By Jon Emont
SINGAPORE -- Foreign businesses in Myanmar are struggling to
operate in an increasingly volatile environment, as the military
uses lethal violence against a swelling protest movement opposing
last month's coup and swaths of the country's workforce go on
strike.
Bank employees and port workers aren't punching in, part of a
massive civil-disobedience campaign meant to pressure the military
regime to restore elected government. That has paralyzed Myanmar's
financial system and logistics arteries, with executives scrambling
to work out how to pay salaries and import raw materials.
Migrant workers have been fleeing industrial areas near Yangon,
the country's largest city, since security forces gunned down at
least 37 demonstrators there on March 14 and flames tore through
Chinese-owned garment factories amid the chaos.
Energy giants Total SA and Chevron Corp., which have business
ties with a state-owned company, are under pressure to prevent
revenue from flowing to the army that controls the government.
"For businesses in general the conditions are pretty
unworkable," said a senior U.N. official based in Myanmar. "There's
a sense of impending doom."
The Feb. 1 coup ended Myanmar's decadelong transition toward
democracy. Police and soldiers have responded with horrific
violence to the protests that followed, killing at least 247
people, according to the Assistance Association for Political
Prisoners, a nonprofit that monitors arrests and fatalities.
Reduced investment by foreign companies may not shift the
military's calculus, analysts focused on Myanmar say, because the
army appears more motivated by political primacy than economic
development. The generals withstood decades of economic sanctions
-- lifted gradually over the past 10 years during the democratic
shift -- and are accustomed to ruling under international
isolation.
Still, an economic collapse caused by widespread strikes,
potentially amplified by a threat of foreign investors exiting,
would create challenges for them. Sectors like apparel 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 who live near
protest hot spots to secure hotels and are encouraging nonessential
expatriate employees to leave the country, according to Jack
Mullan, chief executive of Singapore-based risk-management firm
Barber Mullan and Associates, which advises foreign businesses
there.
Even basic tasks have become complicated. Companies that
typically wire money from elsewhere in Asia to pay wages are
finding that, with many banks in Myanmar closed, transfers aren't
going through. Mr. Mullan said a transfer he made to a private
Myanmar bank on March 2 has yet to clear.
"It's a big stress for many companies -- how will they get cash
at the end of the month?" he said.
Dale Buckner, chief executive of McLean, Va.-based
security-services company Global Guardian, said his firm has a
workaround to help its seven large corporate clients in Myanmar: It
wires funds to a broker in Singapore who has cash on hand in
Myanmar, and the cash is then delivered in bundles to the offices
of the Myanmar clients. The total delivered has reached around $2.5
million, and the broker's fee has risen to 25%, Mr. Buckner said,
from 12% six weeks ago.
Since early March, clothing brands that source garments from
Myanmar, such as Sweden's Hennes & Mauritz AB and Italy's
Benetton Group SRL, have paused new orders, citing concerns over
instability. Garment manufacturers, whose production accounts for
around a quarter of the country's exports, say it is becoming
harder to staff factories. Thousands of workers have fled two of
Yangon's industrial suburbs since the March 14 protests that left
dozens dead.
"My parents are worried for us," said Ma Thida, 33, a sewing
operator at a Chinese-owned factory, who returned to her rural
family home.
Despite the risk, anticoup protests have drawn citizens from all
layers of society. One Western businessman in Yangon said some of
his employees regularly attend them during working hours. "It's
very difficult to tell them not to go," he said.
Workers at Dutch beverage giant Heineken NV, which has a brewery
in Myanmar, have pressed the company to stop forwarding to the
government the income tax it deducts from employee salaries, as a
way to deny the military funding, according to Heineken employees
in Yangon.
A business analyst in Yangon familiar with the situation said
companies like Heineken face a quandary: Break the law by not
delivering the tax money, or risk being branded pro-military -- and
perhaps suffering boycotts -- by delivering it over employee
objections.
"All companies are having this problem," the analyst said.
"Staff are saying, 'We don't want to pay income tax.'"
A spokeswoman for Heineken said after this article was published
initially 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 deferment of its tax payments.
Some are finding a third way. A Yangon-based Western lawyer said
he knows of several businesses that are offering protesting staff
the option of becoming independent contractors, making the workers
responsible for delivering their own income taxes to the
government. They can choose not to, without implicating the
company.
Multinationals working with state-owned businesses are finding
it harder to escape scrutiny. Activists and a group representing
ousted Myanmar legislators have called on French energy company
Total -- whose operations in Myanmar waters supply gas for the
domestic market and for export to neighboring Thailand -- to stop
transferring revenue to its state-owned partner Myanmar Oil and Gas
Enterprise. The legislators' group said in a letter to Total that
continuing the payments would fund the junta.
Human-rights campaigners are asking energy companies in the
country like Total and Chevron Corp., part of the venture with
Total, to place the revenue in escrow accounts until civilian rule
is restored.
Western oil-and-gas companies worry that could be a breach of
contract and invite legal reprisals against local employees,
according to a person familiar with their thinking. There are no
easy options for exiting the country, the person said. Negotiating
a sale to exit from the country could take months or years, and
quickly handing over fields to an unprepared new operator could
lead to power outages, the person said.
Chevron said it is working to "ensure safe and reliable energy
for the people of Myanmar at a time of crisis, and during a
pandemic." Total declined to comment. The company, along with other
foreign businesses, signed a mid-February statement saying they
were watching developments in Myanmar with "growing and deep
concern."
Write to Jon Emont at jonathan.emont@wsj.com
(END) Dow Jones Newswires
March 21, 2021 12:09 ET (16:09 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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