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

Migrant workers have fled industrial areas near Yangon, the country’s largest city, since security forces killed at least 37 protesters there on March 14 and flames ravaged Chinese-owned clothing factories in the middle of the chaos.

Energy giants Total SE and Chevron Corp.

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

“For companies in general, the conditions are quite unfeasible,” said a senior UN official based in Myanmar. “There is a sense of impending doom.”

The February 1 coup ended Myanmar’s decadent transition to democracy. Police and soldiers have responded with horrific violence to subsequent protests, killing at least 247 people, according to the Political Prisoners Assistance Association, a nonprofit organization that monitors arrests and fatalities.

The reduction in investment by foreign companies may not change the calculation of the army, analysts say in Myanmar, because the army seems more motivated by political primacy than by economic development. Generals have withstood decades of economic sanctions – gradually lifted over the past ten years during democratic change – and are accustomed to governing under international isolation.

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

Some foreign companies are relocating staff living near protest hot spots to protect hotels and encouraging non-essential expatriate employees to leave the country, according to Jack Mullan, executive director of risk management firm Barber Mullan and Associates, based in Singapore, which advises foreign companies. there.

Even the basic tasks have been complicated. Companies that usually send money from other Asian countries to pay salaries find that with many banks in Myanmar closed, transfers are not happening. Mullan said the transfer he made to a private bank in Myanmar on March 2 has not yet been deleted.

“It’s a big stress for many companies: how will they get money at the end of the month?” He said.

Dale Buckner, executive director of McLean-based security services company Global Guardian, said his company has an alternative solution to help its seven major corporate clients in Myanmar. and cash is delivered in packages to Myanmar customer offices. The total delivered has reached $ 2.5 million and the broker’s commission has risen to 25%, Buckner said, from 12% six weeks ago.

Since early March, clothing brands have been testing garments from Myanmar, such as Sweden’s Hennes & Mauritz HM.B -2.02%

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

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

Despite the risk, the anti-coup protests have attracted citizens from all walks of life. A Western employer in Yangon said some of his employees attended regularly during working hours. “It’s very hard to tell them not to go,” he said.

Workers of the Dutch beverage giant Heineken HEINY 0.60%

NV, which has a brewery in Myanmar, has pressured the company to stop sending the government income tax deducted 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: breaking the law by not paying tax money or risking being called military – and perhaps boycotting it – by handing it over. by employee objections.

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

A Heineken spokeswoman said after the article was initially published that the company was “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 has requested a deferral of its taxes.

Some find a third way. A Yangon-based Western lawyer said he knows several companies that offer Protestant staff the option to become independent contractors, making workers responsible for handing over their own income taxes to the government. They can choose not to do so without involving the company.

Multinationals working with state-owned companies have more difficulty escaping the exam. Activists and a group representing lawmakers expelled from Myanmar have called on French energy company Total, whose operations in Myanmar’s waters supply gas to the domestic market and for export to neighboring Thailand, to stop transfer revenue to its state partner Myanmar Oil and Gas Enterprise. The group of lawmakers said in a letter to Total that continuing payments would fund the Board.

Human rights defenders are calling on the country’s energy companies, such as Total and Chevron, which are part of the company with Total, to place revenue instead of deposit until civilian government is restored.

Western oil and gas companies are worried it could be a breach of contract and are calling for legal retaliation against local employees, according to a person familiar with their thinking. There are no easy options for leaving the country, the person said. Negotiating a sale to leave the country can take months or years, and quickly handing over the fields to a new unprepared operator could result in power outages, the person said.

Chevron said it is working to “ensure safe and reliable energy for the people of Myanmar in 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 they were watching developments in Myanmar with “growing and deep concern”.

Write to Jon Emont to [email protected]

Corrections and amplifications
An earlier version of this article incorrectly identified the TOTAL TOT 1.71%

SE as Total SA.