Once perceived as Asia's final frontier, Myanmar has been tested severely by dual shocks -- a surge in Covid-19 cases in 2021 and the military coup that has brought its economy close to a standstill and left its people suffering from ongoing violence.
A steady decline in Covid cases and deaths from July to January has led to an easing of containment measures. But new daily infections have moved back above four digits and rising for the past two weeks. Myanmar remains highly vulnerable to the Omicron variant and further waves of the pandemic, experts say, citing very low vaccination rates and weak public health capacity.
As well, the reliability of data is uncertain. Anecdotal reports suggest Covid transmission could be higher in some areas, particularly near the border with India, which is facing a significant surge in Omicron cases.
Covid is just one of many complications in a country that began its second year under military rule on Feb 1. The security environment continues to deteriorate in many parts of Myanmar, including in states and regions that have historically been relatively peaceful.
A growing number of disaffected citizens have fled to the hinterlands and taken up arms, often alongside ethnic armed groups, and violent clashes with the army are increasing in frequency.
The pervasive atmosphere of conflict and dimming hopes for a resolution have dealt a severe blow to business operations, logistics, confidence and the appetite to invest. Many foreign firms are pulling out of the country as revenue falls amid sluggish consumption.
The World Bank projects the economy of Myanmar will expand by a mere 1% in the year to September 2022 -- but that follows an estimated contraction of 18% in the last fiscal year. Even with recent signs of stabilisation in some areas, the forecast remains consistent with a critically weak economy, around 30% smaller than it might have been in the absence of Covid and the coup.
In the near term, the outlook will depend on the impact of new wave(s) of Covid-19, the extent and effects of conflict, and the degree to which foreign-exchange and financial sector disruptions persist, together with other disruptions such as to electricity, logistics and internet services, the bank stated in its Myanmar Economic Monitor, released in late January.
"Most indicators suggest that private investment has fallen markedly, and previously viable projects are becoming unviable as demand remains weak. The cost of imports has risen, and kyat-denominated revenues are worth less in foreign currency terms," said Kim Edwards, the bank's senior economist for Myanmar.
"Recent trends of escalating conflict are concerning -- firstly from a humanitarian perspective but also from the implications for economic activity," added Mariam Sherman, the bank's country director for Myanmar, Cambodia and Laos.
Even as mobility improved following the decline in Covid cases and easing of lockdowns, economic activity continues to be affected by substantial weaknesses in both supply and demand. Some 80% of firms surveyed by the World Bank reported a decline in sales since January 2021, with an average decline of 59%.
Around half of all firms experienced disruptions in the supply of inputs and raw materials, largely because of increases in costs, exacerbated by a sharp exchange-rate depreciation in September. A similar proportion reported poor cashflow, with 28% struggling to pay suppliers and employees due to limited banking services.
"Financial dysfunction is the primary concern of Japanese companies in Myanmar for current operations," said Atsushi Taketani, president of the Japan External Trade Organization (Jetro) in Bangkok and chief representative for Asean.
"The liquidity of the US dollar and Myanmar kyat decreased drastically after the political upheaval. It remains quite difficult to convert kyat to or procure dollars in the financial market."
The kyat, which was trading around 1,330 to the US dollar just before the coup, sank as low as 2,200 in September last year. It was trading around 1,780 last week.
Mr Taketani shared the view of other experts that the crisis in Myanmar is adversely affecting the potential growth of Asean as a whole. "Before the coup, Japanese companies in Thailand considered Myanmar the fourth most promising export market, next to Vietnam, India and Indonesia," he told Asia Focus.
"Myanmar was in the process of integration into the Asean-wide supply chain. I understand that there were economic interactions not only in manufacturing but also in energy between Myanmar and other Asean nations. Disruptions in such a relationship would have a negative impact on the overall Asean-wide economy."
"Most Asean member states are not in the position to tackle questions of democracy and human rights [in Myanmar] because they are not democratic," says Kasit Piromya, a former foreign minister of Thailand. Patipat Janthong
POLITICAL DIVISIONS
Myanmar's crisis has further deepened Asean's political divisions as well. As such, it weakens Asean's potential, said Thitinan Pongsudhirak, director of the Institute of Security and International Studies (ISIS) at Chulalongkorn University in Bangkok.
"Indonesia, Malaysia, Singapore and the Philippines have called for a return to the democratic process, while other Asean members, including Thailand, are turning a blind eye to the military's brutality against Myanmar people," he told Asia Focus by email.
"The Asean narrative of being a single market and production hub has been undermined. Asean now has nine functioning member states, while the 10th rogue member is giving the whole organisation a bad name in front of the international community."
Between July and November 2021, Myanmar approved just 17 foreign direct investment (FDI) projects, with committed funds of US$267 million -- five times lower than in the same period last year, the World Bank report noted.
"International firms continued to announce suspension or termination of their operations or otherwise changed their investment plans for pipeline projects -- indicating a deteriorating investment and business climate," it said.
India's Adani Ports and Special Economic Zone Ltd, for example, announced the withdrawal of its plan to build a container port in the military-owned Ahlone port in Yangon by June this year.
Several other noticeable suspensions or divestments included the cessation of operations by the German retailer Metro, the Swiss hotelier Kempinski and British American Tobacco.
Moreover, the European telecom company Telenor agreed to sell 51% of its shares in Wave Money, a mobile financial services company, to the local conglomerate Yoma Strategic Holdings in January this year, following an announcement that it would sell its Myanmar mobile operations.
The Nay Pyi Taw government rejected Telenor's original proposal to sell the mobile business to the Lebanon-based M1 Group, pushing instead for the latter to partner with Shwe Byain Phyu Group, a local conglomerate involved in everything from petroleum to jade mining, with numerous links to the military and its businesses.
In January, TotalEnergies of France announced that it would withdraw from the Yadana gas field and from Moattama Gas Transportation Company (MGTC) -- which operates the pipeline that transports gas from the Yadana field to Thailand. US-based Chevron, another Yadana partner, quickly followed suit.
PTT Exploration and Production (PTTEP) of Thailand, which already holds a 25.5% stake in Yadana, is seen as the main candidate to acquire the interests of Total and Chevron, but the junta is pushing for more Myanmar-based investors to acquire shares.
"Asean now has nine functioning member states, while the 10th rogue member is giving the whole organisation a bad name," says Thitinan Pongsudhirak, director of the Institute of Security and International Studies (ISIS) at Chulalongkorn University. Chulalongkorn University
DAMAGE TO LIVELIHOODS
The departures of foreign firms are likely to mean a reduction in employment and new job creation, as well as a decline in access to foreign expertise and technology, the World Bank report said.
The report also noted a rise in conflict in every state and region of Myanmar since last August, with noteworthy increases in the northern and central states, particularly in Sagaing, Magway and Mandalay, but also in Kachin, Shan and Chin. Subregional GDP data indicate that these six states were responsible for around 38% of total economic activity in 2019. Yangon, responsible for a further 25% of GDP, has also seen a sharp rise in conflict.
"Conflict, insecurity and displacement are having severe impacts on the lives and livelihoods of people across the country," said the report, citing a United Nations estimate that 223,000 people have been displaced since Feb 1, 2021.
"Through several different channels, conflict can also act to exacerbate income declines, price increases and economic constraints faced by the broader population, particularly those living in rural areas who are dependent on the agriculture sector for their livelihoods," the World Bank said.
This is in addition to the direct impacts on security, freedom of movement and accessibility of critical services. "The household-level impacts of recent shocks are therefore likely to be particularly severe in areas where conflict is greatest."
The share of the population living in poverty is estimated to have more than doubled since before the pandemic began.
Inflation and credit/liquidity constraints will further compound food security risks, particularly for the poor, the World Bank noted.
The International Labour Organization (ILO) estimated some 1.6 million jobs were lost in Myanmar last year, with the coup compounding the impacts of the pandemic.
"One year on from the military takeover, the labour market remains fragile," the UN agency said late last month, adding that working hours are estimated to have decreased by 18% in 2021 relative to 2020, equivalent to the working time of at least 3.1 million full-time workers.
"These working-hour losses were driven by employment losses as well as increased underemployment," it explained.
Key sectors have suffered considerably, with farmers hard hit by armed conflict, violence and insecurity. Construction, garments and tourism and hospitality were also among the hardest-hit industries in 2021, with year-on-year employment losses reaching an estimated 31%, 27% and 30%, respectively.
"The losses in both working hours and employment were disproportionately greater for women than men overall," the ILO said. "Women also accounted for an overwhelming majority of job losses in garments as well as tourism and hospitality."
Donglin Li, country director of ILO Myanmar, said the military takeover and the pandemic "have put millions of workers in Myanmar in a grim situation".
"We are witnessing a reversal of years of progress in the labour market. Should this continue, it can only lead to increased poverty and insecurity across the country," he added.
The World Bank has observed that over the longer term, recent events will limit Myanmar's potential to recover and grow as the dual shocks of Covid and the coup have had substantial impacts on physical and human capital accumulation.
Lost months of education, together with rapid increases in unemployment and displacement, will reduce human capital and productive capacity over the longer term, said Mr Edwards.
"Financial dysfunction is the primary concern of Japanese companies in Myanmar for current operations," says Atsushi Taketani, president of Jetro Bangkok. Photo credit
WAYS FORWARD
Attempts to find a political solution, or even bring the junta and other parties to the negotiating table, are proving extremely difficult.
Cambodia's foreign minister said last Thursday that he hopes to visit Myanmar next month in his role as the Asean special envoy. Prak Sokhonn said he hoped the junta will allow him to talk to members of a shadow government that it has labelled "terrorists", but conceded that this would be a challenge.
The Asean Parliamentarians for Human Rights (APHR) has proposed that Asean recognise the National Unity Government of Myanmar (NUG), said Kasit Piromya, who served as foreign minister of Thailand from 2008-11 and is a member of APHR.
"This is very important because the NUG is more or less the legitimate representative of the Myanmar people," he told an online forum hosted by ISIS late last month.
"You cannot have dialogue unless and until Asean, through its chair or individual member states, can speak not only to the military junta but also to start talking to the NUG to provide a sense of balance and fair play to boost the NUG."
In the 10-member Asean bloc, Indonesia, Singapore, Malaysia and the Philippines have been the most outspoken in their condemnation of the Myanmar military's intransigence. The APHR believes those four states should work together to push Cambodian Prime Minister Hun Sen to uphold the collective role of the Asean team, not a "unilateral, individualistic role", said Mr Kasit.
In his capacity as Asean chair this year, the Cambodian strongman travelled to Myanmar in January and met with junta leader Senior Gen Min Aung Hlaing. The visit was controversial as he did not consult other Asean states beforehand.
The APHR has emphasised the need for the UN to oversee humanitarian assistance in Myanmar and press the junta to drop its insistence that all aid agencies must go through them. It also is pressing the Thai government to facilitate humanitarian assistance along its border, said Mr Kasit.
Dr Thitinan observed that the Tatmadaw may have seized power but it has not been able to consolidate control over the country, losing ground in a war of attrition war waged by Myanmar people.
"Like-minded Asean member states should broaden dialogue with the civilian-led opposition alliance to put more pressure on the junta," he said.
Piling on more pressure, he cautioned, may lead to rifts and change inside the high command, sufficient to bring the generals to the negotiating table.
Mr Kasit said the crisis had underlined the need for Asean to undergo drastic reform to be more democratic so that it can play a more concrete role in addressing regional and global issues.
"When it comes to the challenges in regard to democracy and human rights, Asean collectively is not in a position to handle this issue," he said. "That has been reflected in this attempt to handle the Myanmar issue.
"Spiritually, ideologically and so on, most Asean member states are not in a position to tackle questions of democracy and human rights [in Myanmar] because they are not democratic and they do not go for universal values."
The Myanmar crisis, he stated, has shown that Asean cannot go on operating without some form of common ideology.
"They won't be able to handle anything, or to have a common collective stance when it comes to normal global issues like terrorism or things that have been going on such as ethnic conflicts, and the rise of authoritarianism."
The veteran diplomat said a paper by the Indonesian foreign ministry on the future of Asean might set the tone for reform. "I think there is something going on already related to the reform of Asean to bring it more in tune with the Asean mentality and to link that to being people-centred and promoting Asean centrality," he explained.
"Both of these principles cannot move forward unless and until, the thinking inside each Asean member state and inside Asean as a whole, is based on democratic principles."
