Today’s handover from military to civilian rule in Myanmar marks another welcome step forward in the country’s political development. But the new government must overcome a number of major challenges if the economy is to meet its full potential. A key priority will be restoring macro-stability amid signs that the economy is overheating. Progress is also needed on structural reform. Myanmar has one of the most difficult business environments in the region. Relaxing restrictions on foreign and domestic companies will be necessary if Myanmar is to make the most from China’s move up the value chain, which is seeing low-end manufacturing move to cheaper locations. The National League for Democracy’s (NLD) clear victory in November’s elections puts it in a strong position to push ahead with decisive reforms. However, questions remain over how much the military will be willing to cede power, especially since it will retain a number of key cabinet positions within the new government. There are also concerns over the new government’s lack of experience. Members of the NLD have spent much of the last 25 years out of government, either in political exile or prison. (See our Focus “Myanmar: Asian Tiger or basket case”, 29th October.)
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