In her small wooden home on a narrow, muddy lane in a rundown Rangoon neighbourhood, Lae Lae Win will be watching the evening news on Monday with interest. The 52-year-old is keen to see how state TV reports the historic visit by Barack Obama, who is the first sitting US president to come to Burma. But she is also hoping for an announcement that at least some of the 300 or so political prisoners held in Burmese prisons are to be freed. One of those detainees is her husband, a human rights activist called Myint Aye, who has been held since 2008 on his eighth stint in prison since they were married 30 years ago.

"When I saw him last, he was sure he would be released if the president came," Win said.

Expectations for Obama's visit are high across this poor and troubled country. For the reformist president Thein Sein – who in under two years has led Burma from being a pariah nation to host of the most powerful man in the world – the visit is the most concrete sign yet that he has successfully brought his country in from the diplomatic cold.

For pro-democracy campaigners such as Win Htein – who was elected to parliament in April for the National League of Democracy led by Nobel prize laureate Aung San Suu Kyi – it will reinforce efforts to take on the still hugely powerful military. For the poor, such as Yi Yi Cho – who ekes out a living from a snack stall in Rangoon's Ahlone neighbourhood – Obama's arrival means a better economic future.

"Things should improve now. I hope so. It's tough these days and getting tougher. Rents, rice medicine – everything costs more and more and business is bad. Maybe that'll change," she said.

The visit is also seen as critical outside Burma: in Washington, policymakers see the country as a key part of the US strategic "pivot", which will privilege Asia over Europe or the Middle East. Obama's aides hope the intense diplomatic effort will yield dividends where similar attempts to engage other "rogue states" such as North Korea have failed. A key goal is to roll back Chinese influence.

The trip is not without controversy. Many, particularly outside the country, say it has come too soon and rewards only partial reform. "You squander some leverage by making this trip so early in the liberalisation process," said Michael Kugelman, an expert on South Asia at the Woodrow Wilson Centre in Washington. "This very intense outreach to what is still a very repressive state – and, in terms of its military, a sadistic one – is fraught with risks."

Speaking in Bangkok on Sunday, Obama said his visit was an acknowledgement of Burma's progress towards democracy, and not an endorsement of the government. "I don't think anybody is under the illusion that Burma's arrived, that they're where they need to be," he said. "On the other hand, if we waited to engage until they had achieved a perfect democracy, my suspicion is we'd be waiting an awful long time.

"One of the goals of this trip is to highlight the progress that has been made and give voice to the much greater progress that needs to be made in the future."

Obama is due to address hundreds of activists and parliamentarians at Rangoon University on Monday after meeting Aung San Suu Kyi and Thein Sein. But according to Phil Robertson, of campaign group Human Rights Watch (HRW), even if the president's public comments make his hosts uncomfortable, the real question is, what will change on the ground when he is gone?

"The levers that are driving this policy are opaque and our concern is that human rights gets left behind," Robertson said. The impatience of businesses, in the US and elsewhere, to invest in Burma, which has vast natural resources and a population of about 60 million with few consumer goods, has fuelled suspicions that commercial interests are accelerating the engagement process.

On Sunday, HRW released evidence of recent violence between ethnic minorities in the west, which has so far killed hundreds and displaced tens of thousands, largely Rohingya Muslims. In the north and east, ethnic minorities have long suffered human rights abuses at the hands of the military.

Khun Htun Oo, a politician from the Shan ethnic minority, said Obama "should have waited to see if Burma is on the right track" before coming. "It is still rather early," he said. "Burma still has so many problems."

Administration officials have worked hard to defuse such concerns, speaking of their intention to raise difficult issues with the Burmese authorities.

Obama spent Sunday in Thailand, a long-term US ally in the region, and will fly on to Cambodia to attend a summit of the Association of Southeast Asian Nations (Asean) on Tuesday. The timetabling of the trip was in part determined by a busy domestic agenda with the president facing tough battles over economic policy at home and rolling crises elsewhere in the world, particularly the Middle East. "Making this trip now makes sense," said Kugelman.

One difference from many other trips undertaken by Obama in recent years elsewhere in the world is the depth of pro-American sentiment in Burma.

The most senior US official to visit Burma previously was vice-president Richard Nixon in 1953. The Burmese military seized power in the former British colony nine years later, violently repressing any dissent and, over following decades, destroyed a once promising economy through mismanagement and graft. After an uprising in 1988, elections were held, but the results – a victory by Aung San Suu Kyi's NLD – were ignored. Successive sanctions imposed by the US and the EU over the following 20 years were suspended in April in recognition of the changes since November 2010, when Aung San Suu Kyi was freed from house arrest.

The result, said one diplomat in Yangon, was that as the US was seen as being absent through the bad times, there was a general belief that its return means good times. "The US is also seen as having supported the democracy movement against the military. There's a huge fund of goodwill," he said.

Popular culture also plays a role. In Rangoon, the pirated DVDs sold are of Hollywood films, not Chinese productions. English is still the most popular second language.

Thi Ha Saw, a respected editor and vice-president of the new Association of Independent Journalists, said people were excited. "Obama's coming indicates a much closer relationship in the future and that will be a boost for the reform process. It makes [the changes] seem real," he said.

Thi Ha Saw believes most people see closer ties with the US as a way out of Chinese influence and towards better human rights – though he said the recent changes could still be reversed.

The extent and speed of the reforms in Burma are still hotly debated by observers. Their impact is certainly yet to be felt by many in rural areas and the urban poor. Despite glimmerings of emerging democratic institutions, the old security apparatus is still potent. Before Obama's visit, activists say, security officials rang hundreds of pro-democracy campaigners asking them where they would be on the day the president was in Burma and what they planned to do. One recently released prisoner said she hoped Obama would not "get the wrong impression" during his short stay.

But in Rangoon at least, the sense of change is inescapable. On the top floor of the scruffy and crowded Ruby Mart shopping centre, Maung Chan, 26, had just ordered a plate of "democracy curry", a new dish offered at the Bangkok Expresso Nudle Café and inspired, the owners said, by the changes.

"It's not traditional round here, so I'm curious to see what it's like," he said.