Podcast

International companies in Myanmar: The case for responsible resilience

  • Asia Pacific
  • Myanmar
  • Corporate Duty of Care
  • Ethics and Compliance Consulting
  • Market entry/ exit risk assessment
John Bray

John Bray

International companies in Myanmar: The case for responsible resilience


In the immediate aftermath of Myanmar’s military coup in February, we told our international clients to prepare for “a marathon, not a sprint”. Now it’s clear that an ultramarathon lies before us. The crisis will not be resolved in a matter of months. It is essential to prepare for an extended period of hope, disappointment and, at times, acute personal strain. So does that mean that it’s time to leave the country altogether?

Exiting the country is definitely an option against the background of economic contraction, deteriorating security, and the ongoing pandemic. Ultimately, each company will need to make its own choices, depending on its sector, financial resources and risk appetite. However, an exit should not be the only option.

The alternative is a strategy of “responsible resilience”, combining tough short-term decisions with a long-term commitment to the country. If companies choose this option, they need to be able to show that their presence has a positive impact that serves the wider interests of Myanmar citizens. Here’s how it can work.

 

Focus on smart survival

Companies will not be able to make any contribution at all unless they can continue to operate. The immediate challenge is therefore about how to survive from one day to the next. This requires a combination of practical wisdom, determination and ethical judgement.

The responsibilities of company managers – and their international supervisors – start with their staff. Effective leadership requires a capacity for listening. In the face of the combined political and pandemic crisis, as well as a collapsing market, it is unrealistic to expect normal performance. While supporting their Myanmar colleagues in difficult times, business leaders need to tap into their ingenuity to find immediate solutions to pressing problems. These may be to do with logistical challenges, or simply getting money out of the bank at a time when the financial system is still dysfunctional.

The need to secure commercial survival means that painful decisions about jobs may be unavoidable. Anecdotally, we have heard of cases where companies, after they have consulted their staff, have been able to negotiate salary reductions or changes in work patterns to avoid redundancies.

Be prepared to defend tough decisions

Tough choices must be accompanied by political sensitivity. While Myanmar is so polarised, it is implausible for businesses to claim to be “apolitical”. Rather, the question is how to make the right choices. While listening carefully to voices from civil society, business leaders ultimately have to take responsibility for their own decisions.

Tax payments are a highly sensitive topic. In the early stages after the coup, Civil Disobedience Movement activists called on companies to withhold tax payments to an illegitimate regime, and many companies’ employees supported this campaign. At first, it was possible for managers to equivocate because the disruption to the banking sector meant that it was impossible to pay taxes in any case. That time is now coming to a close. If companies have to pay tax to ensure their survival, they will need to pay.

Think beyond sanctions

Unlike in the 1990s and early 2000s, we do not expect blanket sanctions on Myanmar from the UN, the US or any other source. Rather, the emphasis has been on sanctions that are targeted against individuals and interest groups associated with the Tatmadaw (Myanmar military) and its immediate supporters. Companies that have conducted credible due diligence and chosen less contentious partnerships are better placed to mitigate future sanctions risk.

Instead of just waiting for sanctions to happen, companies need to demonstrate an alternative business model that is both transparent and viable. Long before the coup, the case against partnerships with Tatmadaw-linked companies was not simply that they were a source of cash for military interests. The more important point was that they lacked accountability and therefore distorted the Myanmar economy. The presence of well-run international companies demonstrates a credible alternative.

Reaffirm the long view

Beyond the immediate challenges of survival, it may be that the private sector’s greatest contribution is to offer a different, more hopeful vision of the future.

For most international companies, the immediate business case for entering Myanmar was to make a long-term bet on an under-developed, high-risk market with extensive natural resources and a strategic location. These fundamentals still apply.

The companies that choose to stay may be making the harder choice, and the immediate financial rewards will be meagre. However, it remains essential to take the long-term view. Myanmar has scant prospects of recovery without the participation of a responsible private sector.

International companies that know the country well, and have stuck with it in difficult times, will be best placed to contribute to its eventual revival. The situation in Myanmar has raised the stakes, but it is a gamble that companies should still consider.

This article was originally published in The Business Times.

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