The one-year anniversary of the escape of over half a million Muslim Rohingya refugees from Myanmar’s Rakhine State into Bangladesh, with a current total of over 900,000 in the world’s largest camp, coincided with clear United Nations condemnation of human-rights abuses as well as investor fears over the economic policy and performance fallout on both sides of the border. The Myanmar military, which controls major state enterprises, will likely face additional Western commercial sanctions and asset freezes with the UN’s call for an investigation of genocidal crimes. Before the report, Aung San Suu Kyi, the government’s civilian head, gave a speech in friendly Singapore assigning neither the army nor leading officials who have concocted a mix of lower growth, higher inflation and currency depreciation to blame for their actions.

China as its top Asian ally has felt the impact of the tourism and foreign direct investment slowdown, with a 15%, $900 million decline in the last fiscal year, as Myanmar reportedly will slash the original $7.5-billion Kyaukpyu port project in Western Rakhine to $1.5 billion. The Belt and Road venture, with Citic Group as the main developer, was reached with the prior government to speed oil and gas delivery to Yunnan Province. However, the location in a conflict zone, and headlines over deep debt and structural failures in neighboring Laos and Sri Lanka prompted a rethink that intensified when Soe Win, a former Deloitte management consultant, became finance minister in May. With foreign aid cuts and a record budget deficit to be funded 20% by the central bank, he argued that the transaction had to shrink, as frontier market ambitions were otherwise scaled back despite passage of overdue reforms such as a new company law.

The budget gap is at a 7-year peak with big losses at one-third of 30 government enterprises, including the power and rail monopolies

The latest updates went into effect in August and allow 100% international wholesale enterprise ownership with a minimum $5 million allocation. Thai textile firms have expressed interest in diversification with higher domestic production costs, but lawmakers regularly criticize the investment agency for blocking and delaying applications amid land and tax disputes. Electricity and information technology infrastructure are also lacking, and the outdated banking system suffers from limited private and mobile competition and exchange rate restrictions, according to an August Yangon seminar on the economic outlook. A main adviser to State Councilor Daw Aung San Suu Kyi, Australian professor Sean Tunnell, echoed the Asian Development Bank forecast that gross domestic product growth will slip under 7%. Inflation hit 7.5% in the last quarter through July with food crop flood damage and a 5% monthly devaluation of the kyat against the dollar through mid-August.

The budget gap is at a 7-year peak with big losses at one-third of 30 government enterprises, including the power and rail monopolies. Less than $2 billion in concessional debt and foreign assistance will come in this year, and the trade deficit widened to $1 billion from April-July and was 4% of GDP in 2016-17. The Chamber of Commerce’s recent business sentiment survey revealed a drop from last year on “unclear economic policies” as the government continues to promise an overarching “Sustainable Development Plan” for long-term vision beyond the Rahkine crisis.

With the currency sliding past 1,500/dollar under reserve pressure, the central bank abandoned the daily 0.8% fluctuation band and introduced swap facilities in a stabilization attempt. It injected millions of dollars in liquidity in August as private banks were accused of hording foreign exchange, and diesel and sugar re-exports were suspended to mitigate swings. The Chamber of Commerce unveiled a currency reform blueprint to liberalize access and trading, and central bank technocrats urge a free-float system. However, the governor in the post for 15 years, U Kyaw Kyaw Maung, was reappointed in July and has traditionally advocated monetary policy and financial institution caution. Interest rates are still controlled and foreign banks were only recently allowed to offer trade credit, and stock exchange promoters of expanded overseas entry expressed regret at the incumbent’s continued tenure.

Bangladesh’s business and financial communities are likewise outraged at the Rohingya refugee status quo, as they point to hosting and environmental costs in Cox’s Bazar without prospects of voluntary return and fulfilled aid pledges. Foreign investors are net equity sellers ahead of elections which could bring their own standoff, and de-listings without compensation multiplied area upsets.