We're Live Bangla Saturday, April 01, 2023

Kirin to exit Myanmar beer market over human rights

Brewer To Be First Japanese Company Leaving The Country After Military Takeover

Myanmar Brewery is 51% owned by Japanese brewer Kirin, which decided to unwind its partnership with a military-owned company after Myanmar's military took control of the country. (Source photo by Yoichi Iwata)

TOKYO -- Japanese beverage company Kirin Holdings is set to exit its Myanmar operations after it concluded there is no hope of resolving a dispute with its military-backed partner a year after a military takeover plunged the Southeast Asian nation into turmoil, Nikkei has learned.

Kirin will now begin procedures to shut down is business in the country, which it operates as a joint venture with military-owned Myanma Economic Holdings (MEHL). Although Kirin is considering options for the disposal of its interest in the venture, including sales to a third party company, it is aiming to finish the deal by June.

The Japanese company had sought to end its partnership with MEHL after the military seized power in February 2021, concerned about the deteriorating human rights situation in the country. Although Kirin had hoped to continue its beer business in Myanmar after the dissolution of the joint venture, that did not work out.

After unsuccessful negotiations with MEHL, Kirin took its case to the Singapore International Arbitration Center in early December. But the brewer seems to have decided to pull out, as no progress is expected.

The sale includes Myanmar Brewery, a local beer company in which Kirin took a stake in 2015, and Mandalay Brewery, a joint venture with MEHL established in 2017. Kirin holds 51% stakes in the two companies and MEHL the rest. Kirin seems it plans to sell all of its shares to a company with no military links. The buyer and sales value will be decided by the end of June.

After Myanmar began its democratic transition in 2011, many international companies, like Kirin, entered the market hoping for strong growth. But since the military takeover, foreign businesses have announced withdrawals one after another. Kirin's move will be the first time that a major Japanese company has dissolved a joint venture involving a military-affiliated company and withdrawn from the country. Kirin's decision could affect the strategies of other companies as well.

Kirin had hoped to continue its profitable business in Myanmar, teaming up with a new partner after dissolving the joint venture, which had grown to account for 9% of its total profits before the military takeover.

However, the negotiations proved difficult, as both sides were keen to retain their interest in the profitable brewing business. Kirin decided to exit because it faced difficulties in resolving the issue from an early stage and recently informed MEHL of its plan to withdraw from Myanmar.

The focus will now be on the selection of a buyer. Kirin will likely avoid selling to companies related to the military, as its choice of buyer could bring it pressure from human rights organizations again.

It is unclear whether Kirin can find a buyer. Depending on the amount of the sale, Kirin may be forced to post a loss in its consolidated financial results for the fiscal year ending December 2022.

Among other global companies, French TotalEnergies announced in January that it would withdraw from Myanmar. Like Kirin, South Korean steel giant POSCO is aiming to dissolve a joint venture with MEHL but seems to be having trouble with the negotiations. Among Japanese companies, the Myanmar operations of Fujita, Tokyo Tatemono and Yokogawa Bridge Holdings have been pointed out as having ties to the military.