Myanmar, on the other hand, was ensconced in military rule, and its policies sought to reorient the economy to a socialist one.
Today, Myanmar has nominal GDP per capita of US$1,221 while the equivalent for Singapore is more than 46 times higher at US$56,319. Interestingly, Ne Win ruled Myanmar for 26 years, while Lee Kuan Yew was at the helm for 31 years, and each man’s political ideology and actions materially shaped the fortunes of both nations.
Political changes can also be short and sharp: look to the events of the 2014 elections in India.
The consensus view was that reform-minded Narendra Modi would win, but with no majority. An unwieldy coalition was widely expected.
When the results were tallied, it became clear Modi had won a historic victory and investor sentiment turned extremely positive. Money flowed in as the currency rebounded, delivering outsized returns over the following 12 months.
The market’s recent enthusiasm has made valuations less attractive, but the long-term prospects remain striking. I believe the potential for growth is significant in India, but so are the challenges faced by Modi’s regime.
The incumbent Sri Lanka Prime Minister, Mahinda Rajapaksa, surprised the markets when he called for an early election—nearly two years before the end of his scheduled term. The result was expected to be close but seemed to be a foregone conclusion—except that Mr. Rajapaksa lost.
Now everything has changed. The new party is off to a disappointing start, announcing a shareholder unfriendly 25% retroactive corporate tax within days of winning the election.
Another Asian country with political issues is Bangladesh.
Over most of the past 14 years, two leaders, Khaleda Zia and Sheikh Hasina, have been locked in a power struggle. The last election was a farce but the question to answer is what happens next?
Gauging political impact
History suggests political upheaval is frequently an interesting buying opportunity for those with long-term horizons.
These examples show that even in a tumultuous environment investors should ask themselves: over time, will we see the political environment improve? Will it become more robust? Will democratic institutions, system checks and balances continue to improve? How will companies fare under these regimes?
There will almost certainly be setbacks but if we use history as our guide, we may conclude that if politics makes the investment road bumpy, keep your focus on the distant horizon as local businesses do not tend to just stop.
