Bangkok, Thailand — Amid escalating conflicts in Myanmar, Thai businesses are strategically pausing their investment plans. The ongoing turmoil between the Myanmar government and ethnic groups has raised alarms, signaling a potential “failed state” scenario that deters investment.
Since the COVID-19 pandemic and the subsequent military coup in 2021, Myanmar’s economy has been in a steep decline. The International Monetary Fund reported a drastic 17.9% contraction in 2021, with only marginal growth of 0.6% in 2022. The projected 2.49% growth for 2023 now appears overly optimistic given the intensifying conflicts.
The clashes between the Myanmar military and ethnic armed groups, particularly along the northern border with China, have disrupted trade and created a climate of uncertainty. These developments have significant implications for overland trade routes with Thailand, especially in critical areas like Kawkareik, a town essential for the flow of goods to the Thai border at Mae Sot.
The Thai-Myanmar Business Council (TMBC) confirms that Thai businesses are delaying new investments due to the volatile situation. TMBC chairman Krit Ungwitunsathit noted Myanmar’s severe cash flow challenges and a shortage of dollars. Nevertheless, trade between Thailand and Myanmar, conducted in baht and kyat, remains less affected. TMBC is seeking negotiations with the Myanmar regime to remove trade obstacles.
Foreign direct investment in Myanmar has sharply declined following the imposition of sanctions by Western governments after the 2021 coup. This led to the withdrawal of numerous multinational corporations. Notably, Bangkok Bank, the only Thai bank previously approved to operate as a local bank in Myanmar, has halted its expansion plans. Similarly, Thai energy giant PTT has postponed new investments in its Myanmar operations, although gas deliveries continue.
Thailand currently imports about 10% of its natural gas from Myanmar. PTT’s retail arm, OR, had launched a joint venture with Myanmar’s Brighter Energy (BE) in 2019, operating the largest fuel depot in Myanmar. However, OR has halted further investments in the BE project and temporarily closed its Amazon coffee outlets in conflict zones.
Existing Thai businesses in Myanmar face significant challenges, including limited access to foreign currency and trade restrictions. While consumer spending continues, cash flow has decreased markedly, reflecting the broader economic slump since the pandemic and the coup.
The Thai Ambassador in Myanmar, in coordination with the Thai-Myanmar Business Council, is preparing contingency plans. These include exploring alternative border channels to ensure the continued flow of Thai products into the market.
Thai banks Kasikorn (KBank) and Siam Commercial (SCB) have delayed their expansion plans in Myanmar until stability returns. KBank, the first foreign bank to invest in Myanmar’s banking industry, planned a significant stake in Ayeyarwaddy Farmers Development Bank. Similarly, SCB had envisioned a substantial credit injection to facilitate trade and investment in the region.
Despite current challenges, the long-term economic potential of Myanmar remains attractive to Thai businesses. However, they are likely to remain cautious and wait for the political and security situation to improve before making further investments. The strategic pause reflects a calculated approach, ensuring that investments are made in a stable and secure environment, ultimately fostering sustainable growth and mutual benefits for both nations.