Business Not as Usual: International Business and the Myanmar Crisis

Three years after the military coup that toppled Myanmar’s democratic government, the crisis poses ethical dilemmas for international companies that remain engaged.

Three years after the Myanmar military carried out a coup d’état, the international community continues to grapple with the fallout of the political and humanitarian crisis that followed. As time dragged on, foreign investors in Myanmar were called upon to do ‘their part’ to help end the crisis. More specifically, international businesses invested in Myanmar were instructed, and in some cases, pressured to divest from military-backed conglomerates in an effort not only to starve the military of its financial resources but to help Myanmar’s resistance forces eventually restore the country to civilian rule.

The link between international businesses and military-backed conglomerates came to light even before the 2021 coup, back in 2017, when the Myanmar military attacked the ethnic minority Muslim Rohingyas in the northwest region known as Rakhine State. A 2019 United Nations (UN) report entitled the Economic Interests of the Myanmar Military demonstrated how the military utilized the tax and other revenues it collected from the private sector to fund its violent ethnic cleansing campaign against the Rohingya. Particularly, the report highlighted the key role played by two military-backed conglomerates – Myanmar Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC), naming 14 foreign companies who had entered joint ventures with the junta-controlled companies, plus 44 companies that were reported to have commercial ties to the military-owned conglomerates.

Since then, the military’s use of revenues from the private sector has been well-documented, and a decision was made within the resistance movement to support the severance of all financial ties with the military, regardless of the economic consequences. Following the coup, the 2019 UN report became an often-used reference for civil society activists and the international community to apply pressure on businesses to cut ties with the military or completely exit the country if the investor were found to be contributing revenues to the military (directly or indirectly) –  a call strengthened by the military’s escalating violence against civilians.

Waves of targeted sanctions followed the 2021 coup, with the US, the EU, Canada, and the UK imposing a litany of restrictions on military conglomerates, selected state-owned enterprise (SOEs), and businesses connected to the military, and instituting asset freezes and travel bans on the top brass, their families, and top associates. Australian sanctions (so far imposed on military conglomerates, individuals, state-owned banks, and businesses dealing with jet fuels) are far less than those of other Western democracies. Following the publication of the Justice for Myanmar report entitled, ‘Mines Against Humanity’ alleging ten Australian mining companies or mining services providers are actively involved in Myanmar’s mining sector despite the 2021 coup d’état, it is high time to widen Australian sanctions to mining enterprises in Myanmar.

Many civil society organisations have called for corporate exits from Myanmar, especially as the mere presence of a business in the economy was considered by some activists to be a contributing factor to the military’s continued hold on power. The Oil and Gas (O&G) sector was particularly scrutinized, given the sector contributed the most significant revenues to the military and its sprawling business network. Total Energies, a French conglomerate, for example, was involved in a consortium with Myanmar Oil and Gas Enterprise (MOGE) as a partner, and that consortium was a key money earner for the military. After attracting much criticism both at home and abroad, Total succumbed to the pressure and ultimately decided to withdraw from the Myanmar economy in January 2022. While Total’s exit was a clear victory for the anti-coup movement from a human rights perspective, there was one rare case in which activists did not welcome withdrawal. This was the exit of Norway’s state-owned telecommunication company, Telenor. Due to concerns that sensitive user data may fall into the military’s hands, the anti-coup movement did not want Telenor to leave. Against these wishes, five months after the coup, Telenor sold their stake to a buyer who was considered to have a poor human rights record.

Sectoral differences can guide who should stay and who should go. One sector that has been the subject of debate has been sourcing of made-in-Myanmar garments  by international brands and retailers. The brands themselves appeared indecisive as they flip-flopped their exit and re-entry decisions. H&M, the Swedish clothing company, resumed orders in mid-2021 from Myanmar after pausing for five months and in 2023 H&M announced its decision to stop sourcing from Myanmar. Inditex, the owner of Zara, also announced its withdrawal of sourcing from Myanmar. Amidst brands’ withdrawals from Myanmar, the EU’s policy stance on Myanmar has come under fire. It continues to fund a project to improve labour conditions in Myanmar’s growing garment factories. The opposition to the junta is also divided on this issue – unions and other organized labour groups are the strongest proponents of the brands’ exit, citing labour abuses in garment factories. The labour groups pointed to labour rights violations and a lack of freedom of association in garment factories under the military. However, some business advocacy groups responded by arguing factories provide much-needed employment. Notably, EUROCHAM – the association representing European businesses in Myanmar – argued that the Myanmar military is not involved in the sector and that the continued employment of these workers is essential. The National Unity Government, which formed in exile following the coup, has not called for garment sourcing to stop.

The reasons for the exit of garment brands and others went beyond respect for human rights and concern for reputational risks. The dire condition of Myanmar’s economy, due mainly to the erratic policymaking of the junta regarding foreign currency restrictions for imports and exports, and the increasingly unsafe working environments for employees also have contributed to companies’ exits.

Critically, the corporate decision-making process of whether to ‘exit’ the Myanmar economy has varied not only due to sectoral differences and human rights considerations, but also because of corporate philosophy. Broadly speaking, among European companies that decided to exit Myanmar, such as Telenor, senior company leadership found that it would be nearly impossible to fulfill fundamental obligations to their employees and the local population.

Asian companies, on the other hand, took a different approach, with the majority of Japanese companies, for example, choosing to temporarily suspend their operations rather than  consider a complete ‘exit’. Following the coup, several Japanese multinationals such as Toyota and Suzuki suspended operations at their factories, but then slowly began ramping up production about a year later. To date, only a handful of Japanese companies have left the Myanmar market, with some deciding to expand investment even as Myanmar descends further into chaos.

Honeys, a Japanese apparel company that produces many of its garments in Myanmar, chose to grow its number of factories in the country shortly after the coup. The company’s CEO even pushed back against human rights criticism from activists, arguing that the jobs and economic opportunities the company provides to average Myanmar citizens outweigh any downside to continued investment. The Myanmar case, if nothing else, illustrates that there is a continued subjectivity, ambiguity, and uncertainty on what constitutes ethical and ‘responsible’ business practice in a country experiencing a human rights and humanitarian crisis.

Dr Htwe Htwe Thein is an Associate Professor in International Business at the School of Management, Curtin University.

Sam Baron is the inaugural Policy Research Fellow at the Yokosuka Council on Asia-Pacific Studies (YCAPS).