‘Riding a rollercoaster’ in Myanmar’s post-coup economy
Deepening conflict, sudden changes to regulations and a lack of transparency have made doing business in the country increasingly challenging.
Bangkok/Yangon – For Aung Thet, a successful entrepreneur in Yangon, running a business under Myanmar’s military regime feels like “riding a rollercoaster”.
The Southeast Asian country’s economy has been brought to its knees by the conflict triggered by the military’s power grab two years ago.
Foreign investors have headed for the exits and the generals have forced companies like Aung Thet’s to convert their foreign exchange accounts into Myanmar kyat. Criticism of the military administration is not tolerated.
“It’s a very hostile environment for businesspeople and the risks for speaking out on policy issues are high,” Aung Thet, who asked to speak under a pseudonym, told Al Jazeera. “Even the national business lobby doesn’t have much clout over the junta’s economic policies. They could be brutal to businesspeople who voiced their criticisms.”
In some ways, Aung Thet is relatively fortunate. His company is in the agricultural export sector and is not existentially threatened as long as farmers continue to produce the crops he sells in countries – including in Africa and Europe.
Since toppling Aung San Suu Kyi’s democratically-elected government on February 1, 2021, the military has cracked down on the civilian population opposing the coup and filled the country’s prisons with people critical of its rule.
But opposition to the military – led by the National Unity Government (NUG) established by the elected politicians the military overthrew – remains strong and the generals have been unable to secure full control of the majority Bamar heartland. Meanwhile, ethnic armed groups – some aligned with the resistance – have consolidated their rule over swathes of the country.
A huge civil disobedience movement and consumer boycott have also undermined the military’s hold over the government apparatus and hurt military-owned companies with well-known brands.
Under Senior General Min Aung Hlaing, Myanmar has also faced its worst-ever power cuts and joined Iran and North Korea on global watchdog Financial Action Task Force’s financial terrorism blacklist.
Economically, Myanmar has experienced considerable banking and currency volatility as well as an exodus of big foreign names including Norway’s Telenor, Alibaba of China, French giant Total and Ooredoo of Qatar.
Gross domestic product (GDP) shrunk by almost a fifth in 2021 before growing by just 3 percent from a much smaller base the following year.
The World Bank this week put Myanmar’s growth for the fiscal year ending in September at 3 percent but warned that per capita GDP would remain about 13 percent below its level before the COVID-19 pandemic. That means Myanmar’s 2023 GDP will still be smaller than the pre-coup economy.
Recovery from the shocks of COVID-19 and the coup “is expected to remain subdued in the near term, constrained by significant macroeconomic and regulatory uncertainty, persistent conflict, and ongoing electricity outages,” the World Bank said in its update.
Myanmar’s poverty rate has also more than doubled compared with pre-COVID levels, according to the International Labour Organization. Household income has further reduced and food insecurity has worsened.
The undoing of a decade of economic progress, combined with the military government’s failure to quell the resistance, poses a threat to Min Aung Hlaing’s ability to deliver on strategic projects for China and other supporters. They also put at risk the general’s plan for elections later this year, which are widely seen as a way for the military to cement its hold on politics through its proxy, the Union Solidarity and Development Party.
The military regime has detained some of Myanmar’s tycoons and confiscated the passports of foreign corporate executives. The jailing last year of prominent foreign business advocate Vicky Bowman, a former United Kingdom ambassador to Myanmar, and her husband, in particular, have raised concern among international investors.
In April, the administration ordered banks and other holders of foreign currency to convert all deposits into the local currency, kyat, giving foreign currency holders one day to exchange their holdings at licensed banks. Business groups and diplomats, including the Chinese ambassador, complained about the policy.
The move made it impossible to buy United States dollars to settle payments for suppliers. Businesses have had to depend on informal remittances, such as convincing suppliers to accept IOUs. The alternative is to go through middlemen, which involves a fee of as much as 5 percent.
“Let me be absolutely frank. The generals did the fixing of USD in April and it’s a bad move,” Aung Thet said. “Since 2022, the policies are volatile on imports, even for essential items. One day they said this was their top priority and the next day they came out with a different take. It’s extremely volatile and difficult. It forces us to consider scaling down our businesses in order to survive.”
While Aung Thet’s company laid off 5 percent of workers after the coup, he has been able to keep the rest – a few hundred people – on the payroll without having to cut their income. Revenues, in millions of dollars before the coup, have stabilised since late last year.
“Farmers have to do what they can do,” he said. “If they missed a month of growing crops, they would struggle massively to stay afloat, especially smaller farmers.”
But in regions where there is active fighting, such as Sagaing and Kayah states, farmers have suffered heavy losses, Aung Thet said.
“Kayah’s agriculture industry has been decimated while Sagaing – another hotspot between the resistance and the regime – has lost around 30 percent of its crop. But others have soldiered on because farmers need to grow crops to survive,” he said.
While the depreciation of the kyat has made farmers’ exports more competitive overseas, rising prices, driven by soaring petrol costs, have eaten into their profits.
In Yangon’s tea shops, the cost of Mohinga, a traditional breakfast of rice noodles and fish soup, has more than doubled since the coup.
Farmers are also struggling to access credit as micro-finance institutions and banks have cut back on lending.
“Marginalised and smaller, poorer farmers can’t afford to buy fertilisers, because their prices have tripled,” Aung Thet said. “This is extremely difficult.”
The military administration has downplayed the economic difficulties since the coup.
“If everybody strives for boosting the state’s economy with momentum, Myanmar will reach the middle class of economies among ASEAN countries in a short time,” Min Aung Hlaing said last month during a meeting with military officers and families in western Rakhine state.
The army chief has claimed that the economy declined under Aung San Suu Kyi’s government and that the military had led its revival.
GDP grew by a solid 2.4 percent during the first half of the 2021-22 fiscal year and by 3.4 percent in the second half, he told fellow officials at a meeting in Naypyidaw on January 6, the numbers far higher than those given by the World Bank.
The NUG dismisses Min Aung Hlaing’s rosy prognosis.
The generals have “driven the economy off the cliff by terrorising the workforce, destroying labour rights and imposing disastrous policies such as forex restrictions,” Dr Sasa, an NUG cabinet minister, told Al Jazeera.
He said the minimum wage had not increased even as prices had risen and noted that the illicit economy had expanded. This was in reference to a United Nations Office on Drugs and Crime report last week that showed Myanmar’s opium production was at a nine-year high.
“The generals severely damaged business confidence and pushed half of the population under the poverty line,” Sasa said.
The minimum wage remains at 4,800 Myanmar kyat [$2.30] a day – a level set in 2018.
Min Aung Hlaing has also pushed for “domestic manufacturing” and called for less reliance on imports and foreign aid.
Shadows of Than Shwe
The general’s economic plans – which include proposals to build a metro system in the capital Naypyidaw and turn Myanmar into a hub for electric car manufacturing despite repeated blackouts – have drawn comparisons with former strongman Than Shwe, whose focus on infrastructure included the development of Naypyidaw, which was built in secret, and the construction of the controversial Myitsone dam.
Myanmar approved $1.45bn in foreign direct investment during the first seven months of the 2022-23 fiscal year, most of it from Singapore, a conduit for foreign money into Myanmar and China, according to official data. The military administration has stopped disclosing the projects it has approved since the coup, scrapping or restricting access to a number of corporate registries.
Chinese energy companies are among the few foreign firms that appear willing to make new investments in the country, participating in the administration’s plan to expand solar power.
Still, given the scale of the problems afflicting the industry, experts say the project is unlikely to address the root cause of the country’s chronic blackouts, which include the collapse of stable governance, conflict and currency volatility.
“Myanmar’s energy system is in shambles and there’s no plan to fix it. Not today, not in five years,” Guillaume de Langre, an energy expert who used to advise the Myanmar government, told Al Jazeera. “The junta is lying to investors, while local resistance forces are ramping up sophisticated attacks on critical points of the power grid.”
A state of emergency imposed after the coup was extended again on Wednesday, by six months, suggesting the election the military had said would be held by August might be delayed.
Even if the polls do go ahead, they are unlikely to do much to reassure investors.
“The ‘elections’ are not poised to inspire any noticeable investor confidence in Myanmar, at least for the immediate term,” said a source in Yangon who has access to the military and declined to be named for fear of reprisals. He expects business processing times will remain slower now that the state of emergency has been prolonged.
“[The] crackdown in the post-election period will intensify in a bid to paint the resistance as the obstacle from returning to ‘business as usual’.”
But unlike multinationals, Myanmar’s businesspeople, shopkeepers and farmers have nowhere to go.
“Livelihoods matter,” Aung Thet said. “Right now Myanmar is in the worst-ever state I’ve seen in my life: Broken economy, broken society, broken everything. But you would be surprised to learn that I have faith in the country’s future. I am worried yet determined to plough on.”