a party preference.
“Transparent government and transparent policy, generally speaking, is what all Myanmar business- people are looking forward to seeing,” he said.
The recent purge of Thura U Shwe Mann as chair of the Union Solidarity and Development Party, supported by security forces, and the rise of extremism under Buddhist nationalists have fed into fears of instability. As a result, many companies continue their “wait and see” approach toward Myanmar, despite the government’s urgent calls for investment.
Religious tensions between Buddhist and Muslim communities rose when the country opened up after President Thein Sein assumed office in 2011. Since then, communal violence has left scores dead and more than 140,000 people, mainly Muslims, displaced.
It is widely believed that the violence is politically motivated and there is apprehension that nationalism could be used to cause unrest during the election campaigning period.
“Companies that don’t already have something [in the works] decided to stay on the sidelines until the political dust settles, but those with something already in the pipeline have got their foot on the accelerator,” said Mr Armstrong, director of Siward Newton.
U Zaw Naing, deputy director general in the treasury department at the Ministry of Finance, said on the sidelines of the Myanmar Global Investment Forum held by Euromoney Conferences in Nay Pyi Taw earlier this month that a majority of new investments at the moment are into the Thilawa special economic zone.
The zone is a Myanmar-Japan joint venture, located to the south of Yangon, and is the first of its kind in Myanmar. The 400-hectare Zone A – home to more than 40 companies – officially launched last week.
According to the businessperson at the Japanese trading company, a big concern is that “something goes wrong with the election process and the international community and the media have a field day”, leading to US sanctions being maintained, European Union sanctions reinstated, and the Japanese government under pressure to tighten policies on Myanmar.
