Until the dark cloud over the economic future of the Southeast Asian nation clears, these projects are unlikely to be restarted.

Japanese investors are among those caught in the middle.

At least three large-scale projects with an estimated total investment of US$1.3 billion backed by Japanese investors have been put on ice as spending by foreign tourists and middle-class consumers – a key revenue source for commercial properties – dried up.

One of these projects is the Y Complex, which was being built on the site of a former military museum in central Yangon.

Now, the northern half of the new building is covered by a grey sheet.

The Y Complex was meant to comprise swanky offices, shops and a luxury hotel, to be developed by a joint venture involving Fujita, a subsidiary of Daiwa House Industry, real estate developer Tokyo Tatemono, Japan Overseas Infrastructure Investment Corp for Transport & Urban Development (JOIN), a public-private fund, and Ayeyar Hinthar, a Myanmar conglomerate.

The complex, 70% finished, is in an upscale residential area in central Yangon with a relatively large population of foreign residents. Originally, the US$330-million complex was scheduled to open in last year.

Instead, Tokyo Tatemono booked ¥6.8 billion (US$49.2 million) in losses from the project for 2021, announcing that work on it had been suspended on a full scale.

Similarly, Daiwa House reported ¥9 billion in related losses for the year ended in March 2022. JOIN, however, has not disclosed losses it incurred from the botched project, citing confidentiality.

Development of the Y Complex project has raised ethical questions as it is built on land owned by the nation’s army, according to Justice for Myanmar, a nonprofit organisation.

Since rent has been paid into a bank account believed to be managed by the military, the project has been criticised for providing funds to Myanmar’s armed forces that had allegedly brutalised protesters.

The Japanese companies told Nikkei by email, “The land has been subleased from our Myanmar partner, to whom it had been leased by the defence ministry.” The companies also said, “Sublease fees have not been paid since Feb 1, 2021.”

Real estate projects that are not directly linked to the military are also in trouble.

Foreign companies that were expected to take up leases in those buildings have stopped investing in the country as middle-class consumers worried about their future rein in on spending after the military’s power grab.

Even if developers want to go ahead with their construction projects, a shortage of foreign exchange in Myanmar makes it hard to import necessary materials.

Japanese construction powerhouse Kajima, also with partial investment from JOIN, is involved in a project to build a complex of offices, hotels and shops in the city’s Yankin area.

An extended delay to the restart of the suspended project is expected and work is now underway to protect the construction site from wet weather. This work is expected to be completed by the end of July.

An executive at a company involved said, “We cannot easily pull out since we have invested in the project at our own risk.”

But it remains unclear when the work will be relaunched. Kajima booked an impairment loss of some ¥16 billion in connection with the project for the year ended in March.

Trading behemoth Mitsubishi and its group company Mitsubishi Estate have teamed up with Yoma Group, a leading local conglomerate, to develop a huge complex of four buildings housing offices, shops and hotels called “Yoma Central” near Yangon Central railway station.

Before the change in government, work on the site was frenetic, but there are no workers there now.

Adjacent to that, Hongkong and Shanghai Hotels, operator of the upmarket Peninsula chain, was redeveloping the former colonial-style downtown headquarters of Myanmar Railway Co into an 88-room luxury hotel, the Peninsula Yangon, at a cost of US$130 million.

In March, Hongkong and Shanghai Hotels said it would book an impairment loss of US$87 million on the stalled project.

Resentment of the military rulers runs deep among citizens. The project owners carefully assess the risk that is deemed related to the military and therefore could become a target of armed attack by resistance groups.

The suspension of all these projects has led to massive job losses. The country’s construction industry employed some 1.1 million workers before February 2021, according to the International Labor Organization.

The industry has since shed some 350,000 jobs, or 30% of workforce in the sector.

Talented engineers and skilled workers are leaving the country for jobs overseas, said a developer. “When we decide to restart the project, we may have a hard time trying to find necessary workers.”