Back to ‘basket case’? Myanmar economy at risk after coup

YANGON: Foreign buyers flocked to Myanmar because it started its democratic transition a decade in the past, however this week’s military coup is probably going to speed up a pattern of Western withdrawal – and China’s enlargement.

Myanmar’s untapped potential was up for grabs in 2011, when generals in control of a junta loosened their iron grip after 49 years, paving the best way for democratic reforms and financial liberalisation within the nation of greater than 50 million individuals.

Investors pumped cash into telecommunications, infrastructure, manufacturing and development initiatives.

But the thrill was already fading by 2017 for the West, after a navy crackdown on Rohingya Muslims in Rakhine state led to allegations of genocide.

And the sight of generals working the present once more might be the final straw for Western companies, analysts say.

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“Now with the coup, the view would be: Basket case, banana republic,” Yangon-based analyst David Mathieson advised AFP. “I think what we are going to see is a lot of Western countries going, ‘No way.'”

Panic over the return to navy rule was fast.

The response reverberated from the outskirts of Yangon – the place development work halted on a Thai-owned US$1 billion industrial property mission – to Australia, the place a Perth-based sources firm creating a silver, zinc and lead mine in Shan state suspended share-trading.


In the coup’s fast aftermath, United States President Joe Biden threatened to reintroduce financial sanctions that have been formally eliminated in 2016.

Some focused sanctions have been imposed on key Myanmar navy personnel over the 2017 Rohingya disaster.

And because the European Union considers an financial embargo, the nation’s rag commerce business might be at risk.

The garment sector has boomed in recent times, bolstered by scores of worldwide manufacturers similar to H&M, Gap and Adidas, which shifted their manufacturing to factories in Yangon’s outskirts.

According to Singapore-based Capital Economics, “Made in Myanmar” clothes, footwear and purses make up 3 per cent of the nation’s gross home product.

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But with the navy again in energy, a Yangon-based personal sector supply worries for the destiny of the business’s 700,000 staff.

Global heavyweight clothes retailers would possibly search for a “PR bounce” and halt sourcing from Myanmar’s factories, he mentioned, requesting anonymity owing to the sensitivity of the difficulty.

But the unintended impression might be “malnutrition and sex-trafficking” for the principally feminine staff.

“The people who are going to suffer are the factory workers … Brash actions from multinational retailers are going to hit them hard,” he advised AFP.

Already, the nation is reeling from the troublesome financial headwinds of the COVID-19 pandemic, prompting the International Monetary Fund to ship Myanmar a US$350 million emergency money bundle in January.

The World Bank predicted the virus’ impression may improve “households’ vulnerability and potential unemployment”.

“Myanmar could lose the gains in poverty reduction achieved in the last decade,” it mentioned in a report final yr.


But for a few of Myanmar’s prime buying and selling companions – China, Hong Kong, Singapore and India – analysts predict no main blowback.

If something, “the coup will push Myanmar even further into China’s arms and the imbalance between Chinese and Western investments in the country will increase”, Francoise Nicolas, Asia director of the French Institute of International Relations, advised AFP.

China’s financial flex is already obvious thanks to its Belt and Road Initiative – an expansive imaginative and prescient for maritime, rail and highway initiatives throughout Asia, Africa and Europe that options Myanmar prominently.

“I don’t think they’re going to be shaken at all,” Mathieson mentioned.

READ: Operations resume for many Singapore businesses in Myanmar as they closely monitor situation

READ: Singaporeans in Myanmar say situation appears ‘calm’ a day after military coup

However, Japan – which ranks as Myanmar’s third-largest buying and selling companion – may waver.

“The Japanese business community has always been a bit split, and this might make it difficult in the near term,” he mentioned.

After Monday’s coup, Japanese automotive big Suzuki quickly halted operations at its two Myanmar factories, which produced 13,300 automobiles in 2019 – virtually all of which have been bought in-country.

Suzuki has had operations in Myanmar since 1998, when the nation was beneath junta rule, and it’s constructing a 3rd manufacturing plant.

“Our decision to close the factories was aimed at making sure that our people could commute safely,” a spokesman mentioned, including that Suzuki will reopen doorways on Thursday.

The solely ones celebrating a possible monetary windfall from the coup would be the navy, with big enterprise pursuits spanning jade mining, development, prescription drugs, manufacturing, insurance coverage, tourism and banking.

Mathieson mentioned worldwide mining giants, who already depend on the navy for safety, will doubtless be unruffled by the takeover.

“This is just fewer phone calls to make,” he mentioned.

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