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A short walk from Yangon’s notorious Insein prison, where Myanmar’s military junta jailed and tortured political prisoners, lies the Eden Centre for Disabled Children. Its little courtyard and few surrounding buildings are among the only facilities in the country for young people with physical and learning difficulties.

On improvised slalom courses made from cushions and wooden benches, those with cerebral palsy, Down’s syndrome and muscular dystrophy are taught to improve their motor skills. Teachers provide basic education for those with learning difficulties. They also counsel parents worried about what will happen when their children grow up, given Myanmar’s lack of social security and scant job prospects for disabled people.

“I am trying to learn more about advanced techniques,” says Lilian Gyi, director of the school, whose training in Germany 35 years ago makes her the country’s only expert in special education.

The Eden Centre is a small reminder of how deprived Myanmar’s people have been left by years of military rule and poor economic management. However, it also stands as a symbol of how the shift towards democracy that began 18 months ago could have a profound impact in unexpected areas of national life.

Since the junta led by Than Shwe ceded power to an elected government last March, the country has changed in remarkable and often unanticipated ways. Initially dismissed as a continuation of military government in disguise, the new administration led by President Thein Sein has unleashed a barrage of changes. Political prisoners have been released, press censorship abolished, free by-elections held and progressive laws passed. The president is regularly compared to F. W. de Klerk, the South African leader who helped to dismantle apartheid.

U Soe Thane, a former head of the navy who is now a senior minister and trusted adviser to Mr Thein Sein, says Myanmar’s leaders have become convinced that democracy is the best method of improving meagre living standards. “After just a year and a half, we are doing clean government, good government,” he says.

The west has responded by easing sanctions and setting up diplomatic missions. Part of the generals’ motivation to change was concern about becoming too dependent on China. In November, in a sign of just how rapid the rapprochement has been, Barack Obama became the first US president to visit Myanmar, delivering a speech in which he paid tribute to the country’s “dramatic transition”.

The Eden Centre, too, has noticed the difference. Until recently, says Tha Uke, a physiotherapist, its work was couched in the language of charity. Now the school, founded in 2000, talks in terms that were taboo under the generals: “We are changing . . . to a rights-based approach,” he says. The government recently ratified the UN Convention on the Rights of Persons with Disabilities. Under a disability law being drafted, there could be funding for disability pro­jects as well as tax breaks for companies hiring disabled workers. “We’ve been praying for something like this to happen for 20 years,” says Mr Tha Uke.

Myanmar’s almost miraculous transformation is encouraging people to test boundaries in other areas as well. At Yangon Film School in the former capital city, students are working out what kind of documentaries they can make – and possibly broadcast – in a country that previously banned anything with even the most oblique political content.

Ma Cho Pyone, a shy 32-year-old from Shan state in the country’s northeast, recently shot a film depicting the lives of people working and living in a crumbling colonial building in central Yangon. The work, tackling sensitive topics, has not yet been shown in Myanmar, where the dismantling of censorship for broadcasters has been slower than for print media. In one scene, for example, the camera pans over rats in a gutter. The junta banned images of anything showing the country as dirty or poor. There are also interviews with illegal squatters and a scene in which a woman complains about government corruption. “We are still very afraid of censorship so our mind is not yet set free,” says another of the school’s budding directors, who wants filmmakers to be more daring.

A sense of new possibilities is everywhere. In the Irrawaddy Delta, a poor region southwest of Yangon that was devastated by Cyclone Nargis in 2008, more aid money is getting through as western governments re-engage. Myanmar used to be known as the “orphan of aid” – until recently sanctions meant many agencies, banned by their governments from offering development aid, were limited to providing emergency relief. Now aid pledges are rolling in and the country has become a magnet for new development projects. In the two years to the end of 2013, the European Commission alone plans to pour in $150m– nearly as much as it donated in the previous 20 years.

In Yangon, too, where hotels are perpetually full with visiting trade missions and would-be investors, there is an air of expectation. Alisher Ali, chairman of Silk Road Finance, has just closed a $25m fund to invest in start-up companies. Mr Ali, who specialises in frontier markets such as Kazakhstan and Mongolia, says: “I am quite impressed with the quality of young entrepreneurs. Many of them are recent returnees.”

There are also plans to start a proper stock market (the existing one has only two listed stocks) and to implement a recently passed law relaxing foreign investment restrictions. Coca-Cola, Nestlé and General Electric have all announced supply and distribution deals, though few companies have yet committed to big fixed asset investments.

“We are in a new era and we have momentum moving forward,” says Soe Yin, former rector of Yangon university. Andreas List, who heads the EU office that opened in Yangon in April, agrees. “It will be difficult to go back to policy habits of the past. The genie is out of the bottle.”

Yet, amid all the justified excitement, Myanmar faces several obstacles to a transition to economically successful democracy.

The most important is the risk of ethnic conflict, which has plagued the country since independence from the British in 1948. There are plausible fears that, without the junta, the nation could break up like Yugoslavia after the death of Marshal Tito. The population is split into 135 ethnic groups, many speaking mutually un­intelligible languages and practising religions other than the Buddhism of the majority Burmans. Since independence, the army has fought border wars with groups such as the Kachin, Shan and Karen, which have pressed for greater autonomy or independence. This has cost thousands of lives and left hundreds of thousands displaced or exiled, says Benedict Rogers, a human-rights activist.

Ceasefires have been signed with more than 20 armed groups, raising hopes that the government can negotiate a lasting peace. But one long-dormant conflict, with the Kachin in the north, has restarted. Even where fighting has stopped there is no political settlement. “The ceasefires that exist are fragile and preliminary,” says Mr Rogers, calling them a “pause” rather than a “full stop”. Meanwhile, violence has broken out in the western state of Rakhine between the Buddhist majority and local Muslims. The army is trying, with limited success, to keep the peace. At least 170 people, mainly Muslims, have been killed and more than 100,000 burnt out of their villages.

Aung Min, a retired major general now in charge of peace negotiations, says the government is determined to progress beyond ceasefires towards nation-building. It is “willing to discuss federalism, which was taboo for 20 years”, he says. But suspicion still runs deep and the chance of resumed fighting is not negligible. “Ethnic peace is the key for this country,” says the EU’s Mr List. “The government’s legitimacy will depend on stabilising the ethnic situation.”

The second obstacle is a lack of in­frastructure and training. The Eden Centre’s Ms Gyi, the lone special education expert, is evidence of an undertrained population. Years of isolation have left a lack of experts in finance, public administration and law. A priority of multilateral bodies is to help train a vanguard of technocrats.

Physical infrastructure, too, is lacking. The patchy mobile network needs overhauling and the financial system is primitive. Transferring money is cumbersome at best. Last month, the talk of Yangon’s foreign community was the installation of an automatic cash dispenser at the airport. Electricity shortages are common, hampering the operations of the few foreign factories brave enough to set up shop.

The third area that needs careful handling is the transition to full democracy. The government, though it has shown democratic instincts, is filled with military men. One explained earnestly why it remained necessary on security grounds to ban motorbikes in Yangon.

New freedoms present opportunities but also challenges for the government in dealing with emergent protest movements. Labour unions, banned under the junta, are testing their strength. Last week, security forces used tear gas and incendiary devices to crack down on villagers and Buddhist monks occupying the country’s biggest copper mine. Protesters say the development of the mine, partly Chinese owned, has been accompanied by land expropriation and environmental damage. The government has launched an investigation, led by Aung San Suu Kyi, into the official response. The potential for further protest and violence around land and environmental issues is significant.

Nor is it clear how ready the government is to tolerate the presidential ambitions of Ms Suu Kyi, icon of the opposition for more than two decades. Released from house arrest in 2010 and elected as an MP this year, she is barred from seeking the presidency because she was married to a foreigner. The constitution cannot be changed without military agreement. But if Ms Suu Kyi’s National League for Democracy wins 2015 general elections, held under current rules, this could create an unstoppable momentum for constitutional reform.

Members of the new government say they are the vehicle of, not the obstacle to, further democratic reform. Mr Soe Thane says Myanmar has moved faster in this direction than any country in modern times. “We are,” he says, “trying to achieve something in world history that nobody else has achieved.”

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