From 1 April, Myanmar will be governed by an inexperienced political party, while the military will retain considerable influence.
IHS perspective | |
Significance | While the National League for Democracy (NLD) will take power on 1 April for the first time, the military remains very influential – in particular retaining control of the civil service. |
Implications | The NLD – in part due to its inexperience, and also due to reliance upon co-operation from the military – will risk failure in meeting voters' expectations for better economic opportunities, land reform, and consultation over planned projects. |
Outlook | In the next two to three years, political pressure on the NLD is likely to increase until the reform process risks becoming stalled, particularly if relations with the military become strained. |
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Htin Kyaw, incoming president of Myanmar |
The proxy president
On 15 March, Myanmar's National League for Democracy (NLD)-dominated parliament is expected to elect Htin Kyaw, a close ally of NLD leader Aung San Suu Kyi, as the country's next president. Suu Kyi, who is constitutionally barred from the presidency, has indicated that she will nevertheless exercise presidential powers through Htin Kyaw as a proxy. While the military appears to have accepted this arrangement, strains with between the NLD and the military establishment could increase as a consequence of the challenges the incoming NLD government faces.
Risks to the incoming government
The NLD government will take office for the first time on 1 April. Its inexperience in itself raises risks for investors (see Myanmar: 3 March 2016: Contract delays, revisions, and less certain investment policies and rules likely under Myanmar's incoming NLD government). However, the nature of the issues that the new administration must address – and voters' expectations of the new government – potentially pose additional risks for the NLD.
The military will remain influential, controlling the three important ministries of Defence, Border Affairs, and Home Affairs. Crucially, the Home Affairs ministry, through the General Affairs Department, controls the civil service from the central level through to township level. Considering this factor, the NLD government's relations with the military will be crucial to meeting the expectations of Myanmar's voters, as well as those of foreign investors for continued pro-market reforms. The risk remains that the military's pervasive control over the bureaucracy could stymie the NLD government's projects with the aim of extracting concessions or undermining the NLD, and San Suu Kyi in particular.
Land titles are unclear in many cases in Myanmar. Under military rule, land was confiscated with little or no compensation; this practice was also undertaken by domestic businesses with ties to military officials. With the pro-democracy NLD taking office, there are expectations that past confiscations will be redressed, and that Myanmarese will be offered more security in their landholdings: for instance, the NLD-controlled Mandalay regional government has been preparing complaints over land seizures for negotiation with the incoming government. If the NLD were to prove ineffective in dealing with such complaints, the party will risk losing political ground; at the same time, however, the NLD cannot afford a direct confrontation with the military over past land seizures.
Belatedly, the NLD will also be expected to undertake meaningful consultations with communities in areas in which projects are planned. Notably, NLD members of parliament have queried the outgoing government's haste in approving projects like the proposed dam constructions on the Thanlwin River – many of which were awarded to Chinese companies, and which non-governmental organisations (NGOs) have criticised for being awarded without adequate information or consultation with the affected communities. The incoming government is expected to review such projects, and will also come under pressure from NGOs and the relevant local communities with regard to other projects undertaken without proper consultation.
NLD officials have also stated an intention to review the Dawai and Kyaukphyu Special Economic Zones, which have attracted local opposition. Instituting proper consultation procedures could potentially cause future projects to be delayed. Once again, however, the incoming government will likely exercise caution in reviewing past projects that involved military-linked companies.
Outlook and implications
The NLD currently enjoys very high levels of political support, and is faced with meeting high expectations of the electorate towards improved employment prospects and incomes. Should the new administration fail to achieve progress in delivering on its election promises, within a period of two years the risk of government instability due to public discontent with the NLD could increase. At the least, the incoming government will be expected to maintain the economic growth of about 8.5% achieved by the end of the outgoing government's term. Such instability risks could also arise from within the NLD, as factions begin to emerge.
Relations with the military may also become strained over the NLD's five-year term – particularly if protests for land reform and greater consultation over projects turn violent, prompting the military to take action. Such strains are also likely if the NLD government is perceived as conceding too much power to ethnic rebel groups – for instance in Kachin and Shan states – in a bid to achieve a national ceasefire.
Accordingly, IHS expects that political pressure on the NLD will increase in the next two to three years. As the new administration takes on the substantial challenges of governing Myanmar, the NLD government's responsiveness to the requirements of foreign investors risks becoming stalled while attention is focused upon its political challenges.