Foreign investment in Myanmar has dropped precipitously in the three and a half years since the military seized power from a democratically elected government, according to officials and observers, as companies weigh the risks of operating in a nation engulfed in civil war.
Myanmar’s economy has been in freefall since the Feb. 1, 2021, coup, contracting by nearly 20%, according to the World Bank. Its 2024 gross domestic product growth estimates have been halved to 1%, in large part due to widespread conflict and junta mismanagement.
Investors have fled, citing political instability, rising inflation, difficulties with bank transactions, challenges in obtaining raw materials, and insufficient manpower as reasons for scaling back their presence or leaving Myanmar altogether.
According to official statements from Myanmar’s Directorate of Investments and Company Administration, foreign investment reached a mere US$150 million in the first seven months of 2024. Comparatively, some US$2.9 billion in investment flowed into Myanmar during the three years between 2021 and 2024.
These numbers represent a drop in the bucket when measured against US$3.8 billion in foreign investment in 2020 alone, when the country was governed by former State Counsellor Aung San Suu Kyi’s civilian National League for Democracy party.
Singapore’s Sembcorp became one of the latest firms to reduce its footprint in Myanmar on Aug. 12, when it announced the temporary closure of its gas-fired power plant in the Mandalay region city of Myingyan, citing safety concerns.
Similarly, on May 28, South Korea’s CJ Feed Myanmar announced the suspension of its production and sales of animal feed at its plant in the largest city Yangon due to the economic crisis.
Dueling exchange rates
One Myanmar businessman told RFA Burmese that the junta’s control of the exchange rate for the kyat has made it difficult for foreign companies to operate.
"The exchange rate of the dollar is unstable due to inflation,” said the businessman who, like others interviewed for this report, requested anonymity for security reasons. “The Central Bank’s control of the dollar, with a fixed rate of 2,100 kyats, poses significant challenges for foreign companies."
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The junta is increasingly cracking down on black market money changers as they keep desperately needed foreign exchange out of the formal banking system, where people and companies are forced to convert it to kyats at artificially low exchange rates.
In Myanmar’s informal banking sector, known as hundi, one U.S. dollar is worth more than 6,000 kyats.
Worsening conflict
However, the main obstacle to foreign investment is the worsening conflict, according to Aung Thu Nyein, a member of the Institute for Strategy and Policy – Myanmar think tank.
"The current environment in Myanmar is not conducive to smooth business operations,” he said. “The primary concern is that investing in Myanmar under the present circumstances entails significant political risk.”
Meanwhile, the junta’s investment policies are unclear, “making it uncertain with whom one should engage."
Just last month, Thailand-based newspaper The Thaiger reported that Thai companies with investments worth US$7 billion had withdrawn from Myanmar due to the persistent tensions between the junta and the armed opposition.
And Japan’s Nikkei Asia reported last week that numerous businesses in Myanmar have relocated to Thailand due to the conflict.
Junta lacks ‘business mindset’
A senior official from the junta’s Ministry of Investment and Foreign Economic Relations, who also declined to be identified, told RFA that “new investment is unlikely.”
“Foreign investment is almost non-existent under the present circumstances,” he said. “Existing businesses may be transferred, with the likelihood of such transfers depending on the evolving situation.”
The official noted that it was increasingly difficult for companies to justify investing in Myanmar when they could do so elsewhere in the region, where the political situation was more stable.
An economic analyst told RFA that the junta lacks a “business-oriented mindset.”
"If the economy were managed by a government with a strong understanding of business practices, the country’s economic situation would likely improve,” he said.
Following the coup in 2021, a majority of Western companies withdrew from Myanmar.
According to a report released by ISP-Myanmar at the end of 2022, out of 52 countries with companies that had regularly done business in Myanmar, 39 had ceased their investments.
The primary foreign investors in Myanmar now are companies based in Singapore, China, and Thailand. Among the 12 foreign investment sectors, energy, natural gas, and oil manufacturing attract the most investment.
Translated by Kalyar Lwin. Edited by Joshua Lipes and Malcolm Foster.