Myanmar’s election not an economic reset, says former UK ambassador

Key Concepts

• Myanmar Election (2024): The recently concluded election dominated by the pro-military party, Union Solidarity and Development Party (USDP).
• Coup d'état (2021): The military coup that overthrew the democratically elected government in 2021, setting the stage for the current political and economic crisis.
• Brain Drain: The emigration of skilled workers and professionals from Myanmar due to political instability and economic hardship.
• Western Sanctions: Targeted sanctions imposed by Western countries on individuals and entities linked to the military regime.
• China’s Influence: The growing economic and political influence of China in Myanmar, particularly regarding natural resource extraction.
• Federal Political Settlement: The need for a political agreement that addresses the concerns of ethnic groups and establishes a more inclusive governance structure.
• Managed Float Exchange Rate: A system where a country’s exchange rate is allowed to fluctuate within a certain range, managed by the central bank.

Myanmar’s Post-Election Economic Outlook: A Detailed Analysis

I. Election Results and Initial Reactions

A month-long election in Myanmar has concluded with the pro-military party poised for a landslide victory. However, the election’s legitimacy is widely questioned. ASEAN chair Malaysia has refused to certify the results, citing concerns about the lack of inclusive and free participation. Many Myanmar citizens have also rejected the polls, deeming them a sham. This election is the first since the 2021 coup and occurs amidst ongoing armed conflicts and a deteriorating economy.

II. Economic Implications of the Election Outcome

Vicki Bowman, Senior Advisor at the Institute for Human Rights and Business and former UK Ambassador to Myanmar, suggests that businesses in Myanmar are hoping the election will create some space for policy dialogue. The establishment of a parliament, even one dominated by the military and USDP, could potentially move policymaking out of the “black box” of the military regime. However, she emphasizes that the election does not address the fundamental problems plaguing Myanmar’s economy.

Specifically, she highlights persistent issues like:

• Infrastructure Deficiencies: Internet connectivity speeds have decreased by 78% in 2024 and continue to decline.
• Political Instability: Ongoing civil wars disrupt border trade and erode personal security, driving a significant outflow of skilled labor.
• Brain Drain: A large number of young people are attempting to leave the country for work, refugee status, or education abroad, creating a significant loss of human capital.

III. Regional Investment and Predictability

The possibility of the USDP-led results offering a predictable partner for regional investors was discussed. However, Bowman cautions that the situation remains unpredictable, as the ultimate selection of the President – inevitably a military figure backed by the USDP – is still months away.

A key concern is the ongoing trade restrictions imposed by the military, particularly on essential imports like fertilizer and pesticides. These restrictions have fueled a resurgence of corruption, with brokers demanding payments to facilitate import licenses – a reversal of previous improvements in transparency. Bowman stresses the need for the new government to demonstrate a commitment to change and restore business confidence.

IV. The Impact of Sanctions and External Factors

Bowman argues that Western sanctions are often overstated in their impact on Myanmar’s economy. She contends that the primary drivers of economic hardship are the policies implemented by the military regime over the past five years, including import constraints and exchange rate manipulation. A unification and return to a managed float exchange rate would be a positive signal of confidence.

However, she notes that global turmoil has diminished Myanmar’s attractiveness as an investment destination, and the optimism seen in 2010-2012 – when there was strong international support and diaspora return – is currently absent.

V. China’s Growing Influence and Resource Extraction

Myanmar is expected to continue relying heavily on China and Russia. While Russian influence is described as largely psychological, China’s role is deemed “absolutely essential.” Bowman expresses concern that the regime may have granted China extensive access to Myanmar’s mineral resources in exchange for assistance in suppressing ethnic armed groups.

She details the outflow of valuable resources – teak, jade, antimony, tin, light and heavy rare earths – to China at significantly undervalued prices, benefiting China strategically and economically. Bowman emphasizes the importance of maximizing the value of these resources for Myanmar and linking this to a federal political settlement.

VI. Debt and Long-Term Implications

The discussion highlighted the potential for increased debt to China as Myanmar becomes more reliant on its support. The lack of transparency surrounding agreements with China raises concerns about the long-term implications for Myanmar’s economic sovereignty.

VII. Notable Quotes

• “What’s holding it back is the policies which have been run for the last five years.” – Vicki Bowman, referring to the factors hindering Myanmar’s economic recovery.
• “We don’t know that, but that’s definitely a fear that I hear from the business community.” – Vicki Bowman, regarding the potential for Myanmar to have promised China free access to its mineral resources.

Conclusion

The Myanmar election, while resulting in a predictable outcome, has not resolved the fundamental political and economic challenges facing the country. While a new parliament may offer a limited space for dialogue, the underlying issues of civil war, infrastructure deficiencies, and restrictive policies remain. Myanmar’s economic future is increasingly intertwined with China, raising concerns about resource exploitation and debt. A sustainable path forward requires a federal political settlement that addresses the concerns of all stakeholders and maximizes the value of Myanmar’s resources for its own people. The election, therefore, represents a continuation of the existing crisis rather than a turning point towards stability and prosperity.