[Global Focus] What Will Global Companies Partnering with Myanmar Military Camp Enterprises Do Next?

Concerns Over Prolonged Coup Damage
Global Companies Including Japan's Kirin Holdings
Weigh Withdrawal or Maintenance of Military-Linked Partnerships

Military Command Also Controls Economic Power
Partnerships Essential for Local Market Entry

[Asia Economy Reporter Cho Hyun-ui] Japanese beer company Kirin Holdings abruptly announced on the 5th of last month that it would terminate its partnership with Myanmar military-owned enterprise Myanmar Economic Holdings Limited (MEHL). At the time, Kirin stated in a press release, "We are deeply concerned about the actions of the Myanmar military that violate our standards and human rights policies," adding, "Considering the current situation, we have no choice but to end our joint venture partnership with MEHL, which operates the Myanmar military welfare fund." The chairman of MEHL, with whom Kirin decided to sever ties, is none other than Senior General Min Aung Hlaing, the leader of the recent Myanmar coup.

Companies Caught in a Dilemma

One month after the military coup occurred in Myanmar on February 1st, global companies operating locally have found themselves in a dilemma. As the coup prolongs, the damages faced by companies operating in the region are snowballing.

Meanwhile, some human rights organizations are turning their criticism towards these companies, accusing them of "collaborating with the military." There are also concerns that if governments such as those of the United States and Europe impose sanctions on the Myanmar military, the fallout could affect these companies. However, it is difficult for them to absorb investment losses and withdraw from the local market.

According to a report released by international human rights organization Amnesty International in September last year, among the eight companies engaged in joint ventures with MEHL at that time, six were foreign firms. Japanese beer company Kirin Holdings, Chinese metal mining company Wanbao Mining, and Singapore's tobacco business fund RMH were listed. South Korea had three companies included, such as POSCO.

[Image source=AP Yonhap News]

Amid this, Kirin Holdings, which had been pressured to sever ties with the military, became the first company to cut relations with the military after the coup. Kirin's decision is believed to have been influenced by a boycott movement against 'Myanmar Beer,' produced in partnership with the military. In fact, a famous food and beverage chain in Yangon, Myanmar's largest city, declared on the 24th of last month that it would no longer sell products from companies operated by the military, including Myanmar Beer.

Following Kirin, Singapore-based RMH, which operates the tobacco business in Myanmar, also decided to end its partnership with the military. RMH Singapore announced on the 9th of last month that it would proceed with the sale of its shares in Myanmar's Virginia Tobacco Company, established jointly with MEHL.

POSCO obtained land use rights from MEHL in 2017 to build the Lotte Hotel in Yangon. POSCO emphasizes that it has not paid dividends since 2017. A representative from POSCO Steel Sheet Myanmar recently told domestic media that dividends from the Myanmar subsidiary would not be paid until clear evidence emerges that the dividends have not been used for the military's human rights violations.

Military's Control Over the Economy

The reason global companies partner with the Myanmar military is that, even after the official end of military rule in 2011, the military continues to dominate all sectors and wields enormous influence over Myanmar's economy. According to the constitution drafted by the military, they automatically occupy 25% of parliamentary seats and monopolize the appointment of ministers in key departments such as defense, interior, and foreign affairs. MEHL, established in 1990 by the military for the welfare of current and former soldiers, enjoys these privileges and has expanded into a wide range of sectors including gemstone mining, distribution, finance, travel, shipping, public transportation, construction, and textiles. MEHL reportedly has over 50 subsidiaries.

For foreign companies to enter Myanmar's monopolized and closed market, a partnership with the military is virtually essential. Since the military has nationalized key assets such as land, this partnership is the first gateway to acquiring factory or building sites locally. MEHL mainly forms partnerships through joint ventures with foreign companies. In return, the military grants these companies rights to operate specific businesses or land use rights. For example, Wanbao Mining was granted mining rights for the Letpadaung copper mine by MEHL.

[Image source=AP Yonhap News]

One Month After the Coup, Myanmar's Fate

Meanwhile, the Myanmar military staged a coup on the 1st of last month, claiming that the government failed to properly investigate fraud in the November general election last year, and seized power. The military detained National League for Democracy (NLD) leaders including State Counsellor Aung San Suu Kyi and President Win Myint, and declared a one-year state of emergency. The military has been arresting citizens protesting the coup by using water cannons, rubber bullets, and live ammunition. According to the Assistance Association for Political Prisoners in Myanmar, at least 30 people have died at the hands of the military and pro-military forces since the coup. In response, Myanmar citizens have been conducting the 'three-finger salute' protests, symbolizing 'resistance to military dictatorship,' 'opposition to the military,' and 'refusal to obey.'