UMFCCI Vice Chair says impact on economy uncertain

It is uncertain how the current state of emergency will impact the economy and investors will have to wait and see how the situation unfolds in the coming days, said U Maung Maung Lay vice-chair of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). “We cannot predict anything with certainty at this point. However, economic sanctions may occur if the current situation goes on. Currently, our country’s reputation has been tarnished and protests are occurring abroad. We have to wait and see what will happen,” he said.

U Maung Maung Lay added that foreign investments will come only when the country’s political situation is stable.
“Investors will come only when they are assured of making returns. If the political situation is unstable, it will be difficult to invest,” he said. He warned that Myanmar must quickly act to ensure that existing commitments are not revoked. “Based on the current political situation, we cannot think about drawing new investments. In fact,
existing investors may decide to pull out of Myanmar,” he said.

Concern among foreign investors is already rising. “The state of emergency will have a significant political impact. First and foremost, this is substantial backtracking of the progress with regard to the democratic process in recent years and will weigh heavily on policymaking, social stability as well as international perceptions of the country,” according to Fitch Solutions in a February 1 report.

“From a domestic policy perspective, the situation is highly fluid, but we would expect a greater clampdown by the military to result in increased political unrest and uncertainty. From an international perspective, the state of emergency could result in a backlash from the international community which could result in sanctions on the country,” it said.

The US has already issued warnings of potential sanctions. In a statement by White House Spokesperson Jen Psaki said “the US opposes any attempt to alter the outcome of the recent elections or impede Myanmar’s democratic transition and will take action against those responsible if these steps are not reversed.”

The US affirmed its support of Myanmar’s democratic institutions and urged the military to adhere to democratic norms ad the rule of law and to release those detained, which include Daw Aung Sa Suu Kyi. That said, with Asia accounting for more than 60 percent of Myanmar’s total exports, and with China and Thailand together already accounting for about half of total exports, demand from the region could still help to blunt the negative impact of unilateral sanctions by Western countries, Fitch Solutions said.

The research firm has revised its GDP growth forecasts to 2pc for fiscal 2020-21 and fiscal 2021-22 from 5.6pc and 6pc previously. “Myanmar’s growth outlook depends heavily on a pipeline of key infrastructure projects and foreign direct investment (FDI), which could be delayed or canceled altogether if sanctions are implemented and if foreign entities decide to pull the plug amid elevated political risks,” it said.

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Source: Myanmar Times

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