Indian business and Myanmar

In Myanmar, Indian businesses may need to stay sharp, perhaps more than play sharp.

 
The World Economic Forum meeting this past June in Myanmar’s capital Nay Pyi Taw may have been prophetic about its concern over what some in media described as “greedy land grabbing and displacement, especially in ethnic areas with tentative and fragile peace processes”.

 

This thought, attributed to David Mathieson, a senior Myanmar researcher with New York-based Human Rights Watch, appears realistic given the peaking of violence in August. Among other things, it highlighted the contentious halfway house between absolutism and democracy occupied by this next big thing among South-East Asian economies, expected to soon grow at 10% a year.

 

That lure has also drawn the interest of several Indian companies in areas as diverse as telecommunications, trading and manufacturing, and both onshore and offshore mining. At any rate, the churn offers an insight into a neighbour’s practices in the realm of business and human rights, and attempts at conflict resolution.

 

The focus of recent violence was over the controversial Letpadaung copper mine in Myanmar’s northwestern Sagaing division. Part of this region, west of Mandalay, borders Manipur and Nagaland in India, and is also home to tribes with a restive, often violent history with military juntas and elected governments alike. The government of Myanmar now holds 51% interest in the project, the remainder being shared by China’s Wanbao Mining—which holds 30%—and Union of Myanmar Economic Holdings Ltd, or simply MEH, controlled by the country’s vastly powerful army.

 

Police have repeatedly waded into protesters in Monywa town and villages close to or within the Letpadaung project area; locals were protesting imposition of the project over what they termed secure livelihoods in agriculture, and shabby treatment and unkept promises to those displaced by the project. In early August, police also attacked and destroyed property at a local monastery in its search for protesters; some Buddhist clergy have allied with protesters.

 

The billion-dollar project is seen as prestigious for newly reform-oriented Myanmar where government at this point is, at best, quasi-civilian. Moreover, the overwhelming government—and army—control over the project in partnership with an entity from long-time strategic partner China is being watched closely by both locals and those from overseas for signs whether Myanmar has indeed changed, or still continues to be run with the DNA of a junta wearing the mask of global public relations. Even democracy doyenne Aung San Suu Kyi, leader of the opposition, drew some criticism from locals after a committee she headed to review the Letpadaung project suggested, according to the combative and pioneering Myanmarese news source Mizzima, that “the project should go on as the best choice for the economic benefit of the nation and the people”. The investigation followed public outrage after massive police crackdown against protesters in November 2012.

 

Wanbao and its partner MEH are learning how to play ball in a Myanmar that has the world’s eyes on it. Alongside reorganizing its holding structure to allay public anger against the project—in which Wanbao’s interest was slashed from 49% to 30%—a new deal struck in July 2013 calls for a $5 million levy on MEH by state-run Myanmar Mine Enterprise.

 

Wanbao, for its part, is required to open an escrow account with Myanmar Foreign Trade Bank and deposit $2 million annually during the “lifetime of the project”, as a Wanbao statement claims, for reclamation projects. This is in addition to $1 million a year to be spent by Wanbao on aspects of corporate social responsibility, besides 2% of net profit accruing to all partners to be invested in such activities.

 

This is a change, of course, for long-favoured Chinese businesses in Myanmar. In an article timed to coincide with Myanmar president Thein Sein’s visit to the US in May, The New York Times wrote: “In response to the broad opposition, Beijing has ordered secretive state-owned Chinese companies to do something they have rarely done before: publicly embrace Western-style corporate social responsibility practices and act humbly toward the people who live near their vaunted projects.”

 

This includes the behemoth China National Petroleum Corp. (CNPC), accused of benefiting from human rights violations. CNPC has a project to transport products extracted in the Bay of Bengal through an 800km pipeline to China. (A facility it co-owns in Myanmar’s Shan State, close to the border with China, was attacked by rebel guerillas earlier this year.)

 

Indian businesses would do well to tread with care.

 

Livemint