For foreign companies in Myanmar, Coup creates an unworkable situation

Migrant workers have been fleeing industrial areas near Yangon, the country’s largest city, since security forces shot dead at least 37 protesters on March 14 and tore flames amid the chaos by Chinese clothing factories.

Energy giant Total SE in Chevron Corp.

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, which has affairs with a state-owned enterprise, is under pressure to prevent revenue from flowing to the government-controlled army.

“For general enterprises, the conditions are quite unworkable,” said a senior UN official in Myanmar. “There’s a sense of impending doom.”

The February 1 coup ended Myanmar’s decades-long transition to democracy. According to the Assistance Association for Political Prisoners, police and soldiers responded with appalling response to the protest action, killing at least 247 people.

Less investment by foreign companies may not shift the calculation of the military, say analysts in Myanmar, as the military is more motivated by political priority than economic development. The generals have resisted decades of economic sanctions – which were gradually lifted during the democratic shift over the past ten years – and are accustomed to governing under international isolation.

An economic collapse caused by widespread strikes, which could potentially be exacerbated by the threat of foreign investors, will 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 staff living near protest rallies to secure hotels and encouraging non-important foreign workers to leave the country, according to Jack Mullan, CEO of risk management firm Barber Mullan and Associates in Singapore, which advises foreign companies. there.

Even basic tasks have become complicated. Companies that usually deposit money from elsewhere in Asia to pay wages find that the transfers have not been closed with many banks in Myanmar. Mullan said a transfer he made to a private bank in Myanmar on March 2 has not yet been approved.

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

Dale Buckner, CEO of security services company Global Guardian, McLean, said his firm has the solution to help its seven major corporate clients in Myanmar: it sends money to a broker in Singapore who has cash in Myanmar. , and the cash is then delivered in bundles to the offices of the Myanmar customers. The total delivery reached about $ 2.5 million and the broker’s fee increased to 25%, said Mr. Buckner said, up from 12% six weeks ago.

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

AB and the Italian Benetton Group SRL have suspended new orders, citing concerns about instability. Clothing manufacturers, whose production accounts for about a quarter of the country’s exports, say it is becoming more difficult to man factories. Thousands of workers have fled two of Yangon’s industrial suburbs since the March 14 protests in which dozens were killed.

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

Despite the risk, protesters are pulling against group of citizens from all walks of life. One Western businessman in Yangon said some of his employees attend them regularly during working hours. “It’s very difficult to say they should not go,” he said.

Workers at the Dutch liquor giant Heineken HEINY 0.60%

NV, which has Heineken employees in Yangon, urged NV, which has a brewery in Myanmar, to stop sending the income tax it deducts from employees’ salaries to the government as a way to reduce military to refuse funding.

An industry analyst in Yangon, familiar with the situation, said companies like Heineken have a problem: breaking the law by not paying the tax money, or running the risk of being branded as military – and perhaps suffering boycotts – by delivering it against objections of employees.

“All companies are experiencing this problem,” the analyst said. ‘Staff say:’ We do not want to pay income tax. ‘”

A Heineken spokesman said after the article was initially published, the company was ‘committed to complying with the law and paying taxes to ensure we can continue to work’, but added that ‘the company’ given the current situation in Myanmar ‘postponement of its tax payments.

Some find a third way. A Western lawyer in Yangon said he knows of several businesses that offer protesting staff the option of becoming independent contractors, making the workers responsible for paying their own income taxes to the government. They can choose not to do so without involving the company.

Multinational companies working with state-owned enterprises find it more difficult to escape investigation. Activists and a group representing the ousted legislators in Myanmar called on the French energy company Total – whose operations in Myanmar waters supply gas to the domestic market and for export to neighboring Thailand – to stop transfer the revenue to its partner Myanmar Oil and Gas Enterprise. The legislature said in a letter to Total that the continued existence of the payments would fund the junta.

Human rights activists are asking energy companies in the country such as Total and Chevron, which are part of the deal with Total, to put the revenue into surety accounts until the civilian government is restored.

Western oil and gas companies are worried it could be a breach of contract and provoke legal retaliation against local workers, according to a person familiar with their thinking. The person said there are no easy options to leave the country. Negotiating a sale to leave the country can take months or years, and handing over lands to an unprepared new operator can lead to power outages.

Chevron said it was working to “ensure safe and reliable energy for the people of Myanmar during 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 it was monitoring developments in Myanmar with ‘growing and deep concern’.

Write to Jon Emont by [email protected]

Corrections and reinforcements
An earlier version of this article misidentified Total TOT 1.71%

SE as Total SA.