Worldbox Business Intelligence Risk Rating – August 2024
MYANMAR
Summary
| Overall Risk Score 12 (Stable)
Political risk: Stable 4/10 Economic risk: Stable 4/10 Commercial risk: Stable 4/10 The risk assessment of a country is made up of 3 components, being Political, Economic and Commercial. Each component is scored out of 10 with 1 being the highest risk and 10 the lowest. |
ESG Risk: 4/10 (Stable)*
*Environmental, social and governance (ESG) issues are becoming increasingly important to companies, investors and consumers in Southeast Asia. That is why we are now preparing a separate ESG score and section with our quarterly country risk reports. We explain how each country rates, looking at the E, S and G individually, and outline recent developments. |
Political Risk – Stable at 4
The rebellion against the military, which has been in power since 1962, intensified significantly in 2023. Momentum continues to move towards the rebels in 2024. The country’s civil war is the longest running armed conflict in the world as ethic groups battle for autonomy. No Burmese government has been fully in control of the country since independence in 1948.
The ethnically diverse country fragmented into numerous civil conflicts. Officially, there are more than 135 ethnic groups in the country of more than 55 million people. However, the majority Bamar (also known as Burman) ethnic group has dominated both the military and major parties, such as the NLD.
The rebel insurgency, along with a campaign of civil disobedience, escalated significantly following the 1 February 2021 military coup that ousted Aung San Suu Kyi’s elected government. Following the coup, lawmakers formed a government in exile, the National Unity Government (NUG), which established the Peoples’ Defence Force (PDF) of civilians, which has fought alongside established ethnic armed groups.
China could prove key to any peace talks. ASEAN has been marginalized, while China’s veto has protected the government from any action by the United Nations. Although the NUG holds the country’s seat at the United Nations, it has struggled to win international recognition — the EU recognizes the NUG but Japan and the United States do not.
China had good relations with Aung San Suu Kyi’s government and craves stability in the country, having invested heavily in infrastructure and other projects. It has expanded high-level engagement with the military regime on issues of concern. But it has refrained from normalising relations or recognising regime leader Min Aung Hlaing as head of state. China continues to prefer that the regime enter dialogue with Aung San Suu Kyi on a path back to constitutional rule, however unlikely that may be.
China has also been alarmed by the level of lawlessness in areas of Myanmar bordering China, and particularly by the military government’s tolerance of scam centres targeting Chinese citizens in China.
China’s leverage over the military is increasing as the junta’s position weakens and it becomes ever more dependent on Chinese support. China may be manoeuvring to replace the current leaders, Min Aung Hlaing and Soe Win, for more pragmatic military leaders who could explore a peaceful resolution to the war.
Economic Risk – Stable at 4
Given the civil war raging in the country it’s very difficult to gain an accurate picture of what is happening to the economy. The junta hasn’t published monthly economic data since mid-2022 and figures from the World Bank and other organizations are at best guesstimates of what is happening in the country and could well be wildly inaccurate.
It is known that war is severely disrupting economic activity, which was already badly hit by the impact of the pandemic. The military takeover in February 2021 has caused foreign investment and tourist numbers to plummet, while exports have also been hit. Moreover, rolling blackouts are disrupting economic activity.
According to a UN Development Programme report released in April 2024, the economy continues to deteriorate. The report found a protracted recession has taken a heavy toll across Myanmar’s economy, which has yet to recover in any significant way since the severe 17.9% contraction in GDP in 2021. The UN reported that 76% of the population lives below or perilously close to a subsistence existence and poverty rates have almost doubled from 24.8% in 2017 to 49.7% in 2023.
The report polled over 12,000 households across Myanmar, one of the largest nationwide surveys conducted in recent years, finding that most families and households have been forced to resort to various, often unsustainable, coping mechanisms like cutting healthcare and education expenses, depleting savings, borrowing, and eating less.
Commercial Risk – Stable at 4
Myanmar is rated as one of the most difficult countries in the Asia–Pacific region in which to do business even prior to the military coup and escalating civil war.
Since the coup, the banking system has been disrupted significantly. Sending money out of Myanmar is extremely difficult, with much stricter oversight by the central bank, harming international trade and commerce. Access to and use of the internet is more difficult, with internet shutdowns common, and the disruptive effect on business activity has been magnified by the coronavirus and the associated need for remote working. Privacy and data-security concerns have also increased. Entering, leaving and moving around the country are difficult, with safety concerns about staff a major issue given the deteriorating security situation in many areas of the country.
Meanwhile, government decision-making and the administrative process are much slower and less predictable, affecting even routine matters such as tax administration and visa processing. Senior government personnel in many positions have changed, while new policies have been adopted, and the civil disobedience campaign has severely disrupted administrative processes.
The rule of law has suffered further setbacks. Even prior to the pandemic, businesses reported very low trust in the independence of the judiciary, with bribes and irregular payments in exchange for favorable judicial decisions very common.
Corruption – already a significant challenge – has worsened as living standards have plummeted. Myanmar ranks 162nd out of 180 countries in Transparency International’s 2023 Corruption Perceptions Index, moving down five places over the course of the year. The Myanmar Corruption Report by GAN says that corruption is endemic in Myanmar, presenting companies with high risks. The weak rule of law and complex and opaque licensing systems are serious barriers to investment and trade in Myanmar.
A lack of adequate infrastructure also provides significant challenges to operating in Myanmar. Sanctions levied since the 1960s have caused Myanmar’s infrastructure to become outdated. Much of the country’s electrical grid relies on hydropower, and factory operation, for example, becomes unreliable during dry seasons. While there has been significant growth in the country’s paved road network, the vast majority of the network – around 60% – remains unpaved. Meanwhile, port capacity is limited and the railway service depends on aging and unreliable equipment.
August Bulletin
Political Risk – Stable at 4
The military continues to lose ground against the rebels. The latest setbacks include the loss in July of Lashio, a major military stronghold and key city on Myanmar’s trade route with China. Lashio lies close to the border of China’s Yunnan province. It is the first time one of the 14 regional military commands around the country has fallen to an ethnic armed group in more than 50 years of military rule. The rebels said that more than 4000 troops had been taken into custody.
The loss of Lashio could result in an escalation of fighting as the opposition groups target towns and cities that have long been considered military strongholds, such as Myawaddy and Mandalay. Myawaddy, located along the Myanmar–Thailand border, is a key trading post, and was briefly occupied by Karen rebels in April. Meanwhile, Mandalay city, the country’s second-largest city, lies just over 200 kilometres away from Lashio.
The rebels are now believed to be moving on the town of Pyin Oo Lwin, home of the Myanmar military’s Defense Forces Academy and a key garrison town for the armed forces. A successful attack down the highway on Pyin Oo Lwin would signal a definitive step towards the siege of Mandalay – and potentially the beginning of the end for the junta in upper Myanmar, according to the publication The Diplomat.
Economic Risk – Stable at 4
The economy continues to face significant challenges and growth is expected to remain feeble as conflict, macroeconomic instability and dislocation constrain production, according to the latest Myanmar Economic Monitor, published by the World Bank in June 2024.
The report projects a 1% rise in gross domestic product over the year to March 2025, in line with growth estimates for the previous year but down from the December 2023 forecast of 2% growth. Economic output is expected to remain about 9% below 2019 levels, in sharp contrast to the experience of other large economies in the region.
Inflation and unemployment remain elevated, while poverty has become entrenched across the country, adds the Monitor. It says that shortages of imported inputs, labour-market disruptions and electricity outages have curtailed manufacturing activity. Falling real incomes and stretched household buffers have constrained consumption and retail trade.
The poverty rate topped 32% in early 2024, rising to levels last seen in 2015, while an additional third of the population is classified as economically insecure. At the same time, poverty is becoming increasingly entrenched, with its depth and severity approaching 2015 levels. Myanmar is now estimated to have 7 million more people living in poverty than it did immediately prior to the COVID-19 pandemic.
It has been impossible to gauge inflation and other economic measures since the government halted publication of several hitherto regular updates on government fiscal policies and quarterly budget reports in October 2023. Inflation data and reports on select monthly economic indicators have not been published since August 2022.
Commercial Risk – Stable at 4
Commercial risk has increased significantly since the coup, amid a deterioration in the ability of government ministries and the banking and legal systems to function effectively.
According to Fulcrum, which is published by the ISEAS-Yusof Ishak Institute in Singapore, the Ministry of Commerce has introduced a process for cross-border barter trade transactions with India, Thailand and China as the junta seeks to de-dollarize its cross-border trade.
Thailand has announced plans for a task force to help Thai banks vet business with Myanmar’s military regime for possible arms deals. The move followed a report by the United Nations’ special rapporteur on human rights in Myanmar, Tom Andrews, saying that Thai banks had taken a leading role in financing arms purchases for the military regime.
Environmental, Social and Governance (ESG) – Stable at 4
The United Nations’ Sustainable Development Goals (SDGs) are recognized as a beneficial framework for responsible investment. The Sustainable Development Report from Cambridge University Press assesses the progress of all 193 UN Member States on the SDGs. It provides a useful means of ranking Southeast Asian countries on their ESG progress.
Myanmar is ranked 120 out of 166 in the 2024 report, with a score of 62.8.
Environment – Myanmar is one of the most climate-vulnerable countries in the world, according to Georgetown University in Washington DC. A report in the university’s Journal of International Affairs, published in June 2024, says the country faces a high risk of climate hazards, including floods, cyclones, extreme heat and landslides.
Myanmar’s vulnerable coasts are particularly exposed, threatening more than 5 million people in low-lying and coastal regions, adds the publication. Furthermore, Myanmar’s predominantly rural population, relying on the climate-vulnerable agriculture, fisheries and forestry sectors for their livelihoods, are ill-prepared for an increasingly worsening climate. Practices such as illegal logging have worsened the risk of landslides during flooding, which occurs annually during the rainy season.
Social – According to the IndustriALL Global Union, which represents 50 million workers in 140 countries in the mining, energy and manufacturing sectors, the situation for workers continues to deteriorate. It says:
“Unions have been outlawed and with no mechanism to help workers and no freedom of association, workers are in a very vulnerable situation. Violations against workers are increasing, as is wage exploitation, forced labour and harassment against women. The military has cracked down on unions and its members, with violent attacks and arrests.”
Governance – Another area where Myanmar scores very poorly, reflecting high levels of corruption and the lack of the rule of law. The IFC – a sister organization of the World Bank – reported in 2018 that the current level of governance standards in most firms in Myanmar was very low. It added that governance structures at Myanmar firms remain largely underdeveloped with poorly functioning boards, antiquated management control processes, and low levels of transparency. Governance levels are likely to have deteriorated even further since.
August Bulletin
Environmental, Social and Governance (ESG) – Stable at 4
Myanmar recorded its hottest-ever April temperature of 48.2°C late in the month. Across large areas of the country, daytime temperatures were 3–4°C higher than the April average, according to the country’s weather monitor.
Despite sanctions, the military regime continues to earn substantial revenues from illegal logging, according to the publication Fulcrum, from the ISEAS-Yusof Ishak Institute in Singapore. Fulcrum cites military sources as saying the country exported around US$236m of timber between October 2021 and mid-2023. Actual production levels are likely much higher than official reports, due to the prevalence of cross-border smuggling, adds the Fulcrum report, published in June.
Latest economic data
f – forecasts
e – estimate
Source: World Bank/Asian Development Bank, Worldbox Business Intelligence
Useful links
https://www.worldbank.org/en/country/myanmar/publication/myanmar-economic-monitor-reports
https://www.transparency.org/en/cpi/2021
https://www.imf.org/en/Countries/MMR
https://www.adb.org/countries/myanmar/main
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