Myanmar & COVID-19

Two-Thirds of Myanmar Businesses Struggle to Survive Pandemic: Survey


By Nan Lwin 9 June 2020

YANGON—The latest nationwide survey on the impacts of COVID-19 on Myanmar businesses shows that nearly two-thirds of businesses expect to face cash flow problems, putting their survival at risk as government emergency loans have reached only a fraction of businesses so far.

The survey by The Asia Foundation, backed by the DaNa Facility and aid from the UK, said on Monday that on average, the businesses in the survey estimated that they require 18 million kyats (US$12,851) in additional cash flow in order to survive until September 2020.

The survey estimated that nationwide, businesses need an additional 900 billion to 2.1 trillion kyats (US$642.5 million-1.5 billion), equivalent to 0.7-1.7 percent of the International Monetary Fund ’s (IMF) projection of Myanmar’s GDP for the 2019-2020 fiscal year.

The survey solicited responses from 750 businesses across the country between April 28 and May 10, during the period when the government had imposed strict rules to curb the further spread of COVID-19 in the country.

The Myanmar government initiated measures including social distancing, cancelation of public gatherings and limited business hours in order to reduce people’s risk of exposure to the virus. The survey said these measures, although potentially effective in slowing the pandemic, had serious negative impacts on businesses.

According to the survey, about half of the businesses reported that their commercial survival was at either moderate or high risk due to COVID-19. The manufacturing sectors for textiles, apparel and leather as well as the accommodation sector are among the industries facing the highest levels of risk.

Additionally, accommodation and food and beverage services were also suffering because potential national and international customers have been unable to travel. The government’s instructions to people to stay home and avoid gathering in groups of more than five have had a particularly large impact on the food and beverage sector, the survey said.

The retail and wholesale industry reported facing relatively smaller risks to its survival. Among the different locations covered in the survey, businesses in townships belonging to the Yangon City Development Committee (CDC), the mid-dry zone and the lower Irrawaddy River valley expressed that they were facing the highest amount of risk to their survival.

To relieve the impact on the country’s economy, the government announced a series of stimulus packages in late March, including a COVID-19 fund for small or medium-sized enterprises (SMEs) and textile and tourism businesses. The government also announced a deferral of commercial taxes and quarterly income taxes as well as exemptions from the 2 percent advance income tax on exports.

But the survey found out that 67 percent of businesses were still unaware of the loan program, and the least well-known policy was that of exemptions from the income tax on exports, which was unknown to 92 percent of businesses.

The survey results suggest that it has been hard for businesses to benefit from any of the four policies; the number of businesses that were denied from the programs or found the application procedures too difficult was higher than or equal to the number that eventually did benefit from the policies.

Out of the four policies, the emergency loan had reached the fewest businesses (only two of the interviewed businesses), although many more businesses are still waiting for the results of their applications.

The survey also found that many businesses are concerned about repaying their loan principals and interest but have not discussed the issue with their lenders.

It suggested that the government should encourage businesses and banks to actively seek an agreement to restructure loan interest and principal payments. It said the move could benefit both banks and businesses as it could lower the number of bankruptcies and defaults during the crisis.

According to the Ministry of Investment and Foreign Economic Relations (MIFER), the government had lent a total of 28 billion kyats (US$20.2 million) to businesses hit by COVID-19 as of June 1.

Furthermore, the survey found that about 92 percent of businesses had suffered a drop in sales due to COVID-19. Three out of four businesses had faced sharp revenue decreases of a half or more. For more than one-fifth of businesses, sales had ceased completely due to COVID- 19, the survey said.

The businesses surveyed have laid off 16 percent of their workforce due to COVID-19. Given this, the survey said the government may need to reconsider whether the actions outlined in the COVID-19 Economic Relief Plan (CERP) to support employees who have lost their jobs are adequate, or if there are additional or better ways to target these employees.

Launched in late April, the CERP focuses on improving the macroeconomic environment through monetary stimulus; easing the impact on the private sector through improvements to the investment, trade and banking sectors; assisting laborers, workers and households; promoting innovative products and platforms; strengthening the health care system; and increasing access to COVID-19 response financing, including contingency funds.

The CERP also includes commitments to increase funding for local businesses from 100 billion kyats (US$71.4 million) to 200-500 billion kyats. Under the plan, the government plans to establish a separate 100-billion-kyat fund by the end of 2020 for designated commercial banks to promote trade financing.

In May, the deputy head of the Ministry of Planning, Finance and Industry (MOPFI), U Maung Maung Win, said that the government is preparing to spend up to 5 percent of GDP for economic recovery from the pandemic. Myanmar’s GDP is more than US$70 billion, which means the deputy minister expects the country to spend $3-3.5 billion on stimulus efforts.

MOPFI said that the government would need several hundred billion kyats for the economic relief plan, the details of which are currently being worked out between government departments.

Based on the findings, the survey said that many businesses appear unaware of government policies and schemes designed to support them. It said that the government should make a greater effort to publicize these policies to help ensure that all eligible businesses are aware of them.

It also suggested that the government should make sure that the procedures for accessing the support schemes or policies are not overly complicated.

The survey said that there is a risk that businesses will not be able to benefit from these policies if government officials who deal directly with the businesses do not have a sufficient understanding about the policies and schemes themselves. It suggested that the frontline government officials should have a good understanding of policies and schemes with appropriate and clear decision-making power, to ensure that the policies and schemes are applied in a transparent and uniform manner.

The survey said that relaxing movement restrictions and other COVID-19-related measures would improve the situation of businesses, however it may take longer for businesses to fully recover from the damage already done and even after reopening and their survival may still be at risk.

The survey urged the government to keep a close eye on the country’s business situation.

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