IHS Country Risk head of Asia analysis and forecasting Omar Hamid looks at the risks and challenges in south-east Asia’s second largest country


In April 2011, a civilian government formed by the Union Solidarity and Development Party (USDP) took office in Myanmar after five decades of military rule. However, the military remains influential, as the constitution guarantees it 25%of parliamentary seats and three cabinet posts.

The government, led by president Thein Sein, a former army general, has initiated a political reform process, releasing hundreds of political prisoners. He also invited opposition leader Aung San Suu Kyi and her National League for Democracy (NLD) to contest by-elections in April 2012.

As a result, Western sanctions have been largely suspended, with the exception of arms embargoes and some US restrictions on doing business with military-owned firms.

The government is also opening the economy to foreign investment. There has been speculation of a backlash against reforms from military and political hardliners, but this is unlikely.

Suu Kyi presidential bid

Suu Kyi has declared her intention to run for president in 2015. A constitutional amendment allowing Suu Kyi to do so is likely.

The military is interested in improving the image of the country, and removing obstacles stopping Suu Kyi from becoming a presidential candidate would go a long way to achieving this.

The military knows that the USDP is unlikely to lose an election. But even if it does, constitutionally the military is guaranteed 25% of all parliamentary seats and three cabinet positions. That means its influence is certain in any government.

Investors will need to take into account the ethnically divided nature of Myanmar. There are more than 130 ethnic groups’

Investors will also need to take into account the ethnically divided nature of Myanmar. There are more than 130 ethnic groups and many are represented in parliament by ethnic-based parties.

Bamar is the dominant group, but others such as the Shan, Kachin and Kayin are also significant. An investor would need to accommodate local as well as central government interests in any project.

Terrorism risk outlook

Ethnic militias have waged low-level insurgencies for some decades, consisting of sporadic attacks against security forces and government infrastructure, particularly in Shan state, Kachin state and Karen state.

In November 2011, the government began peace talks with each of these groups, and by January 2012 ceasefire agreements had been signed with the Chin, Kayin, Mon and Shan state militants.

However, these ceasefires have been violated, and fighting between the ethnic militias and government security forces is intermittent.

In May 2013, the government and the Kachin Independence Organisation (KIO) announced that they had reached a seven-point agreement to reduce fighting. Importantly, the deal is not a ceasefire, so sporadic fighting is likely to continue.

Continuing confrontations

In June 2013, the KIO claimed that government troops had fired on its bases in Kachin state’s Mai Ja Yang region.

However, the army is less likely to initiate large operations with aerial support, as it did in early 2013.

The principle source of income for the militias (and the army) is protection money on cargo convoys from smugglers bringing in goods from Thailand and China.

Any attempts by the military to take control of smuggling routes controlled by the Kachin Independence Army (KIA), the military arm of the KIO, would probably result in KIA attacks on infrastructure projects in the area.

Exploding tensions

Power facilities are likely targets for militias. In April 2010, several improvised explosive devices detonated on the site of the Myitsone Dam project, in Kachin state, destroying vehicles and buildings; in November, 2010, militants attacked a power transmission pylon in Thaton township, in Mon state; and in January 2013, KIA militants destroyed an electricity pylon near Myothit village in Kachin.

Dissident militant groups have the capability to stage crude improvised explosive devices attacks’

Dissident militant groups, notably the Vigorous Burmese Student Warriors (VBSW) and the All Burma Democratic Front, have the capability to stage crude improvised explosive devices attacks, and are likely to attempt attacks intermittently in Yangon.

Probable targets include government facilities, hotels and restaurants. Past targets of dissident plots include City Hall (September 2008), Insein Prison (to coincide with the visit of UN secretary general Ban Ki Moon in August 2009), Traders Hotel, Panorama Hotel and the Zawgyi House restaurant.

The VBSW launched an attack using improvised explosive devices in Yangon during new year celebrations in April 2010, injuring 60 people.