Airports Shut and Roads Blocked as Military Coup Disrupts Supply Chains in MyanmarEverstream Team
After embarking on the path of democratic transition in the past decade, Myanmar’s adoption of representative government came to an end in the early hours of February 1 when the military detained President Win Myint; Aung San Suu Kyi, Myanmar’s de facto leader; and regional chief ministers and declared a state of emergency for one year. The dramatic development immediately impacted logistics and manufacturing operations as airports across the country were seized, roads in Yangon — its largest city — blocked, and internet and telephone networks taken down.
Although the coup was unexpected, tensions have been rising for days over the results of a November 2020 election that the then-ruling National League for Democracy party, led by Aung San Suu Kyi, won by a large margin. The election, which was only the second democratic vote since the end of military rule in the southeast Asian country, was called fraudulent by the opposition party over alleged false names on voter lists. The military action on February 1 came as the parliament was due to meet on the same day to begin proceedings for the elected government’s second term.
Airports shut down, seaports remain open
As the day broke, operations at all airports across the country, including Yangon International Airport, were shut down, cutting off the country from both international passenger and cargo air traffic. Myanmar’s primary regional connections are with international airports in Bangkok, Singapore, and Kuala Lumpur. The Myanmar Civil Aviation Authority later confirmed that all flight operations will remain suspended until at least May 31, effectively shutting air travel into and out of the country for four months.
While no major violence has been reported, soldiers blocked roads in the capital, Nay Pyi Taw, as well as Yangon, prompting logistics providers to suspend pick-up and delivery operations until there was greater clarity on the situation. Meanwhile, port operations at the ports of Yangon and Thilawa reportedly slowed down, but remained uninterrupted and border crossings that were not previously closed due to COVID-19 also remained open amid heightened security.
|Key ports of entry in Myanmar||Status||Reopening date|
|Yangon International Airport||CLOSED||May 31, 2021|
|Port of Yangon||OPEN||–|
As communication and internet lines had been cut off for several hours on February 1 and could face intermittent disruptions over the coming days, logistics and manufacturing operations are likely to face significant hurdles in order processing and customer service. This is further complicated by the fact that many workers have stayed at home on February 1 as safety precautions, and are likely to do so over the coming days.
Garment exports at heightened risk
Since the country opened up to global trade in 2015, Myanmar has established itself as a leading exporter of garments after foreign investors set up factories in the country. While Western apparel firms have started to increasingly review their sourcing arrangements in the country in 2020 following a United Nations report that disclosed ties of garment factories to the military, the latest developments will likely discourage foreign brands from further investing in Myanmar, partly due to increased reputational risks.
In addition to garments, other export sectors with large foreign direct investments such as shoemaking, suitcase manufacturing, and oil and gas could also be affected. Such developments would further hit Myanmar’s key export industries that have been suffering from COVID-19, forcing factories into lockdown until the end of 2020 and causing significant job losses.
Sanctions and shipping delays likely in the coming weeks
While many countries have expressed concern over the military coup and the United Nations Security Council will hold an emergency meeting on the situation on February 2, a coordinated international response remains unlikely at this point.
However, given the new U.S. administration’s focus on human rights, there is a possibility that targeted sanctions could be imposed, a move that could cause Western companies to pull out of Myanmar. This would effectively reverse a trend to move labor intensive work from China to Myanmar in recent years that has taken advantage of lower wages despite less developed infrastructure. The developments could also accelerate a decision by the European Commission to revoke trade privileges — a move it has considered since 2018 — that include preferential access to the EU market, which would affect the garment and shoemaking sectors. Both the U.S. and the EU, however, are unlikely to adopt widespread sanctions that would hurt Myanmar’s economy as a whole in an effort to not push the country closer to strategic rivals such as China.
With air travel shut for the next few months, shippers will increasingly turn to ocean and land border connections to export goods from Myanmar. As about 95 percent of the country’s trade is conducted by sea, connections through the deep-sea port of Thilawa and the Port of Yangon are vital for the Myanmar’s economy. Still, if the uncertainty around the coup lingers on in the coming days, carriers could temporarily omit port calls to Myanmar, cutting off a crucial connection which is mainly used by smaller vessels that carry containers to Singapore for consolidation and onward carriage.
Customers with an interest in Myanmar should keep abreast of the latest developments and anticipate delays to both logistics and manufacturing operations in the coming weeks. Due to the volatile situation and given their access to first-hand information on the ground, it is also recommended to get in touch with local suppliers and carriers to assess their business continuity plans.