Webinar on “What Does Responsible Investment Mean in Myanmar?”

In this webinar, Ms Vicky Bowman, the Director of the Myanmar Centre for Responsible Business (MCRB), shared her insights on the challenges and dilemmas faced by businesses operating in and sourcing from Myanmar after the 2021 coup.


Monday, 15 May 2023 – The ISEAS Myanmar Studies Programme convened a webinar under the Chatham House Rule, inviting Ms Vicky Bowman to share her thoughts on what constitutes ‘responsible business’ in Myanmar, and how international measures and investment decisions impact the people of Myanmar in different ways. Ms Moe Thuzar, coordinator of the ISEAS Myanmar Studies Programme moderated the webinar. The webinar attracted the interest of 161 attendees. Key discussion points covered the internal and external context for company decision-making; applying the United Nations Guiding Principles on Business and Human Rights to the Myanmar context, including conducting heightened human rights due diligence and conflict analysis/sensitivity; the debate on whether companies should pay tax to illegitimate regimes, and whether they should remain or exit. She particularly highlighted how Myanmar’s garment sector contributes to the economy and individual welfare.

Speaker Ms Vicky Bowman with moderator Ms Moe Thuzar. (Credit: ISEAS – Yusof Ishak Institute)

Ms Bowman highlighted the most recent (March 2023) survey of the business operating environment in Myanmar by the European Chamber of Commerce (EuroCham). Banking issues remain the top concern for foreign EuroCham members, followed by regulatory challenges and electricity disruptions. However, many businesses have remained in Myanmar though operating at far lower capacity during the COVID-19 pandemic prior to the 2021 coup. The impact of the FATF blacklisting in October 2022 on business operations, while negative, so far appeared to have been manageable.

She also noted that the last three months of the Purchasing Managers Index (PMI) for Myanmar had been above 50 (the rate which signified optimism about future prospects), despite power blackouts and banking and regulatory challenges. Many of those surveyed were likely to have been garment factories, where the labour market could also be seen as starting to recover and tighten.

Vicky reminded participants of the three pillars of the 2011 UN Guiding Principles on Business and Human Rights, which place the ‘duty to protect’ human rights on the state, the ‘responsibility to respect’ on business, and require both government and business to provide access to remedy. Businesses need to conduct ‘human rights due diligence’, a six-step process incorporating identification of adverse human rights impacts which the business causes, contributes to or is linked to, and take steps to avoid or mitigate these, track and report on them, and provide remedy. The emphasis is on ‘adverse human rights impacts’ rather than positive ones such as job creation. However, when undertaking due diligence on the adverse impacts of exit, this might include adverse impacts on human rights of the withdrawal of the company, such as loss of direct and indirect employment or reduced access to the internet.

Furthermore, in conflict-affected and high-risk areas, or CAHRAs – https://www.cahraslist.net – which now comprise all of Myanmar, human rights due diligence by companies needs to be ‘heightened’. This means companies need to apply a conflict analysis – how the conflict affects business operations and vice versa.

Obvious examples of this are security risks for employees and customers, including increased risk of detention, inter alia under the new, post-coup, Section 505(a) of the Penal Code, which criminalises critical comments about the coup or the SAC. This can endanger employees on their commute if phones are checked by the army. But there were also examples of current or former employees using 505a to seek revenge for personal grudges against colleagues, by getting them arrested for their Facebook posts. Increased social polarisation since the coup is another example of the impact of conflict on the business, affecting workplace cohesion, mental welfare and employee safety. An example was the ‘social punishment’ of a colleague from the accounts department involved in paying taxes on behalf of the company, putting their welfare and even life at risk.

Polarisation of attitudes between those remaining inside Myanmar and those in exile, and lack of trust was another impact of the conflict on businesses. This meant even more effort needed to be put into 1:1 engagement of rightsholders and stakeholders, particularly those inside Myanmar who may not be willing to speak out in wider groups or on social media. 

These tensions were clearly present in the garment sector, where workers, trade unionists and labour activists inside Myanmar had different views from those in exile who were campaigning for companies to exit. Those inside were focused on retaining jobs in the formal sector, and in particular those supplying brands and buyers who were more responsive to remedying grievances, and improving working conditions and sourcing practices.

Ms Bowman explained that the garment sector does not only positively impact the economy and Myanmar people through the creation of hundreds of thousands of formal jobs, and indirect jobs. Foreign exchange is brought into Myanmar to buy kyats and pay for operating costs, including salaries. This creates demand for kyat, and therefore counters devaluation pressures which would otherwise generate inflation with a knock-on negative effect on the whole population. Furthermore, garment exports help reduce the trade deficit; this therefore may serve to persuade the military leadership that they can allow more imports. Otherwise, restrictions on imported goods will also create inflationary pressures and shortages.

Ms Bowman noted that export revenues from the garment sector do not accrue to military or government coffers, despite some claims to the contrary. Neither military nor the government is involved in cut make pack (CMP) for export. The sector is dominated by Myanmar and foreign private-sector investors. Taxation of the sector is light, due to low wages for the majority of workers, the CMP business model where much of the economic action stays offshore, and tax exemptions. Depending on the accounting approach and exemptions of the companies in the garment value chain, companies could exchange the FX they bring in via the bank for operating costs and salaries at a better rate than the official rate of 2100, closer to the market rate. 

However, the working conditions in Myanmar’s garment sector need significant improvement, as they do in most developing countries. The legal minimum wage, on which wage structures and pricing is based, has not been increased since 2018. Inflation and kyat devaluation has halved its value since then. Increasing uncertainty of orders, partly as a consequence of COVID and then of brands withdrawing from the market under pressure from international campaigns, has exacerbated a shift to using temporary day labourers, rather than staff on contracts, who enjoy better working conditions. Uncertainty about where the next order is coming from also led to deteriorating working conditions, unrealistic targets, workplace stress and bullying, and a rise in unauthorised sub-contracting by factories to other factories with worse labour and environmental practices.

Trade unions remain legal, although they struggle to operate. Non-union labour rights groups are now grappling with the impact of the October 2022 changes to the Associations Law which outlaws groups that do not register. But a number continue to work bravely to support workers and raise their grievances with factories and the brands that place the orders. One such group, Action Labor Rights had supported the resolution of 321 complaints from workers in 2022, most of them in the garment sector.

Ms Bowman outlined the new EU-funded “Multi-stakeholder Alliance for Decent Employment in Myanmar (‘MADE in Myanmar’) of which she is a Steering Committee member. The initiative aims to improve practices and standards within the garment sector, prevent abuses, address grievances and promote dialogue with workers and their representatives. Companies joining the ‘Alliance’ must commit to transparency, heightened human rights due diligence, grievance handling and increasing wages. The role of brands in pursuing responsible sourcing practices is thus crucial for the sector. The conditions of the garment workers will only be improved if buyers are committed to staying and building solid relationships with factories and through them, workers.

Ms Bowman observed that some foreign investors have exited Myanmar since 2021 due to sanction risks, human rights risks or stakeholder/reputation risks, but that the main reason for exit – including for many Asian companies – has been commercial/operational. She noted that it is easier for a non-profitable business to exit responsibly. Profitable businesses, particularly in sectors where there is are limited licences such as telecoms, breweries and extractives, are more likely to see their business taken over by vested interests connected to the military regime. This was why human rights impact assessment and due diligence of the possibility of exit should take these factors into account, and the full consequences of exit should be explained to and discussed with stakeholders.

She commented that the ongoing debate – in post-coup Myanmar, or the Russia/Ukraine context – on whether companies should pay tax boils down to a debate about whether they should stay or go. The NUG’s call for businesses to withhold tax payments to the SAC is not an option for foreign investors for whom compliance with the laws of the land is a red line. Furthermore, tax non-compliance or manufacturing a tax dispute could be used as an excuse to expropriate the business or arrest its employees. Companies have a few options for legal, rather than illegal, ‘tax resistance’. These included ‘payment under protest’ (which Telenor had done at the time of paying its annual licence fee in March 2021, when the internet was shut down), and a short-term delay in payment, which several companies had done just after the coup in 2021. But other than that, the only legal options a company would have to reduce its taxes would be commercial ones. This included delaying or ceasing country entry; deferring expansion or going slow; or minimising operations (and possibly employment) which would reduce sales and profits and therefore, tax. Some companies were taking these decisions anyway, rather than just to reduce tax.

Ms Bowman remarked that the international debate around tax and human rights is usually framed in terms of tax avoidance and evasion being the human rights abuse, rather than tax payment. Professor John Ruggie who developed the UN Guiding Principles, had noted to the UN Human Rights Council in 2008 that “Mere presence in a country, paying taxes, or silence in the face of abuses is unlikely to amount to the practical assistance required for legal liability.”

Finally, and looking ahead, Ms Bowman encouraged those working on federal options for Myanmar to pay attention to constitutional and legal frameworks for business. If businesses were to be able to operate responsibly, these frameworks needed to be clear and functional, and protect human rights. Issues such as natural resource planning, permitting, taxation, and environmental and social regulation were examples of where a federal legal framework needed to be properly designed. Arrangements for company registration, for example at national, or at sub-national level (as occurs in the USA), should also be addressed. MCRB’s earlier sector-wide impact assessments (SWIAs) on oil and gas, mining, tourism, and ICT had identified and made recommendations on some of the problems in the existing Myanmar legal framework.

Several attendees sought Ms Bowman’s further thoughts on extending accountability and human rights protections in the supply chain, transnational standard-setting bodies, specifics on heightened due diligence, the role of development partners during the current political crisis, ways to promote corporate social responsibility, nurturing public discourse on responsible investment in Myanmar, country-specific projects and their relation to sustainability, increased extractive industry activities in conflict areas, and remedies to address human right violations in the absence of effective state protection.