Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Myanmar coup becoming risk for POSCO's businesses there
A gas field platform run by POSCO International off the coast of Myanmar / Courtesy of POSCO International
By Nam Hyun-woo
By Nam Hyun-woo
The military coup in Myanmar is emerging as a risk in POSCO’s businesses in the Southeast Asian country, as analysts raise concerns over potential setbacks in the group’s gas project there. Civic groups also allege POSCO’s local joint venture of being linked to financing by Myanmar’s military.
According to POSCO International, Tuesday, more than 70 of its employees dispatched to the company's gas field project in Myanmar have been working from home since the coup earlier this month. Except for essential personnel needed to run production facilities, field workers hired there are also staying at home for their safety.
POSCO International's Shwe gas field project is a major business for the company. The project generated 305.6 billion won ($276 million) in operating profit last year, accounting for 64 percent of the company's total operating profit of 474.5 billion won in the same year. The project is now in Phase 2 development and POSCO International recently signed an engineering, procurement, construction, installation and commissioning contract with Hyundai Heavy Industries for Phase 3 development.
In a Feb. 2 report, S&P Global said the coup “threatens to disrupt energy investment in Myanmar's oil, gas and power sectors as companies assess the risk of operations amid heightened political uncertainty and the potential for renewed international sanctions,” and mentioned POSCO International's Shwe project as one of the main energy projects in the country.
An official at POSCO International said the company is monitoring the situation closely, but sees no setbacks in gas production or delays in gas field development at present. However, analysts said risks remain due to uncertainties in winning development approvals from the local government.
“The startup of POSCO's Shwe Phase 2 and Shwe Phyu projects were anticipated in 2021 and 2022, respectively, but delays are likely here as well,” Vishruthi Acharya, an analyst at Rystad Energy, told Energy Voice.
POSCO C&C's joint venture in Myanmar is also emerging as a risk.
Last September, Amnesty International published a report alleging Myanmar's military was receiving financing from international companies including POSCO C&C.
The report claimed that the military has been receiving revenue from shares it held in Myanmar Economic Holdings Limited (MEHL), a conglomerate involved in mining, beer, tobacco, garment manufacturing and banking.
POSCO C&C set up two joint ventures with MEHL ― Myanmar POSCO Steel in 1997 and Myanmar POSCO C&C in 2013. MEHL has a 30 percent stake in each company.
The report said many of MEHL's business partners are “linked to crimes under international law and other serious human rights violations by virtue of their business relationships with the conglomerate” and dividends from those joint ventures are sent to MEHL which are then given to MEHL shareholders, including allegedly the military.
POSCO responded to the report by saying Myanmar POSCO C&C has never paid any dividends to MEHL since its incorporation in 2013, and no other dividend payments have been made by Myanmar POSCO Steel to MEHL since the last one to reflect business performance in 2017. The group added that it asked MEHL in August last year to confirm whether it used the dividends for MEHL's business objectives, but did not receive an answer.
POSCO said Wednesday it has yet to receive an answer from MEHL, while declining to comment further on the issue.