Myanmar’s government also recently signed ceasefire agreements with the Karen and Shan armed factions, and although no resolution has been reached with the Kachin Independence Army, the government has pulled back from its offensive.

An IMF-World Bank team was in Myanmar last month, working to assess the state of the economy, the need for international financial support and to identify priority reforms, including the process of unifying the official and unofficial exchange rates. One challenge is that Myanmar will need to make an arrangement to pay back arrears to the World Bank and Asian Development Bank in order to receive funds from these institutions. But if President Thein Sein maintains the trend of opening Myanmar economically and politically — and there is reason to believe he will — such bottlenecks could be removed, external finance could flow, and Myanmar could experience an economic boom as labour productivity and living standards catch up with its Southeast Asian neighbours.

While the reasons behind the timing of Myanmar’s political opening up will be debated and studied for years, three factors have probably played a key role. First, China’s large and growing economic presence in the country must have worried Myanmar’s generals — who earned their spurs fighting communism — and aggravated the country’s fiercely independent streak. The proximate reason provided for the postponement of the Myitsone Dam was environmental factors, in part because the issue had gained momentum with Aung San Suu Kyi’s support; but its timing suggested an exertion of sovereign authority that was part of a broader change in direction. Second, the leadership of ASEAN in channelling global aid to Myanmar following Cyclone Nargis in 2008 pointed to a constructive approach through which Myanmar could interact with the world. It also opened a policy space in which initial, small reform steps could be implemented. And third, ASEAN sent a clear message that progress was needed on human rights and democracy if Myanmar was to chair ASEAN in 2014 — a message that was echoed and supported by the United States.

It will be important, however, to keep expectations in check about the future speed of economic and political reforms, and to be mindful of limits to the government’s institutional and implementation capacity. Economic reforms should be introduced slowly and deliberately, and with careful attention to sequencing. Once donor funds start flowing, they should be directed through the budget, subjected to parliamentary oversight and aligned with country — not donor — priorities. The initial focus will need to be on maintaining macroeconomic stability, increasing rural infrastructure to support agriculture, gradually liberalising agricultural prices and developing a governance framework for natural-resource management. Trying to do too much too fast would be wasteful, potentially trigger macroeconomic instability and perhaps even retard long-term growth.

It will also be important to recognise that Myanmar’s abundance of natural resources requires a development path that uses this wealth prudently to build sustained and inclusive development for generations to come. A strategy to achieve this will require institutional change, sound macroeconomic management and a long-term vision for the country’s development that is supported by the majority of stakeholders. At the same time, the outside world will need to be patient and realistic in its demands for more political freedoms. The appropriate approach would be constructive engagement, helping to fashion a political or institutional framework that is tailored to Myanmar’s unique history and culture, rather than foisting a foreign framework on the country.

And finally, Myanmar’s ethnic problem cannot be overemphasised and will require prolonged internal negotiations. After all, the ethnic minorities account for a third of the population and half of Myanmar’s states. Without a durable sub-national framework for its ethnic minorities, appropriate political representation and an adequate voice in national policy formulation, Myanmar’s internal political reforms will count for naught.

Vikram Nehru is Senior Associate in the Asia Program and Bakrie Chair in Southeast Asian Studies at the Carnegie Endowment for International Peace.

A version of this article was first published here by the Carnegie Endowment for International Peace.