Military coup likely to damage Myanmar’s economy

Businesses and analysts predict that the coup in Myanmar is likely to damage the country’s economy.

Companies say the coup has already put billions worth of foreign investment at risk.

The US has already said it is considering imposing additional sanctions on Myanmar, which is one of the region’s poorest countries.

However, the impact of US sanctions could be limited because most of the country’s investment comes from Asia.

According to the World Bank, Singapore was the largest foreign investor in Myanmar last year, accounting for 34% of overall approved investment. Hong Kong was the second largest investor with 26%.

Foreign Direct Investment (FDI) commitments into Myanmar were worth $5.5bn (£4bn) in the 2020 fiscal year, which ended in September.

Real estate and manufacturing each accounted for about 20% of that figure.

These figures were already expected to be significantly lower this year due to the Covid-19 pandemic.

Sanctions could have a significant effect on foreign investment, with both Western and Japanese companies thinking twice about projects in Myanmar.

With the US already considering sanctions against Myanmar, Mr Vriens thinks businesses might turn to China instead.

“It’s really the only country they can turn to,” he said.

Impact of sanctions

A Yangon based businessman, said he’s relieved that the coup so far appears to have been relatively peaceful.

“So far it’s peaceful, without protests, but emotions are strong and people are upset,” he said.

He said it’s likely to have an impact on the economy, but the effect of any western sanctions will depend on whether they’re broad or they target the coup leaders.

The effect of sanctions could be limited, however, because the bulk of foreign investment comes from Asia.

“It will have a psychological impact, but the actual dollar figure coming in, we were never reliant on western investment,” he said.

He said engagement is a better approach than sanctions, which punish responsible companies.

“You have responsible companies that are adhering to European or US standards who are ironically most affected by sanctions,” he said.

Fashion democracy

Stephen Lamar, president of the American Apparel & Footwear Association, said many of the trade group’s members did business in Myanmar and found the coup deeply concerning.

“Our hearts and prayers are with the Myanmar people for a swift, peaceful, and democratic resolution to this crisis – one that does not take away the economic progress made by the hardworking people of Myanmar,” he said.

A spokesperson for H&M said the company was monitoring events and was in close contact with suppliers, but had no immediate plans to change its sourcing strategy.

“We are closely following the developments, but refrain from speculating about what this will mean for us going forward,” the official said.

Olusola Akintonde/BBC