Home Japanese values Withdrawal of foreign companies jeopardizes Myanmar’s economy

Withdrawal of foreign companies jeopardizes Myanmar’s economy

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

Myanmar has now been under this latest military rule for nearly a year. The incidence of human rights violations continues to increase in the country. With that, the economy slowed down. In this situation, one foreign company after another leaves the Southeast Asian country. Following this trend, TotalEnergies and Chevron announced that they were ceasing their activities in Myanmar.

Obviously, Myanmar’s economy could be affected by the shutdown of foreign business investment. Although Myanmar had been isolated for decades, the democratic flux of a decade ago opened the door for it to connect to the world.

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

The military regime undermines the rule of law and facilitates widespread corruption and serious human rights abuses, increasing the risk of providing financial services to foreign or local companies operating in Myanmar. In such a situation, those who continue to do business in Myanmar run an extreme risk on the one hand and on the other hand they encourage human rights violators.

Hundreds of billions of dollars in foreign investment would be at risk as a result of the coup.

However, there was good news. According to media on Wednesday, US President Joe Biden’s administration has warned companies of the risks of doing business in Myanmar. When the rule of law and political stability are compromised, the environment for doing business in a country becomes unfavourable.

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

Energy giants pull out

TotalEnergies, a French company, and Chevron of the United States have decided to suspend operations in the country, citing continued human rights abuses by Myanmar’s military government. The two organizations made the 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 February 2021 military coup, the situation in Myanmar, including human rights and the rule of law, has deteriorated, forcing us to reassess the situation,” Total said in a statement. communicated. “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 spokesperson said, “Given the situation in Myanmar, we have decided to leave the country by transferring our operations from the Yadana natural gas project.”

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

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

After the return to democracy, foreign companies began to gradually invest in Myanmar. But the Rohingya refugee crisis in 2017 once again damaged the country’s international image and international pressure intensified. Then last year’s coup made the situation even worse.

Costly exodus

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

Not only these oil companies but almost all major foreign companies have announced that they will 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 revenues and royalties from the Yadana gas project, the country’s largest foreign exchange earner.

Electricité de France (EDF), France’s largest energy company, was involved in a $1.5 billion joint venture for hydropower projects in the country, but pulled out. French renewable energy company Voltalia has also left Myanmar.

The Norwegian company Telenor owns Myanmar’s largest telecommunications service provider. It also announced last year that it would sell its operations in the country. British American Tobacco closed its doors last October.

According to a news report, Japanese car giant Toyota was supposed to open a plant in Myanmar last year but has since postponed it. Suzuki, an Arab-Japanese automaker, closed two factories soon after the military government came to power. The clothing industry was also booming in recent years, but because of the coup, brands such as Benetton stopped buying clothes from Myanmar.

Kirin, a Japanese beverage maker, has been trying for months to sever business ties with the Burmese military. The Danish multinational Carlsberg has around 450 employees in the country, but has announced that it will limit its activities there.

As foreign companies leave Myanmar one by one, it is unclear how Myanmar will cope with its economic stagflation. The Covid-19 pandemic and internal political instability have aggravated the situation.

Allegations of human rights violations against various ethnic groups, including the Rohingya and peaceful pro-democracy protesters, may endanger Myanmar’s economy.

Can only Chinese and Singaporean economic aid and investment can revive Myanmar’s economy? Time will tell us. But Myanmar’s economy could achieve enormous growth if the flow of Western investment could be assured.