After five decades of repressive military rule, Myanmar’s political and economic transformation continues to impress. The country is preparing for milestone elections in autumn 2015, ceasefire talks have opened with ethnic groups and work begun on important constitutional changes ahead of next year’s polls. With the economy growing by 6-7 percent a year and labour costs still low, foreign investments are pouring in. Myanmar’s current chairmanship of the Association of Southeast Asian Nations (ASEAN) provides President Thein Sein with a further opportunity to boost the country’s regional and international profile.

And yet. Initial optimism over Myanmar’s transition is beginning to wear thin. Increasing ethnic violence and civil unrest, especially in Rakhine state, among Buddhist groups and the stateless Rohingya Muslims, is a big, dark spot on Myanmar’s credentials. With thousands of Rohingya forced to live in overcrowded camps or flee by boat, beleaguered relief agencies – many of which have been forced out of the country – have warned of a humanitarian crisis in the strife-hit state.

International criticism of the government’s failure to stem the violence is increasing, with 46 countries, including the United States (US), recently joining forces with the European Union (EU) at the United Nations Human Rights Council to express serious concern over the situation of the Rohingya and other minorities in Rakhine State. The resolution also asked for the extension of the mandate of the Special Rapporteur on Myanmar for one more year and urged an opening of the Office of the High Commissioner for Human Rights in the country.

Inclusive growth

Additionally, there is concern that while growth rates are high, Myanmar remains one of Southeast Asia’s most impoverished countries. Foreign partners worry that any slowdown in reform efforts in the run up to elections will make it even more difficult for the government to ensure inclusive and sustainable growth.
On the bright side, attracted by a growing consumer base and low-cost workforce, foreign investors are lining up to establish a foothold in Myanmar. A foreign investment law was passed in 2012 allowing some overseas firms to fully own ventures. In a bid to further open up, a Telecommunications Law was passed last year and foreign energy companies have recently been given rights to explore offshore Myanmar. The country is also slowly opening up its banking sector, with foreign banks expected to be allowed to operate independently by the end of the year. About 35 international banks already have representative offices in Myanmar.

The next stage of political reform looks set to be especially challenging. The government is hoping for progress toward peace through the signature of a Nationwide Ceasefire Agreement with ethnic armed groups. Preliminary talks were held in Thailand at the end of January and the second round in Yangon, on March 9-10. The third round to coordinate the joint-drafting of a single nationwide document was completed on April 8, with both sides agreeing on the titles of the seven-chapter draft which will be further discussed in early May. Formal high-level peace talks to set a date for the signing of the agreement are expected to take place in Hpa-an, capital of Kayin state. Once ready, the deal will be signed by the government, parliament, the armed forces, political parties and leaders of different ethnic groups.

The government has also embarked on the difficult task of amending the constitution, including article 59(f), which debars opposition leader Aung San Suu Kyi from becoming president because of the foreign citizenship of her children and late husband. The process is proving to be more complex than anticipated, however, prompting fears the reform process is running out of steam.

President Sein raised hopes earlier this year by voicing support for changing the constitution to allow “any citizen,” to run for the presidency in 2015. But preliminary non-binding recommendations issued in January by the Constitutional Review Joint Committee, a 109-member parliamentary body tasked with reviewing proposals to amend the nation’s 2008 military-drafted constitution, suggest insufficient support for this change although a greater devolution of authority to states and regions, a key demand of many ethnic groups, appears to have the green light. These recommendations will now be reviewed by a 31-member committee which will, in turn, report to the parliament.

The census currently under way in the country – which also asks sensitive questions about race and ethnicity that human rights groups have repeatedly warned puts vulnerable populations such as the Rohingya (regarded by the authorities as illegal Bengali immigrants) at additional risk, is another complication. Ethnic minorities, which together make up about 40 percent of Myanmar’s population, contend that they were not properly consulted ahead of the census, which requires respondents to identify themselves as one of 135 ethnic groups.

Cautious ASEAN chair

Myanmar joined ASEAN in 1997 and was to take the ASEAN chairmanship in 2006 but was passed over amid international pressure due to its poor human rights record. Although the country now shines in the global spotlight, as current ASEAN chair, Myanmar faces a tough regional agenda, with its partners and the international community anxious about the country’s ability to host the multiple high-level meetings scheduled for the year and to keep ASEAN on course to meet its 2015 end-target for establishing a frontier-free economic community.

At a time when ASEAN needs strong leadership, dealing with difficult issues such as conflicting territorial claims in the South China Sea between China and ASEAN members Vietnam and the Philippines will also be a challenge. Analysts say Myanmar performed well at the first informal meeting of ASEAN foreign ministers held in Bagan earlier this year by steering the group to release a short statement calling on states to settle disputes by peaceful means in accordance with international law, including the 1982 United Nations Convention on the Law of the Sea. In comparison, two years ago, when Cambodia was ASEAN chair, the organisation split under pressure from Beijing to avoid any mention of the South China Sea.

Significantly, Myanmar is also current chair of the ASEAN Intergovernmental Commission on Human Rights (AICHR), and as such is under strong pressure from increasingly vocal ASEAN civil society groups to adhere to the human rights commitments which are part of the ASEAN Charter.

A role for Europe

Despite competition from the US, China, Japan, India and others, the EU has quickly emerged as a key partner for Myanmar. EU sanctions – except on exports of weapons – were lifted in April 2013 and the country was brought into the “Everything but Arms” trade regime which provides duty free and quota access for exports from least developed states. As a result, bilateral EU-Myanmar trade is expanding rapidly, climbing up to €569 million last year, a 41% increase compared to 2012 (€403 million).

EU investment in Myanmar has so far been limited as a result of sanctions. According to Myanmar’s official figures, cumulated existing EU investments amounted to some US$ 3.1 billion in 2013 (9% of Myanmar’s FDI). This is set to change, however, as investors scour the country for business opportunities and the EU and Myanmar launch negotiations on an investment protection treaty which Trade Commissioner Karel De Gucht has said will become an important accelerator for reform in the country.

“Experience has shown that improving legal certainty and predictability for investments is key in providing business opportunities and much-needed development for this growing economy,” De Gucht said during a recent visit to Myanmar. The deal is expected to provide European investors with guarantees against discrimination, expropriation without compensation and protection against unfair and inequitable treatment.

EU aid to Myanmar is increasing. The EU committed €100 million of the total €150 million in assistance to the country in 2012, with the money being spent on existing education and health support schemes and for people who have been internally displaced as a result of the country’s numerous ethnic conflicts. In 2013, commitments totaled €50 million covering longer-term support to trade and the private sector, ethnic peace, climate change as well as more support to civil society. EU aid to Myanmar is expected to increase by 20 percent in 2014. There is also an agreement in principle that the European Investment Bank (EIB) will extend its operations to Myanmar, with a focus on infrastructure projects including transport and energy, forestry and the opening of credit lines to selected local banks for on-lending to small and medium-sized enterprises.

An important balancing act

The EU’s focus on economics is important. Through trade and aid, Europe can help ease poverty in the country and play a vital role in helping the government to strike the right balance between rapid economic growth and sustainable and inclusive development.

Encouragingly, Europe is also keeping up the pressure on human rights in both its bilateral contacts with Myanmar and in international fora such as the United Nations Human Rights Council. Acting on different fronts, EU funds are being used to help Myanmar’s political and economic transition through government capacity-building, support for the Myanmar Human Rights Commission and the Election Commission. EU support is also being channelled to the Myanmar Peace Centre (MPC), created by the government to secure peace in ethnic areas as well as to the peace process and the development of ethnic areas. In addition, ethnic groups have also received assistance to enable their participation in peace talks.

As it deepens its engagement with Myanmar – and ASEAN – the EU should continue to balance its economic overtures to the country with continuing pressure on issues of human rights, good governance and the rule of law.

Myanmar has come a long way in a very short time. Visionaries in the government and the region say there is no reason the country cannot fulfil its long-term ambition to become a regional powerhouse. To make the dream a reality, however, Myanmar will have to learn that economic growth and progress must be shared by all its people, human rights must be respected – and there must be a place in the country for all ethnic groups, whatever their religion.