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Coca-Cola has defended its business practices in Burma after an international industry watchdog pointed out connections between the corporation’s local partner and the US Treasury-blacklisted company Myanmar Economic Holdings Limited (MEHL).
Prior to recommencing business in Burma, the drinks giant insisted it had conducted “comprehensive” due diligence checks in the years 2009 to 2012 “based on the information at the time”. But it wasn’t until Global Witness alerted Coca-Cola to these links that the conglomerate realised that its only local director in Burma, Shwe Cynn, was also a shareholder in the jade mining company Xie Family.
Juman Kubba, a spokesperson for Global Witness, told DVB on Thursday that while there may not have been any actual wrongdoing by either company, the fact that Coca-Cola’s partner had a stake in the jade business should have raised some red flags.
“The jade sector is notorious for corruption, military involvement, and environmental and human rights abuse, and Myanmar jade is still subject to US sanctions,” she said.
“Xie Family itself has had a long-standing partnership with the army company, Myanmar Economic Holdings Limited, which is also subject to US sanctions and which has been embroiled in allegations of land-grabbing, pollution and the use of violence against protestors in connection to the Letpadaung mining project.”
Coca-Cola responded, saying that having recently completed further checks on their local entities and directors, they concluded that there were no breaches of ethical business conduct.
“Our findings from the additional due diligence conducted in 2015 are in line with our earlier assessment and we remain confident that our investment is in compliance with applicable laws,” read the statement released by the US-based corporation on 30 June.
“Daw Shwe Cynn’s relationship with the Xie Family is unrelated to our business,” a Coca-Cola spokesperson told DVB on 2 July.
In 2014, a ‘report card’ released by US Campaign for Burma (USCB) assessing American companies investing in Burma declared Coca-Cola the only “responsible investor” of the six corporations investigated. However, the beverage manufacturer’s report fell down in failing to properly explain how it selected Pinya Manufacturing Co Ltd – where Shwe Cynn is a shareholder – as its local partner.
USCB Executive Director Simon Billenness said that due to the pervasive presence of the military in the Burmese market, avoiding connections somewhere along the line can be difficult.
“Coca-Cola spent a lot of time and money doing its due diligence on prospective business partners in Burma,” he said.
“The fact that the military is so entwined with the economy and local business community means that such due diligence is insufficient. It is virtually impossible to find a local business partner in Burma that is not complicit in human rights abuses or in business with the military.”
Kubba agrees, saying that this case highlights the limitations of private due diligence, but questions how the checks, reportedly amounting to a seven-figure sum, could have missed the connection.
“Despite spending huge sums on big-name [due] diligence companies, Coca-Cola failed to pick up on this connection – and the question is why. Were the right questions asked in the first place? Were points such as the local partner’s known connection to the jewellery trade pursued?” she said.
The Global Witness spokesperson added that in order to avoid such “nasty surprises” in future, the company needed to maintain transparency in its business dealings.
“Of course, in an opaque environment like Myanmar, there may be times when even the most thorough due diligence has gaps.
“It is therefore crucial that international companies publish details of the local individuals who own and control their Myanmar business ventures, to provide an opportunity for any such gaps to be identified and filled.”
Coca-Cola has since made moves to cool the issue, publishing the names of two corporate shareholders in their Burmese business venture, but has not released the names of the individuals who control them. The Atlanta-based firm also said it is working with Shwe Cynn and Global Witness to “raise concerns” regarding the unethical reputation of the jade mining industry.
“While the jade mining industry is unrelated to our business, we encouraged and facilitated engagement between Daw Shwe Cynn and Global Witness.
“We hope that Global Witness will agree and is willing to play a role to work with related parties in Myanmar to bring about the positive and long-lasting change in the country.”
In June 2013, Coca-Cola opened a bottling plant in Hmawbi Township in the outskirts of Rangoon, part of a reported investment of around US$200 million in Burma, as the multinational firm re-entered the country after a hiatus of more than 60 years.
It was one of the first US companies to announce investment in Burma after the suspension of economic sanctions on the country in 2012, following decades of military rule.
At the time, Burma was one of only three countries in the world where Coca-Cola did not have business, the other two being Cuba and North Korea.