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November 07, 2003
British American Tobacco Reluctantly Exits Myanmar
    by William Baue

Bowing to pressure from activists and the UK government, BAT sold its interest in its Myanmar operation, though it will continue to license its cigarette brands there.


British American Tobacco (ticker: BATS.L) announced yesterday that it intends to pull out of its operation in Myanmar (formerly known as Burma), which it co-owns with a government that is infamously linked with human right abuses. BAT is selling its 60 percent stake in Rothmans of Pall Mall Myanmar (RPMM), a cigarette manufacturing and marketing company, to Singapore-based Distinction Investment Holding (DIH). The remaining 40 percent of RPMM will continue to be controlled by the Union of Myanmar Economic Holdings (UMEH), a company owned by Myanmar’s military regime. The US State Department describes that regime as a brutal and repressive supporter of forced labor.

“The sale agreement follows the exceptional formal request by the British Government in July for us to reconsider our investment in the joint venture,” said Michael Prideaux, BAT’s director of corporate and regulatory affairs. “As a UK-based multinational, we have taken the request seriously.”

BAT acknowledged that the advocacy efforts of Burma Campaign UK played a role in the company’s decision to pull out.

“This is a huge victory,” said John Jackson, director of Burma Campaign UK. “They had to be dragged out kicking and screaming, but at least they are out.”

The company openly questions whether its departure indeed serves the best interests of social responsibility in the country.

“While some stakeholders say business should withdraw from countries whose governments they criticize, others believe that economic impoverishment renders people less free, more frustrated, and less likely to support democratic principles,” reads a BAT position statement. “We believe that withdrawal from Myanmar would not be in employees’ best interest and would not benefit their communities, especially as employees would not readily find other work given the conditions of Myanmar’s economy.”

For these reasons, BAT stipulated that RPMM remain a viable concern by continuing to license production of its “London” and “State Express 555” brands for sale to the Myanmar market. ISIS Asset Management, a UK-based socially responsible investment (SRI) firm, commended BAT’s decision.

“We believe that through withdrawal from manufacturing, in favor of a licensing agreement, BAT has found an elegant solution to an extremely difficult business decision,” said Kirsty Jenkinson Thomas, senior analyst in ISIS's governance and SRI team. “The UK government's call to withdraw from Burma had raised the stakes, but this is not a black and white issue because companies have to consider how such exits will impact the conditions of the local employees left behind.”

Switzerland-based Sustainability Asset Management (SAM), which co-manages the Dow Jones Sustainability Indexes (DJSI), also approved the decision. The DJSI came under fire a year ago it added BAT to its indexes after its annual review.

“BAT reduced their reputational risk substantially with the pullout from Burma,” said Gabriela Grab Hartmann, the sustainability analyst responsible for the tobacco sector at SAM. “In this perspective, it can be seen as a positive move from a social responsibility perspective.”

“Although their reputational risk is reduced, we will still follow this issue in the future,” Ms. Hartmann told SocialFunds.com. “We expect BAT to uphold their worldwide employment standards and principles under a licensing agreement just as we would expect any company operating in a country with human rights or employment risks to do so.”

 

 
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