BANGKOK/YANGON -- Foreign investment in Myanmar, first depressed by the COVID-19 pandemic and then by the political unrest that spread after the February military takeover, has fallen to an eight-year low, official numbers show.

And amid the country's streams of foreign currency drying up, the International Monetary Fund expects the economy to post negative growth next year.

The total amount of foreign investment permitted in Myanmar in the year through September dropped 22% to $3.8 billion, according to the country's Directorate of Investment and Company Administration.

The figure excludes investments in special economic zone projects.

During the 12 months, the number of newly approved investment projects fell sharply, to 48, one-fifth the year-earlier total. Of the 48, 38 were approved before the military takeover.

Of the approved investments, the amount for power-related projects tripled from the previous year to $3.12 billion. This was driven by a $2.5 billion investment approved in May for a joint liquefied natural gas thermal power plant.

Local and Chinese companies are involved in the project. They intend to build a power plant with an output capacity of 1.39 million kilowatts and an LNG import base along Myanmar's Indian Ocean coast.

Approved investments in the manufacturing industry, which significantly impact job creation, decreased 75% from a year earlier to $286 million.

The third largest approved investment amount, $133 million, went into transportation and communication. This was followed by $81 million for hotels and tourism and $28 million for industrial-use real estate.

Many of the foreign companies operating in Myanmar are refraining from making additional investments.

"It's difficult for many companies to decide whether to withdraw or restart investing until the dust settles," said Shinsuke Goto, chief executive officer of Trust Venture Partners, which advises foreign companies operating in Myanmar.

The uncertain situation has left these companies unable to decide whether the country's political and public safety situations will return to normal, or whether the business environment might be made worse by tighter sanctions and other factors.

Myanmar's economy in the year through September shrunk 18%, according to an estimate by the World Bank. The Asian Development Bank puts the contraction at 18.4%.

The IMF expects matters to worsen. On Oct. 12, it revised downward its forecast for Myanmar's 2022 economic growth rate to -0.1%.

In April, it projected 1.4% growth.

The IMF also expects the impact on the economy to last longer. It now projects an annual 2.4-2.5% growth for 2023 to 2026, significantly lower than its forecast of 6.4-6.5% for 2022 to 2025 a year ago.

A group of women hold torches as it protests the military takeover in Yangon, Myanmar, on July 14, 2021.   © Reuters

Some foreign companies have decided to either withdraw from Myanmar or downsize their operations in the country. German wholesale company Metro has announced it will cease its local operations by the end of October. The company built a logistics base in the Thilawa Special Economic Zone, in suburban Yangon, and began offering food ingredients to restaurants and hotels in 2019.

"We cannot offer services at the level of quality we want to maintain in the current environment," the company said in a statement on its Facebook page in early September.

Norwegian telco Telenor announced in July that it would sell its mobile communication business in Myanmar to a Lebanese investment company for $105 million. But the matter remains unsettled as Myanmar authorities have not approved the sale.

More than 400 Myanmar citizens formed a group to raise their concerns on the sale. In a statement, they said, "Telenor has a responsibility to consider the human rights impact of any disengagement from Myanmar," including assessing the suitability of the company to which it is offloading the business.

Telenor in September said it had determined that it would be impossible to continue to operate in Myanmar as it faced "increasing pressure to activate intercept equipment that is subject to Norwegian and European sanctions for use by the authorities in Myanmar."

Some franchisees for foreign food and beverage brands targeting Myanmar's growing middle-income segment -- including Auntie Anne's, a U.S.-based chain of pretzel shops, and Koi The, a tapioca tea house operator from Taiwan -- have closed their businesses in Myanmar.

According to DICA, $2.2 billion worth of investments or loans associated with foreign direct investment flowed into Myanmar in 2020. It is likely the total will fall significantly in 2021.

Meanwhile, Myanmar is seen to be hurt by the drop-off in foreign currency revenue, money it uses to support the economy. At the same time, tourism will likely slump and official development assistance from other countries will dissipate.