BANGKOK/TOKYO — The heart of Yangon is crowded and rowdy in the evenings, with beer flowing and music blaring. Stylish new bars and restaurants have opened around Myanmar’s commercial capital in recent months, driven by the military regime’s efforts to make city life look “normal” despite authoritarian rule, a broad campaign to crush dissent and war engulfing much of the nation.
Shopping malls are drawing crowds, and several luxury hotels that closed after the Feb. 1, 2021, military takeover have reopened. Visitors to central Yangon may be surprised to see barely a soldier or police officer.
The relative prosperity of Yangon stands in sharp contrast to the escalating conflict elsewhere, such as along the border with China’s Yunnan province, where rebel forces have mounted successful offensives. But a darker mood can be detected in the outer districts of Yangon.
“Don’t be misled,” said one resident. “It looks and feels really normal by day, but people are being detained every night in my district — simply picked up by police as they walk along the road. Their phones are searched, and if they even have a VPN (virtual private network) on their phone, that’s a crime. If they have nothing incriminating, they are still detained, and families have to pay money for their release.”
Just ahead of the third anniversary of the army takeover on Thursday, there is a pervasive sense among sources in Yangon that some kind of change is looming. Far less certain is what that will mean for the regime, the myriad ethnic groups now tasked with managing areas they have captured, the parallel National Unity Government (NUG) and the global companies clinging to their interests.
About two-thirds of Myanmar is estimated by the United Nations to be mired in conflict. More than 2.6 million people are displaced, including many hundreds of thousands who fled after several ethnic resistance groups launched Operation 1027, a series of sweeping coordinated attacks across the north and northeast in late October. The rebel offensive received the implicit backing of China, which wanted to crack down on clusters of scam centers that were operated by Chinese-linked criminal gangs on the Myanmar side of their border and had been tolerated or even protected by the military.
The attacks galvanized other resistance forces across areas dominated by both ethnic minorities and the majority Bamar, also known as Burmans. At least 34 towns have fallen to the rebel groups, and several more are under threat.
In many areas, education and health services are as scant as food and drinking water, posing an acute challenge for whoever is in charge.
“Deepening violence, rising poverty levels, and deteriorating living conditions are having a devastating impact on people’s lives,” stated the U.N. High Commissioner for Refugees in a report in January. The World Food Programme estimated last June that 25% of the population was suffering from food insecurity and nearly a third needed humanitarian assistance. The economy is likely to grow by only 1% this year, according to the World Bank, and inflation has clearly exceeded the bank’s estimate of 20%, judging from the prices of staples such as rice and fuel in Yangon.
Yangon residents line up for subsidized cooking oil on Aug. 5, 2023. High prices of staples such as rice and fuel suggest inflation is running higher than the World Bank’s 20% estimate. (Photo by Yuichi Nitta)The resistance’s gains from Operation 1027 have been credited to ethnic armed groups seeking autonomy. The NUG and its network of People’s Defense Force units, which are aligned with the deposed civilian government of State Counselor Aung San Suu Kyi, are fighting alongside the ethnic armed groups and also operating separately in the Bamar heartlands centered on Sagaing, Magway and Mandalay. A small number of urban units in the big cities are also staging assassinations against regime officials and carrying out drone and bomb attacks on official facilities.
Although the NUG is training local administrators, its presence on the ground is sometimes uncertain. “Central Myanmar villages are dominated by a confusing web of often-overlapping resistance groups, where allegiance to NUG is extremely variable,” said Adrian Rovel, an independent Myanmar analyst.
The rapid progress by the resistance has fueled perceptions that regime forces are beginning to crumble, despite their aerial and artillery firepower that has leveled more than 80,000 homes and public buildings in three years.
People’s Defense Force soldiers gather to mourn a fallen comrade after clashes with regime forces in Kayah state in 2021. (Photo by Mauk Kham Wah)Nearly 3,000 army soldiers surrendered in the northeastern town of Laukkai near the Chinese border in late 2023. The military regime responded to the defeat by sentencing three of the generals involved to death and imprisoning three others.
The harsh sentences could backfire, said Maj. Naung Yo of People’s Goal, which is supporting military defectors. “They think harsh sentences will scare soldiers, but in fact it has shocked middle-ranked officers” and destroyed their trust in the top leadership. He claimed that more than 6,000 of the regime’s soldiers have joined the resistance forces and many thousands more have surrendered or deserted.
Even so, the defeat of the military regime, or State Administration Council, “is not a binary question,” stressed one Yangon-based analyst. “This won’t be Saigon 1975 — the SAC is not simply going to collapse overnight.”
The regime will almost certainly extend its six-month period of emergency rule, which expires on Thursday. But sooner or later it may rename itself and attempt to “civilianize” its image, with SAC chief Senior Gen. Min Aung Hlaing taking on a loftier prime ministerial role. There is also revived talk of elections, initially promised in early 2022. Yet none of that, say analysts in Yangon, will really alter the dynamics.
“The only game changer will be when the regime simply can’t function, and that could be a year or much more,” said one Asian diplomat in Yangon.
Nothing can be ruled out in a country like Myanmar, but Rovel said the regime maintains a firm hold on the capital, Naypyitaw. “The whole city was designed with military logic at the core; that’s where all the high-tech armaments and the best commandos remain stationed,” he said. “The resistance doesn’t have the firepower and even the critical manpower to really take it on.”
Yangon and Mandalay are also expected to remain in the military’s hands for now. In the long term, added Rovel, there are major concerns about a fragmentation of Myanmar. “Post-SAC Myanmar will be dominated by powerful, well-armed ethnic armed organizations, with territories larger than ever, and with a clear divide between Chinese-affiliated ones and the others. The NUG might still be around, but with influence only on the lowlands, and little leverage over” the ethnic groups.
A destroyed church in the village of Daw Nyay Khu, in Myanmar’s Kayah state, on Christmas Day 2023. (Photo by Mauk Kham Wah)“Most probably, the [ethnic organizations] will push for a federal system, which would benefit them, which would trigger tensions with the Bamar political forces, especially the remnants of the National League for Democracy,” Suu Kyi’s party. But, he warned, “if no credible inclusive body manages to bring all those forces around the table and have proper political dialogue, the risk of a breakup of Myanmar should be taken seriously.”
As long as the SAC has the reins of the central bank and state apparatus, there will be some semblance of control, said a Yangon-based manufacturing executive. “Highways might be blocked, border trading posts might fall to the resistance, but as long as manufacturing and business continues in Yangon and shipping ports and airports function, the economy — and the regime — can survive,” he said.
Myanmar is heavily reliant on trade, which accounted for nearly 73% of gross domestic product in 2022, according to the World Bank. The recent fighting has disrupted trade with China and Thailand, with imports falling nearly to zero at some border posts, prompting a shift to sea routes.
Most foreign companies operating in Myanmar appear to be in for the long haul, with foreign chambers of commerce reporting that just 20% of their members overall have exited the country since February 2021. EuroCham Myanmar, a combined European chamber of commerce, actually saw its membership jump to 158 last year from 90 in 2022.
“Companies that are still here are survivors, and that is why they’re here to stay,” said a veteran executive of the American Chamber of Commerce in Myanmar, which has retained 75% of its membership.
At a recent meeting, AmCham President Adam Castillo acknowledged increased red tape, onerous foreign exchange requirements and the “ultimate sacrifice that so many civilians in Myanmar have paid since 2021.” But he insisted that members need to “believe that together, we can and will resolve problems that now confront us. Let this be understood by those who doubt the future of American business in this country or who doubt that this country has a future.”
Japanese companies, among the biggest foreign investors in Myanmar, also remain despite the troubled exit of Kirin Holdings from a joint venture with the military-linked company MEHL in January 2023. Sumitomo, KDDI and Toyota Motor continue to do business. Shinsuke Goto, a Japanese business consultant in Yangon, said, “Many companies invested here have kept a wait-and-see attitude, but potentially there are some that may exit.”
People’s Defense Force soldiers walk with bamboo guns during basic training on Dec. 14, 2023, in Myanmar’s Kayah state. (Photo by Berry)Neighboring Thailand, another major investor, is taking a cautious approach as it aims to prevent an influx of refugees. It is moving to put in place a mechanism for cross-border humanitarian relief in conflict areas. Central to its strategy is to bring the unpopular regime back into the regional diplomatic fold by persuading the Association of Southeast Asian Nations to soften its position on barring Myanmar from high-level meetings.
But Bangkok wants to reduce its dependence on natural gas imports from Myanmar, which fell by about 20% in 2023, according to official figures. Thai officials say privately that the shift is tied to sanctions imposed by the U.S. and other countries, which are creating reputational issues for the Thai oil and gas major PTT Exploration and Production (PTTEP).
Reputational risk is a problem for all Myanmar-based businesses transacting with the West and is affecting offshore banking arrangements, said a private equity investor in Yangon. “Singapore was once our offshore banking hub of choice, [but] now ‘Myanmar’ is a dirty word, they don’t want to know us — even the Thai banks don’t want our business.”
More than 500 townhouses were recently sold in two hours at Star City, a sprawling residential complex on Yangon’s Bago River, for $125,000 each. (Photo by Ken Kobayashi)Yet in the Yangon bubble, commerce is thriving.
Property sales are at record levels due to pent-up savings and demand from buyers fleeing conflict areas. More than 500 townhouses were recently sold in two hours at Star City, a sprawling complex on the Bago River, for $125,000 each. “We never expected demand to be so high. It seems people feel safe here,” said a spokesman.
Indeed, as one Western visitor recently put it, the atmosphere in Yangon is “shockingly normal” for a country increasingly portrayed as a quagmire of violence and anarchy.