For foreign businesses in Myanmar, Coup creates ‘non-operational’ situation

Immigrant workers have been fleeing industrial areas near Yangon, the country’s largest city, as security forces shut down at least 37 demonstrators there on March 14 and flames ripping through garment factories in China amid the chaos.

Total energy giants SA

TOTAL 1.71%

and Chevron Corp.

CVX -0.71%

, which has business ties to a state-owned company, is under pressure to prevent revenues from flowing into the government-controlled army.

“For businesses in general the conditions are very unworkable,” said the chief executive of the Myanmar-based DA. “There is a sense that things are wrong.”

The February 1 coup ended Myanmar’s decanelong transition to democracy. Police and soldiers have dealt with horrific violence in the ensuing protests, killing at least 247 people, according to the Association for the Support of Political Prisoners, a nonprofit organization that monitors arrests and deaths.

Less investment by foreign companies may not change the army’s calculus, analysts pointing to Myanmar say, as the military appears to have more political priority than economic development. The generals are facing decades of economic sanctions – gradually lifted over the last 10 years in the democratic movement – and are accustomed to ruling under international isolation.

However, economic downturns caused by widespread strikes, which may be exacerbated by the threat of foreign investors going out, would create challenges for them. Sectors such as clothing and infrastructure have attracted significant investment over the past decade, particularly from Asian countries, and employ hundreds of thousands of workers.

Some foreign companies are relocating workers living near hot spots to secure hotels and are encouraging amateur workers to leave the country, according to Jack Mullan, chief executive of Singapore-based risk management firm Barber Mullan and Associates, which advises foreign businesses. there.

Even basic tasks have become complicated. Companies that typically wire money from elsewhere in Asia to pay wages are finding that, with many banks in Myanmar closed, transfers are not going through. Mr Mullan said a transfer he made to Myanmar’s private bank on March 2 is yet to be cleared.

“It’s a big concern for a lot of companies – how do they get money at the end of the month?” he said.

Dale Buckner, chief executive of McLean, Global Guardian, a Va.-Based security services company, said his company has a mission to help its seven major corporate messengers in Myanmar: It wires money to a broker in Singapore who has cash on hand in Myanmar, and the money is then delivered in packages to Myanmar client offices. The total number delivered has reached about $ 2.5 million, and the broker’s tax has gone up to 25%, Mr. Buckner said, from 12% six weeks ago.

From early March, clothing brands looking for clothing from Myanmar, such as Hennes & Mauritz HM.B in Sweden -2.02%

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

“My parents are worried for us,” said Ma Thida, 33, a sewing company at a factory in China, who returned to her rural family home.

Despite the threat, anticoup protests have drawn citizens from all walks of life. One Western businessman in Yangon said that some of his employees attend them regularly during working hours. “It’s very difficult to tell them not to go,” he said.

Workers at Dutch beverage giant Heineken HEINY 0.60%

NV, which owns a brewery in Myanmar, has pressed the company to stop passing to the government the income tax it is deducting from workers’ salaries, as a way of financing arms. refused, according to Heineken employees in Yangon.

An industry analyst in Yangon familiar with the situation said companies like Heineken are against quandary: Break the law by not delivering tax money, or risk being identified as pro-arms – and possibly boycotts – by delivering it over employee grievances.

“Every company has this problem,” said the analyst. “Employees say, ‘We don’t want to pay income tax. ‘”

A spokesman for Heineken said after this article was first published that the company was “committed to complying with the law and paying taxes to ensure we can continue to operate,” but she said “with the current situation in Myanmar” the company has called for a delay in its tax payments.

Some find the third method. A Yangon-based Western lawyer said he is familiar with a number of businesses that offer grievance workers the option of becoming independent contractors, forcing workers to be responsible. to deliver their own income taxes to the government. They can choose not to, not to influence the company.

Multinational companies working with state-owned businesses are finding it harder to get past scrutiny. Activists and a group representing ousted Myanmar lawmakers have called on French power company Total – which has activity in Myanmar waters to supply gas for the domestic market and for export to neighboring Thailand – to stop the transfer of revenues to state-owned partner Myanmar Oil and Gas Enterprise. The legislature’s group said in a letter to Total that continuing the payments would fund the junta.

Human rights activists are urging energy companies in the country such as Total and Chevron, part of the campaign with Total, to put the revenue in escrow accounts until civil regulation is renewed.

Western oil and gas companies are concerned that this could be a breach of contract and invite legal retaliation against local workers, according to someone familiar with their way of 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 fields to an unprepared new operator could lead to a power outage, the person said. .

Chevron said it is working to “ensure safe and reliable energy for the people of Myanmar in times of crisis, and in pandemics.” Total refused to comment. The company, along with other foreign businesses, signed a statement in mid-February stating that it was watching developments in Myanmar with “growing concern.”

Write to Jon Emont at [email protected]