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Myanmar’s coup takes a rising economic toll

ISSUE-3

Business operations are yet to fully resume following a coup d’etat launched by Myanmar’s powerful military three weeks ago, raising fresh concerns about an economic collapse.

Many businesses are now dealing with low sales, finding it difficult to operate and face an uncertain future as the coup staged by Myanmar’s military approached its third week.

The military regime, however, has been adamant that under its administration it will be business as usual, with Commander-in-Chief Min Aung Hlaing stating in his first televised speech on February 8 that agreements made under the previous government will be followed and adding that approaches were being made to the international community to come and invest in Myanmar.

“There will be no change in the foreign policy, government policy and economic policy of the country during the period [where] we are temporarily taking responsibility for the state. We shall continue on the same path as before,” Min Aung Hlaing said on the military-owned Myawady TV channel.

A forecast of Myanmar’s GDP growth has been lowered to 2% from 5% for the 2020/21 financial year by New York-based research group Fitch Solutions due to the coup.

Last year, the country’s foreign direct investment approval rate increased by 37% in the midst of the pandemic, according to Thaung Tun, then minister for Investment and Foreign Economic Relations, in an interview with The Myanmar Times.

But the current political turmoil and sanctions being imposed by the West will likely have an impact on the economy.

 ‘Elevated political risks’

“Myanmar’s growth outlook depends heavily on a pipeline of key infrastructure projects and foreign direct investment, which could be delayed or canceled altogether if sanctions are implemented, and if foreign entities decide to pull the plug amid elevated political risks,” Fitch Solutions said in its report.

The Southeast Asian country’s most vulnerable groups have been affected by Covid-19 and the World Bank’s Myanmar Economic Monitor released last December predicted that as a result of the global pandemic, the poverty rate could increase from 22.4% in FY 2018/19 to 27% in FY 2020/21 and return to pre-crisis levels in FY 2021/22 at the earliest.

Over 1,000 hotels of the more than 2,000 in Myanmar have temporarily closed due to Covid-19 and nearly 30,000 hotel employees were without jobs by the end of last December, the hotel and tourism ministry said.

In January, the five-star Sule Shangri-La Hotel, owned by Hong Kong’s Shangri-La Hotels and Resort and located in downtown Yangon, announced it would close for nine months starting February 1 due to low business levels.

Financial transactions have come to a halt as private banks – including the large ones such as KBZ and Ayeyarwady – have been closed for nearly three weeks as the majority of staff participate in the civil disobedience movement, raising concerns of a banking crisis.

The military-owned Myawaddy Bank told the Irrawaddy it was having difficulties giving money to its customers as cash reserves were low.

Myawaddy Bank had to limit the number of customers allowed to withdraw cash to 200 a day, set a maximum withdrawal limit of K500,000 (US$355) and close its branches early as people queued to get their money.

Losses and low sales

With companies having no clear indication of what the future holds, life is not normal on the ground and several business owners Asia Times spoke to were facing losses or low sales.

“I used to earn between K200,000-K300,000, but now it has plunged to around K50,000,” said Ko Thura, the owner of a Chinese food roadside shop in eastern Yangon. 

“I need to pay rent for my store and I need to pay rent for the home. There are also other costs. Life’s tough now,” he lamented.

With the junta imposing a night curfew from 8pm to 4am, many shops are closing by 6pm, with grocery store owner Daw Thuzar saying she’s closing early as she’s worried about strangers causing trouble at night.

Daw Thuzar was referring to incidents where strangers – allegedly ex-convicts drugged by the military – start fires or riots in the night.

On Thursday, a man was stabbed, pushed to the ground and kicked in broad daylight in front of the Sule Shangri-La Hotel in downtown Yangon by pro-military supporters. The culprits fled as a crowd gathered around the stabbed man to protect him.

At least 20 people were injured on Thursday in another incident near Yangon’s Central Railway Station after pro-military supporters assaulted protesters.

Internet connectivity has been cut from 1am to 9am since February 15, resulting in disruptions to many businesses. There are 23.65 million internet users in Myanmar and a 43.3% internet penetration rate in January 2021, according to a report from DataReportal.

A small-scale online delivery business owner said with the internet connectivity problem, many online shops have been forced to close.

“I’m noticing that the internet speed is quite slow in recent days. As our shop has to rely on the internet as we do mobile money transfers, things are not easy,” said Ko Yazar, a store clerk from a corner store in Yangon.

“It seems they [the junta] do not like seeing the people prosper,” he added.