Myanmar’s Post-Coup Position: Review of ASEAN, India and China Ties
Marco Zecchillo, Head Researcher MI G.E.O. Economics
As the military gains power in Myanmar in 2021 and establishes a junta to rule the country, this South-East Asian nation is plunged back into history. The course of history the country seemed and hoped to have abandoned in the early 2010s, with the embryonic symptoms of democratic reforms, was interrupted tout-court as the so-called Tatmadaw, the name for the military in the local Burmese language, established its government in Naypyidaw. The goal of the present analysis is to provide an update of the economic development in Myanmar after the coup took place in 2021. Furthermore, the country sits at a complex junction of interests of several countries and international players, including the Association of Southeast Asian Nations (ASEAN, which Myanmar is a part of), India and China.
A Troubled History
Myanmar was hoping to have definitely moved forward from the decades of military rule and to have finally found the relative stability that other countries of the South-East Asian area have, instead, developed. To discuss Myanmar’s position in the current regional scenario, it is important to frame the country into a historical perspective (CFR, 2021). The modern history of what will become Myanmar is said to begin in 1947, when the Burma Independence Act was signed by the British Parliament on December 10. Such a legal document formally established the Union of Burma (Pyidaunzu Myanmar Nainngandaw). The new territorial entity lacked effective control over the whole population and the totality of the land of the newly established state, thereby allowing for doubts on the very concept of statehood itself for this country. Already in pre-independence times, agreements between different ethnic groups were being negotiated, as was the case for the Panglong Agreement of 1947. Such a document ensured a higher degree of autonomy for bordering regions of the country, generally populated with ethnic communities. As this agreement was not implemented in the years of the immediate post-WW2 period, tensions increased sensibly until they degenerated in veritable insurgency movements that were being brought forward by a plurality of actors. The main objective that many of them shared was the strenous opposition to the Tatmadaw. The number of insurgent groups is incredibly vast and beyond the scope of this article. Burma’s formal military rule began in 1962, as the country was ruled by a military junta led by Ne Win, who will remain in power until 1988. Such an event ends the difficult attempt to establish a parliamentary system in the country, together with the rule of U Nu. 1988 is the year of an attempted uprising, known as the 8888 Uprising, whose objective was to end the military rule and the economic isolationist policy that had marked U’s government. What will follow after the crackdown is another military regime that establishes the Union of Myanmar.
Fast-forwarding in time, the post-2011 attempt for a democratic transition saw, nonetheless, the continuation of a pervasive military influence in the nation (Maizland, 2022). The Tatmadaw, arguably, maintained their effective control on domestic security and on key aspects of foreign policy and external affairs.
Then, the 2021 coup occurred, the well-known event that has brought Myanmar back into history. Its impacts on the country’s economy and its relationships with neighbouring nations will be further discussed in the following paragraphs.
Post-Coup Macroeconomic Trends
The economic history of Burma and, later, Myanmar, has been marked by many years of a command and planned economy. The nation had undergone a period of nationalisation of its main industries in the early 1960s, as the country vied for self-sufficiency. Namely, it can be argued that the 1962-1988 period has witnessed the country implementing a variant of centralised planning, customarily referred to as the “Burmese Way to Socialism” (Kubo, 2011; Rieffel, 2012). The Burmese economy would later phase out such a policy, and initiate a quest towards a higher grade of liberalisation. In such a context, the transition in status of Myanmar’s market has been gradual and was deemed to be still taking place as the new Millennium began (Than and Thein, 2007).
Specifically, it can be assessed how the implementation of market-oriented and openness policies not only was based on the difficulties in operating a centralised economic system, but also on the observation of the regional landscape surrounding Myanmar by Burmese policymakers. For instance, the progressive opening of other SE Asian nations is thought to be one of the possible explanations underlying the gradual reversal in the policy course undertaken during the military rule period. After the valid GDP performance the country had shown in the late 1990s and the early 2000s, the recent coup surely adds an element of uncertainty and further volatility to these trends (Asian Development Bank, 2023). After the pandemic and the strong contraction in economic output witnessed in 2020, it was expected that the country’s economy would rebound. The Covid-related recession has sensibly contracted Myanmar’s production capacity of at least 6.5 trillion Kyats (around 300 million Euro at the time of writing), with the agricultural sector facing negative consequences (Diao et alia, 2020). Expectations for a recovery of the economy were shattered by the comeback to power of the military in 2021. Still, the country’s economic landscape shows a high share of the total value added being attributable to the agricultural sector (Britannica, 2022). Moreover, its exposition to external fluctuations due to a low degree of diversification in export partners and commodities is another factor that may present potential future issues, as the country’s policymakers have no discretion over externally-determined occurrences. Following theoretical formulations, it is possible to identify a pervasive sensitivity, and a deriving level of vulnerability [1]to changes in the global system of prices. Specifically, it can be discerned how the People’s Republic of China has progressively gained a lion share in Myanmar’s scenery of exporting partners, covering around 34% of the total value (6.9 billion USD out of 20.4) (Observatory of Economic Complexity, 2022). India, despite bordering the Burmese country (i.e., neighbouring countries tend to trade more with each other), occupies a more minoritarian position at 4% after Japan and Thailand. In terms of commodity composition, Myanmar shows a tendency to export goods that present a volatile price, which may render the returns from trade variable as well. These include petroleum, cereals, vegetables and non-knitted clothing accessories. In accordance with the view shared by Byrd (2022), the present analysis considers two main factors as the main determinants of the negative course the Burmese economy is set to follow in the coming years. Namely, these relate to the Kyat’s progressive loss of value (Devaluation) and the demographic imbalances that have led thousands of high-skilled workers to flee the country, exacerbating the Brain Drain effect. As far as the first idea is concerned, Myanmar’s Kyat has followed an unrelenting and persistent decrease in value at least since 2020. At the time of writing in May 2023, one Euro equates to around 2,400 Kyats, according to the World Bank elaboration (World Bank, 2023). Viewing the whole trend clearly points towards a likely continuation of this trend, as the depreciation has been continuative. While currency devaluation renders exported goods more competitive, which is believed to underlie an increase in the economic output of a country[2], other things equal, such an evolution certainly hampers domestic instances and import-competing groups.
As such, Political Risk is often referred to in economic literature to be a key determinant of flows of Foreign Direct Investment, and to be negatively correlated to the entity of these movements. Risk, a concept borrowed from Corporate Finance and applied to politics in the present analysis, is referred to in terms of variance in a political context. Being a qualitative variable, its operationalisation requires further research to be fully representative of the Myanmar’s case. In the second instance hereby considered, the Brain Drain effect surely threatens to trigger negative spill-over effects over the whole Burmese economic system. Sanctions and the increasingly variable political context tend to dissuade long-term business ventures from moving into Myanmar and incentivises established ones to leave. The closing of Burmese subsidiaries of petroleum multinationals may have contributed to the contraction of domestic output, which has been estimated to be around 17.9% in 2021 (World Bank, 2022), declining from a value of 79 billions to 65.1.
ASEAN Ties
Myanmar became a member of the Association of South East Asian Nations in 1997. ASEAN accession is to be ascribed to the path towards a larger degree of market liberalisation undertaken by the country in the previous years.
After the 2021 events, ASEAN members have often seen the developments in Myanmar with anxiety and preoccupation. External viewers look at the Burmese events as presenting a challenge to ASEAN. Reports highlight how officials from countries of the association view the post-2021 junta of Myanmar to be composed of outlaws (Al Jazeera, 2022). It is important to remember how ASEAN has rooted its existence in the avoidance of pooling political competences to the supranational level, and in the respect of non-interference. Some commentators believe this aspect to be a source for the shortcomings the association showed in the management of the Burmese upheaval (Kurlantzick, 2022). Moreover, declarations of members of the post-2021 government of Myanmar have expressly pledged support and praised Vladimir Putin for the Russian use of force after the Ukraine invasion, which has surely alienated other players in the conventional ASEAN forum and in its +3 and + 5 configurations (Lindgren, 2022). This renewed cold in political relations certainly intensifies the risk of economic divergence and dis-engagement. The Phnom-Penh 2022 ASEAN Summit and the Cambodian temporary presidency of the grouping decisively drove towards a criticising posture towards the post-2021 Burmese government. The events in Naypyidaw were seen as significant challenges to ASEAN cohesion, and some countries including Malaysia have chosen to engage the former government (the NUG – National Unity Government), currently in exile (Lindgren, 2022b).
India Ties
India’s engagement in Myanmar is definable as substantial and comprehensive, as the country initiated a large number of investment projects. The Indian Federal states bordering Myanmar are Manipur, Nagaland, Mizoram and Arunchal Pradesh. Delhi’s interest has materialised itself particularly on infrastructural investment, as the 2012 Report on India-Myanmar Relations promoted by the Indian Foreign Ministry shows (MEA, 2012). Being Myanmar the only ASEAN member that borders India, officials admit their perception of the country as a bridge to the emerging markets in South-East Asia. After the coup, India has sought a hedging strategy and tried to avoid excessively contentious criticism of the new Burmese junta for a variety of reasons that deal with politics and economics at the same time (Krishnan, 2022).
China Ties
For obvious reasons of proximity and a rather porous border between the Yunnan Province of China and the Northern part of Myanmar, the two countries have frequently interacted. A factor that transposes throughout time is China’s willingness to engage its neighbour economically, both at formal and informal levels (Kubo, 2016).
China, together with India, has been investing heavily into the country. As it is the case for Delhi, Beijing shares a long border area with Myanmar. Their proximity, in mainstream international trade theory, is believed to positively correlate to larger trade and investment flows. The country shares a long border with the People’s Republic, as the provinces of Tibet and Yunnan border Myanmar to the South. Several Chinese entrepreneurial and government-sponsored ventures saw the Myanmar area as fit for a future expansion. Famously, a corridor of the Belt and Road Initiative is set to employ the country as one of its major hubs in the context of the CMEC (China-Myanmar Economic Corridor). PRC’s operations are to be seen in a broader picture, as the country has invested substantially in Indonesian infrastructure and in Cambodian businesses, which reinforced the ties especially with the Southwestern area of China. The latter region also displays an enormous potential for a future breakthrough in capital-intensive and knowledge-based domains and for a shift from labour-intensive goods. Such a visible unfolding in China may render its economy to increasingly become complementary with the Burmese one, as Beijing seeks lower labour costs and as Naypyidaw endeavours industrial machinery and know-how.
Having become an economic and political giant at the same time, Beijing’s economic initiatives in the area are immediately interpreted under a diplomatic or even strategic lens. These evolutions are deserving of attention, especially when considering the multiplicity of actors operating in the region, as they may exacerbate conflict or cooperation simultaneously, given the politicisation of issues. This perspective is particularly salient when considering the current and prolonged strain in Sino-Indian relations.
Conclusion
The present brief analysis aimed at providing a broad overview on the complex economic and political situation Myanmar finds itself in after the 2021 Coup. Its geographical position in the South-East Asian region, at an equal distance between India and China, renders it a naturally interesting case study. The picture arising from this paper highlights an economy that has followed a number of steps into isolationism, in a counter-trend with respect to the developments in the region. Furthermore, Myanmar displays an excessively low level of diversification, which subjects the livelihoods of the inhabitants to be conditional upon developments in other parts of the region (China, primarily) and the world.
Sources Ranking
Contenuto dell’Informazione | ||
1 | Confermata | Confermato da altre fonti indipendenti; logico in sé; coerente con altre informazioni sull’argomento |
2 | Presumibilmente Vera | Non confermato; logico in sé; consistente con altre informazioni sull’argomento. |
3 | Forse Vera | Non confermato; ragionevolmente logico in sé; concorda con alcune altre informazioni sull’argomento |
4 | Incerta | Non confermato; possibile ma non logico in sé; non ci sono altre informazioni sull’argomento |
5 | Improbabile | Non confermato; non logico in sé; contraddetto da altre informazioni sul soggetto. |
6 | Non giudicabile | Non esiste alcuna base per valutare la validità dell’informazione. |
Affidabilità della fonte | ||
A | Affidabile | Nessun dubbio di autenticità, affidabilità o competenza; ha una storia di completa affidabilità. |
B | Normalmente Affidabile | Piccoli dubbi di autenticità, affidabilità, o competenza, tuttavia ha una storia di informazioni valide nella maggior parte dei casi. |
C | Abbastanza Affidabile | Dubbio di autenticità, affidabilità o competenza; tuttavia, in passato ha fornito informazioni valide. |
D | Normalmente non Affidabile | Dubbio significativo sull’autenticità affidabilità o competenza, tuttavia in passato ha fornito informazioni valide. |
E | Inaffidabile | Mancanza di autenticità, affidabilità e competenza; storia di informazioni non valide. |
F | Non giudicabile | Non esiste alcuna base per valutare l’affidabilità della fonte. |
Sources
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Statistics on Myanmar’s Economic Indicators were gathered from the World Bank’s Database [consulted May 2023] and from the Observatory of Economic Complexity [consulted May 2023] A-1
[1] Sensitivity, following Keohane and Nye (1977), is deemed as the exposition of a country to external changes, while Vulnerability is a function of the cost of adjustment to such mutations, when they produce negative effects.
[2] Following the expenditure method in computing GDP, positive trade balances conventionally enhance the value of total output, ceteris paribus. Many other effects are at play in reality that influence other fundamentals.