For foreign companies in Myanmar, the coup creates an “unfeasible” situation

Migrant workers have fled industrial areas near Yangon, the country’s largest city, since security forces shot at least 37 protesters there on March 14 and flames broke out in China’s clothing factories amid chaos.

Energy giants Total SE and Chevron Body.

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, who have trade ties with a state-owned company, are under pressure to prevent revenue from returning to the government-controlled army.

“For businesses in general, the conditions are quite unfeasible,” said a senior UN official based in Myanmar. “There is a sense of imminent fatality.”

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

The low investment of foreign companies may not change the military’s calculation, say analysts focusing on Myanmar, as the military appears more motivated by political primacy than economic development. Generals have withstood decades of economic sanctions – gradually lifted over the past 10 years during democratic change – and are accustomed to governing under international isolation.

However, an economic collapse caused by large-scale strikes, potentially amplified by the threat of foreign investors leaving, would create challenges for them. Sectors such as clothing and infrastructure have attracted substantial investment over the last decade, especially from Asian countries, and employ hundreds of thousands of workers.

Some foreign companies are moving staff living near hot spots to secure hotels and encouraging non-essential expatriate employees to leave the country, according to Jack Mullan, executive director of Singapore-based Barber Mullan and Associates, which advises foreign affairs. There.

Even basic tasks have become complicated. Companies that normally transfer money from other parts of Asia to pay salaries find that with many Myanmar banks closed, transfers do not take place. Mr Mullan said a transfer to a private bank in Myanmar on March 2 had not yet been clarified.

“It’s a big stress for many companies – how will they get paid at the end of the month?” he said.

Dale Buckner, chief executive of Global Guardian security services in McLean, Virginia, said his company has a solution to help its seven largest corporate clients in Myanmar: transfer funds to a Singapore-based broker with cash on hand in Myanmar, and the cash is then delivered in packages to Myanmar customer offices. The total delivered reached about $ 2.5 million, and the broker’s commission increased to 25%, said Mr. Buckner, from 12% six weeks ago.

From early March, clothing brands supplying clothing to Myanmar, such as the Swedes Hennes and Mauritz HM.B -2.02%

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

“My parents are worried about us,” said 33-year-old Ma Thida, a sewing operator at a factory in China who has returned to her rural family home.

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

Workers at the Dutch beverage giant Heineken HEINY 0.60%

NV, which has a brewery in Myanmar, has pressured the company to stop charging the government the income tax it deducts from employees’ salaries as a way to deny military funding, according to Heineken employees in Yangon.

A business analyst in Yangon, familiar with the situation, said companies like Heineken face a dilemma: break the law by not delivering tax money or risk being branded pro-military – and may suffer boycotts – by delivering. and in the face of employee objections.

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

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

Some find a third way. A Western lawyer in Yangon said he knows of several companies that offer protesters the option to become independent entrepreneurs, holding workers accountable for paying their own government income taxes. They can choose not to do so without involving the company.

Multinationals working with state-owned enterprises find it harder to get out of control. Activists and a group representing lawmakers fired from Myanmar have called on French energy company Total – whose operations in Myanmar’s waters supply gas to the domestic market and for exports 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 further payments would fund the junta.

Human rights activists are calling on energy companies in the country, such as Total and Chevron, part of the Total project, to place their revenues in escrow accounts until civilian rule is restored.

Western oil and gas companies fear there may be a breach of contract and are calling for legal retaliation against local employees, according to someone familiar with their thinking. There are no easy options for leaving the country, he said. Negotiating a sale to leave the country could take months or years, and the rapid handover of the fields to a new unprepared operator could lead to power outages, he said.

Chevron said it was working to “ensure safe and reliable energy for the people of Myanmar in times of crisis and during a pandemic.” Totally declined to comment. The company, along with other foreign affairs, signed a statement in mid-February, saying it was following developments in Myanmar with “growing and deep concern”.

Write to Jon Emont at [email protected]

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

SE as Total SA.