For foreign companies in Myanmar, the coup creates an ‘unworkable’ situation


SINGAPORE – Foreign companies in Myanmar struggle to operate in an increasingly volatile environment as the armed forces use deadly violence against a growing protest movement opposing last month’s coup and sections of the country’s workforce are they go on strike.

Bank clerks and dock workers are not taking action, as part of a massive campaign of civil disobedience aimed at pressuring the military regime to restore the elected government. That has paralyzed Myanmar’s financial system and logistics arteries, with executives scrambling to figure out how to pay wages and import raw materials.

Migrant workers have been fleeing industrial areas near Yangon, the country’s largest city, since security forces shot dead at least 37 protesters there on March 14 and flames swept through owned clothing factories. china in the midst of chaos.

Energy giants Total SE and Chevron Corp.

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, who have business ties to a state-owned company, are under pressure to prevent revenue from flowing into the army that controls the government.

“For companies in general, the conditions are quite unfeasible,” said a senior Myanmar-based UN official. “There is a sense of impending death.”

The February 1 coup ended Myanmar’s decade-long transition to democracy. Police and soldiers responded with terrible violence to the protests that followed, killing at least 247 people, according to the Political Prisoner Assistance Association, a nonprofit that monitors arrests and deaths.

Garment factories, like this one in Yangon last May, produce about a quarter of the country’s exports, but manufacturers say they are becoming increasingly difficult to staff.


Photo:

Associated Press

Reducing investment by foreign companies may not change the military calculus, Myanmar-focused analysts say, because the military appears more motivated by political primacy than economic development. The generals resisted decades of economic sanctions, gradually lifted over the past 10 years during democratic change, and are used to ruling in international isolation.

However, an economic collapse caused by widespread strikes, potentially amplified by a threat of outflow from foreign investors, would pose challenges for them. Sectors such as clothing and infrastructure have attracted substantial investment over the past decade, especially from Asian countries, and employ hundreds of thousands of workers.

Some foreign companies are relocating staff living near protest hotspots to secure hotels and are encouraging non-essential expat employees to leave the country, according to Jack Mullan, CEO of the based risk management firm. in Singapore Barber Mullan and Associates, which advises foreign companies there.

Even basic tasks have gotten complicated. Businesses that normally transfer money from other parts of Asia to pay wages are finding that with many banks in Myanmar closed, transfers are not going through. Mullan said a transfer he made to a private bank in Myanmar on March 2 has yet to be settled.

“It is a great stress for many companies: how will they get cash at the end of the month?” he said.

Dale Buckner, CEO of McLean, Virginia-based security services firm Global Guardian, said his company has a solution to help its seven large corporate clients in Myanmar: transfer funds to a broker in Singapore who has cash on hand in Myanmar. and the cash is then delivered in parcels to clients’ offices in Myanmar. The total delivered has reached about $ 2.5 million, and the broker’s fee has risen to 25%, Buckner said, from 12% six weeks ago.

Since the beginning of March, clothing brands sourcing garments from Myanmar, such as Hennes & Mauritz HM.B from Sweden -2.02%

Italy’s AB and Benetton Group SRL have halted new orders, citing concerns about instability. Garment manufacturers, whose output accounts for about a quarter of the country’s exports, say it is becoming increasingly difficult to staff factories. Thousands of workers have fled two of Yangon’s industrial suburbs since protests on March 14 that left dozens dead.

Amid the chaos of the deadly March 14 protests in industrial areas near Yangon, fire ripped through some Chinese-owned clothing factories.


Photo:

Associated Press

“My parents are worried about us,” said Ma Thida, 33, a sewing operator at a Chinese-owned factory, who returned to her family’s rural home.

Despite the risk, protests against the coup have attracted citizens from all walks of life. A Western businessman in Yangon said that some of his employees regularly assist them during working hours. “It’s very difficult to tell them not to go,” he said.

Workers of the Dutch beverage giant Heineken HEINY 0.60%

NV, which owns a brewery in Myanmar, has lobbied the company to stop sending the income tax it deducts from employees’ wages to the government as a way to deny military funding, according to employees of Heineken in Yangon.

A business analyst in Yangon familiar with the situation said companies like Heineken face a dilemma: They break the law by failing to hand over tax money, or they risk being branded as promilitaries – and perhaps boycotts – by handing them over despite of employee objections.

“All companies are having this problem,” said the analyst. “The staff says, ‘We don’t want to pay income taxes.’ “

A Heineken spokeswoman said after the initial publication of this article that the company was “committed to complying with the law and paying taxes to ensure that we can continue to operate,” but added that “given the current situation in Myanmar,” the company has requested a deferral of its tax payments.

Some are finding a third way. A Yangon-based Western lawyer said he knows of several companies that offer protesting staff the option to become independent contractors, making workers responsible for submitting their own income taxes to the government. They can choose not to, without involving the company.

Multinationals working with state-owned companies have a harder time escaping scrutiny. Activists and a group representing ousted Myanmar lawmakers called on French energy company Total, whose operations in Myanmar waters supply gas for the domestic market and for export to neighboring Thailand, to stop transferring revenue to its state partner Myanmar. Oil and Gas Enterprise. The group of lawmakers said in a letter to Total that continuing the payments would fund the board.

Human rights defenders are calling on the country’s energy companies, such as Total and Chevron, part of the Total venture, to put the proceeds into escrow accounts until civil government is restored.

Western oil and gas companies worry that it could be a breach of contract and invite legal retaliation against local employees, according to a person familiar with their thinking. There are no easy options for leaving the country, the person said. Negotiating a sale to leave the country could take months or years, and quickly handing over the fields to an unprepared new operator could lead to power outages, the person said.

Chevron said it is working to “ensure safe and reliable energy for the people of Myanmar in a time of crisis and during a pandemic.” Total declined to comment. The company, along with other foreign companies, signed a statement in mid-February saying they were viewing developments in Myanmar with “growing and deep concern.”

Two symbols of the protests, a three-finger salute and images of the detained civilian leader Aung San Suu Kyi, were displayed in Yangon on March 12.


Photo:

Agence France-Presse / Getty Images

Write to Jon Emont at [email protected]

Corrections and amplifications
An earlier version of this article incorrectly identified Total TOT 1.71%

SE as Total SA.

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