In this webinar, Mr Thurein Lwin and Mr Matthew Arnold discussed the micro-realities of Myanmar’s post-coup economic challenges, and implications for governance, the bureaucracy and future investment and development prospects.
MYANMAR STUDIES PROGRAMME WEBINAR
Monday, 5 July 2021 – The ISEAS Myanmar Studies Programme webinar series on the impact of the military coup in Myanmar continued its focus on discussing the impact and implications for the economy. Following the previous month’s conversation on a near-term economic outlook, attendees at this current webinar heard research insights from Mr Thurein Lwin and Mr Matthew Arnold on the challenges that Myanmar’s economy faced five months after the February 1 military coup, and the implications of the coup on the economic reforms undertaken in the past decade of the country’s democratic transition. Dr Oh Su-Ann moderated the panel discussions, which attracted the interest of 149 attendees.
Among the many challenges that Myanmar’s economy had been facing prior to and after the coup, the financial market, unemployment situation, agricultural debt, micro, small and medium enterprises (MSME) businesses, and budget regulations had been most affected after the coup. While the entire economy had been severely affected by political instabilities, the weaker economic conditions (even before the coup) in several regions in the country, relative to key economic regions such as Yangon and Mandalay, rendered them more vulnerable to such shocks.
- In the financial market, there was a cash shortage; people were not able to withdraw money from banks, and the amount of money circulating in the market was shrinking despite the Central Bank of Myanmar’s efforts to remedy the financial crisis.
- Rising unemployment could affect as many as 10 million people, due to factories shutting down operations, especially in the garment industry. The combined effect of the coup and the pandemic was likely to result in the stagnation, if not the decline, of the minimum wage. Prior to the coup, there had been a plan to increase the minimum wage every two years.
- In the agricultural sector, which employs about 70% of Myanmar’s workforce, farmers’ incomes were falling partly due to the lowering demand from China, the biggest buyer of Myanmar’s agricultural products. Unable to repay their debts, farmers were no longer able to access credit or borrow money, plunging them deeper into poverty.
- Meanwhile, internet shutdowns after the coup posed challenges to businesses, such as online food delivery services. These businesses seemed to be getting back on track with some reopening of internet access, but the impact of internet blackouts (and their frequency) affected the business operations of SMSEs, which were already struggling to survive.
- In terms of budget regulations, there was a potential for corruption if the State Administration Council (SAC) changed tender procedures to meet/suit its budget needs. Ongoing tax boycotts had affected revenue from taxes. There were concerns that the SAC would resort to natural resource exploitation to shore up its budget deficit.
During the past decade (2011 to 2020) of transition, the Union Solidarity Development Party (USDP) and the National League for Democracy (NLD) administrations had both undertaken several economic reforms, most of which had positive results and impact. Maintaining that trajectory and momentum was now almost impossible after the military coup. From 2011 up to the coup in February 2021, Myanmar’s reforms had been driven by evolution rather than revolution, following the objectives of emerging from military dictatorship, sustaining poverty alleviation, and nurturing democratization and federalism.
There had been four major reform areas in the past decade.
- The first was to reintegrate the country into the global economy after decades of isolation. Such reforms included reforms in currency exchange, security debt forgiveness, and reforms in intellectual property rights and trademark laws.
- The second type of reforms was to modernize the legal and regulatory framework for the economy. Such reforms could be seen in the Central Bank of Myanmar Law (2013), Companies Law (2017), Financial Institutions Law (2016), and Tax Administration Law (2019).
- The third type of reforms was for the gap-filling or the introduction of policy areas that had previously never existed. Such reforms included reforms in foreign bank licensing in 2019, the Consumer Protection Law (2014), and the Telecommunication Law (2013).
- The fourth type of reforms was to transform state institutions and build up administrative capacity. Such reforms were reflected in treasury bonds auctions, the central bank’s authorization of the country’s first credit bureau, the introduction of the integrated tax administration system, national statistical system and national indicators framework, and fiscal framework, and the formation of investment commission, competition commission, large and medium tax bureau office, and anti-corruption commission.
One of the key drivers of Myanmar’s economic transformation in the past decade was the fear of national economic collapse after decades of isolationism. This was noteworthy, as economic crises had preceded almost all major uprisings in Myanmar previously. Additionally, rising inequality and an increasing dependency on China had affected Myanmar’s economy before the reforms started.
In the current scenario, even though the military had stated that it would continue with economic reforms after the coup, the economy created by a decade of reforms would not be viable under a military that ruled by violence. Further liberalization of the economy and the diversification of international engagement would prove difficult, at best. The military coup on February 1 had thus ended a decade of economic reforms.
The webinar concluded with a general discussion of the key points raised by the speakers, dealing with a a wide range of issues, including: the relations between escalating violent conflicts and deteriorating economic conditions in states, the economic pressures on the military regime to return to democracy, the transition from cash to digital currency, the implication of the economic crisis on remittances, the state of digital remittances after the coup, the engagement of the military regime with think-tanks on economic policy-making, reactions and adaptation of large domestic companies in the current crisis, the unemployment situation in both private and public sectors as people participate in civil disobedience movement, the impact of the civil disobedience movement on the economy, the economic relations between India and Myanmar, benefits of signing the Regional Comprehensive Economic Partnership (RCEP) agreement, the impact on resurging conflicts between the military and the ethnic armed organizations on the economy, and economic relations between Myanmar and Russia.