Economic Impact of Myanmar's Coup
By Robyn Ma |
The Story
On 1 February 2021, Myanmar’s military seized control of the state and imprisoned ruling officials, including Aung San Suu Kyi, the state counsellor, and President Win Myint (New York Times). This was justified on the basis of alleged voter fraud in November, which had resulted in a victory to San Suu Kyi’s party (Financial Times). As power was handed over to senior General Min Aung Hlaing, protestors marched the streets (Deutsche Welle). Many states have condemned this coup and are calling for the return of power to San Suu Kyi and Win Myint, and the release of detained protestors (CNN). This marks the collapse of the democratic transition brought in by the country’s first democratic election in 2015.
Whilst in power, however, San Suu Kyi was accused of encouraging and covering for the military’s ethnic cleansing of Rohingya Muslims (New York Times). This had led to accusations of genocide against the minority group, and sanctions against the state for their role in human rights abuses. These events and Covid-19 have threatened the fragile economic recovery of the Southeast Asian country.
What It Means For Businesses and Law Firms
While Myanmar officially opened up to foreign investments in 2011, “foreign investment in the country peaked around 2015 [...] at $9.5bn - roughly 10 times the amount […] before the democratic transition” (Deutsche Welle; Financial Times). Billions were pumped into the state’s oil and gas, transport, manufacturing, power, and communication sectors. However, the political upheaval is expected to jeopardise the $3.5billion in foreign investment proposals, leading to a 4.1% drop in gross domestic product (GDP) (Deutsche Welle; Oxford Economics).
President Joe Biden has announced that the US will “sanction Myanmar’s military leaders”, while urging other international leaders to do the same (CNN). Nonetheless, as the US only accounts for 4.4% of Myanmar’s total exports, sanctions from Asian countries and the EU may create a larger impact (Deutsche Welle). Western sanctions on Myanmar may edge the country close towards China, it’s largest trade partner.
Large businesses face the dilemma of whether to engage or withdraw operations in the country (Financial Times). Most investments, having built up over the past few years, are only now beginning to pay off, adding to the difficulties investors face (Financial Times). One example is Japanese brewing giant Kirin, which has 80% of market share in Myanmar. Amidst the recent coup and allegations of human rights atrocities, the company has dropped its six-year-old venture with a holding company in Myanmar linked to the country’s military (CNN).
Additionally, a new “draconian cyber security bill [...] has caused alarm among human rights campaigners and business groups” (Financial Times). This would require online service providers in Myanmar to store user data at a location and hand it over to authorities (Financial Times). This follows the military’s recent move to block access to Facebook, Twitter and Instagram. Law firms may be asked to help foreign investors decide whether to engage or withdraw operations, and help businesses better understand the proposed law.
Image Credit: PradeepGaurs / Shutterstock.com
