Despite the euphoria of yesterday’s historic handover, the reality is that President U HTin KYaw’s administration takes office at a time when the country is facing a range of economic, political, and social challenges. The Myanmar Times has surveyed 10 of the most significant hurdles the new government will face as it seeks to achieve its policy pledges and meet the high expectations of the voters who put it in power.

The future of China-backed projects

When it was shunned by the West, Myanmar turned toward China and the country quickly became the largest source for foreign investment, especially in natural resource extraction. Projects and concessions granted to Myanmar’s powerful neighbour by previous governments have left an ugly trace of land grabs and environmental degradation. Two of China’s largest projects in Myanmar – the Letpadaung copper mine in Sagaing Region and the multi-billion-dollar Myitsone hydropower dam in Kachin State – have been the source of recurrent protests by locals and civil society groups. The new government now needs to decide on their long-term future. The awarding to China of large infrastructure projects in the Kyaukphyu Special Economic Zone in Rakhine State is also highly controversial, and may draw NLD scrutiny. It will be impossible for the NLD to please all. The new government will need to balance the demands of environmental activists and farmers with those of China and associated investors. The NLD likely cannot afford to alienate China, as it may hold the key to a peace accord in Myanmar because of its strong hold over the ethnic armed groups operating near its borders.

Agriculture and land rights

For any government in Myanmar, agriculture and land rights is a high-risk, high-reward proposition. Get policy horribly wrong and you can expect to have farmers marching on the capital and mass migrations away from rural areas. But get it right and you can make significant inroads into poverty and provide long-term stability for communities. For most of the past five decades, agriculture policy has been on the wrong side of the ledger. Millions of acres have been confiscated, farmers have been forced to grow the wrong crops and export markets were closed off. In its economic policy, the NLD has identified agriculture as having “immense potential” to spur equitable growth and development, and do so more quickly than other areas of the economy. It says it will take steps to grant production freedom to farmers; reform credit, milling and links in the production chain, and improve market access. Activists say legal reform will also be needed, particularly a National Land Law that lays out a framework for the sector for all other laws to follow. The most immediate concern will be unrest over land disputes, which continues to simmer despite some attempts at restitution by the outgoing government.

Managing government military relations

Behind all the pomp, drama and sheer relief surrounding the peaceful handover to Myanmar’s first real civilian government since 1962, it should not be forgotten that the NLD will be sharing power with the military – for years to come. “HERE TO STAY” was the banner headline of The Global New Light of Myanmar, the mouthpiece of the outgoing regime, as it marked Armed Forces Day last weekend. Commander-in-Chief Senior General Min Aung Hlaing gave a tough speech declaring that not abiding by the rule of law, and the presence of armed insurgencies, could lead to “chaotic democracy”. His words could be seen as a warning to Daw Aung San Suu Kyi to stick to the 2008 constitution and be careful in negotiating peace with ethnic armed groups. Three rounds of transition talks they held were reported to be difficult and brought no breakthrough. How these two leaders get along will be key to the government’s success, with the military in control of three important ministries and holding effective veto power in parliament over changes to the constitution.

Rakhine State

Rakhine State and the enforced segregation of its stateless Muslim minority from the Buddhist majority may well present the most formidable challenge to the new government. It is also an issue raising deep nationalist sensitivities that Daw Aung San Suu Kyi has conspicuously avoided, despite strong international pressure. UN special rapporteur for human rights Yanghee Lee this month urged the new government to immediately allow over 100,000 Rohingya – officially referred to as Bengalis – to leave IDP camps and move freely. “There are more than a million Rohingya Muslims in Myanmar deprived of some of their most fundamental rights. This is a million too many,” Ms Lee said, also referring to lack of access to healthcare, education and basic services. Maintaining security will be a first priority, with memories still strong of the 2012 communal violence. This week’s unexpected lifting of the state of emergency by the outgoing government could have uncertain repercussions. Politically the NLD is weak in Rakhine State, holding a minority in the local parliament where it has angered the Arakan National Party by appointing an NLD chief minister. Whatever the government does in Rakhine – where China holds major economic interests – will be closely scrutinised by the international community.

The drug trade

Myanmar is the world’s second-largest producer of raw opium and, after a temporary decrease in production, cultivation increased again under the U Thein Sein government. Together with a surge in production and consumption of methamphetamines, the illegal narcotics trade will test the new government’s ability to cooperate with the military, which coordinates anti-drug efforts under the Tatmadaw-controlled Ministry of Home Affairs.

The NLD’s work on the peace process will have a significant impact on the narcotics trade as the civil war continues to contribute to illegal drug production, particularly given the Tatmadaw’s history of allowing allied militias to engage in the trade in return for their help against ethnic armed groups.

But Myanmar’s drug problem is much more than a domestic issue. China and Thailand also suffer enormous social consequences from the cross-border trade, even if corrupted local powers also facilitate and profit from it. Regional cooperation on security issues is likely to be high on the NLD’s agenda.

Cleaning up the jade trade

Hpakant in Kachin State is an opened Pandora‘s Box: the issues range from corruption, conflict and human rights abuses to environmental damage, drug use, smuggling and deadly landslides. Many of Myanmar’s old elite continue to fund themselves through the jade mines, meaning the NLD may not want to tread too heavily, at least at first. The party will come under the pressure to act from locals, however, as reckless excavation has exacerbated the area’s myriad problems and prompted calls for government action. Legalising sales of uncut jade in Myanmar would help to bring the lucrative trade within the country’s borders and allow the government to collect tax. A comprehensive peace agreement with the Kachin Independence Army including revenue-sharing terms, combined with new safety measures, labour rules, and an investigation into corruption and criminal activity could go a long way toward improving conditions in this regulatory no man’s land.

Rebooting the stalled peace process

Establishing a lasting peace with ethnic armed groups through negotiated constitutional changes is the stated priority for Daw Aung San Suu Kyi. While the goal is reasonably clear, even the NLD’s first steps along the new peace process are not. The government inherits a very tense situation. The “nationwide” ceasefire pact signed last October is anything but, and the Tatmadaw in recent weeks has committed more troops to its offensives in northern Shan State. The major armed groups outside the ceasefire pact say they are eager to start talks with the government, but it is not known how the NLD will deal with the three groups that the Tatmadaw insists must first surrender. The international community is standing by with cash and staff to help the process, waiting for the government to set out a plan. Its chief negotiator has not been named but the NLD leader’s personal doctor, U Tin Myo Win, is widely tipped. From first contacts to negotiating a peace incorporating such fundamental issues as sharing natural resources and political power could take years. Success depends heavily on the Tatmadaw’s cooperation.

Health sector reform

If the past five years have taught us anything, it’s that there are no quick fixes to what ails Myanmar. Health sector reform is going to be a long, hard slog. Despite relatively large budget increases, which have been used to reduce out-of-pocket costs for treatment and improve health facilities, complaints continue to roll in about the parlous state of the health system. Challenges range from retention and remuneration of staff to improving health capacity in peri-urban areas, where population growth has far outstripped resources and access to state facilities is often worse than in rural areas. In the long term, there’s also a target to introduce universal health coverage, but that remains several decades away. For now though it is unclear whether the NLD even has a reform plan other than following the previous government’s commitment to annual budget increases. Another looming issue is non-government systems and providers in ethnic minority areas where the state does not currently reach. How these will be integrated into the national system as the peace process – hopefully – progresses and how much autonomy they retain will be a key policy question for the future.

Central Bank, growth and deficits

The economic challenges facing the new government are formidable. The International Monetary Fund has warned of increasing vulnerability due to rising macroeconomic imbalances. With double-digit inflation, a fiscal deficit of almost 5 percent of GDP, a current account deficit of around 9pc, foreign exchange reserves at less than three months of imports and a weakening currency, the economy will require a strong hand. Building a genuinely autonomous and capable Central Bank would help the macro outlook, as would tightening monetary policy, developing a liquid government bond market, encouraging foreign investment and reforming the tax system. Finance Minister U Kyaw Win has said economic growth (projected to reach up to 8.5pc this fiscal year) is his first priority, based on improved access to finance, taxation and rural development. Restructuring the state-owned banks could also help redirect much-needed capital to the rural economy and protect against shocks brought on by extreme weather conditions.

Fighting corruption and graft

Though perceived levels of corruption have come down slightly over the past few years in Myanmar, according to global watchdog Transparency International, the issue remains widespread with requests for bribes continuing to impede business. Respondents to a 2014 study from UMFCCI, UNESCAP and the OECD described corruption as a very severe obstacle to doing business.

A recent anti-corruption workshop held by the Myanmar Centre for Responsible Business (MCRB) and ASEAN CSR Network (ACN) surveyed attendees on graft and where they came across it. More than one-quarter of those polled said bribery happened most dealing with ministries on licences or tenders, while the same portion – 27 percent of respondents – said it was most prevalent at income tax offices, said a press release from the workshop organisers. Meanwhile, attendees said that they personally saw corruption at Yangon City Development Committee (YCDC), immigration offices and in engaging with traffic police.

“The new government knows that combating corruption is vital to Myanmar’s future, and we expect it to be strongly committed to taking this forward,” said MCRB director Vicky Bowman in a statement. “As a starting point, we encourage them to survey the businesses community to determine which processes drive demand for bribes, and where reform efforts should be focused.”