Myanmar coup’s impact on Hong Kong economy limited, business groups say

Enoch Yiu
·4-min read

The future of Hong Kong investments in Myanmar was uncertain following a military coup on Monday, but its impact on the city’s economy would be limited, business groups and industry watchers have said.

About 200 Hong Kong companies have invested in the Southeast Asian country, and their investment represented 26 per cent of total foreign direct investments (FDI) that Myanmar received in the 2019-20 financial year. This makes capital from the city a top source of funding, especially for sectors such as energy and infrastructure, according to data from the Myanmar government and the Hong Kong General Chamber of Commerce, the city’s largest industry body.

“While news [of the coup] poses great uncertainty about the future investment environment in Myanmar, the overall impact on the Hong Kong economy, so far, is likely to be limited,” George Leung Siu-kay, the chamber’s chief executive, said in a telephone interview. The industry body’s 4,000 members employed more than 1.3 million people last year.

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Myanmar’s military declared a 12-month state of emergency on Monday and assumed power from a government led by state counsellor Aung San Suu Kyi. The military refused to accept the results of a general election held in November last year, citing irregularities. Suu Kyi and her National League for Democracy party won the election by a landslide.

Leung said Myanmar had become a hotspot for investment by Hong Kong companies since its opening up in 2011, and the beginning of Beijing’s Belt and Road Initiative. The city’s firms invested US$9.8 billion in Myanmar between the 1988-89 and 2019-20 financial years, data from Myanmar’s Directorate of Investment and Company Administration shows. In 2019-20 alone, they invested US$1.4 billion.

A road leading up to Myanmar’s parliament in Naypyidaw on Monday. Photo: AFP
A road leading up to Myanmar’s parliament in Naypyidaw on Monday. Photo: AFP

“While Hong Kong is a key source of FDI in Myanmar, the impact of the latest political situation in the country on Hong Kong remains limited, in terms of total commitment,” Leung said, adding that two-way trade between the city and the country amounted to HK$3.6 billion (US$460 million) in 2020 – or only 0.04 per cent of Hong Kong’s total trade.

There will certainly be a short-term impact on investment sentiment among local and overseas investors, including Hong Kong players, said Albert Oung, the chairman of the Hong Kong Myanmar Chamber of Commerce. “But all are waiting for further details,” he said. “But I still have great confidence in the future of Myanmar’s economic development and reform.”

Hong Kong power distributor VPower Group International is a major investor in Myanmar. It operated nine power generators in Myanmar as of August last year, three of which were developed and are operated under a joint venture with state-owned China National Technical Import and Export Corporation.

The company issued a positive profit alert on January 22, saying that its consolidated profit attributable to owners would grow by 70 per cent in the year ended December 31, 2020, from HK$283.6 million for the year ended December 31, 2019. It attributed this growth mainly to an expansion in its CNTIC VPower business, according to a filing with the Hong Kong stock exchange.

Global private-equity firm TPG Capital, a majority owner of Apollo Towers Myanmar, one of the country’s largest telecoms tower companies, said it was “closely monitoring the situation in Myanmar at present”.

Banks in Myanmar had agreed to suspend financial services on Monday because of poor internet service and would seek permission from the central bank, The Myanmar Bankers Association said in a statement.

Singapore, another top FDI source for Myanmar, has seen its investments in the country grow rapidly in recent years.

According to its Department of Statistics, the Lion City’s investment in Myanmar had risen from S$174.3 million (US$130.8 million) in 2011 to more than S$6.05 billion in 2018. Singapore’s trade ministry said in 2019 that the two countries shared “warm economic relations”, with cumulative investment exceeding US$22 billion in August that year. The ministry touted Singapore as Myanmar’s largest foreign investor.

Among Singaporean companies that have built a presence in Myanmar are food and beverage chain Ya Kun Kaya Toast and energy firm Sembcorp Industries.

Darren Lum, the director of Star Engineers United, a Singapore company that does construction work in Myanmar, said that while he was worried about the situation, it was hard to tell what was going on, given he has not been in Yangon since March last year. “I’ve no idea what is going to happen next,” he said. “I’m worried for the safety of my Burmese colleagues.”

Additional reporting by Alison Tudor-Ackroyd, Dewey Sim and Kok Xinghui

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