Recent surveys of CEOs revealed that almost all consider geopolitical uncertainty to be one of the biggest risks facing their operations. For all the hype, though, few organisations actually take measures to understand the threats in full, or to pre-empt the risks effectively.

Moreover, many surveys speak of geopolitical risks in generic terms, but ignore the brutal realities on the ground.

Myanmar

Deeply informative, then, are the risks now facing businesses in places such as Myanmar, where a desperate government is squeezing money from luckless companies, and where their continued trading results in media attacks driven by opposition forces targeting perceived supporters of the regime.

Of course, the civil war in Myanmar is an outlier. Even so, executives should recognise that the uncertain outlook in the Asia-Pacific region presages real geopolitical risks, and that lessons learned from gritty circumstances in Yangon can inform how best to prepare elsewhere.

SVA can assist in assessing the key geopolitical risks, and in implementing effective Risk Mitigation measures.

A crackdown

In recent weeks, a range of senior executives of banks and other businesses have been detained in Myanmar, by the Office of the Chief of Military Security Affairs, the main intelligence service. The arrests are an angry response to a worsening economic situation.

The government’s main priority appears to be stamping out capital flight. The authorities accordingly arrested 21 gold dealers in early June 2024, froze the accounts of hundi informal bankers, and seized real estate agents selling Thai property through roadshows.

Currency traders have also been detained for “speculation that hinders economic development”. The SAC has even required Myanmar-based companies to default on foreign-currency loans, and established a Barter Transaction Arrangement (“BTA”) for international commerce.

A flailing economy

Myanmar is in a serious plight. The economy is floundering, and hunger is on the rise. The unofficial rate for the Myanmar kyat has fallen to about MMK5,000 to USD1 in 2024, from about MMK1,500 in 2019. The military-dominated State Administration Commission (“SAC”) is assailed on all sides.

Capital flight started in the wake of the February 2021 coup, but has accelerated hugely as the fighting turned against the military government. Many middle-class Burmese citizens are buying Thai property through proxies, in an effort to preserve what remains of their wealth. Even SAC chairman Min Aung Hlaing’s children have (embarrassingly) moved funds to Bangkok.

The government response

The military government has crude powers for use in handling this crisis. The SAC initially put pressure on banks to prevent transfers to various groups opposed to the military takeover (by deploying the intelligence services, and making arrests) in mid2021.

Now, the government is using those tools to bolster its revenues, which have plummeted after the loss in June 2024 of two oil and gas fields to opposition forces that generated crucial foreign exchange.

The government is also seeking to boost income through fair means, or foul. Mechanisms include gathering funds from scam centres, drug smugglers, wildlife exporters, and human traffickers. Corruption, already rife, is worsening.

Perhaps most telling, the authorities have ordered workers operating under a labour scheme in Thailand to pay 25% of their wages to the government. Any failure to comply would result in a loss of official status for the migrant workers, rendering them illegal.

A loss of trust

The SAC appears to have lost faith in its economic experts, too. The Minister of Commerce, a former military officer turned civil servant called Aung Naing Oo, resigned in June 2024, seemingly owing to a failure to boost revenues enough – previously his expertise.

The governor of the Central Bank of Myanmar, Than Than Swe, was also reportedly held in May 2024, after meeting with Thai banks to discuss how best to stabilize the currency, and prior to boarding an international flight. That arrest was striking; she is a regime loyalist, who was seriously wounded in April 2022 in an assassination attempt attributed to the opposition.

Other prominent bankers and tycoons have been recently arrested and their family members harassed.

Attacked from all sides

This situation poses huge risks to business. Worse, companies operating in Myanmar must not only deal with a predatory and unpredictable government, but also with ill-informed media criticism funded by or organised by opposition forces.

Opposition media platforms routinely condemn existing businesses for continuing to trade, and hence for their implied support for the military regime – fairly, or otherwise.

This picture ignores the reality that many companies are simply trying to navigate the chaos that emerged from the ill-conceived 2021 coup, and the subsequent civil war – just as are ordinary citizens.

Moreover, such companies do play an important role in creating at least some jobs, and in providing social support to an increasingly desperate population.

Such nuance rarely makes headlines, though, leaving any-and-all at risk of reputational damage.

Lessons to learn

The situation in Myanmar presents a worst-case example of geopolitical risk, then. However, companies should not dismiss this situation as of no account; rather, they should learn from it.

After all, any outbreak of conflict in the South China Sea or the Taiwan Straits could easily result in other governments taking comparable measures elsewhere, if perhaps on a less extreme basis.

The plight of business in Myanmar should thus give Boards of Directors cause to think more deeply about wider regional geopolitical risks in Asia, and to engage in scenario planning that takes account of the gritty realities at play.

SVA is well-positioned to assist in appraising geopolitical risks, and in developing responses and plans to mitigate such threats. This is no longer an academic exercise.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals, and insurance companies and underwriters around the world.

SVA can be of assistance to your organisation in dealing with these complicated issues. If you wish to protect your business from the negative consequences of geopolitical risks, please do not hesitate to contact us.