Rothmans Myanmar Holdings Singapore (RMHS), a Singapore-based tobacco company, has announced that it is taking legal action against its army-owned joint-venture partner to demand greater transparency.
The company, which has operated in Myanmar since 1993, said in a statement released on Wednesday that it would sue the powerful Myanmar Economic Holdings Limited (MEHL) in a Myanmar court.
According to the statement, the company has been urging MEHL to comply with recent laws and allow an audit of donations made in the name of the joint venture Virginia Tobacco Co., Ltd. (VTCL).
VTCL, which produces the popular Red Ruby and Premium Gold cigarette brands, is the biggest player in Myanmar’s tobacco market. It employs about 1,000 people in the country.
A spokesperson for RMHS told Myanmar Now that VTCL is required to make monthly donations to a fund for disabled veterans, but knows nothing about how the money is spent.
A UN report on the military’s economic interests described MEHL as one of “Myanmar’s most opaque enterprises”.
“If the company doesn’t contribute, MEHL threatens to stop its production and distribution,” the spokesperson said.
A further concern is MEHL’s rejection of an arrangement made by RMHS to reward VTCL staff in September and December of this year.
“As the company’s situation is good, we expect that employees will receive an additional bonus, especially during the Covid-19 pandemic. We should have paid the bonus, but they [MEHL] refused to sign the agreement,” the spokesperson said.
Hla Myo, a general manager at MEHL, told Myanmar Now that the problem was due to a “misunderstanding” between the joint-venture partners.
He said the donations were made as part of MEHL’s commitment to corporate social responsibility. “There is also the welfare of the shareholders. There is just a gap between the two sides in terms of clarification,” he said.
He added that MEHL had no reason to deprive VTCL employees of their rightful compensation, since they were also MEHL employees.
“There is no reason for MEHL to work against the welfare of VTCL employees, who are also employees of MEHL. So there is no discrimination. It was just a matter of the board of directors deciding how much or how little to give,” said Hla Myo.
RMHS has been “subject to unfair and oppressive treatment by MEHL through threats and unreasonable conduct,” according to a statement released by the company
In its statement, RMHS cited scrutiny from Amnesty International and a UN Fact-Finding Mission that examined military business ties in Myanmar last year to support its calls for an independent audit of VTCL’s finances.
In its August 2019 report on the military’s economic interests, the UN Fact-Finding Mission described MEHL and another military-owned conglomerate, the Myanmar Economic Corporation (MEC), as “two of Myanmar’s most opaque enterprises”.
It also urged foreign companies not to do business with Myanmar’s military, as doing so “substantially enhances its ability to carry out gross violations of human rights with impunity.”
According to the report, “at least 15 foreign firms have joint ventures with the Tatmadaw, while 44 others have some form of commercial ties with Tatmadaw businesses.”
The RMHS statement does not address the broader issue of whether it should be doing business with MEHL, but makes clear that it regards its partner’s behaviour as abusive.
“RMHS feels that not only has its requests been ignored, it has also been and continues to be, subject to unfair and oppressive treatment by MEHL through threats and unreasonable conduct,” the statement reads.
The company’s spokesperson told Myanmar Now that it decided it had to take its complaint to court “because MEHL is a very powerful company.”
“For the time being, MEHL has no comment,” said Hla Myo.
RMHS is owned by Distinction Investments Pte and has a complicated corporate structure that includes the use of offshore companies in the British Virgin Islands, a well-known tax haven.
Distinction Investments has three shareholders: Myanmar citizen George Yin Soon, Castlebay Investments, and Bright Seasons. Its directors are George Yin Soon, Lim Kaling and Ong Beng Huat.
Lim Kaling is a co-founder of Razer, a manufacturer of gaming computers listed on the Hong Kong Stock Exchange. The company is connected to 18 entities included in the Offshore Leaks Database, compiled by the International Consortium of Investigative Journalists.
Additional reporting by Chan Thar