26 May 2022, NIICE Commentary 7967
Raagini Shekher Sharma

Myanmar, popularly known as Burma, is a country strategically located in South-East Asia. There are several ethnic groups in the country, however, the prominent religion followed by the population is Buddhism. The country gained its independence from Britain in 1948. Myanmar was ruled by armed forces from 1962 until 2011 when a new government was established ushering the establishment of civilian rule in the country.

A military coup in Myanmar ended a four-year democratic experiment on 1 February 2021. The country was already impoverished prior to the takeover. Despite a significant decline over the previous decade, the poverty rate in Myanmar stayed at 25 percent in 2017. Then, as COVID-19 arrived, Myanmar’s economy began to contract and as a result deteriorated. The military coup has further put the economy in jeopardy.

The Onset of Military Coup in 2021

The military seized control of the country on 1 February, 2021, following a general election in which Aung San Suu Ki’s NLD party partly won the elections. The military coup led to resistance from the masses of the country and the formation of the Campaign of Civil Disobedience giving rise to mass protests and strikes in the whole country. The retaliation of the military has been in the form of live fire, water cannons and rubber bullets used against the citizens. This civil disobedience movement has now turned into a civil war in the country. The military Commander-in-chief Min Aung Hlaing has taken power over the country. There are international sanctions on his alleged role in the military’s attacks on the ethnic minorities. Countries such as the United States, United Kingdom and European Union have imposed sanctions on Myanmar. Even China has called for the return of democratic norms in the country.

Impact of Military Coup on Businesses and the Economy of the Country

Over the last decade, the Myanmar economy benefited from considerable economic and political reforms, generating above 7 percent annual growth and reduced poverty, and a significant rise in Foreign Direct Investment (FDI). The coup has harmed Myanmar’s development progress by causing it to lose approximately USD 3.5 billion in FDI, resulting in a decrease in Myanmar’s GDP.  Investments and the economy have suffered as a result of stalled democracy efforts, the Rohingya genocide, and a drop-in exports and tourism as a result of COVID-19. Many analysts feel that if democratic countries break off trade or eliminate special trade accords to punish the military in Myanmar, the economic recovery will suffer.

According to the international media, the most significant economic repercussions have been driven by internal causes leading to international trade penalties. Millions of public and commercial sector workers joined the anti-coup Civil Disobedience Movement (CDM), refusing to work until democracy was restored. They effectively shut down major areas of the domestic economy leading to a fall in the overall GDP of the country.

It is noted that around 13 percent of the companies in the country have ceased to exist due to the heavy toll on political resilience on the economy. Transportation and internet services have been hampered. The CDM has had a debilitating effect on international trade because of the participation of port personnel, truck drivers, and officers from various government organisations. To squelch political dissent, the military administration has imposed periodic shutdowns and bans on internet connections, causing operational challenges for enterprises as well as significant concerns about human rights.

There have been serious risks in the banking and finance sector. Because of the CDM, many retail and service-based firms have closed or substantially restricted their hours of operation, but even those that have reopened are finding it difficult to acquire funds to pay salaries and suppliers. Many factories have shuttered, and economic activity has slowed, reducing employment prospects and revenue. The issue threatens the viability of the industry, particularly in industries such as garment manufacturing, where some global fashion brand customers have cancelled orders from Myanmar. The National Unity Government, a parallel government in exile made up primarily of deposed elected legislators, has requested that international investors refrain from paying taxes to the military junta government until democracy is restored.

The economic impact due the military has been profound. Consumers have also boycotted Chinese-made items because they believe China supports the military junta. There is a paucity of accurate statistics on the impact of consumer boycotts, but some sources estimate that sales of Myanmar beer a popular military-owned beer brand have dropped by 80 to 90 percent since the coup.

The forecast, published in the World Bank’s Myanmar Economic Monitor report, comes nearly a year after the 1 February 2021, military takeover, which has resulted in a significant increase in poverty and joblessness, as well as severe disruptions in the financial sector and key services such as electricity, logistics, and digital connectivity. Supply-side constraints have deteriorated in recent months, exacerbating the situation. The availability of kyat liquidity, credit, and foreign money remains severely restricted.

Since the takeover a year ago, at least 22 international businesses have declared their withdrawal from Myanmar, and additional declines in foreign direct investment are likely. Simultaneously, mining activity appears to have risen, raising new environmental problems, such as damage to streams and neighbouring ecosystems from unregulated operations. Over the last ten months, there has been a considerable surge in gold and rare earth mining operations in Kachin State, much of which is illegal and/or uncontrolled.

Conclusion

Businesses with a presence in Myanmar should prioritise the safety, security, and mental well-being of their staff and support their human rights to freedom of expression, association, and political participation. Businesses, in particular, should strive to keep their operational-level grievance processes operating even if they leave the nation. These grievance procedures may be critical tools for providing Myanmar people with non-judicial access to remedy during and after the coup, when the Myanmar judiciary may not be working properly. Vulnerable groups and ethnic minorities should have access to these grievance channels.

Raagini Shekher Sharma is a Senior Analyst at Research Institute for European and American Studies (RIEAS), Greece and a Research Associate at The Defence Horizon, Vienna.