"More than two months since the military seized power in a coup and unleashed a campaign to suppress protests, the Myanmar economy is collapsing."

Wall Street Journal

ASIA

Myanmar’s Economy Is in a Free Fall, With Empty Factories, Closed Banks, Failing Internet

Experts expect a double-digit contraction of an economy that had made strides in the last decade in reducing poverty and attracting foreign investment.

By Jon Emont

April 10, 2021

SINGAPORE—Bank branches in Myanmar are closed and government employees are boycotting work. Factory workers have fled to their rural homes and foreign companies have flown their overseas employees out. The internet is largely cut off.

More than two months since the military seized power in a coup and unleashed a deadly campaign to suppress protests, the economy is collapsing, with the World Bank and others expecting a double-digit contraction over the course of this year. The upheaval is erasing the large gains that the country had made in reducing poverty and is frightening away foreign businesses and tourists that had done much to lift Myanmar over the last decade.

It is already one of Asia’s poorest countries. Six million people live on less than $3.20 a day, a poverty threshold for lower middle-income countries like Myanmar. A fourth of the nation’s children are far too small for their age because of inadequate nutrition.

There is a reason for this: For half a century, Myanmar was ruled by military generals who enacted disastrous policies. The picture began to steadily change over the last decade as a democratic opening brought a partially civilian government to power and more international investment flowed in. By one measure, poverty declined to 24.8% in 2017 from 42.2% in 2010, according to World Bank data.

The progress of the past decade is now being reversed. After the coup, which toppled an elected government, the World Bank says the number of people living on less than $3.20 is expected to rise by 30% in 2021. That is 1.8 million additional poor people in one year.

The World Bank, which before the coup predicted 2% growth for the 12 months through September 2021, now expects gross domestic product to decline by 10%. Others say the drop could be sharper, with analytics firm Fitch Solutions projecting a 20% decline as people buy less and low tax collection causes government spending to crater.

Since the coup, the streets of Myanmar have been filled with protesters demanding a return to democracy, but they have been met with violent oppression from the military.

More than 600 people have been killed so far, including children struck by bullets in their yards or homes, according to the Assistance Association for Political Prisoners, a monitoring group.

The economic disruption is in part deliberate. Civil servants, bank employees and factory and port workers aren’t going to work, in an effort, they say, to make it impossible for the military regime to govern. KBZ, the nation’s largest privately owned bank, has just 14 of its more than 500 branches open due to worker strikes, according to its website.

“Without having enough staff and human capacity, it is not possible to run the economy,” said Kaung Htet, a 30-year-old relationship officer at a retail bank, Myanmar Oriental Bank, who hasn’t come to work since February.

On Wednesday, the leader of the coup and head of the armed forces, Senior General Min Aung Hlaing, was quoted in a state-run newspaper saying the civil disobedience movement is “country-destroying.”

The central bank has threatened to levy fines against banks that don’t reopen, according to two people who work in the banking industry. Last month, KBZ sent a notice to employees saying it is in a “no-win situation where if we do not open, the regulator will step in and open the bank for us,” according to a copy seen by The Wall Street Journal.

But the central bank is having trouble getting its own staff to show up. About 300 central bank employees have been suspended by the institution in Myanmar’s two largest cities for refusing to work and some have moved back to their family villages, said a senior bank official who has been absent from the office since February. She fears she might be detained by police amid widespread arrests, she said.

Striking government workers have formed teams to make lodging and financial support available for colleagues who also refuse to work and have been expelled from state housing as a result. Zaw Wai Soe, a surgeon and prominent leader of the movement, has said some supporters are selling land to raise funds and that wealthy citizens abroad are contributing.

The goal is that “step by step the military machinery falters and stops,” he said in a speech posted last month on his Facebook page.

Some citizens staying home, however, are starting to feel the pressure. One parliamentary staff member said he had dipped into savings, but colleagues with large families were weighing whether to resume work. A 30-year-old employee working in finance in Yangon said his company has instructed employees to return in May.

Economic pain is widespread. The garment industry, which accounts for about a quarter of the nation’s goods exports, is losing business as major brands like Sweden’s Hennes & Mauritz AB and Italy’s Benetton pause new orders. Protests and violent crackdowns in industrial areas have driven factory workers back to their villages, leading to severe shortages.

Large-scale internet restrictions, including nightly blackouts and major disruptions to mobile and wireless broadband connectivity during the day, are crippling businesses ranging from finance to hospitality. One restaurant owner in Yangon said he had relied on online orders to weather the pandemic, but those orders have now all but stopped, reducing sales by 70%.

International tourism, which quintupled over the last decade, is reeling. The struggling restaurant owner, who also runs a travel agency catering to European and North American visitors, said he had avoided staff layoffs during the pandemic, instead paying employees half their standard wages for reduced hours. Now, he is preparing to let people go.