‘Roller coaster ride’ in Myanmar’s post-coup economy Business and economic news

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

The Southeast Asian country’s economy has been brought to its knees by the conflict that sparked a military power grab two years ago.

Foreign investors are heading out, and generals are forcing companies like Auntet to convert their foreign exchange accounts into Myanmar kyats.

“It’s a very hostile environment for businessmen and the risk of speaking out on policy issues is high,” Aung Thet, who asked to speak under a pseudonym, told Al Jazeera. They do not have much influence over the economic policies of the junta, and they can be brutal to business people who express their criticism.”

In some respects, Auntette is relatively lucky. His company belongs to the agricultural export sector, and its survival is not threatened as long as farmers continue to produce the crops he sells in countries including Africa and Europe.

Since overthrowing the democratically elected government of Aung San Suu Kyi on February 1, 2021, the military has cracked down on civilians opposing the coup and filled the country’s prisons with those critical of its rule. rice field.

However, opposition to the army, led by the National Unity Government (NUG), which was set up by elected politicians that the army overthrew, remained strong, with generals seeking full control of the majority center of Bamar. is not done. On the other hand, some ethnic armed groups have allied themselves with the Resistance, but have strengthened their control over parts of the country.

Massive civil disobedience movements and consumer boycotts have also undermined the military’s control over government institutions and hurt military-owned businesses with well-known brands.

Under General Min Aung Hlaing, Myanmar is also facing its worst power outage in history, with Iran and North Korea joining the global watchdog Financial Action Task Force’s blacklist of financial terrorists.

Economically, Myanmar has experienced considerable bank and currency volatility, as well as the outflow of major foreign companies such as Norway’s Telenor, China’s Alibaba, French giant Total and Qatar’s Ooredoo.

After shrinking by almost a fifth in 2021, gross domestic product (GDP) grew just 3% the following year from a much smaller base.

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

Recovery from COVID-19 and coup shocks “is expected to remain subdued in the near term due to significant macroeconomic and regulatory uncertainties, persistent conflicts, and ongoing power outages,” says World Bank said in the latest information.

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

price increase

A decade of undermining economic development, combined with the junta’s failure to quell resistance, threatens Min Aung Hlaing’s ability to carry out strategic projects for China and other allies. They are also jeopardizing the General’s plans for elections later this year.

The military government has detained some of Myanmar’s biggest names and confiscated the passports of foreign business executives. The imprisonment last year of Vicky Bowman, a prominent foreign business advocate and former British Ambassador to Myanmar, and her husband has especially caused concern among international investors.

In April, the regime ordered banks and other foreign currency holders to convert all deposits into local currency kyats, allowing foreign currency holders to exchange their holdings at licensed banks within a day. bottom. Business groups and diplomats, including the Chinese ambassador, complained about the policy.

The move made it impossible to buy US dollars to settle payments to suppliers. Businesses had to rely on informal transfers, including convincing suppliers to accept IOUs. Another way is through an intermediary. There is a 5% fee for this.

“Let’s be honest, the generals corrected the US dollar in April, which is a bad move,” said Aung Thet. “After 2022, policies regarding imports, even for essential goods, are unstable. One day they said this was their number one priority, the next day another came out. It is very unstable and difficult.In order to survive, we will have to consider downsizing the business.”

Aung Thet’s company laid off 5% of its workforce after the coup, but he was able to keep hundreds of others on payroll without cutting their income. Income, which was in the millions before the coup, has stabilized since the end of last year.

“Farmers have to do what they can,” he said. “If he misses growing crops for a month, he will struggle to survive on a massive scale, especially for small farmers.”

But in areas where fighting was active, such as Sagaing and Kaya states, farmers suffered heavy losses, Aung Thet said.

“The agricultural industry in Kayah was devastated, and in Sagaing, another hotspot between the resistance and the regime, about 30% of the harvest was lost. But farmers grow their crops to survive. Others are working hard because there is a need,” he said.

While the decline in the kyat has made farmers’ exports more competitive abroad, rising gasoline prices have pushed farmers’ profits lower.

In Yangon tea shops, 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 cut back on loans.

“The marginalized, small and poor farmers cannot afford fertilizer because the price of fertilizer has tripled,” said Aung Thet. “This is very difficult.”

The military government has downplayed the economic difficulties since the coup.

At a meeting with military officers and their families in western Rakhine State last month, Min Aung Hlaing said, “If everyone strives to boost the state’s economy with momentum, Myanmar will be among the ASEAN nations in a short period of time. We will reach a middle-class economy in 2020.”

The army chief claims that the economy declined under Aung San Suu Kyi’s government and that the military spearheaded its revival.

GDP grew 2.4% in the first half of fiscal 2021-22 and 3.4% in the second half, he told other officials at a conference in Naypyidaw on Jan. 6. Bank.

NUG denies Min Aung Hlaing’s rosy prognosis.

The generals “terrorized the labor force, destroyed workers’ rights and imposed disastrous policies such as foreign exchange controls, causing the economy to fall off a cliff,” NUG minister Dr Sasa told Al Jazeera. Told.

He said the minimum wage hasn’t increased even as prices have risen, pointing to a growing illegal economy. That 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 undermined business confidence and pushed half the population below the poverty line,” Sasa said.

Minimum wage remains at 4,800 Myanmar Kyat [$2.30] 1st – level set in 2018.

Min Aung Hlaing also called for promoting “domestic manufacturing” and reducing reliance on imports and foreign aid.

Shadow of Than Shwe

The general’s economic plan includes a proposal to build a metro system in the capital Naypyidaw to make Myanmar a hub for electric vehicle manufacturing despite repeated power outages, but the emphasis is on infrastructure, including the development of Naypyidaw. He’s been compared to former strongman Than Shwe, who had put him down. Construction of the controversial Myitsone Dam, built in secret.

Myanmar has approved $1.45 billion in foreign direct investment in the first seven months of fiscal year 2022-23, according to official data. Most of it comes from Singapore, a conduit for foreign funds to Myanmar and China. Since the coup, the military government has stopped disclosing approved projects and abolished or restricted access to many company registries.

Chinese energy companies are one of the few foreign companies that appear willing to make new investments in the country, joining the administration’s plans to expand solar power.

Still, given the scale of the problem plaguing the industry, experts say the project has the potential to address the root causes of the country’s chronic blackouts, including the breakdown of stable governance, conflict and currency fluctuations. said to be low.

“Myanmar’s energy system is a mess and there are no plans to fix it. Not today, not in five years,” energy expert Guillaume de Langre, who once advised the Myanmar government, told Al Jazeera. rice field. “The junta is lying to investors and local resistance is stepping up its sophisticated attacks on key points in the power grid.”

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

Even if polls were conducted, they are unlikely to do much to reassure investors.

“‘Elections’ are not poised to inspire high-profile investor confidence in Myanmar, at least in the short term,” said a source in Yangon with access to the military, who declined to give his name for fear of retaliation. He expects business processing times to slow now that the emergency has extended.

“[The] Post-election crackdowns will intensify to paint resistance as an obstacle to a return to “business as usual.”

But unlike multinationals, Myanmar business people, shopkeepers and farmers have nowhere to go.

“Livelihood is important,” said Aung Thet. “Right now Myanmar is in the worst situation I have ever seen in my life. Broken economy, broken society, broken everything. But it’s amazing to know that I believe in the future of this country.” I am worried, but I am determined to plow.”