YANGON – Aung San Suu Kyi’s government is putting off foreign companies that emphasize human rights in their investment decisions, as Britain’s CDC Group, Norway’s Telenor and international mining groups struggle to navigate her administration’s controversial policies and their associated reputation risks.
That’s holding back the underdeveloped nation’s economic and business potential, significantly at a time the de facto national leader is running for national re-election amid a moribund economy.
UN investigators have accused the Myanmar military, the Tatmadaw, of carrying out a brutal campaign with “genocidal intent” after more than 700,000 Rohingya Muslims fled Rakhine state into Bangladesh following a brutal military crackdown in 2017.
In a report last year, the UN fact-finding mission called on investors to cut ties with all army-linked businesses and identified around 60 foreign companies involved in the Tatmadaw’s corporate network. The military is active in parts of the economy through two holding firms and their subsidiaries.
That call is apparently causing a corporate rethink among certain Western investors. Danish shipping giant Maersk, for one, will stop using military-owned ports in Myanmar from the end of this month, according to rights group Burma Campaign UK.
Maersk announced last week that after October 15 its services will shift permanently to the Myanmar Industrial Port terminal and away from TMT Ports, which is owned by military conglomerate Myanma Economic Holdings Limited.
The shipping firm said it was “cognizant of recent recommendations from the United Nations to maintain operations in Myanmar while exercising heightened due diligence” but did not comment further.
America’s Western Union and clothing giant Esprit are among other companies that have shunned military-associated entities over the past 12 months. The move reflects growing pressure on foreign investors in the Southeast Asian country to ensure that their corporate activities do not contribute to human rights abuses.
Reputational risks for doing business in Myanmar, a country taken to The Hague for accusations of genocide, have inevitably heightened since the heydays of optimism prior to 2017. Yet, even post-Rohingya crisis, many still share Suu Kyi’s hope that responsible investment will contribute to reduced conflict, job creation and equitable development.
As opposition leader, the Nobel peace laureate talked about the importance of investors being responsible and sensitive to human rights and environmental issues, an emphasis she has repeated since taking office.
“We only ask our investors to ensure that their investments are responsible, by incorporating environmental, social and governance factors into their investment and business undertakings,” she told a crowd of corporate executives and diplomats during her first government-backed investment conference in January 2019.
The speech was seen as an attempt to persuade global investors to put their money in Myanmar and mitigate the fallout of the Rohingya crisis.
But policy stumbles are undermining Suu Kyi’s economic vision by challenging the very companies who are trying to provide the responsible investment she supposedly seeks. Among them include the leading investors in Myanmar’s booming digital market.
The civilian government imposed an internet shutdown in June last year in parts of Rakhine and Chin states at the request of the military to deal with the Arakan Army, a Buddhist-majority insurgent group. A complete shutdown was in effect from June 2019 to August 2020, until 2G services were restored. Though, in actuality, web connectivity in the area remains extremely limited.
Cutting off internet access had undermined efforts to contain the virus and humanitarian work and put lives at risk in the process, digital rights organizations and the United Nations said. Authorities also blocked websites of Rakhine-based media outlets and Justice for Myanmar, a group of activists critical of the military.
Suu Kyi’s foreign ministry argued that the restrictions posed no hindrance because people can communicate via loudspeakers and SMS texts amid the ongoing conflict.
Digital censorship has hurt investor perceptions of the telecoms market, hailed as one of the biggest success stories in Myanmar since the sector opened up to the outside world in 2013 after being tightly controlled by the state for years. The country now boasts a smartphone penetration rate of 80%, according to a Telenor industry report.
Licensed by former president Thein Sein, Telenor initially defied a Communications Ministry directive to ban all websites accused of spreading fake news before bowing to government pressure.
With more than 20 million users, Telenor has the second-highest telecom market share after state operator MPT.
Soon afterwards, CDC Group, the British government’s development finance institution, was urged by the UK’s shadow aid minister and lawmaker Stephen Doughty to divest its US$20 million equity stake in Myanmar internet service provider Frontiir after the firm complied with the government’s censorship request.
Executives at Telenor, Frontiir and Ooredoo, the Qatari telcom operator, are understood to be pushing for the Telecoms Law, the legal basis for the shutdown directives, to be reformed.
Wave Money, backed by local tycoon Serge Pun’s Yoma Strategic conglomerate and a group of European and American chambers of commerce have publicly urged the restrictions to be lifted, alongside the UN and the Myanmar Centre for Responsible Business.
US research institute Freedom House in a report published this week ranks Myanmar as having the worst decline in internet freedom in the world, citing the internet ban and website blocking.
According to the report, Myanmar scores 31 out of 100, dropping five points from 36 in the previous two years. Freedom House rates each country in terms of obstacles to web access, limits on content, and violations of user rights each year.
Yin Yadanar Thein of local rights group Free Expression Myanmar commented that these decisions by the National League for Democracy (NLD) government, together with prosecution of digital rights protesters, make Myanmar “one of the world’s most repressive digital environments.”
Telenor and CDC’s internet restrictions dilemma reflects the “structural limitations on the ruling party’s maneuver,” said Lee Jones, who researches Asian politics at Queen Mary University of London. “The NLD struggles to have an independent policy when security forces are involved. Although Aung San Suu Kyi is constrained politically, she could have done more.”
In the mining sector, the NLD government’s interpretation of a land law they amended in 2018 concerning land controversially categorized as “vacant, fallow, and virgin” – around a third of Myanmar’s territory, mostly in the ethnic minority-dominated uplands – has upset both business and local communities.
Farmers who do not apply for paperwork risk being evicted from land they have farmed for generations under customary tenure.
Meanwhile, exploration companies are told by the agriculture and environment ministries they need to acquire land use permits for swathes of land they only want to temporarily prospect.
The International Investors for Mineral Development Association raised their concerns with the government in early 2019. After failing to receive an answer for over a year, they sent a follow-up letter to Suu Kyi warning that the action “threatens the very viability of the exploration sector and one that is already making the industry extremely unattractive to foreign investors.”
The fiasco highlights the need for an overarching legislative framework and government policy on land to harmonize the country’s economic vision and rights obligations, said Thyn Zar Oo, a land rights expert of rights group Public Legal Aid Network. “Only then could Myanmar possibly come up with a focal nexus that consolidates all scattered bits of strategies from the central authorities into a workable legal framework.”
In both instances, the buck nominally stops with the quasi-civilian administration Suu Kyi leads as state counselor. The telecoms law and its shutdown provisions were legislated by Thein Sein, but his government did not use them to impose blackouts. The new vacant, fallow and virgin land regulations and its applications to mineral explorations have come into force under her NLD’s tenure.
Land rights abuses, moreover, could follow in the government’s belatedly hurried steps towards renewables. Suu Kyi’s energy ministry announced a major solar power initiative in May after sitting on hydropower and solar proposals for years, giving bidders two months to apply for a one-gigawatt tender, even though foreign investors could not enter the country due to a pandemic-induced international flight ban.
Lawyers and critics said that the tight time-frame exacerbated the risk of land-grabbing from undocumented customary users. The energy ministry ended up giving all but one of the 29 solar projects to Chinese developers and their local partners, basing its decision on price alone without incorporating any environmental, social and governance criteria.
“The problems are not an ‘East-versus-West’ competition,” commented a Yangon-based Asian investor, referring to the energy deals and land issues. A list of bidders seen by Asia Times suggests Singapore’s Sembcorp Industries, as well as Mitsubishi, Marubeni, Mitsui and Sumitomo of Japan, all of which have sizable power investments in Myanmar, did not make bids.
“Such government policies heighten the reputational risks of companies who have a commitment to respect human rights. In Japan, for example, some firms [on the] Nikkei 225 have come under increasing scrutiny from civil society on their investments abroad,” the investor added.
These government actions are, in the main, overseen by septuagenarian NLD ministers who grew up under military-socialist rule, in which the private sector was demonized and designed by senior civil servants, many ex-military, imbued with instincts for secrecy.
This lingering distrust of business and a reluctance to consult other ministries before making policy announcements continues to give investors and companies headaches.
“When Aung San Suu Kyi and her party rode to a landslide victory in 2015, they expected international and specifically Western investments to flow in as a political dividend because they had good relationships with Western governments,” Jones told Asia Times.
Suu Kyi’s cabinet and leaders of her NLD party hence paid little attention to addressing concerns facing foreign investors subjected to international standards for business integrity and human rights, he said.
So far the government has shown no public indication that they will act on the rising chorus of business protests. To the contrary, authorities appear to be doubling down.
Dozens of students have recently been arrested after joining protests or sticker campaigns to criticize the authorities and demand internet restrictions to be immediately lifted.
“Myanmar is really not doing itself any favors by taking actions that create reputational problems for foreign investors,” said deputy Asia director at Human Rights Watch Phil Robertson. “It looks like foreign investors are in for an increasingly bumpy ride.”