Japanese drinks giant Kirin Holdings on Friday scrapped its troubled beer tie-up with an opaque conglomerate linked to the Myanmar military, which this week staged a coup and in 2017 killed thousands of Rohingya Muslims in a "genocidal" crackdown.
The abrupt end to the alliance serves as a cautionary tale for other Japanese companies, from Aeon Co. to auto-parts maker Denso Corp., whose Myanmar ventures have been thrown into disarray after the army takeover, experts say.
Human rights monitors have pressured Kirin to end its venture with the Myanmar Economic Holdings Public Company (MEHL) because of its army links. In 2019, the United Nations warned that firms doing business with MEHL aided the army financially and were at "high risk" of contributing to human rights abuses.
The Myanmar military on Monday overthrew the elected government of leader Aung San Suu Kyi, handing power to its top general and declaring a one-year state of emergency, sparking widespread international condemnation and calls for fresh sanctions by the United States.
In 2018, U.N. investigators said the army carried out mass killings and gang rapes of the Rohingya with "genocidal intent" a year earlier, and its top brass should be prosecuted for the gravest crimes under international law.
"Given the current circumstances, we have no option but to terminate our current joint-venture partnership with Myanmar Economic Holdings Public Company Limited, which provides the service of welfare fund management for the military," Kirin said in a statement on Friday.
"We will be taking steps as a matter of urgency to put this termination into effect."
MEHL and the joint venture, Myanmar Brewery Ltd., did not respond to calls seeking comment.
Teppei Kasai of Human Rights Watch said Kirin's move was long-awaited and welcomed.
"Other foreign companies with ties to the Tatmadaw should follow in Kirin's footsteps in an urgent and transparent manner."
"Tatmadaw" is a Burmese term for the country's armed forces.
Kirin acquired a majority stake in Myanmar Brewery in 2015 in partnership with MEHL, a conglomerate with interests across Myanmar's economy. It was part of billions of dollars in foreign investment which flooded into the country with the partial lifting of international sanctions. Later that year, Suu Kyi’s party won the first free election in 25 years.
It took a controlling stake in Mandalay Brewery Ltd. in 2017 at a cost of $4.3 million, topping off its more than $500 million investment in top producer Myanmar Brewery in 2015.
Faced with pressure from human rights monitors, Kirin hired third-party investigators to look into the business and said in November it was halting payments from the beer ventures to MEHL. But it had been undecided on how to resolve the issue.
Myanmar Brewery, whose beverages include its flagship and ubiquitous Myanmar Beer brand, boasts a market share of nearly 80%, according to figures published by Kirin in 2018.
Bernstein Research said it valued Kirin's stake in the joint venture at $1.4 billion to $1.7 billion.
"However, given the current political climate in Myanmar and the minority partner, any buyer would face material reputational risk … and Kirin would likely have to accept a discount," said the brokerage in a note issued earlier this week.
Myanmar accounts for less than 5% of Kirin’s global beer sales, but it is one of the few growing beer markets for Kirin as sales in its home market, Japan, continue to shrink due to an aging population.
Kirin said on Friday it was not necessarily exiting Myanmar.
"We decided to invest in Myanmar in 2015, believing that, through our business, we could contribute positively to the people and the economy of the country as it entered an important period of democratization," it said.
"We hope to find a way forward that will allow us to continue serving Myanmar and its people in the years to come."
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