Myanmar’s powerful army staged a coup on the day that a new session of parliament was set to open, effectively shutting down the ruling National League for Democracy. Critics and western countries have expressed outrage. Be that as it may, the coup is not expected to have much of an impact on the economy. By Lee Kok Leong, executive editor, Maritime Fairtrade
On 1 February, Myanmar’s military overthrew the civilian government in a coup and declared a national state of emergency for one year, after detaining the country’s de facto leader Aung San Suu Kyi, President Win Myint and other top government officials. Senior General Min Aung Hlaing, the commander-in-chief of the armed forces, is now in charge and has installed a new cabinet.
The army alleged that there was fraud in the November 2020 general elections, which Suu Kyi’s party the National League for Democracy (NLD) won by claiming 83 percent of the vote. Notably, just days before the election, the NLD barred huge numbers of ethnic minorities, who usually support their own political parties, from voting.
However, this may not the reason for the coup, because regardless of the election result, the military is guaranteed an unelected quota of 25 percent of parliamentary seats and its commander-in-chief gets to appoint ministers of defense, interior and border affairs. It is speculated that the coup was the result of Suu Kyi’s personal power struggle against Min Aung Hlaing.
Myanmar was ruled by the armed forces, who has long seen itself as the guardian of national unity, from 1962 until 2011 when a new military-backed government instituted political reforms.
In 2015, the country held its first ever open election, and NLD won the majority to form a government. Nevertheless, the military still wields real power. To be clear, the military is never under the control of the civilian government, but there was an uneasy truce with the NLD.
However, with two election successes in 2015 and 2020 where her party won by big margins, Suu Kyi became arrogant and she perhaps overplayed her hands by challenging the grip of the military’s power, which threatened the interests of Min Aung Hlaing. And this in turn forced the general to initiate the coup.
A return to political stability
At this stage, there is nothing to suggest that the army is going to undo the economic progress of the past decade or to upend the lives of ordinary citizens. It is in the interests of the army to focus their attention on fighting the pandemic and developing the economy.
So far, the situation in the country has remained relatively non-violent in the aftermath. In the short term, there will be some unrest, protest and display of anger, but after the dust has settled, the people will carry on with their daily lives and the economy may emerge relatively unscathed.
In fact, with the military in full control, which has always been the strongest institution in Myanmar, there will be political stability and a sense certainty and continuity. Although a return to military rule is a setback for democracy and not palatable to certain segments of society, this can assuage the fears of investors and businesses and provide a conducive environment for them to thrive.
Previously, with the infighting within the government, and Suu Kyi’s constant moves to erode the military’s hold on power, although outwardly Myanmar appeared to be a working democracy, there were powerful undercurrents that threatened the very core of the power-sharing arrangement, which injected a high level of risk and uncertainty to the economy.
Global outrage but empty threats
The UN, US, UK, EU and Australia are among those that have condemned the military takeover, nevertheless the condemnation is just mere words with no meaningful consequence for Myanmar. Although US President Biden threatened to reinstate sanctions, the impact is limited because most of the country’s investment comes from Asia.
The real leverage is with the Asian countries who are backing Myanmar financially and economically, and not those western countries and institutions who have the loudest voice but are toothless as well.
Much of Asia’s response is relatively muted and this can be taken to mean tacit endorsement and thereby non-interference. It is unconceivable that top investors like Singapore, China, Vietnam, Japan and Thailand will rock the boat and break with the army. They have a long history in the country and are traditionally a strong ally of the army.
Singapore, the biggest investor, said “Myanmar is a close friend” and hoped “the situation will return to normal as soon as possible.” China, the second biggest investor, described the coup as a “cabinet reshuffle”. Other countries including Cambodia, Thailand and the Philippines, said it is an “internal matter”.
A frontier economy that offers potential
As one of Asia’s last frontier economies, Myanmar offers promising opportunities for investors and entrepreneurs. The country’s average annual GDP growth rate of six to eight percent is propelled by its largely young working population of 54 million.
By 2020, Myanmar is expected to have 10 million middle-income consumers with higher purchasing power. This young consumer market provides strong growth prospects for food, retail and lifestyle businesses.
Other sectors that are set to boom in the fast-growing economy include agriculture and infrastructure like transportation, telecommunications and energy systems.
Singapore has invested US$22.7 billion as of January 2020, about 34 percent of the overall approved investment, mostly in Yangon in sectors such as hospitality, industrial and residential property development, and water and power utilities.
Also, Myanmar is big part of China’s ambitious Belt and Road Initiative and there are around 40 projects under the China-Myanmar Economic Corridor program, including in infrastructure, agriculture and technology.
It is likely that these financial powerhouses will remain supportive of the economy and may not be pulling out their investment any time soon. As long as the top investors hold firm, the economy will not suffer and in fact, in the long term, may even thrive because of the potential.
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