Kirin’s attempt to extricate itself from a controversial entanglement in Myanmar has hit a new level of complexity.
The Japanese beverage firm has filed for arbitration in Singapore after its partner Myanma Economic Holdings Ltd. (MEHL) had unilaterally filed to terminate their brewing partnership Myanmar Brewery in local courts.
MEHL, an enterprise dominated by current and former members of the military, is one of Myanmar’s largest and most important conglomerates with interests (besides brewing) in industries like mining, tobacco and construction.
Asia Brewers Network had previously reported on Kirin’s reluctance to withdraw from the partnership with MEHL, only announcing a review in mid-2020 of the controversial arrangement after years of pressure from human rights campaigners and even the United Nations.
“One of the most concerning acts by Myanmar Brewery was a donation of around USD 30,000 directly to Burmese armed forces personnel during campaign that the United Nations described as a “textbook example of ethnic cleansing” in Rakhine State in 2017.”
While Kirin at the time had suspended “corporate donations” from Myanmar Brewery, campaigns around the world – notably in the UK with the Burma Campaign’s ‘Boycott Kirin Ichiban’ – made the partnership with MEHL a public relations nightmare.
It took a military coup in early 2021 for Kirin to finally announce their intention to push MEHL out of the partnership and find either a local partner or another international investor.
President and CEO Yoshinori Isozaki reiterated last month in comments to the Japanese press that the firm “wants to maintain its business in Myanmar after exiting the partnership”.
At the time, we predicted that MEHL would struggle to accept the termination of the partnership and that Kirin would equally have serious difficulties finding a foreign investor willing to risk a large capital injection in a turbulent political environment.
Kirin’s reluctance to withdraw from Myanmar is arguably entirely down to how profitable the market is for the brewer: its subsidiaries dominated around 80% of domestic beer sales and it had predicted a profit of 16 billion yen in operating profit in 2021 (prior to the coup).
Even Facebook, a firm that the United Nations noted had played a “determining role” in anti-Rohingya violence, has stated they will no longer allow Myanmar Brewery to advertise on their platforms.
Back to the arbitration, Kirin’s choice of the Singapore International Arbitration Centre – which is regarded as the best location for complex arbitration disputes in APAC by a range of legal reviewers including Thomson Reuters – may also be designed to exert maximum pressure on Myanmar’s ruling junta.
The military government has faced a particularly high level of criticism and scrutiny from ASEAN states and will likely be wincing from further economic damage, a dynamic that will benefit Kirin as other firms in the region evaluate whether to leave Myanmar.
However, even if MEHL come to the table and are able to resolve their differences in Myanmar, it remains to be seen whether Kirin’s will be able to maintain profitability in the market that is struggling with the dual challenges of intensifying civil strife and COVID-19.
