YANGON/BANGKOK -- For one Burmese investor in Myanmar's nascent tech industry, the military coup of Feb. 1 brought back unwelcome memories of his country's dark past, of an atmosphere of repression and fear, that he thought had been left behind.
"I've lived through what I thought were the lowest points ... but I've never seen nor imagined anything like this," said the Bangkok-based investor.
He described how his affiliated network of companies in Myanmar had been approached by junta representatives demanding names of staff who had not turned up for work -- part of a drive to identify workers participating in escalating street protests.
"We were able to say that most were working from home due to COVID-19 concerns," he said, "but that doesn't help that creepy feeling of suddenly living in a police state."
Neither do the junta's new restrictions on freedom of movement and draft laws on the internet and data monitoring, which have triggered unprecedented pushback from the country's key business groups.
The developments threaten to hit rewind on a decade of progress. Since the transition from military rule in 2011, under a government led by former Gen. Thein Sein, business became the engine for a great Southeast Asia catch-up story. The Myanmar economy seemed ready to make up for lost time. From a trickle in 2010, foreign direct investment hit a high point of $38 billion in 2016. In the same period, mobile phone services and internet penetration soared from near zero to more than 40% of the 53 million population.
The coup and the arrest of Aung San Suu Kyi and other civilian leaders has put that trajectory under threat -- and cast doubt on the inflow of foreign investment, business confidence and the expansion of a tech revolution that has fed into a regional boom.
"We see much of our work over the last years in peril, and deplore the prospect that all our good work should become obsolete," said Aung Thura, a Myanmar-based business consultant.
A private equity investor who has lived in Yangon for six years said: "Institutional investors will not put a single kyat more into investments until this situation is resolved -- and quite possibly they may cut their losses if it gets too difficult."
At the same time, a number of business owners and executives, particularly those who were able to negotiate Myanmar's turbulent past, believe they can deal with this latest shift in the political landscape. Some were frustrated with limited progress by Suu Kyi's National League for Democracy-led government on economic reform and believe they can work with military leaders in a country that is savvier and more digitally connected than in previous periods of military rule.
A local businessman who runs an industrial group said: "Ironically, maybe this military regime will not be as bad for the economy as feared. Western foreign direct investments yes, but the overall economy maybe not. I don't think anyone should draw conclusions so fast."
Still, with Myanmar's military back in charge, "doing business in the country will mean walking in a reputational minefield," says Romain Caillaud, principal of Tokyo-based advisory firm, SIPA Partners and a longtime Myanmar expert. "Investors will find themselves between a rock and a hard place. The military government will demand a business-as-usual approach, and that companies pressure employees and suppliers to accept the new political order."
Already some international investors have decided that the cost of maintaining business as usual is too high.
Kirin Holdings, the Japanese brewer, said it is withdrawing from its beer joint venture with military-owned MEHL. Singaporean tycoon Lim Kaling announced his withdrawal from a tobacco joint venture with military-linked Virginia Tobacco, the country's biggest cigarette maker. Thailand-based property developer Amata said it had suspended work on an industrial complex it was developing in Yangon.
Others that are not involved in military joint ventures may follow, with Japanese companies under particular scrutiny: Suzuki Motor and Toyota have substantial investments in the country, while the Japanese chamber of commerce in Yangon has more than 400 members.
"Each company will decide whether to maintain or abandon, but it will not be easy," said a Japanese executive in Yangon. "Whether a [credible] election is held or not is an important point, but it's uncertain whether [Japanese] companies can wait until then. If there's violence, we will have to refrain from new investment."
Then there is the threat of tighter sanctions. The U.S. has already fired a warning shot by sanctioning key members of the junta, freezing their assets and naming three military-held companies on its list of Specially Designated Nationals, in an executive order from U.S. President Joe Biden.
"The Biden administration is taking a careful, calculated approach by first focusing on whom they identify as the key perpetrators," said Alexander Dmitrenko, the Tokyo-based head of Asia sanctions at law firm Freshfields Bruckhaus Derringer.
Dmitrenko said Biden's executive order left "ample authority" for other entities or individuals to be sanctioned. "Should the domestic situation continue to escalate, we will likely see more sanctions designations," he said.
Following the U.S. move to sanction key military figures, more pressure is likely to pile onto MEHL's other business partners, including South Korean steelmaker Posco International, apparel maker Pan-Pacific Group and property developer Inno Group.
Of course, companies that do exit Myanmar could create room for investors less fazed by sanctions -- particularly from China.
"I had hoped more investment would come from the West in the past five years," the Yangon-based businessman said. "But that was not the case. This coup may create a huge vacuum of Western countries. China and many other countries will take advantage."
Such a scenario is not unrealistic but would bring consequences, warned Murray Hiebert, senior associate with the Southeast Asia program at Washington-based think tank CSIS. "This time, Myanmar has more countries willing to do business [with it], including China, Japan, other Asian partners and Russia. But punitive sanctions could reduce the country's exposure to democratic countries, affect the pace of economic reform and restrain fuller development of civil society."
An executive with a prominent Myanmar property developer, meanwhile, said that guarantees and finalization of a number of China's delayed infrastructure projects under its Belt and Road Initiative may finally become a reality. "That could only be good for Myanmar. ... The NLD basically squandered some of the advantages this country could have had with BRI," he said.
Others believe the new government will be more business-friendly than the ousted NLD government. "Sometimes it's who's at the very top that counts," said one of eight Yangon-based business executives who told Nikkei Asia they believed that business could possibly fare better under a military government.
"At least [the military] makes quick decisions and gets things done," said a senior member of the Union of Myanmar Federation of Chambers of Commerce and Industry, the country's leading business body.
Following the coup, when the group asked its members whether it should issue a statement opposing the military intervention, 30% were in favor, with 70% being firmly against it. Chamber executives also met the junta's new State Administrative Council, which reassured them that business would be a priority.
Early appointments to the government are seen by some as another sign of hope. "Appointments in portfolios for investment and finance suggest the junta is trying to allay investor non-confidence [by picking] a proven capable person in Aung Naing Oo," said Myanmar analyst Aung Zin Phyo Thein, referring to the new investment minister, a technocrat who is well-regarded by business.
Some, however, warn that a handful of key appointees cannot burnish the government's business credentials given the political taint. "It is not about the people [appointed]. It is about the system," a local entrepreneur said.
Another major corporate concern is over the treatment of the internet and tech sector. After the coup the junta blocked social media platforms such as Facebook and shut down mobile networks, disrupting business and casting a shadow over companies that rely on online platforms. The junta then published a draft cybersecurity law that would give it sweeping control over data access and online content, and force internet service providers to curb a range of content deemed inappropriate.
The UMFCCI and some foreign chambers, as well as local and foreign businesses, publicly warned that the provisions would hurt the digital economy and undermine foreign investment and innovation. Telenor of Norway, one of the four licensed telco operators, said it was "not appropriate" to pass such a law during a state of emergency and grant such broad powers to a temporary administration.
For businesses and consumers, the law threatens to disrupt popular digital payments and e-commerce services, led by Wave Money, the country's most successful financial services provider, owned by Myanmar-based but Singapore-listed Yoma Strategic Holdings and Ant Financial Services Group. Yoma has resumed services after the coup but warned of a potential "change in business sentiment."
"Myanmar's cash-based economy has had a huge digital push during the pandemic, with services and transactions moving online. The junta's mobile network shutdown and Facebook block have thrown Myanmar's emerging digital economy off the cliff," said a businesswoman in Yangon who owns a service provider. "Suu Kyi's government really wanted to develop the digital economy. With the new government, it is unclear [whether] their tendency to control the internet will severely undermine business confidence."
Vicky Bowman, director of the Myanmar Centre for Responsible Business, said a number of companies, including those in the IT and communications sector, were concerned by the draft law.
"They are uneasy about the wide-ranging reasons given for 'interception,' that is, surveillance, as well as for shutdown of online services, the use of undefined words like 'misinformation,' which could mean anything the military government doesn't like, and the lack of any reference to protecting the right to privacy or freedom of expression," Bowman told Nikkei.
Ultimately, most executives who spoke with Nikkei agreed that regardless of whether the West imposes further sanctions, the reversal of democratic reforms has greatly damaged the justification for any companies entering the Myanmar market.
"We are simply holding our investments but not adding one kyat more," a private equity investor said.
Luc de Waegh, an investment consultant who has been in Myanmar for 27 years, said that in the past it was possible, but very complex, for the country's businesses to do deal with Western counterparts. "Everything was more complicated, took longer and was more expensive," he said. "Doing business in this style can only be justified if the long-term potential can justify the pain."
The question now is whether that justification is still there.
A decade ago, expectations generated by Myanmar's opening to the world were sky-high, de Waegh said. "Today's assessments will be far more realistic and conservative," he said. "From now it will be much harder, if not impossible, to attract first-class international investors."
Additional reporting by Yuichi Nitta in Yangon