A Military Coup Serves Another Blow To Myanmar’s Economy

In early February, the Tatmadaw, Myanmar’s military, seized control and declared a state of emergency for the next…

In early February, the Tatmadaw, Myanmar’s military, seized control and declared a state of emergency for the next year. Power was handed to General Min Aung Hlaing, the military’s commander-in-chief. The country’s de facto leader, state counsellor Aung San Suu Kyi, alongside other senior members of the ruling National League for Democracy (NLD) party were detained following increasing tensions over the November 8 election results. The military-backed Union Solidarity and Development Party (USDP) previously made allegations about election fraud after the NLD won majority seats by a landslide. However, in a joint statement, domestic election observer organisations said, “the results of the elections were credible and reflected the will of the majority voters“. They also urge the military to “respect the election result…to ensure post-election stability and a peaceful power transition“. The National Commission also called the election transparent and fair. This coup is a huge set back to the country’s stride towards democracy after electing Aung San Suu Kyi back in 2015. It is also reminiscent of Myanmar’s long history of military rule.

Authoritarian regimes often leave large corporations grappling with whether to involve or distance themselves. Japanese businesses operating in Myanmar, such as Toyota and Mitsubishi, are faced with a similar situation. Since 2011, when the junta were deposed, the country had been making strides towards democracy. Foreign investors pulling out now could be detrimental to the progress made. Political instability and concerns about reputation might sway many to take their business elsewhere. As one of the poorest economies in Asia, businesses leaving will only add to existing economic challenges. Furthermore, exiting now will mean foregoing investments that have grown in the past few years and are only beginning to generate returns. Experts also predict that companies apprehensive about investing in Myanmar could turn to China as an alternative.

The banking business has dramatically slowed down and is almost at a standstill due to mounting civil unrest. Bank staff have joined mass demonstrations with civil servants, healthcare staff and other workers to protest the military coup. Without staff to carry out various functions, like payroll services for companies, many banks have had to close their branches. A majority of lenders are still trying to keep online services and ATMs running, but the workforce shortage and constant internet shutdowns by the regime have made that difficult. As the time for paying monthly salaries approaches, analysts predict that these problems will become more apparent. Myanmar being a cash-based society, makes this a particularly critical matter. Before the coup, there was already a lot of economic uncertainty, even as the country began its transition to democracy with modern technology and improved lending practices. As the crisis at banks continues, it will become increasingly difficult for Min Aung Hlaing’s junta to carry on with business as normal, especially with the condemnation from Western nations. 

President Joe Biden has since announced that sanctions will be reinstated on the military leaders behind the coup. The US will freeze the $1 billion worth of government assets it currently holds, blocking military access. A list of targets for these sanctions was released by the US Treasury. It included the defence minister and home affairs minister as well as acting president, Myint Swe. Other companies within the jade and gems sector were also named. In a statement, President Biden said, “We’re also going to impose strong exports controls. We’re freezing US assets that benefit the Burmese government while maintaining our support for health care, civil society groups, and other areas that benefit the people of Burma directly“. Following US sanctions, the UK announced they would impose travel bans and freeze the assets of 3 generals. New measures were also put in place to stop UK aid from indirectly providing support to the military regime. In the past, the UK had already placed sanctions against 16 members of the military. Joining forces with the UK is Canada, as they too announced they would place sanctions against 9 military members. This was carried out under the Special Economic Measures Act, which permits governments to freeze assets. A trade ban on arms and any materials related as well as any related financial and technical aid has also been imposed.

On the other hand, most of Myanmar’s foreign ties are in Asia, so, from an economic standpoint, sanctions by Western nations might not be so damaging. (From a diplomatic one, such ties are extremely important, especially for a nation that was in the early stages of forming a democracy). It is also worth noting that Western nations retreating does not stop a military government from seeking investments in other places. For instance, Beijing is reliant on this region for its geostrategic plans as it offers them access to the Indian Ocean via pipelines and ports. This military government is still conscious of the economic struggles brought on by the pandemic. So their power grab, while destabilising, won’t pose a long-term threat to exports, and it’s unlikely that border checkpoints will close. Currently, the Federation of Thai Industries (FTI) has an optimistic outlook, hoping that this administration is tactful and doesn’t sever ties with all foreign investors. 

That being said, condemnation from Western countries should not be underestimated either because it will have a ripple effect, and sanctions could discourage international companies from conducting business there. The pressure to relocate will build as they cannot be perceived to be in favour of the regime. 

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