Responsible Business in Myanmar: A Rethink Could Benefit Workers

Since the 2021 coup in Myanmar, debate has raged about whether it is possible for businesses in Myanmar to abide by responsible business standards. These standards provide guidance for businesses to operate in ways that maximise their positive social and environmental impact and minimise the negative impacts. This has been particularly pronounced in the garment sector, where dozens of global brands source from about 600 factories, creating jobs for nearly half a million Myanmar workers. Yet the current approach to responsible business misunderstands key risks and thus misses ways to mitigate negative effects on workers. Rethinking what responsible business in Myanmar means could help bring meaningful improvements for workers.

The intensifying conflict and human rights violations in Myanmar since 2021 have created a more challenging environment for businesses to operate responsibly. The International Labor Organization (ILO) has documented far-reaching violations of freedom of association and forced labour. It has reported that the Myanmar military has killed, forced into exile, detained, abused and tortured trade union members and leaders. It has also pushed residents into forced labour for military activities.

Some Myanmar unions say that businesses cannot operate responsibly in the country. They argue that it is not possible to conduct due diligence that meets international standards in Myanmar, as the military has “captured and redirected” foreign currency inflows from garment manufacturers, to “help sustain regime priorities”. This contributes to severe human rights risks. The Ethical Trading Initiative, a responsible sourcing initiative, stated that its standards for workers’ rights are not being met and that corporate responsibility to respect human rights is constrained.

Foreign governments should also be more assertive in raising their concerns with Naypyidaw on how the regime’s economic policies fall short of Myanmar’s international economic obligations and in stressing the negative implications of such policies.

Garment brands and factories which have remained in Myanmar, however, claim they can operate responsibly despite human rights risks. Many have committed to heightened human rights due diligence (HRDD) and transparency measures, as defined by international guidelines provided by the UN and OECD. Bestseller, for example, publishes twice-annual HRDD reports. Some brands have increased in-country staffing to monitor factories, assist them with social compliance and support operations in Myanmar.

Others have severed business relationships with military-linked entities in response to calls for businesses operating in or sourcing from Myanmar to “take steps to ensure they do not economically benefit the military”. They allege that the military’s business interests have enabled serious human rights violations amounting to crimes against humanity.

Since the coup, however, the military’s resourcing model has changed. It now relies primarily on state institutions, such as the Central Bank and resource-related state-owned enterprises, rather than on military-linked businesses. New policies require private sector banks to convert incoming foreign exchange transfers into local currency at regime-dictated exchange rates. The regime also controls foreign exchange purchases and allocates them to priority businesses and sectors. These policies allow the regime to benefit from ongoing business activity in Myanmar, using state institutions to help fund the ongoing civil conflict and retain political power.

For businesses, this change has an important consequence: cutting links with military businesses does little to reduce the regime’s sources of funding. Therefore, this does little to reduce human rights violations. Instead, the business relationship that matters most for human rights in post-coup Myanmar is with private sector banks.

This new reality does not mean that businesses should not operate in Myanmar. The United Nations Guiding Principles on Business and Human Rights (UNGP) framework does not explicitly require businesses to exit when they cannot address an adverse impact that they do not (or cannot) control. Instead, multiple factors shape next steps, including the businesses’ leverage, how crucial the relationship is to the business, the severity of the abuse and whether ending the relationship would have adverse human rights consequences. In this context, garment brands and factories have virtually no leverage over the regime and no reasonable alternative to working with private sector banks. If they were to leave Myanmar, this could contribute to other adverse human rights issues that accompany job losses for workers.

However, businesses can take steps to operate more responsibly in Myanmar. They could start by expanding HRDD and reporting on responsible business activities to cover their relationships with banks and the effects of the policies that banks are forced to implement. Second, businesses need clearer guidance on how to respond to Myanmar’s complex context. This should reflect different levels and types of exposure: a brewery’s primary exposure is likely through commercial and specific goods tax payments, whereas a garment factory’s is through foreign exchange remittances. Thirdly, mitigation measures should be explored. The International Chamber of Commerce guidance on responsible business in challenging contexts argues that businesses should explore their leverage to mitigate adverse human rights impacts and the means to apply it.

Labour advocates and foreign governments could also try to make it easier for businesses to operate responsibly in Myanmar. Some labour advocates call for garment brands to exit Myanmar, citing the foreign exchange the sector generates. Yet agriculture and other export sectors also generate foreign exchange, but unions are not calling for an end to agricultural exports. Singling out the garment sector heightens the reputational risks of sourcing from Myanmar and unintentionally contributes to short-term and irregular sourcing. It also pushes some factories to offer lower prices to entice buyers. This exacerbates challenges associated with wages, working conditions and labour rights. Labour advocates could consider these unintended effects and reshape advocacy accordingly.  

Foreign governments should also be more assertive in raising their concerns with Naypyidaw on how the regime’s economic policies fall short of Myanmar’s international economic obligations and in stressing the negative implications of such policies. Businesses have limited leverage over these policies even though they shape the scope for responsible business conduct. Foreign governments, on the other hand, may have some leverage through international forums and trading relationships. A more assertive approach, along with efforts of businesses and unions, could contribute to tangible improvements for Myanmar’s workers.

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