The UK has voted to leave the EU (often referred to as ‘Brexit’). This caused the Pound to decline to its lowest point in three decades and has hit financial markets around the world, including Asia. The Myanmar Times recently asked industry figures and experts: what does Brexit mean for Myanmar.
Releasing a statement, the British Embassy in Yangon said: “We will continue to be a close friend to Myanmar as it strengthens democracy, civilian government and an open economy. We are one of its greatest development partners, and our businesses and institutions are building significant ties. Myanmar continues to hold a special place in the hearts of British people.”
Direct and indirect
Prominent economists U Khin Maung Nyo and Sean Turnell expressed differing opinions on this subject. Nyo argued that because Myanmar has “low trade and investment… with the EU and Britain” there may not be “any direct impact on Myanmar’s economy.” But there may be an indirect impact if “China suffer from Brexit,” because of Myanmar’s strong trade ties with the People’s Republic.
Turnell argued the opposite point, due to the fact that “the UK is a generous and important donor in Myanmar, and its programs are unusually effective and well-conceived.” If Brexit results in budgetary pressure or recession for the UK, he continued, it could lower spending in Myanmar and these programmes could suffer as a result, reducing their ability to spur economic growth.
Turnell also suggested that the ‘shocks’ that come with Brexit could further damage an already weak global economy. If this evolves into a full-on downturn, headwinds could hit Myanmar’s exports and foreign direct investments. The director of the Myanmar Centre for Responsible Business, Vicky Bowman, added that “assuming Brexit prolongs the global [economic] slowdown,” the main impact on Myanmar will probably be spurred on by Brexit’s effect on the wider international economy.
If investors, she continued, lose their risk appetite due to Brexit, they are less likely to invest in Myanmar, which is still seen as a “high-risk” destination. She added that “we don’t know whether the UK will leave the single market” so “it’s difficult at this stage to know whether Myanmar imports to the UK” will be affected by Brexit. This will not become clear until we know what happens to the trade agreements that currently govern UK/Myanmar commerce, some of which are tied to the EU.
Talking US dollars
Meanwhile, Yangon Stock Exchange Executive Senior Manager U Thet Htun Oo was only concerned by one area of this debate: Brexit’s effect on the US dollar exchange rate. He argued that Myanmar’s kyat will be weaker if Brexit causes the dollar’s purchasing power to rise, due to lack of confidence. This would be bad for Myanmar’s importers, he suggested, because it would force them to pay higher import prices but good for its exporters. Myanmar is a “net importer,” he continued, so its economy would suffer if the value of the kyat dropped too much due to Brexit.
Striking new agreements
YGA Capital Managing Director U Thura Ko Ko expressed concerns over whether in a post-Brexit world, the UK would be able to provide Myanmar with the same level of financial aid as it did previously via the EU. Explaining, Ko Ko said: “In the long run … whatever agreements Myanmar and Association of South-East Asian Nations (ASEAN) have in place will no longer technically apply to the UK after Brexit is finalised and enacted. Myanmar – either unilaterally or as part of ASEAN – will need to negotiate and put in place the various accords and agreements it had in place or was negotiating.” Ko Ko added that “common sense should prevail” and Myanmar should be able to use existing EU accords templates to guide new negotiation agreements, but this could add extra legislative burdens.
Htet Tayza’s commentary
It is not clear at present what impact Brexit could have on Myanmar. Expert opinion differs on the UK’s importance to Myanmar’s economic well-being, but there is agreement that if Brexit pro-longs the current global economic slowdown, the South-East Asian nation could suffer as a result. It is unlikely that we will be able to fully assess the impact of Brexit on Myanmar until the country has negotiated new diplomatic and trade agreements with both the UK and EU, which could take years.