‘Riding a rollercoaster’ in Myanmar’s post-coup economy | Business and Economy News
Bangkok/Yangon – For Aung Thet, a successful businessman in Yangon, running a business under Myanmar’s military regime is like riding a roller coaster.
The economy of this Southeast Asian country has been affected by the conflict caused by military power two years ago.
Foreign investors have been looking for a way out, and generals have forced companies like Aung Thet’s to convert their foreign exchange accounts into the Myanmar kyat. Criticism of the junta is not tolerated.
“It is a very hostile environment for entrepreneurs and the risk of speaking out on policy issues is very high,” Aung Thet, who requested to speak under a pseudonym, told Al Jazeera. “Even national corporate lobbying has little influence over the junta’s economic policies. They can be brutal to businessmen who criticize them.”
In some ways, Aung Thet is relatively lucky. His company is in the business of exporting agricultural products and is not threatened to survive as long as farmers continue to produce the crops he sells in other countries – including in Africa and Europe.
From overthrow Aung San Suu Kyi democratically elected government on February 1, 2021, the military cracked down on civilians protesting the coup and filled the country’s prisons with critics of their rule.
But oppose the army – led by the National Unity Government (NUG) formed by elected politicians whom the army overthrew – remained strong and the generals were unable to secure full control of the heartland Bamar has the majority. Meanwhile, ethnic armed groups – some affiliated with the resistance – have consolidated their rule over much of the country.
A massive civil disobedience movement and consumer boycott have also weakened the military’s control of the government apparatus and hurt military-owned companies with brands. famous.
Under Senior Lieutenant General Min Aung Hlaing, Myanmar is also facing its worst power cuts ever, and along with Iran and North Korea is on the Action Task Force’s financial terrorism blacklist. Finance of the global watchdog.
Economically, Myanmar has experienced significant banking and currency volatility as well as the departure of major foreign names including Norway’s TelenorAlibaba of China, French giant Total and Ooredoo of Qatar.
Gross domestic product (GDP) fell by nearly a fifth in 2021 before growing just 3% from a much smaller base the following year.
The World Bank this week put Myanmar’s growth for the financial year ending September at 3% but warned that GDP per capita would remain about 13% below pre-COVID-19 levels. . That means Myanmar’s 2023 GDP will still be smaller than its pre-coup economy.
The World Bank said in its update that recovery from the COVID-19 shock and coup “is expected to continue to be weak in the near-term, constrained by uncertainty about severe macroeconomic and regulatory issues, persistent conflicts, and persistent blackouts.”
Myanmar’s poverty rate has also more than doubled compared with pre-COVID levels, according to the International Labor Organization. Household incomes continue to decline and food insecurity worsens.
The failure of a decade of economic progress, combined with the military government’s failure to quell resistance, poses a threat to Min Aung Hlaing’s ability to carry out his projects. strategic project for China and other advocates. They also jeopardize plans for a general election later this year, seen by many as a way for the military to consolidate political power through its proxy, the Solidarity and Development Coalition Party.
The military regime has arrested several Myanmar oligarchs and confiscated the passports of foreign company executives. Last year’s imprisonment of prominent foreign business advocate Vicky BowmanThe former UK ambassador to Myanmar and especially her husband have raised concerns among international investors.
In April, the authorities ordered banks and other foreign currency holders to convert all deposits into the local currency, the kyat, allowing foreign currency holders to one day be able to exchange the money they hold at licensed banks. Business groups and diplomats, including the Chinese ambassador, have complained about the policy.
The move makes it impossible to buy US dollars to settle payments to suppliers. Businesses have had to depend on informal transfers, such as convincing vendors to accept IOUs. The alternative is through middlemen, which includes a fee of up to 5%.
“Let me be completely frank. The generals set the USD rate in April and it was a bad move,” said Aung Thet. “Since 2022, policies on imports are not stable, even for essential goods. One day they say this is their top priority and the next day they offer another way. It is extremely volatile and difficult. It forced us to consider downsizing our business to survive.”
While Aung Thet’s company laid off 5% of its workers after the coup, he was able to keep the rest – a few hundred people – on the payroll without cutting their income. Revenue, in millions of dollars before the coup, has been steady since late last year.
“Farmers have to do what they can,” he said. “If they miss a month of planting, they will struggle a lot to stay afloat, especially the smaller farmers.”
But in areas where fighting is fierce, such as Sagaing and Kayah states, farmers have been hit hard, Aung Thet said.
“Kayah’s agriculture has been devastated while Sagaing – another flashpoint between the resistance and the regime – has lost about 30% of its crop. But others fought because farmers needed crops to survive,” he said.
While the devaluation of the kyat made farmers’ exports more competitive abroad, rising prices due to rising gasoline costs have eaten into their profits.
At tea houses in Yangon, the price of Mohinga, a traditional breakfast of rice noodles and fish soup, has more than doubled since the coup.
Farmers are also finding it difficult to access credit as microfinance institutions and banks cut back on lending.
“The marginalized and smaller, poorer farmers cannot afford to buy fertilizers because their prices have tripled,” said Aung Thet. “This is extremely difficult.”
The junta has downplayed economic hardship since the coup.
“If everyone tries to boost the state-owned economy with momentum, Myanmar will reach the middle economic class among ASEAN countries in a short time,” Min Aung Hlaing said last month. during a meeting with army officers and their families in the western state of Rakhine.
The head of the army has stated that the economy has faltered under the government of Aung San Suu Kyi and that the military has led its revival.
GDP grew at a solid 2.4% in the first half of the 2021-22 fiscal year and 3.4% in the second half, he told fellow officials at a meeting in Naypyidaw on Jan. 6, the numbers much higher than the figures given by the World. Bank.
NUG dismisses Min Aung Hlaing’s bright prognosis.
Dr Sasa, a cabinet minister of the NUG, told Al Jazeera that the generals had “pulled the economy off the brink by terrorizing the workforce, undermining labor rights and imposing policies as harmful as foreign exchange restrictions”.
He said the minimum wage had not increased even as prices rose and noted that the illegal economy had expanded. This is in connection with a report by the United Nations Office on Drugs and Crime last week showing that Myanmar’s opium production is at a high level. nine years high.
“The generals have seriously damaged business confidence and pushed half the population down to the poverty line,” Sasa said.
Minimum wage remains at 4,800 Myanmar kyat [$2.30] one day – a level established in 2018.
Min Aung Hlaing has also promoted “domestic production” and called for less dependence on imports and foreign aid.
Than Shwe .’s Shadow
The general’s economic plans – including proposals to build a subway system in the capital Naypyidaw and turn Myanmar into an electric car manufacturing hub despite repeated blackouts – have been compared with Former soldier Than Shwefocus on infrastructure including Naypyidaw development, secretly built, and building controversial Myitsone dam.
According to official data, Myanmar approved $1.45 billion in foreign direct investment in the first seven months of fiscal year 2022-23, largely from Singapore, a channel for foreign money into Myanmar and China. The military junta has stopped disclosing projects it has approved since the coup, removing or restricting access to some corporate registries.
Chinese energy companies are among the few foreign companies willing to make new investments in the country, taking part in the government’s solar expansion plan.
However, given the scale of problems affecting the industry, experts say the project is unlikely to address the root causes of the country’s chronic blackouts, including the collapse of the government. right to stability, conflicts and currency fluctuations.
“Myanmar’s energy system is in disarray and there are no plans to fix it. Not today, not in five years,” Guillaume de Langre, an energy expert who once advised the Myanmar government, told Al Jazeera. “The authorities are deceiving investors, while local resistance forces are intensifying sophisticated attacks on critical points of the grid.”
The state of emergency imposed after the coup was extended again on Wednesday for another six months, indicating elections the military has said will take place. Held in August may be delayed.
Even with the polls going, they’re unlikely to do much to reassure investors.
“The ‘elections’ are not poised to inspire any notable investor confidence in Myanmar, at least in the immediate term,” said a source in Yangon who can continue. close to the military and declined to be named for fear of reprisal, said. He expects business processing times to remain slower as the state of emergency has been extended.
“[The] the post-election crackdown will intensify in an attempt to see the protest as an obstacle to getting back to ‘business as usual’.”
But unlike multinational companies, Myanmar entrepreneurs, shopkeepers and farmers have nowhere to go.
“Livelihood is important,” said Aung Thet. “Right now Myanmar is in the worst state I have ever seen in my life: The economy is broken, the society is broken, everything is falling apart. But you will be surprised to know that I have faith in the future of the country. I was worried but still determined to keep plowing.”