A ‘roller coaster ride’ in Myanmar’s post-coup economy | Business and economic news

Bangkok/Yangon – For Aung Thet, a successful entrepreneur in Yangon, running a business under Myanmar’s military regime feels like a “roller coaster ride.”

The economy of this Southeast Asian country was brought to its knees by the conflict caused by the military seizure of power two years ago.

Foreign investors headed for the exits, and the generals forced companies like Aung Thet to convert their foreign currency accounts into Myanmar kyat. Criticism of the military administration is not tolerated.

“It’s a very hostile environment for business people and the risks for speaking publicly on political issues are high,” Aung Thet, who asked to speak under a pseudonym, told Al Jazeera. “Even the national business lobby does not have much influence on the junta’s economic policy. They could be brutal towards business people who voiced their criticism.”

In a way, Aung Thet is relatively happy. His company deals in the agricultural export sector and is not existentially threatened as long as farmers continue to produce the crops he sells in countries – including Africa and Europe.

Since toppling the democratically elected government of Aung San Suu Kyi on February 1, 2021, the military has cracked down on civilians opposed to the coup and filled the country’s jails with people critical of her rule.

But opposition to the army – led by the National Unity Government (NUG) installed by elected politicians ousted by the army – remains strong, and the generals have been unable to secure full control of the majority Bamar heartland. Meanwhile, ethnic armed groups – some who have joined the resistance – have consolidated their hold over parts of the country.

A busy street in Yangon showing cars filling the streets in every direction.  The golden stupa of the Sule Pagoda is behind
While the streets of Yangon remain busy, the post-coup business climate has worsened [AFP]

A major civil disobedience movement and consumer boycott also undermined the military’s control over the government apparatus and hurt military-owned companies with well-known brands.

Under senior general Min Aung Hlaing, Myanmar also faced its worst blackouts and joined Iran and North Korea on the global financial terrorism watchdog’s blacklist.

Economically, Myanmar has experienced considerable banking and currency volatility as well as an exodus of big foreign names including Norway’s Telenor, China’s Alibaba, French giant Total and Qatar’s Ooredoo.

Gross domestic product (GDP) shrank by nearly a fifth in 2021 before rising by just 3 percent the following year from a much lower base.

The World Bank this week estimated Myanmar’s growth for the fiscal year ending in September at 3 percent, but warned that GDP per capita would remain about 13 percent below pre-Covid-19 levels. This means that Myanmar’s GDP in 2023 will still be lower than its pre-coup economy.

The recovery from the shocks caused by the COVID-19 virus and the coup “is expected to remain muted in the near term, constrained by significant macroeconomic and regulatory uncertainty, persistent conflicts, and ongoing power outages,” the World Bank said in its update.

Myanmar’s poverty rate has also more than doubled compared to pre-COVID levels, according to the International Labor Organization. Household incomes further decreased and food insecurity worsened.

Rising prices

The reversal of decades of economic progress, combined with the military government’s failure to quell resistance, threatens Min Aung Hlaing’s ability to pursue 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 consolidate its grip on politics through its proxy, the Union Solidarity and Development Party.

The military regime imprisoned some of Myanmar’s tycoons and confiscated the passports of foreign company executives. Last year’s jailing of prominent foreign business advocate Vicky Bowman, the former UK ambassador to Myanmar, and her husband caused particular concern among international investors.

In April, the administration ordered banks and other foreign currency holders to convert all deposits into the local currency, the kyat, giving foreign currency holders one day to exchange their holdings at authorized banks. Business groups and diplomats, including the Chinese ambassador, have complained about the policy.

A bowl of mohinga soup, a popular breakfast for people in Myanmar.  The dish contains noodles and fish.  There is a slice of lime on the side, and green herbs are sprinkled on top.
Rising prices are affecting people across Myanmar, with mohinga, a traditional rice noodle breakfast dish with fish soup, now costing double what it was at the time of the coup [File: Ann Wang/Reuters]

The move made it impossible to buy US dollars to settle payments to suppliers. Businesses had to depend on informal remittances, such as persuading suppliers to accept IOUs. An alternative is to go through an intermediary, which involves a fee of as much as 5 percent.

“Let me be completely honest. The generals fixed the USD in April and that is a bad move,” said Aung Thet. “From 2022, policies are variable for imports, even for basic items. One day they said it was their top priority, and the next day they came out with a different attitude. It is extremely unstable and heavy. It’s forcing us to think about downsizing in order to survive.”

While Aung Thet’s company laid off 5 percent of its workers after the coup, he managed to keep the rest—several hundred people—on the payroll without reducing their income. Revenues, in millions of dollars before the coup, have stabilized since the end of last year.

“Farmers have to do what they can,” he said. “If they missed a month of growing crops, they would struggle to stay afloat, especially smaller farmers.”

But in regions with active fighting, such as Sagaing and Kayah states, farmers have suffered heavy losses, Aung Thet said.

“Kayah’s agricultural industry has been decimated, while Sagaing – another flashpoint between the resistance and the regime – has lost around 30 percent of its crops. But others have struggled because farmers have to grow crops to survive,” he said.

While the depreciation of the kyat has made farmers’ exports more competitive abroad, rising prices, fueled by huge fuel costs, have eaten into their profits.

In Yangon teahouses, the price 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 microfinance institutions and banks have reduced lending.

“Marginalized and smaller, poorer farmers can’t afford to buy fertilizers because their prices have tripled,” Aung Thet said. “This is extremely difficult.”

The military administration played down the economic difficulties after the coup d’état.

“If everyone strives to strengthen the country’s economy, 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 claimed that the economy had declined under the government of Aung San Suu Kyi and that the army had led its revival.

GDP grew by a solid 2.4 percent during the first half of fiscal year 2021-22. and by 3.4 percent in the second half, he told fellow officials at a meeting in Naypyidaw on January 6, figures far higher than those given by the World Bank.

NUG rejects Min Aung Hlaing’s rosy forecast.

The generals “drove the economy off the cliff by terrorizing the workforce, destroying workers’ rights and imposing disastrous policies such as foreign exchange restrictions,” Dr. Sasa, a minister in the NUG government, told Al Jazeera.

He said the minimum wage had not increased even though prices had risen and noted that the illegal economy had expanded. This was in reference to a report last week by the United Nations Office on Drugs and Crime which showed opium production in Myanmar was at a nine-year high.

“The generals seriously damaged business confidence and pushed half of the population below the poverty line,” Saša said.

The minimum wage remains at 4,800 Myanmar kyats [$2.30] day – level set in 2018.

Min Aung Hlaing also advocated “domestic production” 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 subway system in the capital Naypyidaw and turn Myanmar into a hub for electric car production despite repeated power outages – have drawn comparisons with former strongman Than Shwe, whose infrastructure focus included developing Naypyidaw, which was built in secret, and the construction of the controversial Myitsone dam.

Myanmar approved $1.45 billion 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 to Myanmar and China, according to official figures. The military administration stopped publishing the projects it had approved after the coup, removing or restricting access to a range of corporate registries.

Chinese energy companies are among the few foreign companies willing to make new investments in the country, taking part in the administration’s plan to expand solar power.

Still, given the scale of the problems affecting the industry, experts say the project is unlikely to address the root cause of the country’s chronic power outages, which include the collapse of stable governance, conflict and currency instability.

“Myanmar’s energy system is in shambles and there is no plan to fix it. Not today, not in five years,” Guillaume de Langre, an energy expert who was once an adviser to the Myanmar government, told Al Jazeera. “Junta lies to investors, while local resistance forces step up sophisticated attacks on critical power grid points.”

The state of emergency imposed after the coup was extended again on Wednesday, for six months, suggesting that elections that the military had said would be held by August could be delayed.

A woman crosses an almost empty street in Yangon.  He carries an umbrella to protect himself from the sun
The streets of Yangon, Myanmar’s largest city and commercial capital, were almost deserted on Wednesday as people took part in a ‘silent strike’ to show their opposition to the coup [AFP]

Even if the polls do take place, they are unlikely to reassure investors.

“The ‘election’ is not poised to inspire any discernible investor confidence in Myanmar, at least in the short term,” said a source in Yangon with access to the military who declined to be named for fear of reprisals. He expects processing times to remain slower now that the state of emergency has been extended.

“[The] repression in the post-election period will intensify in an attempt to portray the resistance as an obstacle to a return to ‘business as usual’.”

But unlike multinational companies, Myanmar’s businessmen, traders and farmers have nowhere to go.

“Living wages are important,” Aung Thet said. “Right now, Myanmar is in the worst state I’ve ever seen in my life: Broken economy, broken society, broken everything. But you would be surprised to know that I believe in the future of the country. I’m worried but determined to keep going.”

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