Farewell, Myanmar: Corporate exodus grows, from Europe to India

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BANGKOK — At German wholesaler Metro’s warehouse outside of Yangon, the commercial capital of Myanmar, unmarked white trucks were parked in a line, stripped of their blue-and-yellow logos.Cardboard boxes sat in piles inside the wholesaler’s downtown showroom, which had already closed for business. “Friday will be our last delivery,” a security guard at the warehouse said Thursday.Nearly nine months since the Myanmar military took control of the government, a slowing economy and mounting human rights concerns are pushing foreign companies to leave the country once hailed as Asia’s last great frontier market.Metro announced last month that it will cease operations by the end of October, citing a volatile investment and business environment. “The current circumstances no longer allow us to operate the business to the high standards we set ourselves,” the company said in a statement.The company entered Myanmar’s wholesale market in 2019, supplying food to restaurants and hotels through a joint venture with Yoma Strategic Holdings, a unit of local conglomerate Yoma Group. The venture had received funding from the World Bank Group’s International Finance Corp., which was expecting Metro and its partner to improve the quality of Myanmar’s entire food supply chain, create jobs and raise farmers’ income.
The Metro Myanmar distribution center in the Thilawa Special Economic Zone outside of Yangon.

Melvin Pun, CEO of Yoma Strategic Holdings, blamed slumping demand from hotels, restaurants and cafeterias due to the coronavirus pandemic.”We will stop operations and then work on closing the joint venture,” Pun told Nikkei. “We will likely sell the assets and business in the coming months.”European companies, which face particularly strong pressure on human rights from shareholders and advocacy groups at home, so far have made up the bulk of those exiting Myanmar.In July, Norwegian telecom provider Telenor Group said it would sell its mobile operations in Myanmar for $105 million. Authorities had been pressuring the company to install spyware, sparking human rights concerns. Now the company faces uncertainty due to the military regime’s reluctance to approve the deal.British American Tobacco also plans to leave by the end of the year.”Having evaluated the long-term operational and commercial viability of our business in Myanmar, we have taken the decision to withdraw from the country,” Madeeh Pasha, corporate affairs manager for Middle East and South Asia operations, said in an email.But the exodus is starting to spread beyond European multinationals. India’s Adani Ports and Special Economic Zone on Wednesday said it would withdraw investment in Myanmar. The port operator had been working on a $290 million container terminal on land leased from the military-backed Myanmar Economic Corporation, which critics say helps fund the military.”The company’s risk management committee, after a review of the situation, has decided to work on a plan on exiting the company’s investment in Myanmar, including exploring any divestment opportunities,” the port operator said in a statement.A total of 1,873 foreign-invested projects existed in Myanmar as of the end of September, according to its Directorate of Investment and Company Administration. The number has not changed dramatically since before the military took control, suggesting most businesses are still assessing the situation.But the number of newly approved investment projects plunged to 48 for the year ended September — just one-fifth the year-earlier level. Most of them were approved before the military took control in February, replacing a government led by Aung San Suu Kyi’s National League for Democracy elected in the November 2020 poll.In addition to human rights, foreign investors have been deterred by the financial turmoil under the military government. Foreign currency at Myanmar banks is in short supply, and the local currency, the kyat, has swung sharply.”We can’t convert our revenue into dollars to pay for products,” one importer said, adding that many other companies are experiencing similar difficulties. The list includes manufacturers that source their materials and parts from overseas.Myanmar’s economy will shrink 0.1% in 2022, then grow about 2.5% a year between 2023 and 2026, according to the International Monetary Fund. This would mark a stark turn of fortune from bullish midterm forecasts of around 6.5% growth made before the takeover.Amid the growing business exodus, many Japanese companies find themselves torn. The Japanese government had supported businesses making inroads into Myanmar after it began a transition to civilian rule in 2011, and Japanese-owned companies in the Southeast Asian country now greatly outnumber those from Europe or the U.S.”We’ve already invested a significant amount, so we don’t really have the option to leave,” said an executive at a leading manufacturer.A country manager of a trading house said, “We need to wait and see how the situation will change.” Asked how long the company can wait, the manager replied, “Perhaps until the election.” The military regime says a general election will take place by 2023. However, it is uncertain whether voting will be free and fair.Another executive in the service industry said his company faces a dilemma over investor concerns. “We can’t make big investments since shareholders might object,” the executive said.A Japanese-owned accounting firm in Myanmar has seen business dry up. “About 20% of our client companies have either decided to withdraw or gone dormant,” a manager said.In one of the most high-profile moves by a Japanese multinational in Myanmar, beverage maker Kirin Holdings said it will dissolve its joint venture with a military-backed company shortly after the takeover, though negotiations have since stalled, a senior executive said.”Basically we want to stay in Myanmar,” the executive said. “Some manufacturers have said they will leave Myanmar but we don’t think there are many.”The Thilawa Special Economic Zone is the biggest showcase for Japanese investment in Myanmar. The power grid, port and roads there were funded through yen-denominated loans backed by the Japanese government, and operator Myanmar Japan Thilawa Development (MJTD) is 49% owned by Japanese players, including trading houses Sumitomo Corp., Mitsubishi Corp. and Marubeni. About half the roughly 100 companies operating in the zone are Japanese-owned.Although some suspended operations following the takeover and amid a surge in coronavirus infections, “almost 90% of our tenants from before the takeover are now back in operation,” an MJTD executive said.But there are signs that many of them may not be running at full capacity. Owners of nearby restaurants and tea shops say customer traffic is a fifth of what it used to be.”Normally during lunchtime, we are so busy we don’t even have enough tables,” one owner said. “Now, only four or five customers will come in.”Pulling out of the country threatens the loss of local jobs, which adds another dimension to investors’ decision-making.”NGOs and other groups do not want businesses to leave recklessly, and are more concerned with funding and other ties with the military,” said Yusuke Yukawa, head of the Yangon Office of Japanese law firm Nishimura & Asahi.”If companies choose to continue operating, they will need to conduct a more high-level review on potential risks that they could contribute to human rights abuses.”

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