BowerGroupAsia wrote an update to clients on Myanmar’s political and economic instability.
Context
- The ongoing economic crisis in Myanmar is on the brink of implosion, with a crucial trade passage to the China-Myanmar border completely blocked by renewed military offensives in northeast Myanmar. The rising military pressure from ethnic armed organizations (EAOs), which are not actively fighting against the military’s State Administration Council (SAC), including the powerful United Wa State Army, quickly seized territories from retreating SAC units. This complicated the SAC’s ability to defend its position.
- At the same time, speculation is rife about drastic changes at the upcoming SAC’s National Security and Defense Council meeting, where the SAC’s term must be renewed. China’s recent invitation to former President Thein Sein to Beijing, followed by a visit from Deputy Commander-in-Chief Vice Senior Gen. Soe Win, prompted rumors about a potential shift to an “interim” political arrangement.
Significance
- Renewed fighting has destroyed several assets and businesses of Chinese interest in northeastern Myanmar. Resistance forces are focused on strategic positions along the China-Myanmar Economic Corridor, which runs parallel to a natural gas pipeline connecting China’s Yunnan province to the Kyaukphyu deep seaport on the Bay of Bengal. Complete control of this corridor by resistance forces could effectively partition Myanmar, allowing China to exert influence through the Three Brotherhood Alliance — between EAOs including the Arakan Army, Myanmar National Democratic Alliance Army and the Ta’ang National Liberation Army — and secure its passage to the Indian Ocean while controlling Myanmar’s richest natural resource sites.
- Senior Gen. Min Aung Hlaing, chairman of the SAC, responded assertively to widespread speculation about an “interim” arrangement preceding the proposed 2025 elections by assuming the post of “interim president” on July 22. Despite military losses and economic missteps, he has attempted to consolidate power within the SAC through purges and reshuffling. The move may further frustrate regional powers aiming to prevent the spread of conflicts to Myanmar’s commercial centers. Additional losses of military outposts along the China-Myanmar Economic Corridor could weaken the SAC’s position, giving China significant leverage to dictate the terms of a truce and territorial control for access to the Indian Ocean through the Three Brotherhood Alliance.
Implications
- The military balance in southern Myanmar has shifted as some EAOs allied with the opposition National Unity Government and the People’s Defense Forces lost ground in Karenni and Kayin states. SAC forces recaptured Loikaw, the capital of Karenni State, while resistance forces along the Thai-Myanmar border were cut off from major logistics and supply lines by the Democratic Buddhist Karen Army, a powerful breakaway group allied with the SAC. The only potential assistance may come from other EAOs in Shan State, with tacit approval from China, potentially giving China complete control over all fighting sides in Myanmar.
- The ongoing civil war led Myanmar to surpass Afghanistan as the top producer of opium in 2023, with all neighboring countries facing a surge of synthetic drugs flooding through porous borders. Thailand and Laos have experienced a tenfold increase in drug seizures in recent months, with authorities identifying the conflicts as the main driver of the drug crisis as nonstate actors seek to generate revenue. Halting the war in Myanmar could be of mutual interest to Myanmar’s neighbors and the international community, who are grappling with drug emergencies exacerbated by the fragmented conflict.
We will continue to keep you updated on developments in Myanmar as they occur. If you have any questions or comments, please contact BGA Head of Research Murray Hiebert at mhiebert@bowergroupasia.com.
Best regards,
BowerGroupAsia
BowerGroupAsia