Prolonged electricity outages during this year’s hot season have taken a toll on businesses already struggling with rising costs and shortages of materials and labour, but the junta lacks a credible plan to fill the power gap.
By FRONTIER
Ko Naing Lin has been struggling to keep his printing press afloat. With power outages crippling its operations during the March to May hot season, the revenue of his small press in Yangon’s Pazundaung Township fell by more than half.
“Last year around this time, we faced power cuts during the day but still had full power at night. Our employees could work then after resting in the afternoon. However, this year, power outages have occurred unpredictably, meaning we can’t keep a consistent schedule,” said Naing Lin, using a pseudonym to avoid retaliation from thin-skinned junta authorities.
He told Frontier that employees must report to work whenever electricity becomes available, and that could happen at any hour. This leads to irregular sleeping patterns that worsen their health.
Naing Lin also complains about the lack of alternative power sources.
“Our business is in a residential area, not an industrial zone, making it inconvenient to use a generator. We’re concerned about the loud noise it would make, and we don’t have solar panels,” he said.
Relying on power from the national grid, he added, “makes it difficult to give clients exact pickup dates, and this uncertainty also hinders our ability to fully tap into the market.”
Adding to his business woes was the rising cost of raw materials. These have to be imported from Japan, Singapore or South Korea, but the decreasing value of the kyat against the dollar has made them considerably more expensive.
Naing Lin said that over the last year, the price of a 500-page stack of paper had surged from about K100,000 to about K170,000, while the cost of ink had also kept jumping.
“Sometimes we are forced to use lower-quality products from China,” he said.
Playing the harp to a buffalo
The problems faced by Naing Lin’s printing press are far from unique in Myanmar. With the country plunged into a bloody civil war since the 2021 coup and its economy in a downward spiral, the situation got even worse on May 19, when industrial zones saw electricity supplies reduced from four hours to about two hours a day.
A day later, Yangon Electricity Supply Corporation Chief Executive Officer U Kyaw Thu told BBC Burmese that the regime had decided to prioritise supplying private households during periods of excessive heat, to the detriment of factories.
The junta’s Ministry of Electricity had announced on May 1 that the country’s electricity demand was about 5,500 megawatts per day, but there is only capacity to produce about half of this, at 2,800MW.
In its latest report on Myanmar’s economy, the World Bank said about 33 percent of the companies it surveyed in April reported power outages as their biggest challenge, up from 12pc in September last year. The figure was highest for manufacturing firms, at 42pc.
Mr Guillaume de Langre, a former advisor to the energy ministry under the pre-coup National League for Democracy government, told Frontier that the main reason for the declining electricity supply is a lack of foreign investment since the military takeover, while the junta’s economic illiteracy has prevented possible workarounds.
“The bureaucracy, local and foreign companies have offered solutions, but talking about economics and development to the military is, as the Burmese expression goes, like playing the harp to a buffalo,” he said. “The grid has not produced more than 3,000 megawatts at any point over the last 6 months. That has not happened since 2016.”
The rainy season came in June, alleviating the heat and therefore the demand for electricity to power air conditioners, while also helping to replenish the country’s hydropower dams with water. Local media reported that from June 15, industrial areas in Yangon were receiving about eight hours of electricity from 9 am to 5 pm. However, business sources interviewed by Frontier claimed the supply is erratic at best.
“They have removed the 2-hour supply time limit. But electricity doesn’t come regularly during working hours. It’s true that the supply has increased, and I think that’s because we’re in the rainy season,” said the owner of an iron factory in Yangon’s South Dagon Township. “Electricity is more or less regular in the morning, but it often fails in the afternoon and there’s really no regular full-time electricity from 9 am to 5 pm.”
The poor state of grid infrastructure is another source of blackouts throughout the year. The YESC announced on June 28 that there would be a 20pc temporary cut to Yangon’s power supply because of a fault on a transmission line in Shan State, which needed to be repaired.
Moreover, Myanmar’s store of natural gas – which fuels many of its power stations – is dwindling fast. This, combined with a lack of significant new power generation or gas exploration projects in the pipeline, means individuals and businesses will likely suffer even more in the hot seasons to come.
A costly alternative
The power cuts have forced many businesses to rely on generators, but running them has only got costlier.
“We have to run a diesel generator because there’s no regular supply of electricity,” the iron factory owner in South Dagon told Frontier. “Our costs therefore increase with the fuel prices. This ultimately affects consumers, because businesses pass the increased production costs onto the product price.”
However, the need to remain competitive limits the amount businesses can charge customers, and pushes them to cut or limit other costs – including staff wages.
“We haven’t laid off any employees in our business due to electricity issues, but we’re unable to raise their salaries,” he said.
In its recent report, the World Bank put average consumer price inflation at 26.5pc during the 2023-24 fiscal year, which ended in March, and estimated average inflation of 18pc for the current fiscal year. This means salary freezes for employees amount to substantially worsening pay in real terms.
The factory owner added that electricity from the national grid costs K150 per unit, but the cost rises to over K1,000 per unit for electricity from generators, a high cost explained by fuel prices. These prices differ by region, but in Yangon and Mandalay a litre of octane 95/92 petrol was about K2,800 in early June, while diesel was around K2,500 a litre.
The manager of a garment factory in Yangon’s Mingaladon Industrial Zone said supply was also a problem. “We need to purchase and stockpile fuel in advance because of concerns about availability for the generator. We have a partnership with a fuel dealer but sometimes supply is disrupted, leaving us unable to procure any at all,” she explained.
This situation has prompted some businesses to instal solar panels, but importing the panels and other equipment is too expensive for most. This prompts some companies to invest in only limited solar systems, which don’t cover all their electricity needs.
The owner of a phone repair shop in Magway Region’s Pakokku town said he uses both solar power and a generator for his business, but mainly relies on the generator.
“We’re compelled to raise repair charges due to increased costs when we use the generator. We used to charge K5,000 for repairs, but now we have to ask for K7,000 or K8,000,” he said.
A restaurant owner in Mandalay said her business also uses a mixture of power sources. “We primarily rely on solar power but resort to generators when solar power isn’t feasible. As you know, we can’t depend on the electricity provided by the state,” she explained.
Again, this affects prices. She said that a dish of rice with two types of meat cost K3,500 last year, but in February she increased the price to K4,500 due to the electricity problem and the increased price of rice and other foodstuffs, adding she will need to increase the price again soon. As a consequence, she estimates that sales have decreased around 20pc from last year.
A downward spiral
The prices of many essential commodities are rising in tandem with the devaluation of the kyat. The national currency declined dramatically after the coup, when it was about K1,300 to the US dollar. Its value has sunk further since April, from a market rate of K3,900 to around K5,000 in late May. By press time, the rate has improved somewhat to K4,500 – still well short of the artificial Central Bank peg of K2,100.
U Ye Tun, a political analyst and former MP for the Shan Nationalities Democratic Party, attributed the depreciation of the kyat to factors including a decline in exports, particularly from border trade, a surge in outbound travel and investment, and people within Myanmar looking to hedge against inflation, all of which create an overwhelming demand for dollars.
“The worsening economic conditions have prompted some individuals to engage in panic-buying of gold and dollars, exacerbating the kyat’s depreciation beyond normal market dynamics,” he told Frontier. “Furthermore, the trend of Myanmar citizens investing in condominiums in Thailand has contributed to the downward spiral of the kyat.”
The foreign currency market in Myanmar is so small in relative terms that a seemingly isolated phenomenon, such as an uptick in real estate investment in Thailand, may upset prices. Incidentally, this made it possible for currency and gold speculators to game the market even before the coup.
In an analysis paper published last month for the National Unity Government, the parallel administration set up by lawmakers ousted in the coup, Australian economist and former NLD government advisor Mr Sean Turnell said that another cause of inflation has been the junta’s decision to print money to fill the widening hole in its budget.
“With state revenues in decline as the economy contracts – but with military spending at record levels (up over 60% since the coup) – Myanmar’s growing budget deficits are ‘financed’ by the highly destructive expedient of ‘printing money’,” he wrote.
In a June 3 press conference given alongside Turnell, NUG finance minister U Tin Tun Naing claimed the regime had printed about K30 trillion since it seized power.
Turnell explained in his paper that, “Following the abandonment of the NLD government’s bond market, tax, and other financial reforms by the junta, over 70% of Myanmar’s deficits are now funded this way. Inflation (by far the highest in ASEAN), and the monetary instability already noted, are the highly predictable consequences.”
Amid this instability, many large and small businesses have concluded it’s too costly and uncertain to continue.
The South Korean-owned CJ Feed, which ran an animal feed factory in Yangon’s Hmawbi Township, suspended operations on May 28. In a notice to their customers, the company cited high costs, shortages of raw materials and a lack of workers among the reasons for the closure.
Ordinary workers, meanwhile, are being squeezed by both the rising prices and stagnant wages. “Everything keeps getting more expensive, but my daughters’ wages haven’t gone up,” said a woman in Yangon’s Shwepyithar Township, whose household of six subsists on a combined monthly income of about K500,000 from three working family members. “We have to save more and be stricter with our spending. Unfortunately, I don’t see prices coming down any time soon.”
“There are families in a worse situation than mine. People in some areas have lost their homes because of the military council. I want the revolution [against the junta] to succeed quickly. The people have suffered greatly because of the military council.”
