By Edward Blakeney
Landslide elections – but the political outcomes remain uncertain.
On November 8, Myanmar held its first credible nationwide elections in over 50 years. By any measure it exceeded expectations. The day was peaceful; while there were electoral irregularities, international observers and journalists were pointedly surprised by the professionalism and gentility of election officials.
As the results came in, it also became clear that Aung San Suu Kyi’s NLD party were going to get a landslide victory, to a degree surpassing anyone’s expectations – from international analysts, to the NLD itself, to the ruling USDP. Indeed, the incumbent military aligned USDP party suffered some major casualties. The speaker of the lower house and the chairman of the USDP both lost their seats. The NLD ended up taking around 80% of seats, easily clearing the required amount to have a majority in parliament, even taking into account the automatic 25% still held by the army.
With this degree of defeat in mind, the reaction of senior members of the government and the army has been encouragingly graceful and positive. Such figures have been markedly magnanimous in defeat, publicly stating that they lost their seats fairly and that the results should be respected. Likewise, the head of the army, Min Aung Hlaing, has repeatedly asserted that the army will respect the results.
So What’s The Wait?
The pre-election parliament continues to sit until the end of January. In the meantime, they can still pass legislation, and even in theory change the constitution. However, current legislation up for review is not politically contentious and is involved with making much needed reforms to sectors such as banking and investment. The current speaker of the lower house, U Shwe Mann, also opened the last session by stating the although many current MPs would not be coming back in the new parliament (including himself), they should end their terms responsibly and in the interests of the people.
The new parliament is required to vote for the new president and does not convene until February; the new government will not come into power until 1 April. While the NLD have enough seats to choose the president unilaterally, Suu Kyi remains ineligible to be president under the constitution.
So Who Will Be The President?
No one knows, and while there are a number of likely candidates, there is not much of note to differentiate between them, although the president is likely to be from within the NLD.
What is of note, however, is that Suu Kyi has stated numerous times that she intends to rule ‘above the president’ – effectively the president will be a figurehead. This does not sit uncomfortably with her current leadership style to date, which has appeared to follow a common Burmese political trait in running her party along autocratic lines, and not fostering much depth in leadership.
Another important development is that although the NLD have won a landslide, including crushing the ethnic vote in most of the country, she has said that the cabinet will be inclusive. On 26 November she stated, ‘we will include ethnic representatives who are not NLD members and others who can benefit the country. …[in] the spirit of sharing our success with them based on building national reconciliation.’ This positive sign – encouraging a collaborative political atmosphere – will also bring depth to a government that many had feared would not have sufficient experience to rule effectively.
While post-election developments have so far been positive, the continued presence of the army in Myanmar politics should not be underestimated. As already mentioned, they hold an automatic 25% of the seats in both houses which means their vote is required in order to change the constitution; the army will also choose one of the two vice-presidents. Furthermore, the military maintains direct control of some of the most important ministries: Defence, Border Affairs and Home Affairs. The latter includes the police force, special branch, immigration, and the General Administration Department (GAD), which staffs all regional and state-level governments and provides administration for the country's multiple districts and townships. A cooperative relationship between Suu Kyi and the military will be required. Suu Kyi is due to meet the president and the head of the armed forces on 2 December.
So while the NLD has won a landslide, the political landscape is still far from settled. Government will require a balanced, collaborative approach between different power bases – old and new. Indeed, the approach we see being played out at the moment should be welcome to investors: one in which the democratic transition retains credibility, while allaying non-democratic stakeholders. This is good not just from the point of view of building national unity and stability, but also in retaining governing know-how in meeting the challenges ahead. …so far so good.
IDG Acumen is a corporate intelligence and political risk consultancy with offices in Yangon, Bangkok and Singapore
Twitter: IDG Acumen@Acumen_Myanmar
Ten ways Myanmar’s military can make life very difficult for Aung San Suu Kyi and the NLD.
The harsh realities of power in Myanmar — at least as far as they have been seen until now — demand a fair degree of caution. It might be helpful to list a few basic facts of life in Myanmar, just to set the scene.
First, the armed forces (Tatmadaw) have long been and arguably remain the most powerful political institution in Myanmar. As Robert Taylor has written, ‘Only the army can end its own role in Myanmar’s politics, and that decision is dependent on its perception of the civilian political elite’s ability to manage the future’. He might have added, ‘and protect the Tatmadaw as a national institution’.
Second, it is also important to bear in mind that the elections were relatively free and fair, and produced a reasonably accurate result, only because the leaders of the armed forces permitted them to occur and did not interfere. It may not have been easy, but they could have intervened at any stage of the process and ensured that the elections were cancelled, postponed, or manipulated to give a different outcome.
Third, given their resources and control of Myanmar’s internal affairs, the generals must have known that a free and fair election would result in a decisive victory for Aung San Suu Kyi and the NLD. The final statistics may have come as a bit of a surprise (before the poll some respected analysts were questioning whether the NLD could achieve a landslide), but the outcome could not have been in doubt.
Fourth, this being the case, it can be assumed that, well before the election took place, the Tatmadaw’s senior leadership, probably in consultation with the president, took a collective decision to accept the results. There is no real tradition in Myanmar of sharing political power, but they must also have faced the prospect of negotiating the future governance of the country with Aung San Suu Kyi and her party.
It will be a matter of the Tatmadaw and the NLD having to strike a deal of some kind. The massive show of popular support for Aung San Suu Kyi and her party on 8 November gives them enormous moral authority and a strong bargaining position, but it does not guarantee them a free hand to shape Myanmar’s future. Under current circumstances, that can only be done in cooperation with the armed forces.
The NLD’s expected control of the national parliament opens up a number of intriguing possibilities, but there are still many ways in which the Tatmadaw could make life very difficult for her and the party, if it chose to do so. Here are 10 of the more obvious ones:
One: The 2008 constitution could have been written with the current scenario in mind. The generals clearly anticipated the possibility that the armed forces might one day be faced with a potentially hostile parliament. So they built in various measures to protect the Tatmadaw’s position and core interests and to guarantee its central role in national affairs. That is why the generals view the constitution as ‘the main or mother law’ of Myanmar, which they are determined to safeguard.
Two: Any attempt to challenge the Tatmadaw’s status will be resisted. It has already rejected moves to reduce the guaranteed 25 per cent military representation in all national and regional assemblies. It has also opposed moves to amend the constitution so that Aung San Suu Kyi can become president. Amendments have not been ruled out entirely, but military spokesmen have said they will only occur when Myanmar’s democracy has ‘matured’. The Tatmadaw will decide when that stage has been reached.
Three: Under the 2008 constitution, the Commander-in-Chief (CinC) of Defence Services has wide discretion to intervene in Myanmar’s internal affairs. With the president’s approval (and remember Thein Sein will remain in office until March 2016) he can even declare an emergency and take over the entire government. However, there is a lot the Tatmadaw can do to influence events short of such an extreme step.
Four: The constitution specifies that the portfolios of defence, home affairs and border affairs are filled by serving military officers recommended by the CinC. Also, if the Vice Commander-in-Chief is included, the CinC exercises effective control over at least five of the 11 members of the powerful National Defence and Security Council. These arrangements give the Tatmadaw effective control over Myanmar’s internal affairs.
Five: Should an NLD parliament put pressure on the Tatmadaw, by trying to reduce its share of the national budget, there is bound to be pushback from the armed forces on the grounds that they have a duty to ensure the country’s unity, stability and sovereignty. In any case, under a 2011 law, the Tatmadaw is permitted to use other means to find the resources they need to meet their responsibilities. They already receive funds from a range of off-budget sources.
Six: The role of the armed forces in the national economy has been gradually declining since 2011, as the Tatmadaw has given up some of its monopolies and its two main conglomerates, the Union of Myanmar Economic Holdings Ltd and Myanmar Economic Corporation, have begun paying taxes. Should it wish to do so, however, the armed forces and their powerful ‘cronies’ could still exert pressure on the government by exercising their considerable economic power.
Seven: Aung San Suu Kyi knows that an early resolution of the country’s long-running insurgencies will be one of the NLD’s most pressing policy issues once it takes office. Yet, there is no hope of a more comprehensive ceasefire agreement — let alone a nation-wide peace settlement — without the full cooperation and support of the armed forces which, under the constitution, are guaranteed complete autonomy in all military affairs.
Eight: It is also relevant that the government and civil service are dominated by ex-military and military personnel. Out of 46 ministers at the national level, 37 are currently from the Tatmadaw, including five on active duty. Of the 14 Chief Ministers of Myanmar’s states and regions, all but one are retired military officers. These numbers will change as a result of the latest elections, but at least 170 retired senior officers stood for parliament on 8 November and some will probably secure a seat, if not official appointments.
Nine: In addition, 80 per cent of senior civil service positions in Myanmar are filled by ex-servicemen and women. Of the 33 permanent secretary positions created this year, 23 are held by former military personnel. As Renaud Egreteau has written, over decades the senior officer corps has been socialised into believing that the Tatmadaw is the sole and uncontested embodiment of the state. Even under a NLD government, many positions of authority will be under the influence of former military officers with a strong institutional loyalty to their old employer.
Ten: Last, but by no means least (and the country’s non-state armed groups aside), the Tatmadaw exercises a monopoly of the means of applying physical force in Myanmar. The CinC not only controls the powerful 350,000 strong armed forces but also the 80,000 strong Myanmar Police Force (with its 30-plus armed security battalions), militia units and other paramilitary forces, the Fire Brigades and even the Myanmar Red Cross.
Through these and various other measures, the armed forces have the means to exercise a powerful influence over Myanmar’s political, economic and social affairs, short of direct intervention. In considering the way ahead, Aung San Suu Kyi and the NLD will need to make due allowance for this reality, and come to some kind of modus vivendi with the military leadership. To reject such a course of action would see everyone suffer. However, both sides have shown that they can be pragmatic when it suits them. If they accept that their best option is to work together for the good of the country, and permit each side to pursue their core interests without threatening the other, then Myanmar may be able to look forward to happier times.
Aung San Suu Kyi pledges to pay “special attention” to ties with China
In an interview with China’s state-run Xinhua news agency, the NLD leader said Myanmar had no enemies, but relations with neighbours were more sensitive than others and needed to be carefully handled. China was Myanmar’s lifeline for two decades when sanctions prevented most Western businesses and financial institutions from engaging with the country during military rule from 1962 to 2011 that left the nation underdeveloped. But the stakes are now far higher for Beijing, with business competition heating up and the NLD’s anticipated sweeping-out of the last remnants of the old military guard with which Chinese firms enjoyed a close bond. “Ties between neighbours are always more delicate than that between countries far apart,” Suu Kyi said. “We’ll pay special attention to our relations in order to make them smooth, effective and clear.”
Mistrust still lingers in Myanmar over China’s involvement in its nationwide peace process. Ties have been strained over Myanmar’s domestic border conflicts, some of which have spilled into China and killed civilians. Myanmar’s President Thein Sein lifted martial law in the restive Kokang region near China on Tuesday, saying peace had been restored. Military rule was imposed in February after fighting erupted between the government and the Myanmar National Democratic Alliance Army, a rebel militia born out of the former China-backed Communist Party of Myanmar. Suu Kyi said Myanmar’s foreign policy was about balance and China and Myanmar could have a good friendship. “We maintain friendly ties with friends from far and near,” she said. “There’s no reason establishing a friendship is impossible, if both parties are willing.” China could face a challenge in maintaining its influence in Myanmar as the United States pays closer attention and Japanese and Asian firms compete for contracts. Many European and US companies are expected to set up shop after the clear mandate for change in the Nov. 8 election, the first free poll in a quarter century. Complicating the business picture for China is the fact that its Myanmar investments have historically been unpopular, fuelling perceptions of graft, land grabs, shady deals with generals and the plunder of natural resources. Without mentioning China specifically, Suu Kyi said it was vital for investors targeting Myanmar to win public confidence, and for the government to be transparent and welcome business that was in the country’s interests.
Inclusivity - Myanmar’s new cabinet will include members of other political parties and representatives of ethnic minorities, according to Aung San Suu Kyi, stressing the need for national reconciliation. The NLD won a majority in both houses of Myanmar’s parliament and also fared far better than expected against ethnic political parties in regional legislatures. But Suu Kyi has emphasised that the first democratically elected government in more than 50 years will seek to reconcile the country’s many disparate political groups.
“Our party has won an overwhelming majority of the seats but we won’t take them all,” Suu Kyi said, referring to cabinet seats in an interview with Radio Free Asia’s Myanmar language service. “As I said earlier, we will cooperate with others with the spirit of sharing our success with them based on building national reconciliation. Of course the NLD will lead. It is the mandate the people have given to us at our request. “We will include ethnic representatives who are not NLD members and others who can benefit the country.”
The interview did not touch on the persecuted minority Rohingya Muslims who were not allowed to vote in the election and are effectively stateless in their own land. The NLD captured enough seats in the national-level legislature to have its choice of president, who is elected by members of parliament. The president then selects the cabinet. Suu Kyi has said that regardless of who is appointed president, she will call the shots as leader of the winning party.
The new parliament will sit and elect a president in February, and the new administration will begin its five-year term on April 1. A quarter of all parliament seats are reserved for unelected military officials and three powerful ministries – defence, home affairs and border affairs – are under the remit of the Commander-in-chief Senior General Min Aung Hlaing. Suu Kyi stressed the importance of meeting with Min Aung Hlaing and President Thein Sein to insure smooth transition of power. Both have accepted Suu Kyi’s invitation to meet. “I want these meetings to happen soonest,” she said. “We should start taking steps fast, one after another, towards a smooth transfer of power.”
Foreign investment down 5.1%
Foreign direct investment has fallen during the first seven months of this financial year to US$3.7 billion from $3.9 billion over the same period last year, said the Directorate of Investment and Company Administration (DICA) in a statement. The statement confirms the widespread impression that investors had adopted a wait-and-see attitude for several months in advance of the November 8 election. DICA’s director general U Aung Naing Oo said a few days before the poll that investment was likely to slow as foreign investors waited for greater political certainty before committing to new projects. This could be set to change given the positive attitude the international community has toward the election winners, Aung San Suu Kyi’s National League for Democracy. Economic sanctions may well be lifted, after which the country will gain many opportunities. The economy will grow as a result of politics and in turn, the political situation will improve in parallel with the economy. It is an opportunity to take advantage of this change. In 2011, foreign investors were interested only in natural resource extraction. But they have since diversified into the manufacturing, services, oil and gas, telecoms, tourism and construction sectors. Over the first seven months of this year, foreign companies have pledged capital to 106 businesses. The largest investor is Singapore, followed by China. Businesses from other countries including Brunei, Hong Kong, India, Japan, Korea, Libya, Malaysia, Netherlands, Thailand, United Kingdom, United Arab Emirates, United States and Vietnam have also invested into Myanmar, he said. Currently, 729 foreign firms are operating in Myanmar with a total investment of more than $47 billion.
More Ties Please! - Thai companies are pressuring their government to hold more official visits and business delegations in Myanmar ahead of moves to increase regional economic integration. ASEAN leaders officially established the Asean Economic Community in Kuala Lumpur recently, although steps to drop trade barriers and free up the movement of skilled labour are likely to take some time to kick in fully. Pussadee Polsaram, director of the AEC Strategy Center at the University of the Thai Chamber of Commerce said that Thai companies trying to enter the Burmese economy faced a lack of connections in the country. She called on the Thai government to do more to help Thai businesses trying to invest in Myanmar. “The Thai government should set up trips led by the prime minister or deputy prime minister to introduce Thai businesses to local businesses just like the Chinese and the Vietnamese governments have done,” she was quoted saying. “The two countries could hold talks at an administrative level from time to time to foster cooperation.” Niyom Wairatpanij, a vice-chairman of the Thai Chamber of Commerce, also quoted said that the Thai government should be more proactive in supporting Thai companies in Myanmar. “The government should ease trade and investment along the border by setting up more checkpoints, he said.”
Windows Of Opportunity? - IT giant Microsoft has signed an agreement of cooperation with Myanmar’s Shwe Taung Group. In September, Microsoft also went into a partnership with the Kanbawza Group which has businesses ranging from precious minerals to banking. Greeting the news of the second-largest venture signed by Microsoft in Myanmar, the Financial Times carried the headline: “Microsoft enters minefield of Myanmar business with IT deal.” Both Shwe Taung and Kanbawza have long been under fire domestically and internationally for cronyism with Shwe Taung’s controlling shareholder Aik Htun suspected by the US Treasury of narcotics connections. Likewise, Aung Ko Win, Kanbawza chairman, has faced EU trade sanctions for his connections with the military junta, which were retracted in 2011 when the quasi-civilian government took charge. Both Aik Htun and Aung Ko Win denied the charges. Other American companies like Coca-Cola and Caterpillar have also made murky deals in Myanmar. Coca-Cola admitting to having investments in the jade trade, which carries US sanctions, and Caterpillar’s Myanmar boss, Zaw Bo Khant, was also reported to be involved in the jade trade, according to a recent Global Witness report. The Microsoft deal is being seen as the first of many foreign partnerships made in the wake of Aung San Suu Kyi and her National League for Democracy’s landslide victory on November 8.
Controversial Mining Bill Submitted to Parliament for a Third Time
A Divisive bill that could open Myanmar’s lucrative mining sector further to foreign investment has been submitted for the third time to the Pyidaungsu Hluttaw for approval. The long-awaited Mining Law amendment bill, which will update legislation from 1994, was suspended earlier this year following fierce disagreements between the upper and lower houses. A key piece of legislation, it could bring significant new foreign investment into Myanmar’s natural resources sector, boosting government revenue. The latest draft, submitted by the Pyidaungsu Hluttaw Bill Joint Committee, amends a clause to allow foreign investment into small and medium-sized mining ventures for the first time. However, the amendment also states foreign companies will only be able to engage in certain value-added or trading activities depending on the size and quality of the mineral deposit. This has been a focal point of debate between the two houses. A motion approved by the Amyotha Hluttaw that would allow foreign investors to form joint ventures with smaller local companies was blocked by the Pyithu Hluttaw, which said this would risk pushing small local companies out of the market. The existing law permits foreign investment but only into large companies. This restriction, along with myriad other factors, has stymied foreign interest. Last fiscal year, foreign direct investment into mining was just US$6.2 million through a single project, compared with $3.22 billion into the oil and gas sector. The second notable change to the draft law is aimed at settling a dispute over the power to approve investments and oversee projects. The Amyotha Hluttaw believes this power should be devolved to state and regional governments, and as such approved a clause allowing the Ministry of Mines to form region and state committees – each chaired by the local minister – which would grant investment approval. Permits for evaluating, prospecting, studying the potential of plots, carrying out large, medium or small scale production, improving or selling a mineral, and mining for industrial raw materials or stone should be granted at the regional level. On the other hand the Pyithu Hluttaw said transferring the mandate of the government to oversee the sector could make it difficult to enforce sustainability. The amended clauses proposed by the Bill Joint Committee seemingly seek a compromise, stating, “The ministry can form a region or state committee for scrutinizing and granting plots under the approval of the Union government” and that such committees “can issue working permits with approval from the ministry after scrutinizing the application”. These changes will now be debated once more. When the bill was first discussed by the Pyidaungsu Hluttaw last November, only eight of the 21 clauses and eight additional suggestions were approved by both houses. Another review in May and June led to the approval of just three more. Speaker Shwe Mann then suspended the debate until after Schedule Two of the constitution had been reformed. This happened in July, granting greater power over natural resources to state and regional governments. The other clauses will be amended based on approvals in the Pyithu Hluttaw or the Amyotha Hluttaw.
Most of the country’s most resource-rich areas are near to conflict zones. A truly nationwide ceasefire may open up the industry, assuming the agreement incorporates mutually accepted resource-sharing terms.
Telecom Towers - Malaysian telecommunications firm OCK Group has entered into a memorandum of understanding with Telenor Myanmar, and is set to build more than 900 new mobile phone towers for the Norwegian firm. OCK Group announced that, along with local partner King Royal Technologies, it had entered an agreement with Telenor “to build and lease tower infrastructure to Telenor.” “All parties aimed to conclude the agreement in the next few weeks,” the statement to the Malaysian stock exchange said. The business section of Malaysian newspaper The Star that OCK Group was “in the final stages of getting a contract from Telenor’s Myanmar unit to build and lease more than 900 towers in the country.
Satellite Deal - KBZ Gateway, part of the sprawling local conglomerate Kanbawza Group, has entered an agreement with Hughes Network Systems to use the Maryland-based company’s technology for a new satellite Internet network in Myanmar. A statement from Hughes said that a network was under construction to offer broadband Internet directly to offices and homes in Myanmar, and to the country’s mobile providers. Hughes’ “Jupiter” system will be employed for the network, it said. “The Hughes JUPITER System features a flexible and robust gateway architecture with lights-out operation, enhanced IPoS air interface for bandwidth efficiency, and high-throughput terminals, enabling operators to achieve the highest possible capacity and efficiency for any satellite broadband implementation,” the statement said. “This is an alliance of two companies to help bridge the digital divide in our country,” the statement quoted Stephane Lamoureux, CEO of KBZ Gateway, as saying. “It is not just about launching a new service. It is about driving growth and success of Myanmar’s telecommunication industry by providing high-speed, shared hub services to customers across the country. The JUPITER System gives us a powerful solution today and a seamless growth path to next-generation, high-throughput satellite services as they become available in Myanmar.”
New Yangon business district to cost $350m
A New central business district in the north of Yangon will be built at a cost of almost US$350 million, with construction to begin next year, pending Myanmar Investment Commission approval. The build, operate, transfer project was tendered by Yangon City Development Committee in 2014 and won by a subsidiary of Myanmar V-Pile, First Myanmar Construction. On a 36-acre site in Mayangone township near to Yangon’s airport, the development is aimed at relieving pressure on the city’s downtown area, where new businesses have piled in and cars commute each day, blocking already crowded streets. The new project is slated to include a number of high-rise buildings, including 12-storey office towers, a business hotel, a shopping centre, a trade centre and a five-storey convention centre. The project has its initial approvals and is now waiting final approval from Myanmar Investment Commission. This is likely to come through once a recommendation letter from the Myanmar Engineering Society is issued. The company has a contract to develop the project and operate it for 50 years, with the option to extend the contract with YCDC twice, by 10 years each time.