Alfonso Delgado, University of Texas Rio Grande Valley
Myanmar’s economy is in ruins. CPI inflation is near a decade high, only an estimated 54.5 percent of the population is employed, and the Burmese Kyat is valued at a historic low. However, Myanmar’s current economic distress sits in stark contrast to its previous trajectory. Here’s what went wrong.
Prior to the February 2021 coup, in which the Burmese government was overthrown by the Tatmadaw, Myanmar’s military arm, the country had experienced a period of significant economic growth. From 1992 to 2019, annual GDP growth was consistently above 5%, lifting millions out of poverty. Coupled with promising democratic reforms, including the creation of a civilian parliament in 2011 and the country’s first nationwide, multiparty elections in 2015, this painted a picture of relative stability to foreign investors. Foreign direct investment (FDI) surged from below 200 million USD in 1990 to almost 5 billion USD in 2017, providing much-needed support to sectors such as energy, infrastructure, manufacturing, and telecommunications. The optimism surrounding Myanmar’s future was palpable, with many economists predicting that the nation would soon meet the criteria necessary to exit “Least Developed Country” status. However, political instability and turmoil since the coup has sent shockwaves through the Burmese economy, crippling economic growth and drastically reducing FDI inflows.
Before delving deeper into the grim realities of post-coup Myanmar, it is essential to consider the country’s economic and political history. Since its independence from Britain back in 1948, the country has been ravaged by a series of civil wars, coup d’etats, protests, and other armed conflicts. In 1962, a military junta led by General Ne Win overthrew the country’s parliamentary democracy. Ne Win and the Revolutionary Council of the Union of Burma nationalized most of the country’s main industries, including banking, mining, and oil production, while adopting an isolationist foreign policy stance. By 1988, rampant corruption, food shortages, and a rapidly-deteriorating economic landscape had given way to widespread protests. Only in 2011 did the country experience its first glimpse of democratization in the form of lessened press censorship, regulated labor laws, and increased oversight of its economic policies—openly-contested elections soon followed in 2015, and Myanmar’s promising growth story began to lure foreign investors.
However, the political landscape shifted dramatically with the military coup in 2021, leading to international condemnation and sanctions. Many of these sanctions were specifically targeted at the financial and energy sectors, which severely disrupted Myanmar’s economic progression. The political instability has also resulted in a decline in investor confidence, with many international companies such as Chevron, McKinsey, and Coca-Cola reconsidering their presence in the country. Capital flight has already taken an enormous toll on the Burmese economy: FDI inflows have fallen by almost 75% since 2017.
For Myanmar to rebuild investor trust, political reforms that reestablish democratic processes and ensure stability will be vital. Leaders must work to strengthen relationships with international partners while assuring investors that Myanmar remains a safe destination for capital. To that end, clearer regulatory frameworks for property and investment rights will be essential. Education and vocational training for Burmese citizens could also help foster sustainable economic growth.
Myanmar stands at a critical juncture. While the challenges posed by the coup are significant, the country has a golden opportunity to rebuild and transform its economy. As such, policymakers must work toward creating an environment that is conducive to foreign investment, ensuring that it aligns with broader sustainable development goals.