Government-mandated democratic reforms over the past two years have made Myanmar the next big thing on the hit-list of global corporations and investors. However, inherent operational risks and political instability will continue to affect business in the post-election period.

Myanmar, the largest country in mainland Southeast Asia, has had a turbulent history, from being one of the richest nations pre-WWII, to becoming one of the most isolated and poor military-ruled states of the twenty-first century. However, things appear to be on an uphill trajectory for the land of the Golden Pagodas. Let us discuss why.

Undoubtedly, the biggest development has been Naypyidaw’s persistence at bringing all the ethnic minority groups in the country to the negotiation table. Calling the ceasefire draft agreement a success would be premature at the moment, and should not be expected to pass through anytime soon. However, the apparent decrease in hostilities is a welcome first-step.

Not only will the ceasefire allow Naypyidaw to bring under national ambit the many resources (human, minerals, and land) which have not yet been utilized, but will also allow Myanmar to normalize relations with China, which have often suffered collateral damage due to the ethnic violence in the country.

Equally laudable are President Thein Sein’s recently-attempted reforms in Myanmar’s foreign laws and regulations, which have in turn prompted a revision of the archaic labor laws in the country. A Dispute Settlement Arbitration Council has recently been set up in this regard, and the government is expected to announce an official minimum wage rate for incorporation into the Law on Minimum Wages (2013). Myanmar has consistently clocked a 6-7% GDP growth rate over the past five years, and is on a projected trajectory to keep growing by 7-8% well up to 2020.

The abolition of pre-censorship of the printed press, the return of daily newspapers and other media outlets, and a marked decrease in the number, and frequency of detention of journalists in the country have all contributed to a newfound press freedom, and the Burmese are anything but lapping it up.

In Aung San Suu Kyi, the world sees a promising and able leader; one who will lead Myanmar out on to the global commerce and development stage (albeit, not from the front). The Burmese opposition’s chief party, the National League for Democracy (NLD), confirmed its candidature for the upcoming elections last month. And despite a somewhat divided consensus regarding candidate selection, Suu Kyi recently reassured the citizens of Myanmar of her party’s unanimous intention to herald a change in the country.

Apart from the above trends, Myanmar offers several other reasons for international businesses to pay it heed as an upcoming market destination. Having lived under a repressive and brutal military junta for close to five decades, augmented by international condemnations and sanctions, the Burmese people will have plenty of pent-up consumer demand for international goods and services.

Transitioning across two fronts, viz. governance, from an authoritarian military state to democracy, and economy, from centrally directed to market oriented, Naypyidaw is prepared to revive its faltered economy. This in turn means investment required for infrastructure, supply-chain setups, and better tourism development.

Myanmar has a 2000km long coastline and some of the finest stretches of beaches in Asia, most of which remain undiscovered by tourists and unspoiled by development. Add to this Myanmar’s fertile lands, with vast agricultural potential and a significant abundance of natural resources waiting to be tapped into. Being strategically located between India and China doesn’t hurt, either.

Risks ahead for investment

The path ahead is not as smooth as it appears to be, and for all practical purposes, Myanmar remains a highly unstable potential market. Despite the phase-in-transition, inherent risk factors threaten to offset investor confidence in the country.

The major challenge to business entities remains the underdeveloped enterprise infrastructure in Myanmar. Road and rail connectivity is adequate at best, with many remote areas marginally inaccessible, thus posing a major challenge to supply-chain mechanisms, and limiting the general scope for expansion.

The potential for growth in the telecommunication sector in the country is vastly untapped, partially due to the Tatmadaw’s suppressive rule, especially since 1988. Although mobile subscription has grown in the past five years, per government statistics there were only 5.4 million subscribers as of December 2012, a mere penetration rate of just 9% of the population.

Despite the dismal infrastructure, recent entry of telecom providers such as Telenor and Ooredoo has skyrocketed active subscribers to almost 18 million by March 2015, yet again proving the pent-up consumer demand. The major obstacle to telecommunication access in Myanmar is limited access, and high costs.

Myanmar uses hydropower, which contributes to nearly 70 percent of the country’s total electricity generation, followed by 22 and 8 percent from natural gas and coal, respectively. However, Myanmar’s per capita energy consumption is the lowest amongst all the ASEAN states, with only a quarter of the population estimated to have access to regular supply of electricity. Even major cities like Yangon suffer from frequent power outages, thereby limiting economic growth and development.

The upcoming 2015 parliamentary election is significant in its own right. However, the more important questions are the ones nobody is asking at the moment. Suu Kyi’s NLD is a frontrunner to forming Myanmar’s first democratically elected government in over five decades. Irrespective of whichever political party comes at the center, they will have to work in tandem with the Tatmadaw.

The existing executive branch structure in Myanmar mandates that the President and the commander-in-chief of the country share power. Appointment of three key portfolios viz. defense, home and border affairs rests with the commander-in-chief, and 25 percent of the seats in the parliament are reserved for military personnel.

So the question becomes one of how will the relationship between the NLD and the Tatmadaw will develop. We might just discover that the answer to this will either drown Myanmar into another political deadlock, or finally allow the country to move forward.

The next few months until the elections, and maybe a few more after the outcome, will be fraught with uncertain risks to Myanmar’s democratic ambitions. Therefore, it appears that corporate investors will have to wait a little longer before moving into the last frontier in Southeast Asia.