How Myanmar’s SMEs Are Coping With An Economy Of Uncertainty

Eurasia Review  |  Hsu Latt Phyu

Myanmar’s small and medium-sized enterprises (SMEs) are deploying survival-driven adaptation strategies to navigate severe post-2021 coup economic deterioration marked by 24.6 percent inflation in April 2026, currency depreciation, and systemic infrastructure collapses. Facing daily power outages and intense foreign exchange controls, civilian businesses are shifting away from growth to preserve core operations.

Prolonged political instability following the military takeover, coupled with labor shortages from mandatory military service and external Middle East fuel supply shocks, has severely compromised national productivity. To maintain continuity, 42 percent of firm electricity consumption relied on diesel generators and off-grid solar systems by October 2025, alongside informal financing networks and migration to digital platforms like Telegram, Viber, and TikTok. While these pragmatic adaptation measures prevent immediate operational collapse, long-term economic sustainability requires targeted infrastructure support, credit access, and international sanction recalibration to prevent systemic civilian enterprise erosion across the country.

Comment

The severe contraction of civilian enterprise in Myanmar reveals the structural limits of state-directed capital controls implemented by the State Administration Council. When private firms shift capital into diesel generation and grey-market foreign exchange to maintain baseline operations, formal tax revenues and banking liquidity rapidly drain from state coffers. This structural leakage limits the regime's capacity to finance military procurement and sustain state-owned defense industries through standard fiscal channels.

Consequently, forced capital preservation among small manufacturers accelerates the informalisation of the broader economy, constraining the State Administration Council's ability to extract revenues under the 2010 People's Military Service Law framework. As productive assets shift toward decentralized off-grid power, central authority over economic mobilization breaks down, directly degrading the long-term sustainment capacity of Tatmadaw logistics formations.

Strategic Question for Discussion

If the State Administration Council loses the ability to tax and regulate the informalised SME sector, which factor will more severely constrain Tatmadaw war sustainment — the loss of fiscal revenue for defence imports or the breakdown of domestic supply chains?

The trajectory indicates that the breakdown of domestic supply chains poses the more immediate threat to operational sustainment. While foreign currency reserves can be intermittently bolstered through state-managed resource exports, the Tatmadaw cannot easily substitute local manufacturing, food processing, and transport services once civilian logistics networks fully migrate into informal grey markets beyond state control.

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