While President Trump’s maiden Asia voyage focused on the headline themes of bilateral China relations, North Korea standoff, and trade pacts, the unrelenting Rohingya flight from Myanmar into Bangladesh, with over half the estimated 1 million population exiting so far, was also on the diplomatic and economic agenda as a long-festering regional issue. Washington is reconsidering easing of commercial and financial sanctions late in the Obama administration as refugee advocacy and human rights groups press the State and Treasury Departments for renewed punishment of documented military abuses under the nominal civilian leadership of Nobel laureate Aunt Sang Sue Kyiv. Natural resources under army-controlled companies remain a taboo area subject to strict reporting requirements, but US investors began to join European and Asian counterparts in exploring consumer and real estate ventures in particular. Private equity firms tentatively moved into position for promised stock exchange expansion and liberalization, after a trio of initial listings sparked new frontier market interest.
Despite another year of expected 6-7% GDP growth, these calculations are now indefinitely sidetracked with continued financial sector policy delay and inconsistency, compounded by international community condemnation of the reported Muslim expulsion campaign by the majority Buddhist population. The massive spillover into Bangladesh, following previous waves there and throughout South and East Asia, has raised investor questions about simmering ethnic and religious divides and long-term handling of the humanitarian turned economic development emergency. They come against the backdrop of MSCI stock market performance reverting to its pre-2008 peak, and preference turning to countries better equipped to sustain gains with inclusive business friendly outreach.
Bangladesh, up 6% on the MSCI frontier benchmark through October, won widespread acclaim for agreeing to host another 500,000 Rohingya crossing the border since August in addition to the 100,000 already in the Kutapalong refugee camp for decades. The move softened Sheikh Hasina’s reputation for intolerance toward the political opposition, as domestic supporters glorified her as the “mother of humanity.” She approached donors in Geneva for pledges to build the world’s biggest refugee facility, and her Finance Minister requested World Bank concessional loans at the October annual meeting, with hundreds of millions of dollars to be mobilized in the first phase. However Dhaka has severely restricted non-government organization education, health and housing provision and the refugees’ freedom of movement, including to work or to enroll in local schools. Food prices have jumped in the vicinity, with the arriving Rohingya denied permission to apply their agricultural skills.
On the subcontinent India and Pakistan have also absorbed large Rohingya communities. Shares in the former have been at the bottom of the MSCI core universe since their return, with a 25% loss through October after Prime Minister Sharif was ousted on corruption charges while staying at the helm of his Muslim League-Nawaz party. The Rohingya integrated into the majority population, but remain economically marginalized and may be at increased risk with the chance of another balance of payments crisis forcing IMF rescue, according to observers. The Chinese Economic Corridor has injected billions of dollars in infrastructure stimulus to prevent recession, but added external debt to the existing heavy load on more expensive commercial terms. India on the other hand recently threatened to expel 50,000 Rohingya on national security grounds, citing a possible repeat of the nascent rebel movement claimed by Myanmar’s military to justify its scorched earth tactics. However the stance also fits with the Hindu fundamentalism promoted by Prime Minister Modi and his allies, which was largely ignored by investors as growth was chugging along at 7%, but may now be seen as stoking communal tensions and swallowing reform oxygen with the slowdown to 5% and portfolio outflows.
Indonesia and Malaysia have been equity market laggards, with advances just above 10%, as the Rohingya question comes into play more prominently in relation to identity politics and economic access. The race for Jakarta governor was plagued by Muslim-Christian friction and Investment Minister Tom Lembong decried “rising tribalism” as religious activists insist President Jokowi take a tough line with Myanmar. In Malaysia officials unveiled a generous pre-election budget with growth exceeding projections at 5.5%, but their treatment of Rohingya refugees in detention centers is believed to be opposite and smother available job prospects key to transforming their plight to productive ends.