Pepsi's pullout creates more trouble for Myanmar

Pepsi's pullout creates more trouble for Myanmar

By Deborah Charles

BANGKOK (Reuter): Pepsi's complete withdrawal from Myanmar could spark further pullouts by other multinationals doing business in the military-ruled country as companies bow to growing shareholder pressure, analysts said on Wednesday.

PepsiCo Inc, which last year sold its 40 percent stake in a Myanmar venture after growing pressure from human rights groups, on Tuesday said it had severed the last of its ties with Myanmar. The U.S. soft drinks giant said it had ended an agreement to sell syrup to its former franchise bottler in Yangon.

Human rights activists have been lobbying for years, through a consumer boycott campaign, to convince Pepsi to withdraw from Myanmar, citing human rights abuses by the military government, which took power in 1988 after violently suppressing nationwide pro-democracy protests.

Opposition leader and Nobel Peace laureate Aung San Suu Kyi has also repeatedly urged foreign businesses not to invest in Myanmar until the situation improved.

"This is the biggest company yet to pull out, and it is clearly because of the grass roots campaign," said Simon Billenness, senior analyst at Franklin Research and Development in Boston.

Several major companies, including Liz Claiborne, Spiegel Inc unit Eddie Bauer and beermakers Heineken NV and Carlsberg have pulled out of investments or stopped sourcing products in Myanmar since last year.

"Pepsi's withdrawal isolates other U.S. companies there. It's sort of a wake-up sign to other companies," said Billenness, whose investment firm is active in various human rights issues.

Peter Brimble, president of the Brooker Group, a Bangkok consulting firm that advises on investment in Myanmar, said the impact would most likely be felt by companies who must answer to shareholders.

"Shareholders have an impact on companies. If shareholders are up in arms about the situation in Myanmar the company has to do something," he said. "Private investment firms with no shareholders can look at it differently."

Activists plan next to target major oil companies, such as Unocal, Total, Atlantic Richfield Co (ARCO) and Texaco -- which are trying to exploit Myanmar's plentiful oil and gas reserves.

"The next focus is certainly the oil companies," said Larry Dohrs, spokesman for the Free Myanmar Coalition, which has headed the campaign to stop investment in Myanmar.

Human rights organizations have already put strong pressure on Total and Unocal, which are building a pipeline to move natural gas from the Andaman Sea to Thailand, citing human rights abuses around the pipeline area.

Texaco plans to start commercial production of natural gas off Myanmar in 1999, along with Nippon Oil Co Ltd and Britain's Premier Oil Plc. ARCO has a production-sharing contract to drill on an offshore block in the Bay of Bengal.

Texaco shareholders last year defeated a proposal to end Texaco's operations in Myanmar.

The firms most likely to be impacted by boycotts or shareholder pressure are from Europe and North America, analysts said, because Asian firms were still keen to invest in Myanmar. Diplomats and local analysts said they see a good deal of interest from South Korean and Japanese investors with trade missions making frequent trips to Yangon.

But some of them might be affected by the growing number of selective purchasing laws in the United States, Billenness said. So far, 11 U.S. cities, one county and the state of Massachusetts have passed the laws which bar government agencies from buying from companies that do business in Myanmar and the laws are expected to spread to Europe and Canada this year, Dohrs said.