Pullout of foreign companies jeopardizes Myanmar economy| MENAFN.COM

Tuesday, 17 May 2022 11:58 GMT

Pullout of foreign companies jeopardizes Myanmar economy


(MENAFN- Asia Times)

Myanmar began its path to democracy in 2011, ending more than half a century of military rule. But after only 10 years had passed, the army overthrew the democratic government through a coup and regained power.

Myanmar now has been under this latest military rule for almost a year. The incidence of human rights violations is constantly increasing in the country. With that, the economy has slowed. In this situation, one foreign business after another is leaving the Southeast Asian country. Following this trend, TotalEnergies and Chevron have announced they are wrapping up their business in Myanmar. 

Obviously, Myanmar's economy could be affected by the shutdown of investment by foreign companies. Although Myanmar had been isolated for decades, the democratic flow a decade ago opened the door for it to get connected with the world.

But the path was not easy, and the blossoming of democratic values was nipped in the bud, culminating in the coup in February 2021. But even before that, the Rohingya refugee crisis in 2017 was another example of atrocities committed by the Myanmar army, known as the Tatmadaw.

Military rule undermines the rule of law and facilitates widespread corruption and serious human-rights violations, increasing the risk of providing financial services to foreign businesses or local businesses operating in Myanmar. In such a situation, those who continue to do business in Myanmar are at extreme risk on the one hand and on the other hand are abetting the human-rights violators.

Hundreds of billions of dollars of foreign investment are said to be at risk as a result of the coup.

However, there has been some good news. According to media reports on Wednesday, US President Joe Biden's administration warned businesses of the risks of doing business in Myanmar. When rule of law and political stability are undermined, the environment for doing business in a country becomes unfavorable.

While it is true that the Tatmadaw has its own business empire, Myanmar also needs to do business with international companies. 

Energy giants pull out

TotalEnergies, a French company, and Chevron of the United States have decided to suspend their operations in the country, citing continuing human-rights abuses by Myanmar's military government. The two organizations made this announcement on January 21. Total and Chevron were involved in joint ventures with several other companies in the Yadana gas project in the southwest of the country.

“Since the military coup in February 2021, the situation in Myanmar, including human rights and the rule of law, has been deteriorating, forcing us to re-evaluate the situation,” Total said in a statement .“We, the operators and investors of the Yadana gas field in Myanmar and MGTC, have decided to withdraw from the agreement without any compensation from TotalEnergies.”

A Chevron spokesman said:“Considering the situation in Myanmar, we have decided to leave the country by transferring our operations from the Yadana natural gas project.”

Total owned the highest stake in the project with 31.24%, while Chevron owned 27%. The rest is owned by a unit of Thailand's PPT and a state-owned company in Myanmar.

The country's pro-democracy activists have been urging various companies to cut off the main sources of revenue for the junta. British newspaper The Guardian described it as a big win for them. Since the coup last February, ordinary people have taken up arms and formed a defense force against the junta.

After the return to democracy, foreign companies had started to invest gradually in Myanmar. But the Rohingya refugee crisis in 2017 damaged the country's international image again, and international pressure ramped up. Then last year's coup made the situation even worse.

Costly exodus

Royal Dutch Shell also confirmed the closure of its operations in Myanmar on January 21.

Not only these oil companies but almost all the big foreign companies have announced to withdraw their investments from Myanmar. The country's economy is suffering.

According to Human Rights Watch Total and Chevron alone paid the government more than 1 billion a year in revenue and fees from the Yadana gas project, the single largest source of foreign-exchange earnings in the country.

Électricité de France (EDF), France's largest energy company, was involved in a US$1.5 billion joint venture for hydropower projects in the country, but it has withdrawn. The French renewable-energy company Voltalia has also left Myanmar.

Norway's Telenor owns the largest telecom service provider in Myanmar. It also announced last year that it would sell its business in the country. British American Tobacco closed its business last October.

According to a media report , Japanese automotive giant Toyota was set to open a factory in Myanmar last year but has since postponed it. Suzuki, an Arab-Japanese carmaker, shut down two factories shortly after the military government took power. The garment industry had also been booming for the past few years but because of the coup, such brands as Benetton have stopped buying clothes from Myanmar.

Kirin, a Japanese beverage manufacturer, has been trying to sever business ties with Myanmar's military for months. The Danish multinational company Carlsberg has about 450 employees in the country, but has announced it will limit its activities there.

While foreign companies are leaving Myanmar one by one, it is uncertain how Myanmar will deal with its economic stagflation. The Covid-19 pandemic and internal political instability have worsened the situation.

Allegations of human-rights violations against various ethnic groups including the Rohingya and those who protest peacefully in favor of democracy can endanger the economy of Myanmar.

Can only Chinese and Singaporean economic assistance and investment recover Myanmar's economy? Time will tell. But Myanmar's economy could achieve tremendous growth if the flow of Western investments could be ensured.

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