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Should EU Chambers of Commerce be in business in Myanmar?

January 19, 2023

Almost all European chambers of commerce remain active in Myanmar nearly two years on from a military coup ousted a democratically elected government and sparked a civil war.

Myanmar Naypyitaw parade
Brussels refuses to end Myanmar's trade privileges Image: Aung Shine Oo/AP/picture alliance

The ongoing crisis in Myanmar post-coup, in which nearly 2,700 people have been killed and more than a million displaced, raises ethical concerns for international business. Many of the largest European firms have already pulled out of the Southeast-Asian country.

The European Union has already imposed five rounds of sanctions on junta officials and their aligned businesses.

But Brussels, including the chambers of commerce, refuses to end Myanmar's trade privileges because, it says, doing so would primarily impact vulnerable communities and workers, not the military.

"Unquestionably, the shutdown of businesses and factories would primarily affect the civil society and increase the poverty of the Myanmar people, who are already suffering under the current political situation," Martin Krummeck, CEO of the German Myanmar Business Chamber, told DW.

In January 2022, the EuroCham Myanmar Garment Advocacy Group argued in a report that if European companies withdrew from the country, factories could be bought by investors from countries where there may be less respect for workers' rights.

According to the World Bank's latest report in July, poverty rates have spiked to 40% — the highest rate in 15 years.

Krummeck stated that his organization has not engaged with the "current acting government" in Myanmar, meaning the junta. The business groups that responded to DW all said they have a strict policy of not admitting companies with links to the military.

"Naturally, we are appalled at what is happening," Peter Crowhurst, CEO of the British Chamber of Commerce (BritCham) Myanmar, said.

"Notwithstanding the previous joint foreign-chamber statements, [BritCham] remains apolitical and will continue to support the people and sustainable long-term business of Myanmar, and not least our membership providing a foundation and prospect for the future," Crowhurst added.

But as far as he was aware, Crowhurst said, no international chamber of commerce has exited the Myanmar market, and "many international companies have chosen to stay."

Responses from foreign companies

The foreign business response to the ongoing crisis has been mixed. Several major brands have exited the country, including French oil giant TotalEnergies and Norway's Telenor, which was the country's second-largest wireless carrier.

Others, such as Britain-based Unilever and Dutch brewer Heineken, have remained.

Reporters Without Borders (RSF) last year accused some firms of indirectly supporting the military's violence, including French multinational Thales and the German vehicle manufacturer MAN, whose trucks are allegedly used to transport Myanmar's troops.

The EU has not commented on this matter, and it also divides opinion in Brussels.

"While it may seem like a quick solution, suspending activities or withdrawing from the country may not be the best or most responsible course of action," Heidi Hautala, a European Parliament vice-president and a member of its delegation on Southeast Asia, said. 

"Withdrawal of business," she added, "could have devastating consequences for the livelihoods of workers, particularly in the garment sector where women are disproportionately affected."

There are claims, however, that European officials are overly focused on Myanmar's garment sector.

A few weeks after the coup, a EuroCham report argued that the "garment sector provides few direct benefits to the country's military or government." It estimated that wholly foreign-owned businesses account for 67% of the factories and 80% of employment in the sector.

But of the German Myanmar Business Chamber's 82 members listed on its website, DW analysis found that just three are involved in garment manufacturing.

BritCham Myanmar's latest board, elected in November, are directors of banks, insurance companies, schools and conglomerates — and not of garment manufacturers.

Global trade unions slam Myanmar business

Several international trade unions, including IndustriAll Global Union and industriAll European Trade Union, have called on Brussels to end Myanmar's trade privileges and take a harder stance on business cooperation, commenting that "there is no way to do business in Myanmar without doing harm to the people and workers."

Hautala noted that businesses operating in Myanmar must review their operations since "indirectly funding or legitimizing the junta's rule through business operations is clearly unacceptable."

As such, ethical concerns come down to the subjective question of what is deemed as "indirectly" assisting the junta.

Kristina Kironska, a Bratislava-based academic who specializes in Myanmar, said that the European chambers of commerce remaining in the country "sends the very wrong signals to the generals and also to the world, legitimizing an unlawful government."

"Even if they claim they want to change things from the inside," she added, "this has never worked and does not work this time either, instead they are actually providing a helping hand to the oppressor."

Although many individual companies have chosen not to leave, some analysts think the continued presence of the commerce chambers sends an even more powerful message that it's business as usual in Myanmar.

After its annual general meeting on November 25, BritCham Myanmar boasted in a statement that across 2022 it had "strong membership retention of 85%." It also added 40 new members.

Impact of foreign investment and tax

One topic of debate is whether it benefits the junta if there is new foreign investment in the country.

"It is clear that the terrorist military council gets a lot of profit from money exchange rates when [foreign companies] settle in Burma for their projects," said Linn Thant, representative to the Czech Republic for the National Unity Government (NUG), the anti-junta shadow government.

On the other hand, the European business chambers could have played a role in forcing the junta government into a u-turn when they collectively opposed a new rule last April that gives companies one day to exchange foreign currency earned locally at banks in return for the local kyat currency.

This is a way for the junta's central bank to amass more foreign currency reserves and it acts as a de-facto "tax on exporters," according to a World Bank report last July.

Weeks after this policy was announced, the central bank exempted foreign entities from the policy. A joint statement from the business chambers had warned the original rule "needlessly lowers the living standards of the Myanmar people, halts foreign business activity, stops the flow of foreign direct investment (FDI), and creates trade tensions with other countries."

The other issue is taxation. It's not clear what proportion of European businesses active in Myanmar pay taxes to the junta authorities.

According to the World Bank, 56% of medium-sized firms and 57% of large companies — the typical size of European-owned firms in Myanmar — hadn't paid taxes in the past three months. But that was a much smaller percentage than the typically smaller locally-owned businesses.

"By continuing their activities in Myanmar and by paying unjustified taxes they nonetheless help, in practice, to fund the terror orchestrated by the [military]," Reporters Without Borders argued last year in a statement regarding foreign businesses. 

Thant, of the NUG, told DW that the shadow government urges foreign investors "not to pay their taxes; they can pay into escrow accounts."

He added: "If they support the terrorist military council financially, they break their ethical values themselves."

But the NUG, which now reckons it can defeat the junta within two years, doesn't want foreign businesses to leave for good. In fact, it has recently started a new campaign to collect more taxes from companies active in the areas of the country it controls.

Edited by: Sou-Jie van Brunnersum