A year after its launch, the Yangon Stock Exchange Index with four listings has halved on paltry turnover as economic growth dipped slightly from the 7% trend, and foreign direct investment fell for the first time in five years – by one-third to $6.5 billion. This was despite a new “one-stop shop” law going into full effect in April that cut bureaucracy and offered tax incentives.

The hydrocarbons sector was shunned altogether, as $3 billion went into telecoms and transport as the largest category. Asian neighbors Singapore, China and Japan, which underwrote the stock market’s creation, were the dominant players, as European and US investors keep their distance despite sanctions removal with the shift to civilian government led by Nobel laureate Aung Sung Suu Kyi.

Asian neighbors Singapore, China and Japan, which underwrote the stock market’s creation, were the dominant players

Critics point out that she unveiled a vague economic plan last year that has hardly been fleshed out, and cite as an example the lack of a new companies act to accompany the investment statute in order to modernize corporate practices. Her defenders argue that the country went decades without free market experience and that an attempt to forge peace with ethnic and regional rebel groups has taken early priority amid international attention on the Muslim Rohingya refugee crisis. Officials tried to allay business concern with the claim that FDI exceeded the original $6 billion target, and still promise wider overseas entry into the protected financial sector, but ambitions for a quick transformation into the “next Vietnam,” a popular catchphrase recently touted by the chief executive of consumer goods multinational Unilever, look farfetched with the momentum stall since the democracy transition.

The Planning Ministry designated the coming year for “takeoff” and the Asian Development Bank predicts a return to 7% growth, with agriculture rising 3% after a bad flooding bout in 2016. The NLD party in charge can claim success in taming inflation, which has fallen to the same 7%, but the fiscal deficit is stuck at almost 5% of GDP. The currency is expected to depreciate and the current account gap will widen over the medium term, and coverage implies higher inward direct and portfolio flows as bilateral and multilateral aid may taper.

The ADB emphasized that the private sector will be key to achieving economic diversification aims concentrated first on labor-intensive food, infrastructure and tourism industries that the government hopes to cluster around special zones, including one with China under the Belt and Road program. A $7 billion joint port project has already run into trouble and the Chinese are pressing to up the original 50% split to an 85% stake. The local ADB representative urged better consultation with the business and financial communities on laws and regulations often drafted in isolation by a single ministry. He said recently that rules are “complex and fragmented” with weak enforcement and that cabinet member also need to forge agreements abroad to boost exports.

The World Bank’s IDA concessional lending arm provided US$100 million in April for financial system modernization as the four main state banks, whose assets were at 16 trillion kyat versus 23 trillion kyat for private competitors as of June 2016, are in “dire” need of recapitalization and restructuring. The largest government lender is the Agriculture and Development Bank, which just lowered its interest rate to farmers from 8.5% to below inflation 5% as the paddy cultivation season starts. The Construction and Housing Bank is on a separate binge to finance developers and low-cost apartment acquisition, pending enactment of a new property law.  The central bank has approved the establishment of a central credit bureau, and pledges to allow the dozen foreign banks with representative offices to offer services “soon.” It also intends to release information on foreign reserves and debt that had been treated as state secrets under the military regime. However, following a 2003 systemic bank run which left savers wary, rumors are now flying of trouble and collapse at private banks which officials have denied as they try to assure the public of available emergency liquidity. Myanmar Citizens Bank and First Private Bank are among the group listed on the Yangon exchange, where four brokers trade a few thousand shares daily in the illiquid market not yet allowing foreign investors. Entry could come later this year, but they will probably pause until the floundering economic policy leadership embraces a reset.