On February 1, Vijay Dhayal, an Indian business consultant in Myanmar’s biggest city, Yangon, received a call at 6am (23:30 GMT) from a member of his team telling him that a coup was under way, plunging what had been a routine Monday morning into turmoil
The military had begun detaining civilian leaders, overthrowing Myanmar’s democratically elected government and turning the clock back to the period between 1962 – when Myanmar’s military first took control, 14 years after independence – and 2011, when it ushered in parliamentary elections and democratic reforms.
In addition to concerns about human rights and civil liberties, the coup has also raised flashing question marks for the foreign businesses who had, since 2011, seen Myanmar as a high-risk but potentially highly lucrative place to invest in, mainly as a base for manufacturing goods at low cost for export. It has also become an attractive market, as consumer demand for everything from soaps to smartphones and motorbikes has grown.
According to eyewitness accounts of foreign businesspeople in Myanmar interviewed by Al Jazeera, the military takeover was swift.
“By 8pm (13:30 GMT) the transition of power had taken place,” said Dhayal, who has lived in Myanmar for about 10 years and is the managing director of New Crossroads Asia (NCRA), a consultancy which helps foreign companies set up businesses in Myanmar.
Some executives, who spoke to Al Jazeera on condition of anonymity for fear of reprisals by either the military or opposition protesters, said that on the first day of the coup, business ran remarkably smoothly, as they popped in and out of government offices to get permits approved and chase outstanding requests.
The new rulers had initially cut phone lines, but these were restored by the afternoon. Internet services were operational throughout the first day, the executives said.
But that sense of normality was not to last.
Protesters against the return to military rule have been on the streets of Myanmar’s main cities in large numbers, at times banging pots and pans in anger, calling for the release of detained elected leader Aung San Suu Kyi whose National League for Democracy won November’s election by a landslide. Activists have organised disobedience campaigns urging teachers, doctors and civil servants to stop work.
Observers fear the military may launch a harsh crackdown, something it has done before.
The rise in economic uncertainty following the coup has been reflected in the country’s financial markets.
Its currency, the kyat, has fallen 7 percent against the US dollar, while stocks are down four percent since the takeover. Gold prices in Myanmar rose by five percent as people bought the metal to protect their investments during unpredictable times, but have since dropped back to pre-coup levels.
But experts worry that this is just a foretaste and that the economic effects of the coup could become much worse, potentially clawing back the gains the country of 54 million people has made since opening its borders to foreign investors in 2011.
Since then, the economy has grown by an average of about seven percent a year, helping it to almost halve its poverty rate, which fell from 48 percent of the population in 2005 to 25 percent in 2017, according to World Bank data.
Foreign direct investment shot up from $1.4bn in 2012-2013 to a peak of almost $9.5bn in 2015-2016, according to the government’s Directorate of Investment and Company Administration. In the last fiscal year, Myanmar received investments of $5.5bn.
Singapore was the largest single foreign investor in the 2019-2020 fiscal year, Myanmar’s official figures show, but when mainland China and Hong Kong’s figures are combined, they emerge on top.
Myanmar has become an important link in the supply chains for well-known Western brands in the luggage, fast fashion and footwear industries.
For instance, US imports from Myanmar reached $1.06bn in the 12 months to November 30, 2020, from $245m in 2016, according to Panjiva Supply Chain Intelligence, a unit of research firm S&P Global Market Intelligence. Of the latest figure, apparel and footwear accounted for more than 41 percent. Luggage imports made up nearly 30 percent while fish accounted for 4.4 percent.
According to Panjiva, some of the better-known companies importing products from Myanmar include fashion retailer H&M, luggage maker Samsonite, and apparel firm LL Bean, among others.
When asked if the coup has affected its business in Myanmar, H&M spokesperson Ulrika Isaksson told Al Jazeera in a statement: “We expect our production in Myanmar to be affected. We are in close dialogue with our suppliers and monitoring the situation as it develops.”
Asked whether H&M plans to continue sourcing from its independent suppliers in Myanmar, Isaksson said: “While we are concerned about the situation in Myanmar and closely monitoring the developments, we refrain from taking any immediate action with regards to our presence in the country.”
Samsonite and LL Bean did not respond to Al Jazeera’s emailed requests for comment.
But Myanmar’s economy and its attractiveness as a destination for foreign investment had begun to fade even before the military overthrew Aung San Suu Kyi and her party from power this month. As foreign investment peaked in 2016, so did overall economic growth.
Prior to this month’s events, there were two main reasons for investor scepticism: poor infrastructure and the military clampdown on the Rohingya ethnic minority starting in 2017.
“Many foreign investors were wary even before the coup, because of the government’s incapacity to develop any coherent economic plan, because of the negative association with investing in Myanmar, and because of the threat of instability in the country, which has now only been magnified,” Josh Kurlantzick, senior fellow for Southeast Asia at the Council on Foreign Relations (CFR), told Al Jazeera over email
The country’s shoddy roads, expensive and unreliable electricity supply and the lack of a skilled and appropriately educated workforce have turned many potential investors off, says David Brenner, who teaches conflict and security studies at the University of Sussex and is a Myanmar expert, describing Myanmar’s infrastructure gaps as “hot bottlenecks”.
Despite its progress, it remains “among the very bottom rung” of the Association of Southeast Asian Nations countries in terms of economic growth, Brenner told Al Jazeera, with perhaps only Brunei, Cambodia and Laos lagging behind it.
One country that has long been keen to invest heavily in Myanmar’s infrastructure is its powerful neighbour to the north and east: China.
The China-Myanmar Economic Corridor is a set of infrastructure projects being built as part of Beijing’s Belt and Road scheme. Once complete, they will connect China’s landlocked Yunnan province to the Myanmar port of Kyaukpyu on the Indian Ocean via Mandalay. The link could potentially allow China to bypass the Malacca Strait, one of the world’s busiest shipping routes and a possible choke point in an international conflict.
Chinese firms also have interests in Myanmar’s agriculture, garment manufacturing and mining sectors.
China’s ambassador to Myanmar said on Tuesday the current political situation was “absolutely not what China wants to see” and dismissed social media rumours of Chinese involvement in the coup as “completely nonsense”.
But Myanmar has long been wary of being drawn too close to China’s geopolitical orbit, stemming from Beijing’s support for several decades up to 1989 of a now-defunct Communist insurgency, according to the International Crisis Group think-tank.
Those concerns were, in part, what drove Myanmar’s military leaders to usher in democracy more than 10 years ago, in the hope that doing so would open the door to foreign investment from the West.
That plan had started to work. But the military’s deadly clampdown on the minority Rohingya community in 2017 again made investors nervous.
The crackdown resulted in more than 700,000 of the estimated 1.1 million Rohingya fleeing the country, most of them ending up in refugee camps in neighbouring Bangladesh. The United Nations’s International Court of Justice ruled in January 2020 that Myanmar must take steps to protect the Rohingya from genocide.
The crackdown on the Rohingya was an event that “tarnished the country’s reputation for investors and tourists,” says Myanmar expert Brenner.
Adding to the economic pain caused by falling investment has been the COVID-19 pandemic. In a December report, the World Bank said it estimates Myanmar’s economy grew by 1.7 percent in the 2019-2020 fiscal year, a sharp slowdown from the 6.8-percent growth rate in the preceding 12 months. And it projects the recovery to be fairly muted too, at just 2-percent growth in 2020-2021.
Myanmar’s new rulers got an early taste of what a possible investor exodus could look like. Within days of the coup, Japanese beer maker Kirin Holdings Co announced that it would end its investment in Myanmar – a joint-venture partnership with a firm that provides welfare fund management services for the military. “We will be taking steps as a matter of urgency to put this termination into effect,” the company announced.
Prominent Singapore businessman Lim Kaling, the co-founder and director of Hong Kong-listed gaming group Razer, said he will exit his investment in a tobacco firm linked to the Myanmar military.
Meanwhile, pressure is growing on foreign governments to isolate Myanmar.
Justice for Myanmar – which describes itself as a group of covert activists campaigning for justice and accountability for the people of Myanmar – has asked the global community to locate and freeze about $5.7bn of the country’s foreign currency reserves.
Burma Campaign UK, another advocacy group, which has published a list of more than 100 companies linked to the military, called for “targeted sanctions” against military-owned and controlled companies and their business associates.
US President Joe Biden has called for “an immediate review of our sanction laws and authorities, followed by appropriate action”.
But punishing the military with sanctions could prove to be tricky.
Blanket measures such as those the West imposed during the 1990s and 2000s are unlikely to return as “they are too punitive, impose broad costs on poor people, don’t necessarily target military leaders,” says the CFR’s Kurlantzick.
And penalties targeting important military figures or businesses controlled by them could create even more uncertainty for investors – hitting one business could inadvertently disrupt others due to the murky networks of corporate interests that exist in Myanmar, experts say.
As a result, sectors such as garment and footwear manufacturing and tourism – which are important in helping Myanmar wean itself off its dependence on military-linked businesses – “will suffer”, in turn “boosting the entrenched political calculus of the military”, says Brenner.
A seafood exporter in Yangon is already bracing for the fallout of the coup and its aftermath.
The businessman, who declined to be named for fear of reprisals by local authorities, receives 30 percent of his revenues from Europe and 30 percent from the US and says he is “slightly worried” about possible sanctions.
Currently, Myanmar benefits from the European Union’s Generalised Scheme of Preferences (GSP) which exempts vulnerable nations such as Myanmar from paying import duties, helping their exporters compete against larger rivals. Should the EU take the GSP away, he expects his business to be hit.
While it’s not clear as yet what will happen on the foreign front, he is dealing with a more immediate effect of the coup. Seafood supplies have fallen and the raw materials used by aquaculture businesses are becoming harder to source.
The internet has been slow and some routine government permits are now taking longer than they should to be approved, “maybe because of a manpower shortage,” he told Al Jazeera.
In the initial week after the coup, the fear of what lay ahead also affected his workforce. One of his accountants quit and at least 20 factory workers said they wanted to go back to their villages while construction workers at a new factory that he is building refused to come to work.
“They’re all scared,” he said. “Their parents [who lived through the brutal military crackdown of the 1980s] are calling them and telling them to come back home.”
But his workers, mostly in their 20s and who have grown up in a nominally democratic Myanmar, have since joined in the street protests, shaking off their parents’ fears.
With Myanmar’s economic situation worsening, their employer is worried about the future prospects for his young staff.