Political Instability Impacts on Foreign Direct Investment: A Reflective Study on the Myanmar Crisis

Abstract

Political instability is a critical determinant of foreign direct investment (FDI) flows, particularly in regions marked by conflict and governance disruptions. This paper investigates the impact of Myanmar’s ongoing political crisis on FDI inflows, exploring the interplay between political uncertainty, investor confidence, and economic stability. The crisis, sparked by the 2021 military coup, has significantly altered Myanmar's investment climate, creating a reflective study on how political instability influences global economic decision-making. To understand this dynamic, the study integrates insights from regional investment analysis and empirical insights of FDI trends in politically volatile environments. Literature on FDI determinants highlights governance and stability as primary drivers, and this work builds on those findings by contextualising them within Myanmar’s unique socio-political landscape. Methodologically, the research adopts a qualitative analysis of FDI data pre- and post-crisis with in-depth literature insights from policy reports and investor narratives. Key findings reveal that the crisis has not only led to a sharp decline in FDI but has also redirected investment flows to neighbouring ASEAN countries with relatively stable governance. The analysis underscores how political unpredictability exacerbates economic vulnerability, deterring long-term investments and undermining development goals. The paper concludes by advocating for collaborative governance solutions and multilateral frameworks to stabilise politically fragile states and mitigate FDI disruptions. Future studies are recommended to explore how international actors and regional organisations can foster resilience and safeguard economic growth amidst crises, offering valuable lessons for addressing political risks globally.