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TAPA APAC REPORT MYANMAR


SUPPLY CHAIN AND BUSINESS OUTLOOK PREDICTIONS


Myanmar, one of the poorest countries of southeast Asia, with a population of 54 million, only opened to foreign investment in 2011. Expectations generated at the time of Myanmar’s opening to the world were sky high and the country’s economy seemed ready to make up for lost time.


From a mere trickle in 2010-11, foreign direct investment hit a high point of US$38 billion in 2016. In the same period, mobile phone services and internet penetration soared from near zero to more than 40% of the population.


However, the recent military coup has likely slowed its economic recovery, and the main challenge will be faced by foreign direct investment (FDI). Some economic predictions have been pushed below pre-Covid pandemic levels, and, according to reports, it will probably impact the interests of trade with western countries more than those within the ASEAN and Far East regions. Several western countries are expected to withdraw investment from the country.


Japan has also reacted to the change of government by halting new official development aid for the foreseeable future amid a global outcry and a crackdown on


protests in Myanmar. Following the coup, the United Nations was quick to issue economic sanctions which, economists said, ‘’would punish the citizens before punishing the perpetrators’’. Fitch Solutions warned: ‘’Export outlook will also come under pressure over the near term,” on the back of possible supply disruptions and higher operating costs in the wake of the coup.


That comes as Myanmar had been poised to pick up a bigger share of the global garment production market as rising labour costs pushed manufacturers out of China. Prospects for Myanmar to benefit from the ongoing apparel manufacturing relocation trend, however, have now dimmed significantly. The textile and garment industry could be vulnerable to potential trade sanctions from the European Union, which makes up about 16% of Myanmar’s exports. Additionally, blocked social media platforms and the


shutdown of mobile communications networks is disrupting business and impacting companies that rely on online platforms. Several business chambers, as well as local and foreign businesses, have publicly warned that the provisions will hurt the digital economy and undermine foreign investment and innovation.


However, experts say, the economic impact of fresh United States’ sanctions could be limited by Myanmar’s growing reliance on regional trade. Asia is the destination for more than two-thirds of exports, led by China and Thailand. Fitch Solutions cut its GDP growth forecast to an even lower 2% for FY20/21, down from 5.6% previously, as well as for FY21/22, down from 6%. Maybank predicts gross domestic product (GDP) will grow by 3% in FY2020/21, against an earlier forecast of 4.5%, while growth in FY2021/22 could come in at 4% compared to the previously anticipated 6%.


Whatever GDP performance may look like at the end of the financial year, the silver lining is Myanmar’s regional trade, with Singapore, China and ASEAN countries not expected to respond with any further economic sanctions which will restrict trade or investment. Hence the impact on trade and exports is not expected to be large, given Myanmar’s reliance on regional markets, notably Thailand and China.


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