Bangkok/Yangon – For Ang Thiat, a successful entrepreneur in Yangon, running a business under Myanmar’s military junta has been a “roller-coaster ride”.
The Southeast Asian country’s economy has plummeted following conflict sparked by the military’s takeover of power two years ago.
Foreign investors have fled and the generals have forced companies like Aung Thet’s to convert their foreign exchange accounts into kyat. Criticism of the junta will not be tolerated.
“It’s a very hostile environment for businessmen and the stakes are high to speak out on policy issues,” Aung Thet, who asked to speak under a pseudonym, told Al Jazeera. “Even the national business lobby doesn’t have much leverage over the junta’s economic policies. They can be brutal with businessmen who criticize them.”
In some ways, Aung Thet was relatively lucky. His company is in the agricultural export sector, and as long as farmers continue to produce the crops he sells in countries including Africa and Europe, there is no existential threat.
Since the overthrow of Aung San Suu Kyi’s democratically elected government on Feb. 1, 2021, the military has cracked down on civilians who opposed the coup and has jailed critics of its rule in the country’s prisons.
But opposition to the military – led by the National Unity Government (NUG) established by elected politicians it ousted – remains strong, and the generals have been unable to fully control the majority Bamar heartland. Meanwhile, ethnic armed groups – some allied to the resistance – have consolidated their hold over large swaths of the country.
Massive civil disobedience and consumer boycotts have also weakened the military’s grip on government agencies and hurt military businesses with well-known brands.
Under General Min Aung Hlaing, Myanmar is also facing its worst ever power outage and has been placed on the financial terrorism blacklist of global watchdog Financial Action Task Force, along with Iran and North Korea.
On the economic front, Myanmar has experienced considerable banking and currency volatility, as well as an outflow of large foreign companies 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 growing by just 3% the following year from a much smaller base.
The World Bank this week put Myanmar’s growth rate at 3% for the fiscal year ending in September, but warned that GDP per capita would still be around 13% below pre-COVID-19 levels. This means that Myanmar’s GDP in 2023 will still be lower than the size of the economy before the coup.
In its update, the World Bank said the recovery from the shock of COVID-19 and the coup “is expected to remain subdued in the near term, constrained by significant macroeconomic and regulatory uncertainty, ongoing conflict and ongoing power outages”.
Myanmar’s poverty rate has also more than doubled compared to pre-COVID levels, according to the International Labor Organization. Household incomes have further declined and food insecurity has worsened.
Inflation
The failure of a decade of economic progress, combined with the junta’s failure to quell resistance, poses a threat to Min Aung Hlaing’s ability to implement strategic projects for China and other backers. They also jeopardize the general’s plans for elections later this year, widely seen as a way for the military to consolidate its political control through its proxy, the Union Solidarity and Development Party.
The junta has detained some of Myanmar’s tycoons and confiscated the passports of foreign business executives. The jailing of Vicky Bowman, a prominent foreign business advocate and former British ambassador to Myanmar, and her husband caught the attention of international investors last year.
In April, the government 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 licensed banks. Business groups and diplomats, including the Chinese ambassador, have complained about the policy.
The move made it impossible to buy U.S. dollars to settle payments for suppliers. Businesses have had to rely on informal remittances, such as persuading suppliers to accept IOUs. Another way is through a middleman, which involves fees of up to 5%.
“Let me be absolutely frank. The generals pegged the dollar in April, which was a bad move,” Aung Thet said. “Since 2022, import policy has been changing, even for essentials. One day they say it’s their priority, the next day they say otherwise. It’s very fluid and difficult. It forces We are thinking about scaling back our operations to survive.”
After the coup, Unser’s company laid off 5 percent of its workforce, while he was able to continue to pay the remaining hundreds without cutting revenue. Revenues, measured in pre-coup millions of dollars, have leveled off since late last year.
“Farmers have to do what they can,” he said. “If they miss a month of crop planting, it will be difficult for them to make ends meet, especially small farmers.”
But in war-torn states such as Sagaing and Kayah states, farmers have suffered heavy losses, Aungti said.
“Kaya’s agriculture has been hit hard, and Sagaing – another hotspot between the resistance and the regime – has lost about 30 percent of its crops. But others are holding on because farmers need to grow crops to survive. survive,” he said.
While the weaker kyat has made farmers’ exports more competitive overseas, rising prices have eroded their profits as gasoline costs soared.
In tea shops in Yangon, the price of Mohinga, a traditional breakfast of rice noodles and fish soup, has more than doubled since the coup.
Farmers have also struggled to access credit as microfinance institutions and banks have cut lending.
“Marginalized, smaller and poorer farmers cannot afford fertilizers because their prices have tripled,” Aung Thet said. “It’s very difficult.”
The junta has downplayed economic difficulties since the coup.
“If everyone works hard to drive the momentum of the country’s economy, Myanmar will reach a middle-class economy among ASEAN countries in a short period of time,” Min Aung Hlaing said last month in a meeting with military officers and families in western Rakhine state.
The army chief claimed that the military led the recovery after the economy slumped under Aung San Suu Kyi’s government.
He told other officials at a meeting in Nay Pyi Taw on Jan. 6 that GDP would grow steadily at 2.4 percent in the first half of the 2021-22 fiscal year and 3.4 percent in the second half, figures much higher than those given by countries around the world. digital bank.
NUG dismissed Min Aung Hlaing’s optimistic forecast.
NUG Cabinet Minister Dr Sasa told Al Jazeera that the generals “have pushed the economy off a cliff by intimidating the workforce, undermining labor rights and imposing disastrous policies such as foreign exchange restrictions”.
The minimum wage has not increased even as prices have risen, he said, noting that the illegal economy has expanded. That’s in reference to a report by the United Nations Office on Drugs and Crime last week that showed Myanmar’s opium production was at its highest level in nine years.
“The generals have severely damaged business confidence and pushed half the population below the poverty line,” Sasa said.
Minimum wage remains at 4,800 kyat [$2.30] One day – the level set in 2018.
Min Aung Hlaing also pushed for “domestic manufacturing” and called for less dependence on imports and foreign aid.
Shwe’s Shadow
The general’s economic plans – including proposals to build a subway system in the capital Nay Pyi Taw and turn Myanmar into an electric car manufacturing hub amid repeated power outages – have drawn comparisons to former strongman Than Shwe, who Infrastructure concerns include the development of Nay Pyi Taw, which is being built in secret, and the construction of the controversial Myitsone Dam.
Official data showed Myanmar approved $1.45 billion in foreign direct investment in the first seven months of the 2022-23 fiscal year, most of it from Singapore, a conduit for foreign money flowing into Myanmar and China. The junta has stopped disclosing projects approved since the coup and canceled or restricted access to some company registries.
Chinese energy companies are among the few foreign companies willing to make new investments in the country, taking part in the government’s plan to expand solar power generation.
Still, given the scale of the problems affecting the industry, experts say the project is unlikely to address the root causes of the country’s long-term power outages, which include breakdowns in stable governance, conflict and currency volatility.
“Myanmar’s energy system is a mess and there is no plan to fix it. Not today, not five years from now,” Guillaume De Lange, an energy expert who has advised the Myanmar government, told Al Jazeera. “The junta is lying to investors while local resistance forces are ramping up sophisticated attacks on key points in the grid.”
The state of emergency imposed after Wednesday’s coup was extended for another six months, suggesting the military’s scheduled August elections may be delayed.
Even if the polls do go ahead, it’s unlikely to reassure investors.
“The ‘election’ is not going to inspire any notable investor confidence in Myanmar, at least in the short term,” said a source in Yangon with ties to the military, speaking on condition of anonymity for fear of reprisals. He expects business processing times to continue to slow as the state of emergency has been extended.
“[The] Post-election repression will intensify to portray resistance as an obstacle to a return to ‘business as usual’. “
But unlike multinationals, Myanmar’s traders, shopkeepers and farmers have nowhere to go.
“Livelihood is important,” Unser said. “Right now Myanmar is in the worst state I’ve ever seen in my life: the economy is collapsing, the society is collapsing, everything is collapsing. But you’d be surprised how confident I am in the country’s future. I’m worried but determined to keep trying.”