Myanmar: from land of promise to pariah state
Shortly after the military seized power on February 1, 55 foreign investors in Myanmar, including Coca-Cola and Facebook, signed a statement committing to the country and staff during developments of “deep concern”.
A month on, the pledges are being sorely tested with Myanmar’s economy all but paralysed by huge anticoup protests, strikes and the junta’s killing of dozens of protesters drawing calls for boycotts and sanctions.
A sudden about-turn from Australia’s Woodside Petroleum, one of the signatories to the statement, exemplifies the challenges. It said on February 27 it would reduce its presence in the country amid concerns about violence and pull its offshore exploration team — just one week after saying drilling would not be affected.
This week, fashion giant H&M, which has 45 direct suppliers in Myanmar and is also a signatory to the statement, said it has paused new orders from the country due to transport and manufacturing disruptions.
H&M is not, however, taking any immediate decision on its long-term future in Myanmar. “We fully recognise the complexities ... in balancing different aspects to ensure the people in Myanmar are not negatively affected,” said Serkan Tanka, Myanmar country manager.
One large global firm has already made a dramatic exit. Kirin Holdings is winding up a
beer alliance with a militarylinked company after coming under pressure from activist groups.
Escalating violence, in which more than 50 protesters have been killed, is only adding to the uncertainty facing companies anxious about reputational risk.
“If this goes on for months, more would probably just totally leave,” said Murray Hiebert, senior associate of the Southeast Asia programme at the Centre for Strategic and International Studies.
Operating in Myanmar has long been a wrestle between high risk and potential high reward for foreign business.
ECONOMY CONTROLLED
The opening up of one of Asia’s last frontier markets in 2011 after half a century of military rule led to a surge in foreign direct investment. Net inflows peaked at $4.7bn in 2017 compared with $900m in 2010, according to the World Bank.
But even before the coup, firms were grappling with crumbling infrastructure, constant power disruptions, legal uncertainty and an economy controlled in large part by the military.
While all foreign firms will be assessing and assessed over their next moves, energy companies — among the longeststanding foreign investors — are particularly likely to come under further pressure.
The UN’s human rights investigator on Myanmar, Tom Andrews, said in a report last week that countries should impose sanctions on Myanmar Oil and Gas Enterprise (MOGE), which is now controlled by the military and represents its largest source of revenue.
Total, which has been in Myanmar since 1992, and Chevron have a large offshore gas project in partnership with MOGE. A Chevron spokesperson said it will comply with all applicable laws and sanctions. Total declined to comment on the threat of sanctions.
Telecom and internet companies, too, are in a difficult position as they deal with intermittent shutdowns of services and new amendments to cyber laws that threaten human rights.
Norway’s Telenor, which has a mobile licence in Myanmar, said on Monday that the amendments broaden the powers of the military and reduce civil liberties, calling for the restoration of a sound legal framework in Myanmar.
On February 2, Facebook banned the Myanmar military from using its Facebook and Instagram platforms.
Just how corporates should respond to Myanmar’s challenges is a matter of hot debate.
Chris Sidoti, an expert on Myanmar who was part of a UN-led fact-finding mission in 2019, says all foreign firms should suspend their businesses in Myanmar because the military has taken over every facet of government.
Rights group Burma Campaign UK has called on Western brands to be diligent on who they work with but not to abandon Myanmar workers. Nearly half a million people in Myanmar are employed in factories producing textiles for retailers such as H&M, Adidas, Gap and Zara.
John Bray, director at business consultancy Control Risks, said that pressure on firms in Myanmar needs to be guided by an assessment of “complicity”.
Said Bray, “If you are providing a service for the Myanmar people, which they are paid for and which promotes the development of the economy, I don’t think you’re complicit in what is going on in the streets.”