Will Investors Stop Burma’s Backslide?

Burma, the recent reformation minded darling of Southeast Asia, has been recently hit with ever-increasing ethnic tensions and a spate of threats to international aid workers, coupled with growing uncertainty over the 2015 elections. Will this uptick in conflict influence the Western rush to normalize relations with — and invest in – Burma?

International aid and UN workers were targeted last week in Burma’s northern Rakhine state, after angry mobs accused a worker of mishandling a Buddhist flag. Burmese officials announced that the nation’s first census in 30 years would not permit muslim citizens there to register as “Rohingya” but instead as the “Bengali.”

Medicines Sans Frontieres was kicked out of Burma over its operations in Rakhine state in February, after the government claimed it showed undue bias towards the Rohingya Muslim minority.

Fervent Buddhist nationalism is behind much of this violence and uncertainty, shepherded along by firebrand priest Ashin Wirathu. Unfortunately, fear of the Muslim minority is much more than a fringe view to Burma’s ruling parties, who have supported a potential ban on interfaith marriage — and, as shown by the census decision, continue to refer to Rohingya as “Bengalis” (as in, from Bangladesh and not Burma) in official documents.

Even Nobel Laureate Aung Sang Suu Kyi has not come out in full throated support of the Rohingya, who continue to suffer from displacement and occasional deadly attacks. (Nor does Bangladesh, where they supposedly belong, wish to take them in either).

What does this recent uptick in violence and uncertainty mean for Burma’s much-heralded entrance into international affairs? Likely nothing good, although the deep-pocketed investors casting curious eyes towards Burma’s natural resources may just choose to overlook it.

Many Burma observers are growing increasingly uneasy, a stance neatly summarized by Min Zin in Irwaddy.  Zin points to ethnic tensions and political bickering between Suu Kyi’s  National League for Democracy and the still military-dominated government as the culprits — while meanwhile, the average Burmese citizen continues to deal with poverty, corruption, and other more pedestrian concerns.

Perhaps, as other observers have noted, Burma is slouching towards the Cambodian model of democratic reform: paying enough lip-service to popular politics to secure deep-pocketed aid money and foreign direct investment, but retaining corruption and stiff control over free speech and power.

Foreign direct investment in Burma also continues to grow with impressive speed: it’s set to double last year’s figure to $3.5 billion for the fiscal year 2014, and is anticipated to grow even more, with the telecommunications sector projected to defeat manufacturing as the main driver of growth. Some potential investors into Burma are watching the political situation carefully, hesitant to make a move before they’re sure the current, rather pacific political situation won’t deteriorate.

Aid continues to pour into Burma as well, although government officials have begun to issue not-so-subtle warnings to outside organizations to avoid overstepping their bounds.

A recent statement by presidential spokesman Ye Htut on last week’s attack on  aid workers condemned the violence, but also warned international workers should “should have a good understanding and be aware of local culture, customs and sensitive issues of the places where they are working.”

British MPs in March suggested a 40 percent increase in aid money to the Burmese state, convinced it would help usher in further humanitarian reform. In January, Japan announced it would spend $96 million to assist Myanmar’s ethnic areas, while the World Bank announced a $2 billion aid package the same month.

Last year, the Brookings Institute identified some potential pitfalls in increasing aid to Burma, including distracting government officials from sound policy making  and donor’s desire to “make a difference quick.” The Institute advised that international aid slow down — advice that should be taken a look at again, as Burma’s sectarian violence grows increasingly worse. Further, Burmese leaders eager to secure foreign investment should also consider that sectarian violence isn’t just a moral ill: it’s bad for business.