While official results may take another week to be finalized, the NLD is set to secure a second term under the leadership of Aung San Suu Kyi. Sunday’s election took place amidst concerns in the international community over voter disenfranchisement of the country’s ethnic minorities – Myanmar’s election commission cancelled voting in half of Rakhine state in mid-October, citing security concerns, but critics cried foul over the obvious electoral tilt this would give the party. Even before this move, however, the NLD had been widely favored to win, though most observers predicted a smaller margin of victory than in 2015, when the NLD captured a wave of optimism around the country’s budding democracy. Five years on, Suu Kyi’s international reputation has plummeted, ethnic tensions have escalated, and an already mediocre economic and political track record has taken a massive hit thanks to the surge in Covid-19 infections in the country.

Going into Sunday, while the NLD was widely expected to win, the main question revolved around whether the party would maintain a two-thirds majority in parliament, which given the 25% guaranteed seats afforded to the military under Myanmar’s constitution, would be necessary for it to form a ruling government. It now seems likely based on initial results that the NLD will not only achieve this majority, but it could very well ultimately win more seats than it did in 2015. While the election outcome, therefore, is not much of a surprise, this projected margin of victory provides insight into what we can expect from a second term under Suu Kyi and her NLD government.

Popularity of Aung San Suu Kyi

Rather than a nuanced policy-led campaign, this election was essentially a referendum on Suu Kyi’s leadership – whose popularity has only increased at home since her defense of Myanmar at the ICJ.

On the other side of that coin is the referendum this election delivered on the opposition. The weak showing of the military-aligned Union Solidarity and Development Party (USDP) indicates a widespread rebuke of the military’s involvement in politics.

As referenced above, the NLD needed to maintain a two-thirds majority coming out of this election: with nearly 500 seats in contention between the lower and upper houses of parliament, the NLD would need 322 seats to secure an absolute majority and avoid the possibility of having to form a coalition government. While the official vote count could take up to a week (the latest update from the Union Election Commission puts the NLD at 319 seats), exit polls suggest the NLD could walk away with more than the 390 it won in 2015. Perhaps even more surprising was the NLD’s performance in the country’s ethnic states, where it faced fierce opposition. While results are yet to be confirmed, the party looks poised to lose fewer seats than expected, and even made gains in certain areas – in Chin State, for example, the NLD is expected to pick up as many as 36 of the 39 available seats – up from 28 in 2015.

Political and Economic Outlook

Throughout the months-long election campaign, there was surprisingly little discussion on economics from either side. This is likely because the NLD chose to avoid placing a spotlight on the economy so close to the election, given how badly the country’s two main industries – garment and tourism – have been hit by the pandemic. The USDP, in turn, offered no alternative recommendations or solutions.

While the administration has faced criticism for its slow rate of economic reform, the government has actually performed quite well on the economy during its first term – despite the economic blow brought on by Covid, Myanmar is on track to meet its FDI target of $5.8 billion for this year, and has moved up 10 places in the World Bank’s Ease of Doing Business Rankings since 2015. Furthermore, in the past two years, the government has shown signs of speeding up economic reforms, such as liberalizing the insurance market and foreign bank licensing regime. A strong incumbent administration will likely continue this momentum on key economic initiatives. Indeed, while the economy may not have been a major talking point in the campaign itself, the government has in recent months signaled an increasing seriousness on the economy:

The government is in the process of drafting a new Myanmar Economic Recovery and Reform Plan (MERRP), following a recent review of the Covid-19 Economic Relief Plan (CERP). Whereas CERP was introduced in April as a short-term response plan to mitigate the Covid-19 fallout, MERRP will act as an extension of this, aimed at longer term macroeconomic and financial stability policies and prioritizing growth areas. The Ministry of Investment and Foreign Economic Relations (MIFER) will be responsible for implementing this strategy, with a focus on empowering small- and medium-enterprises; sustainable investment framework; infrastructure and telecommunications development, human resources and the private sector.

Further indicating the administration’s prioritization of economic initiatives is the recent announcement that in conjunction with the OECD, Myanmar has undertaken its second Investment Policy Review. Myanmar’s first IPR in 2014 resulted in several key investment reforms, including the Myanmar Investment Law and Myanmar Companies Law. The second IPR will look to identify further policy reforms and will focus on connectivity; land rights; enhancing economic zones; and green-growth frameworks. The outcome of the review is expected to be released later this month.

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External engagements also offer an indication of future policy priorities

Another sensitive subject not mentioned on the campaign trail was that of China – while it’s unlikely that the NLD government will adopt a tougher stance on China overnight, we can expect the approach to grow even more nuanced, with Suu Kyi likely looking to leverage regional and global geopolitics.

Suu Kyi is nothing if not pragmatic, and her government will more than likely continue to pursue a policy of economic diversification. Myanmar’s recent hosting of high-level foreign affairs and defense officials from India, engagement of the United States business and investment community, broadening of economic cooperation with South Korea and Singapore, signing of an agreement with EuroCham, and introduction of a Swiss Challenge tender process serve as some indicators of this intended direction:

A delegation from the US International Development Finance Corporation (IDFC) met recently with Myanmar’s Ministry of Investment and Foreign Economic Relations to discuss accelerating investments in Myanmar after the election – presumably seeking to offset some of China’s current projects in the country. The US delegation is particularly focused on investing in the country’s ITC and digital infrastructure.

Last month, the government issued a call for EOIs to compete in an open “Swiss challenge” tender process for the New Yangon City project, which is part of China’s Belt and Road Initiative. Under the process, the initial development proposal drawn up by the Beijing-based China Communications Construction Co. Ltd. (CCCC), the biggest builders in the BRI, will be made public to allow firms to offer better terms. MIFER reported it received 16 proposals from nine countries, including Japan, Singapore, Italy, Spain and France.

Myanmar has also recently added a key condition to the China-Myanmar Economic Corridor (CMEC) Cooperation Plan, stipulating that China must allow Myanmar to seek financing for the projects from multiple international financial institutions, especially the World Bank and the Asian Development Bank, to avoid incurring unsustainable debt obligations to China.

The Road Ahead

The projected margin of victory all but guarantees that the NLD will have the power to select the president in February, when the newly elected lawmakers convene in a joint parliamentary session. This will provide NLD with the opportunity to shuffle the cabinet and bring in ministers who are more willing to work with the private sector – meanwhile, those in key posts such as MOTC and MOPFI will likely remain intact.

A stronger than expected mandate to govern going into the second term also suggests that the passage of key legislation will be less prone to being used as political pawns – under a strong incumbent mandate and without the prospect of elections on the horizon, such policies and legislation comes down to the government’s will and priorities. Given the urgency of Covid-19 in the country, it is likely that key economic initiatives such as the aforementioned MERRP and IRP will receive the government’s immediate priority, but we expect that within a short period of time the government will look to continue the trajectory of legislative reforms that were gaining momentum in the 12-18 months before Covid hit.

Finally, if the NLD does indeed win by an even larger margin than in 2015, they would also have the opportunity to follow through on promised constitutional reforms that would reduce the military’s required 25% allotment in parliament. The NLD first attempted to pass such reforms back in March but failed to get the votes. At the time, it was suggested that the effort was meant to serve more as a litmus test to see how much support the amendments had. If the NLD feels confident enough not just in its margin of victory but in how many seats the USDP ultimately loses, they could propose bringing the motion forward again.