Overall score 15, stable 
Political risk: Stable, 5/10
Economic risk: Stable, 5/10
Commercial risk: Stable, 5/ 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 lowest risk and 10 the highest.

Political Risk – Stable at 5

Political risk in Myanmar remains at elevated levels following the 1 February 2021 military coup that ousted Aung San Suu Kyi’s elected government. Peaceful pro-democracy street demonstrations, civil disobedience and general strikes have been met with an increasingly forceful response by the military.

By June 2022, more than 2,000 people had been killed since the coup and over 14,000 arrested, according to the Assistance Association for Political Prisoners, a human rights organisation based in Thailand. In July 2022 four male activists were executed following secret trials. They were accused of helping insurgents to fight Myanmar’s army. Among them were democracy campaigner Kyaw Min Yu, better known as Ko Jimmy, and former lawmaker and hip-hop artist Phyo Zeya Thaw,

Many protesters have taken up arms, encouraged by remnants of the ousted Parliament, who have called for a “revolution” against the military. Thousands of students, activists and workers have flocked to join ethnic groups, such as the Kachin Independence Organisation, that have been fighting the government for decades. The military regime has responded by attacking opposition strongholds with helicopter gunships, fighter jets, and troops that burn villages they accuse of supporting anti-junta militias.

A US State Department official said in February 2022 that the fighting had been much tougher than the military anticipated and that it was not going well for the military. The army has been unable to defeat the country´s separatist groups in 50 years of conflict while the rebel armies are now considerably strengthened. However, the latter also lack the equipment and numbers required to overwhelm the army, resulting in a stalemate that could continue for many years.

Meanwhile, an expanded civil disobedience movement has paralysed the banking system and much economic activity. In February 2022 widespread strikes took place across the country with civilians joining monks to protests against military rule. In April, the population boycotted the normally boisterous New Year water festival.

Opposition to military rule has also disrupted the government´s campaign to control the pandemic. Large numbers of medical staff have joined the civil disobedience movement and have been refusing to work for the military regime since last year’s coup. By May 2022, the government claimed to have fully vaccinated around 42% of the population. However, there are doubts about the real progress of the vaccine programme. Myanmar is also reliant on Chinese vaccines that have been demonstrated to be less effective against COVID-19 than their Western counterparts.

Economic Risk – Stable at 5

Myanmar is experiencing a severe recession as a result of the military takeover in February 2021 and the ensuing political unrest and violence that has disrupted banking and commerce. The country was already in recession prior to the coup: the pandemic took hold in 2020 and paralysed the lucrative tourism sector.

The failure to contain the spread of the virus has only exacerbated the slump. In January 2022, the World Bank reported that the economy was 30% smaller than it would have been but for the coup and the COVID-19 pandemic.

In its Myanmar Economic Monitor, the World Bank estimated that Myanmar’s economy shrank 18% in the fiscal year ending September 2021. It forecast anaemic growth of just 1% in the current fiscal year due to continuing political instability and the impact of the COVID-19 pandemic.

Around 1.6 million lost their jobs in 2021 amid the combined shocks of the COVID-19 pandemic and military coup, the International Labour Organisation said in January 2022.

The UN has warned that more than 14.4 million people — including 5 million children — require humanitarian aid. It adds that acute malnutrition has taken root across the country.

The coup has disrupted foreign investment significantly. Since 2011, approximately 90% of FDI in Myanmar has emanated from Asian countries, which have been steadily improving economic ties. However, in response to the coup and under pressure from activist groups and western nations, firms are restricting activity.

Japan, for example, has cut its aid since the coup and many Japanese companies have frozen their operations in Myanmar due to difficulties in operating business activities. Violence in and around workplaces, internet shutdowns and a scarcity of employees have led office spaces to shut down.

Many infrastructure projects have been suspended, causing a “very large contraction” in the country’s construction market, with the prospect of growth pushed back to the second half of the decade, according to a Fitch report in November 2021. Fitch cites Hong Kong’s VPower Group pulling out of two operational LNG power plants and Adani Ports withdrawing from its investment in the Ahlone International Port Terminal project.

China, however, is stepping up its activities in the country. It continues to push ahead with its Belt and Road Initiative (BRI), even though resentment concerning China’s increasing grip on the economy and its support for the junta appears to be increasing across Myanmar. In February 2022, the UN human rights expert on Myanmar said Russia and China were providing the junta with fighter jets being used against civilians.

Commercial Risk – Stable at 5

Myanmar rated as one of the most difficult countries in the Asia–Pacific region in which to do business even prior to the military coup. It ranked 165 among 190, according to the 2021 World Bank Ease of Doing Business guide. This ranking has almost certainly fallen sharply since that report.

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 favourable judicial decisions very common.

Corruption – already a significant challenge – has worsened as living standards have plummeted. Myanmar ranks joint 137th out of 180 countries in Transparency International’s 2021 Corruption Perceptions Index. 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 ageing and unreliable equipment.

August Bulletin

Political Risk – Stable at 5 out of 10

Myanmar is now more polarised politically than it has been at any point over the past 20 years. As attitudes harden on both the military and pro-democracy sides, the prospect of a dialogue that could bring the two together recedes, and the events in the last month have accelerated this. The military government has consolidated its grip on the country following the February 2021 coup. However, while street protests have subsided, the civil disobedience movement is continuing, disrupting the economy. Meanwhile, the guerrilla war carried out by ethnic groups, whose numbers have been bolstered considerably by new joiners from the protest movements, is intensifying in many parts of the country. Myanmar has experienced bomb and mine blasts in various locations, often near government offices.

The military is shunning attempts by ASEAN and others to pressure it into engaging with the opposition, and as long as it has the support of China, it can withstand external pressure such as sanctions for some time. It is reported that the junta still has access to $5.7 billion in currency reserves, for example. However, the dramatic downturn in the economy, exacerbated by the withdrawal of foreign investors, is inflaming resentment against the military amongst all Burmese. Combined with the increasingly intense guerrilla war in parts of the country, this may cause some in the military to question whether they can continue on the current path and risk losing all the economic and social gains of the past 10 years. There are already signs of resistance within the army, with thousands of soldiers defecting to the rebels.

At the same time, the junta has been facing difficulties in recruiting soldiers. There are also reports of demoralisation among army units, with some analysts even arguing that the military’s long-term viability is in question for the first time in Myanmar’s history. That being said, the military has withstood popular uprisings and civil war for decades, including the mass uprising in 1988 that led to the emergence of Aung San Suu Kyi as a symbol of the pro-democracy movement.

The outlook thus appears bleak. In January 2022, for instance, Fitch Ratings said it anticipated a protracted civil conflict that may last years, posing risks to the country’s economic prospects and business environment. At the same time the country will remain isolated internationally.

Economic Risk – Stable at 5 out of 10

Following an 18% contraction of the economy in the year ended September 2021, the World Bank’s Myanmar Economic Monitor, released in January 2022, projects growth of just 1% in the year to September 2022. The World Bank added that most indicators suggest that private investment has fallen markedly, and previously viable projects are becoming unviable as demand remains weak, the cost of imports has risen, and kyat-denominated revenues are worth less in foreign currency terms.

Energy blackouts are also now a continual threat to economic activity. By April 2022, the country was generating electricity at less than half its normal capacity. Rebels have blown up power lines, while high fuel prices have stalled activity at two major liquefied natural gas power plants in Yangon.

Rebels have also attacked fuel stations, tankers, installations, and their staff. Moreover, a boycott of energy bills – as part of the resistance movement – is reported to have cost the government around US$1.5 billion in lost revenues over the year up to April 2022. Revenue collection has also been disrupted by strikes at utility companies.

The outlook largely depends on the political environment. Given that the military appear unwilling to compromise with the opposition, civil unrest and the guerrilla war will continue. Foreign investors and tourists are unlikely to return under those conditions.

Some countries are also expanding sanctions on the regime. In February, the EU extended sanctions to include a state-owned oil and gas company that generates significant income for the military. It also increased the number of the regime´s officials covered by its sanction programme introduced after the 2021 coup.  Meanwhile in January, Total and Chevron said they were exiting the country because of the worsening human rights abuses committed by the military. About 50% of Myanmar’s foreign currency comes from natural gas revenues.

The country re-opened to tourists in April 2022 but given the uncertain security situation and widespread calls for tourism to boycott the country, it is unlikely that tourism receipts will provide any relief to the economy.

Commercial Risk – Stable at 5 out of 10

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. Thus, many foreign companies are leaving.

In January 2022, the World Bank reported that firms continued to report sharp reductions in sales and profits, cash-flow shortages, and a lack of adequate access to banking and internet services.

Despite bank-branch re-openings and several interventions from the Central Bank of Myanmar, physical currency remains in short supply and access to banking services also remains limited.

Additionally in January 2022, the US issued a formal business advisory for Myanmar. It warned of the heightened risks associated with doing business in the country. The advisory emphasised the reputational and legal risks of doing business and utilising supply chains under Myanmar military control, particularly in any enterprises related to gems and precious metals, real estate and construction, and arms and military equipment.

In April 2022, the country’s military administration acted to tighten its control over movements of foreign currency. In a notification published in state media, the Central Bank of Myanmar ordered banks and other holders of foreign currency to convert these deposits into the local kyat currency. The official central bank exchange rate for the kyat is currently 1,850 per dollar, but this tends to be well below the unofficial black market rate.

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