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One of Asia's hottest markets could become a new home for global terrorism

CNBC logo CNBC 13/9/2017 Nyshka Chandran

The issue of Muslim marginalization in Myanmar has captivated the attention of Islamic State-inspired extremists, sparking fears the country could become fertile ground for transnational terror groups.

For years, Buddhist-majority Myanmar has clashed with the Rohingya — an ethnic minority that is predominately Muslim. The conflict has recently escalated, with increased reports of violent attacks on Rohingya villages in the state of Rakhine by security forces and Buddhist civilians, leading to a daily average of 35,000 Rohingya Muslim refugees fleeing to neighboring Bangladesh over the last week, according to United Nations figures.

Last month, insurgents from the Arakan Rohingya Salvation Army launched coordinated attacks on 30 government targets in Rakhine, resulting in a military crackdown. But international critics say Yangon's response has been too heavy-handed, with the UN Human Rights Commission recently calling the state's treatment of Rohingya a "textbook example of ethnic cleansing."

The crisis could destabilize Myanmar's status as one of Asia's hottest frontier markets. During the first four months of the 2017-2018 fiscal year, the country attracted $3.1 billion in foreign direct investment and the government says it's confident of hitting over $6 billion for the full year.

And on top of existing troubles, there may be new problems brewing: As the situation worsens, the plight of the Rohingya may be exploited by terror networks across Southeast Asia and beyond.

"The repression visited upon the Rohingya by a powerful government largely consisting of leaders from another religion present a potential, transnational flash-point for jihadi-Salafi organizations," analysts at the Center for Strategic and International Studies said in a recent note, referring to an ultraconservative sect of Islam.

"With parallels to the ethno-religio-nationalist insurgencies of southern Thailand and the southern Philippines, there is legitimate concern that the violence will attract outside forces," the analysts continued.

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Foreign fighters have previously flocked to Southeast Asia's domestic struggles. In May this year, a battle between terror group Abu Sayyaf and Philippine armed forces attracted more than 80 foreign fighters, the analysts pointed out. Moreover, ISIS-affiliated soldiers are seeking new missions beyond Syria and Iraq, so opportunities to defend Muslims are inevitably appealing, they added.

In 2014, Rakhine was declared a key region for jihad by Islamic State leader Abu Bakr al-Baghdadi.

Living in an environment of systemic discrimination, Rohingya Muslims are also targets for religious radicalization. Yangon regards the group, which is nearly one million strong, as illegal migrants and denies them citizenship in addition to restricting marriage, family planning, employment, education and movement.

"The conditions in Rakhine are ripe for the influence of extremist stimuli, including the infiltration of Islamic State ideology, which may worsen the situation in Myanmar," researchers at Singapore-based Nanyang Technological University said in a report. It's an ideal situation for ISIS and affiliates to collaborate with regional groups, they added.

De-facto leader, Nobel Peace Prize recipient Aung San Suu Kyi, is now under a barrage of international criticism for her failure to end alleged military crimes against the Rohingya.

The Rakhine conflict has also become a rallying call for radical Muslims in Southeast Asia.

Hardliners in Indonesia, home to the world's largest Muslim population, are currently using Myanmar's crisis to play into domestic religious tensions, Peter Mumford, Southeast Asia head at political consultancy Eurasia Group, explained in a recent note.

The same Islamic political groups that organized mass demonstrations against former Jakarta governor Basuki Tjahaja Purnama earlier this year are now leading pro-Rohingya rallies, with a Sept. 7 protest calling for jihad against Myanmar's Buddhists.

There are concerns the situation in Rakhine "will draw in more extreme Islamists from elsewhere in Southeast Asia, and beyond, to support their cause," said Mumford.

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