The “roller coaster ride” in Myanmar’s economy after the coup Business and economic news

Bangkok/Yangon – For Aung Tet, a successful entrepreneur in Yangon, running a business under Myanmar’s military regime is like “riding a rollercoaster”.

The Southeast Asian country’s economy has been brought to its knees by the conflict that began two years ago when the military seized power.

Foreign investors have moved out, and the generals have forced companies like Aung Tet to convert their foreign currency accounts into Myanmar kyats. Criticism of the military government cannot be tolerated.

“It’s a very hostile environment for businessmen and the stakes are high for talking about political issues,” Ang Tet, who asked to speak under a pseudonym, told Al Jazeera. “Even the national business lobby does not have much influence on the military government’s economic policies. “They can be brutal towards traders who voice their criticism.”

In some ways, Ang Tet is relatively lucky. His company is in the agricultural export sector, and as long as farmers continue to produce the products he sells in countries including Africa and Europe, it is not threatened existentially.

Since the overthrow of the democratically elected government of Aung San Suu Kyi on February 1, 2021, the military has cracked down on civilian opposition to 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) led by elected politicians the military overthrew — remains strong, and the generals have failed to secure full control of Bamar’s majority center. Meanwhile, ethnic armed groups – some aligned with the resistance – have consolidated their rule over parts of the country.

While Yangon’s streets are busy, the business climate has worsened since the coup [AFP]

The massive civil disobedience movement and consumer boycotts have also undermined the military’s grip on the state apparatus and hurt brand-name military companies.

Under the command of Senior General Min Aung Hlaing, Myanmar also faced its worst power outage and joined Iran and North Korea on the financial terrorism blacklist of the global watchdog’s Financial Action Task Force.

Economically, Myanmar has experienced significant banking and currency fluctuations as well as the migration of big foreign names including Norway’s Telenor, China’s Alibaba, French giant Total and Qatar’s Ooredoo.

Gross domestic product (GDP) fell by almost a fifth in 2021 and grew by just 3% the following year from a much smaller base.

The World Bank this week put Myanmar’s growth at 3 percent for the fiscal year to September, but warned that gross domestic product 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 the pre-coup economy.

In its update, the World Bank stated: The recovery after the shocks of Covid-19 and the coup “is expected to remain patchy in the short term under the influence of macroeconomic and regulatory uncertainties, ongoing conflicts and power outages”.

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

the increase of the prices

The undoing of a decade of economic progress, combined with the military government’s failure to suppress resistance, threatens Min Aung Hlaing’s ability to deliver strategic projects to China and its other supporters. They also jeopardized the general’s plan for elections later this year, widely seen as a way for the military to consolidate its grip on politics through its representative, the Unity and Development Party.

The military regime has arrested some Myanmar investors and confiscated the passports of foreign company managers. The imprisonment of Vicky Bowman, the former British ambassador to Myanmar, and her husband last year has raised concerns among international investors.

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

A bowl of Muinga soup, a popular breakfast for Myanmar people.  This dish contains noodles and fish.  There is a piece of lime on the side and green plants scattered on it.
Rising prices have affected people across Myanmar, with muinga, a traditional breakfast dish of rice noodles with fish soup, now more than double what it cost at the time of the coup. [File: Ann Wang/Reuters]

This action made it impossible for suppliers to buy US dollars to settle payments. Businesses have had to depend on informal remittances such as persuading suppliers to accept IOUs. The alternative is to go through intermediaries, which involves a fee of up to 5%.

“Let me be perfectly clear. “The generals corrected the dollar in April and that’s a bad move.” Ang Tet said. From 2022, policies on imports are fluctuating, even for essential items. One day they said this is their main priority and the next day they came out with a different opinion. It is very volatile and difficult. This forces us to reduce our business to survive.”

While Aung Tet’s company laid off 5 percent of its workers after the coup, he has been able to keep the rest—several hundred—on the payroll without a cut in earnings. Millions of dollars in revenue have been fixed since late last year before the coup.

“Farmers have to do what they can,” he said. “If they lose a month of crop growth, they will struggle to stay afloat, especially smaller farmers.”

But in areas where there is active conflict, such as Sagaing and Kiah states, farmers have suffered heavy losses, Aung Tet said.

“Kiah’s agricultural industry has been destroyed while Sagaing – another hot spot between the resistance and the regime – has lost about 30 percent of its harvest. “But others have continued because farmers need to grow crops to survive.”

While the devaluation of the kyat has made farmers’ exports more competitive abroad, rising prices caused by higher gasoline costs have reduced their profits.

In Yangon’s 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 have reduced their lending.

“Marginalized, smaller and poorer farmers can’t afford fertilizer because the price has tripled,” said Ang Tet. “It’s very difficult.”

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

In a meeting with military officers and families in western Rakhine state last month, Min Aung Hlaing said, “If everyone works to strengthen the state’s economy, Myanmar will soon reach the middle class economy among ASEAN countries. “

The army chief has claimed that the economy has declined under Aung San Suu Kyi’s rule and that the military has led its revival.

At a meeting in Nay Pyi Taw on Jan. 6, he told fellow officials that gross domestic product grew by 2.4 percent in the first half of the 2021-22 fiscal year and 3.4 percent in the second half, numbers far higher than those given by the world. Bank.

NUG rejects Min Aung Hlaing’s dire prognosis.

Dr. Sasa, the cabinet minister of the National Unity Government, told Al Jazeera that the generals have pushed the economy off the cliff by terrorizing the workforce, eliminating labor rights, and implementing disastrous policies such as currency restrictions.

He said the minimum wage has not risen even as prices have risen, noting that the illegal economy has expanded. It cited a report by the United Nations Office on Drugs and Crime last week that showed Myanmar’s opium production had reached a nine-year high.

“The generals severely damaged business confidence and pushed half the population below the poverty line,” Sassa said.

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

Min Aung Hlaing also emphasized “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 make Myanmar a hub for electric car manufacturing despite frequent blackouts – have drawn comparisons to former strongman Tan Shwe, whose focus on infrastructure included the development of Naypyidaw. which was secretly built and the construction of the controversial Myitsone Dam.

According to official data, Myanmar approved $1.45 billion in foreign direct investment during the first seven months of the 2022-2023 fiscal year, most of it from Singapore, a conduit for foreign money to Myanmar and China. After the coup, the military government canceled the disclosure of projects it had approved or restricted access to a number of registered companies.

Chinese energy companies are among the few foreign companies that appear willing to make new investments in the country and participate in the government’s plan to develop solar energy.

However, 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 blackouts, which include the collapse of stable governance, conflict and currency fluctuations.

Myanmar’s energy system is a mess and there are no plans to fix it. Guillaume de Langer, an energy expert who previously advised the Myanmar government, told Al Jazeera: “Not today, not in the next five years.” The junta lies to investors, while local resistance forces step up sophisticated attacks on sensitive points in the power grid.

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

A woman walks down 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 protest the coup. [AFP]

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

A source in Yangon with access to the military, who declined to be named for fear of reprisals, said the “elections” will not inspire any significant investor confidence in Myanmar, at least for the immediate term. He expects business processing times will be slower now that the emergency has been extended.

“[The] Repression will be intensified in the post-election period to present the resistance as an obstacle to a return to “business as usual”.

But unlike multinational corporations, Myanmar’s traders, shopkeepers and farmers have nowhere to go.

“Livelihood is important,” said Aung Tet. Right now Myanmar is in the worst situation I have ever seen in my life: the economy is broken, the society is broken, everything is broken. But you will be surprised if you know that I believe in the future of the country. “I’m worried but I’m determined to plow on.”

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