Economists say there is no specific indication of Malaysian business withdrawing from Myanmar after the coup earlier this month, but some may reconsider it if the situation worsens.
Vice President of the Malaysian Economic Association, Dr. Evelyn S. Devadason said Myanmar was also unlikely to be an investment option for new investors, at least during the emergency year-round, due to uncertainty over the coup.
"I think if the situation worsens, there may be a massive withdrawal of capital from Myanmar. For now, we can not guess what the military plans. Although the coup may end after a year, international investors in Myanmar should consider the post-coup political uncertainty, "he said as reported by Bernama.
Evelyn added that international business in Myanmar should expect changes, such as regime changes or new policy amendments, that could affect the country's investment climate.
"There is also the possibility that the investment environment will be worse. Apart from that, the junta government may not be friendly with the company because the firm invests in Myanmar through the market base when the country is moving towards democratic governance, ”he said.
Evelyn said Malaysian businesses and investors in Myanmar should also be prepared to face tighter US sanctions on Myanmar companies if the situation worsens.
"Indirectly, it will affect bilateral trade. This not only affects investor confidence, but if the sanctions involve Myanmar companies that have large investment ties with Malaysia, it can cause problems, "he explained.
According to Evelyn, Malaysia's business in Myanmar involves the oil and gas industry, real estate, manufacturing, hotels and tourism, and agriculture.
He opined that trade conditions may not change much in the near future based on current trading patterns, but stressed that if large-scale investment is affected, bilateral trade with Myanmar will decline in the future.
In 2019, Malaysia will be among the 10 largest investors in the country with investments worth around US $ 2 billion,
According to the United Nations (UN) Comtrade database, bilateral trade volume increased 4.8% between 2012 and 2019, from US $ 888 million in 2012 to US $ 931 million in 2019. Malaysia remains a major exporter to Myanmar.
Last Thursday, US President Joe Biden issued an executive order to impose sanctions on Myanmar in response to military actions to seize power and overthrow a democratically elected government.
The order targeted 10 individuals and three entities linked to the military responsible for the coup.
On the impact of the coup on the region, Evelyn said, although the existing economic ties within the bloc would not change much as ‘democracy is not a condition to be a member of ASEAN’, it would affect steps towards Myanmar’s economic integration with ASEAN.
According to him, ASEAN's response as a bloc to the coup also affected the bloc's own integration with regional partner countries, especially the US and other countries that have strongly condemned the military's actions.
The coup, he said, occurred when the United Nations Conference on Trade and Development (UNCTAD) announced a significant 31 per cent decline in foreign direct investment (FDI) in Southeast Asia.
"From that perspective, this coup undermines ASEAN's efforts to strengthen its relations with external parties," said Evelyn.
On February 1, the Myanmar army launched a coup and detained National Counselor Aung San Suu Kyi; President Win Myint and senior leaders of the National Democratic League (NLD) on charges of cheating on November 8 last year.
The military also announced a one-year emergency order in the country.
Since then, protests have continued in major cities across the country, demanding the military restore civilian rule. International media reported more than 384 individuals have been detained since the coup.
