Korean steelmaker to cut ties with Myanmar junta after investor pressure

South Korean industrial group Posco has said it would end a steel venture with a Myanmar military-controlled conglomerate, becoming the latest big business to cut ties with the country’s junta following investor and activist pressure.

The move on Friday came after institutional funds raised concerns that their holdings in Posco would threaten their own responsible investing commitments after Aung San Suu Kyi’s government was overthrown in a military coup in February.

Posco C&C, a majority-owned subsidiary of South Korea’s biggest steelmaker, said it would end its partnership with Myanmar Economic Holdings Limited, a group controlled by the junta.

Posco’s move came as human rights groups and Myanmar’s civil disobedience movement have increased pressure on companies to sever business ties with MEHL and as well as Myanmar Economic Corporation, another military-owned conglomerate.

Seoul-listed Posco C&C told the Financial Times that it wanted to continue its business producing steel products in Myanmar, but it did not say how it would structure the operation.

“We will end our partnership with MEHL because of issues raised against it . . . We hope that our steel business in Myanmar continues to help improve Myanmar’s residential environment,” the company said in a regulatory filing.

Park Yoo-kyung, an adviser with APG, the $668bn Dutch pension fund that had campaigned for Posco’s board and management to cut ties with the junta, called the industrial group’s decision “fantastic news”.

However, Park added that investors were also “concerned” about Posco’s interests in gas production in Myanmar, which work in partnership with the state-owned Myanmar Oil and Gas Enterprise, now under military control.

“If I were in the company I would look into what the money is being used for,” she said.

The US and UK have followed Canada in imposing sanctions against MEHL and MEC after the coup, elevating the risks to foreign companies that are still doing business with the sprawling groups. Reuters reported on Friday that the EU was also preparing sanctions that would target parts of the two Myanmar conglomerates’ operations.

The countries have also imposed sanctions against sanctions General Min Aung Hlaing, the junta leader, other senior military figures as well as other businesses they control, including in the gemstone industry.

Activist group Justice for Myanmar has pressured European fund managers to divest from companies that do business with the military’s conglomerates or generate revenues for the junta, including foreign oil and gas companies. 

The activist group welcomed the decision by Posco, but it urged the South Korean company to end other businesses it said benefited the military.

“We condemn their remaining ties with the military and [the] illegal junta and remain concerned over Posco C&C’s presence in a military-controlled industrial zone,” it said in a statement. “Posco’s gas production and pipeline bankroll the junta’s crimes against humanity.”

Japanese beer group Kirin announced it would end two brewing joint ventures days after the coup, although it said it would not exit Myanmar entirely and has not yet announced a sale of its stakes.

Lim Kaling, a Singapore-based venture capital investor and co-founder of gaming company Razer, has also said he would sell his passive, minority stake in Myanmar’s leading cigarette producer, which is controlled by MEHL.