THE Yangon Stock Exchange does not lack ambition. It is housed within the imposing former headquarters of the central bank. The two guards manning the entrance protect a stack of visitor badges, mostly unused. Inside, a list of “missions”—integrity, fairness and openness—hangs beside a Christmas tree which still has presents stacked beneath it in late February. Books by Warren Buffett and Thomas Piketty are prominently displayed. The centrepiece is a series of television screens tracking the fortunes of the five companies listed on the exchange. When a power cut momentarily shuts everything down, one of the 20 employees is reassuring. “Don’t worry—we have a generator,” he explains, as the lights gradually return.
When Myanmar’s transition to democracy began in 2011, the government seemed equally hopeful for the economy. The president of the day, Thein Sein, a former army general, started reversing half a century of stasis and isolation. He gave the central bank more independence and awarded mobile licences to foreign telecoms companies. Several special economic zones were set up to encourage investment. The economy grew 8.4% in 2013. Land values in Yangon, the former capital, surged, as office space became scarce.
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Yet since Aung San Suu Kyi’s National League for Democracy (NLD) won elections in 2015 progress has been as underwhelming as the stock exchange. A regulatory crackdown stalled most construction in Yangon in the government’s first year. This, combined with a poor harvest, led to lower-than-expected growth, which is only just starting to pick up (see chart).
Four months after coming to power the NLD issued a 12-point plan for the economy which sounded promising, if woolly. There was talk of boosting foreign investment and making life easier for small businesses. Almost two years later, on February 26th, the government released a document fleshing out these ideas with no fewer than 238 measures to spur the economy, from improving the justice system to reforming state-owned enterprises. But there was no indication of who would push all these changes through, much less any sense of urgency.
There should be. With one of the lowest tax takes in the world, at just 6.4% of GDP, the government can afford little in the way of public services. Most ministries are Dickensian, with piles of paper stacked up on desks and a lack of co-ordination between one department and another. Shoddy infrastructure means that, although on paper the country has 50m consumers, in reality only about half of them can be reached easily by road. Skilled workers are hard to find. The courts are unreliable at best. A steady supply of electricity, particularly in summer, is a rarity. “You can have a low labour cost,” points out Filip Lauwerysen of the European chamber of commerce. “But it is useless if you have the whole labour force doing nothing because of a power cut.” As a result, Myanmar languishes near the bottom of the World Bank’s ease-of-doing-business rankings, just above Liberia but below Sudan. It is ranked particularly badly at protecting minority investors, enforcing contracts and resolving insolvency.
The government has narrowed the fiscal deficit and is relying less on the central bank to finance the shortfall, issuing bonds instead. That has helped to reduce inflation from 10% in 2015 to 6.5% last year. But it has yet to take the necessary bureaucratic steps to bring into force a law permitting foreign investors to take a 35% stake in local companies. The central bank, for its part, has called off a drive to get private banks to write down non-performing loans, for fear that their balance-sheets were already overstretched.
Supporters of the government argue that 50 years of isolation and 20 years of sanctions are hard to reverse, and that the previous government had already adopted all the easy reforms. “Sometimes it is a wonder so much economic reform takes place at all,” sighs Sean Turnell, an Australian economist who advises Ms Suu Kyi.
But the state counsellor, as Ms Suu Kyi styles herself, has made ending Myanmar’s many ethnic insurgencies her priority. It is not clear that the economy is of much interest to her. It does not help that she is not so much a micro-manager as a “nano-manager”, as one critic puts it, leaving everyone else uncomfortable making any decisions. Policy wonks complain that, whereas the previous government would take advice from technocrats, the NLD shuns outsiders. The party’s long list of promised policies disguises a “lack of willingness” to reform, says Eric Rose. He shut the local office of his law firm early last month after five years of trying to help Americans invest in Myanmar.