SINGAPORE (June 24): On June 19, cyclists wearing shirts emblazoned with Aung San Suu Kyi’s picture biked around Mandalay. In downtown Yangon, about 1,000 people gathered at a public square, many bearing placards to form a large portrait of Aung San Suu Kyi. It was the State Counsellor’s 74th birthday.

While the public events were relatively low-key, they were nonetheless significant expressions of support at a time when the freedom fighter-turned-de facto head of state is under immense pressure. As Aung San Suu Kyi faces the next election in 2020, her international standing has taken a beating because of inaction over the Rohingya crisis. At home, the pace of economic reforms has not been quick enough and investor sentiment has faded, fast.

Even before her National League for Democracy (NLD) swept into power in November 2015, Myanmar had seen an influx of businessmen and dealmakers eager to be the first in what was ostensibly the last frontier market in fast-growing Southeast Asia. They saw opportunities in the undeveloped nation, which was rich in resources and had a young population that translated into a large and cheap workforce and a market for consumer goods. Meanwhile, local entrepreneurs who had risen through decades of isolation and in spite of harsh economic and business conditions were eager for their market to open up.

Indeed, on the face of it, Myanmar was primed to be the fastest-growing economy in Asia. The changes to laws made over the past two years to attract business and investment have also been promising. However, as this paper reported in 2012, much of the reforms had been already put into motion before the NLD came to power.

In 2010, for the country’s first elections after 20 years of military dictatorship, former general Thein Sein, the country’s appointed prime minister at the time, formed the Union Solidarity and Development Party (USDP). The NLD, led by Aung San Suu Kyi who had been freed from house arrest, boycotted the polls as the international community denounced the vote as a sham. Thein Sein took power, but then surprised everyone with wide-ranging reforms, engaging with Aung San Suu Kyi and committing to a democracy. The 2015 election result seemed to reinforce the notion that Myanmar was well and truly open for business.

Yet, the realities of navigating the underdeveloped and politically complex territory have caught up with many investors. The lack of infrastructure and regulatory clarity, coupled with ongoing political tensions and violence, seems to have stopped foreign investors in their tracks. In mid-2018, foreign direct investment slumped to US$1.74 billion ($2.36 billion), from US$5.7 billion in 2017. Between 2015 and 2016, when the NLD came in power, FDI amounted to US$9.5 billion. By the Myanmar government’s own admission, a lack of coordination between the NLD and regional governments on development policies, red tape and weak implementation of new laws have hampered the flow of FDI into Myanmar.

One concern is that the pullback of FDI will drive Myanmar towards China, which has made the struggling state a key node in its expansive Belt and Road Initiative. There are at least six major BRI-related projects in Myanmar, including three economic zones on the border with China, in the Shan and Kachin states, and the mammoth China-Myanmar Economic corridor. The BRI projects would provide much-needed jobs and infrastructure development. But as this paper reported in 2012, Myanmar’s reforms were driven by its desire to wean itself off its economic dependence on China to begin with. Chinese-led projects, particularly a dam on the Irrawaddy River to produce hydroelectric power for the mainland, had been unpopular with the locals.

Still-crumbling infrastructure and the lack of economic progress will make it hard for Aung San Suu Kyi and the NLD to sell their message of growth and development to voters. For example, blackouts are regularly scheduled in the major cities of Yangon and Mandalay, as the country struggles to cope with the growing demand for power.

However, Myanmar watchers that The Edge Singapore spoke to point out that the country is in a uniquely difficult position, that not even its neighbouring emerging markets went through. The country is effectively undertaking multiple reforms — political, economic, social and administrative — at the same time. The uncertainty over global economic growth and now the trade war between the US and China are not doing it any favours either.

In July 2016, the NLD government unveiled a 12-point economic policy that listed as the top priority, national reconciliation based on a sustainable and equitable management of national resources. Among the other points were commitments to the development of private enterprise and infrastructure development, the reform of state-owned enterprises, and the improvement of public finances and fiscal policy to ensure economic stability. In the countdown to 2020, whether the government has fulfilled these commitments or not will come to the fore.

This story first appears in The Edge Singapore (Issue 887, week of June 24) which is on sale now. To read our cover story this week "Myanmar: The long game", subscribers please click here and login