OSAKA -- It has been nearly half a year since the military seized control in Myanmar. Many foreign companies, including Norwegian telecom operator Telenor and Japanese brewer Kirin Holdings, have decided to sell their businesses or end joint ventures in the country.
If a foreign company leaves Myanmar, it runs the risk of losing the business franchise it has built up in the country and wasting its investment. On the other hand, continuing to do business in the country may be regarded by the international community and pro-democracy citizens as a gesture of support for the current administration, which can deteriorate a company's brand image.
Japan's Kubota has ample experience doing business in foreign countries, but President Yuichi Kitao said it "never expected the situation to become this bad."
The farm machinery maker has maintained a relationship with the country since the 1950s, starting with export of farming machinery. It has also built water supply and sewage systems there.
The company currently operates in more than 120 countries, including emerging economies, with overseas revenue representing about 70% of its total revenue. Nikkei asked Kitao how the company is dealing with country risk, which is increasing across the globe.
Q: Confusion remains in Myanmar's society and economy. How has the situation been for Kubota?
A: We have had a lot of difficulties in the past few months. There was trouble at customs and containers carrying farming machinery were held up for a while and we weren't able to deliver the products. Banks finally reopened for business, but there's a shortage of cash. We're not generating sales from farmers who cannot withdraw money. We cannot expect to receive new orders for construction of water supply and sewage systems from public bodies and businesses. So it's difficult to accurately forecast business outcomes.
Q: Many foreign companies have announced decisions to discontinue their current operations in Myanmar. Does Kubota plan to continue to operate in Myanmar?
A: Yes, we do. Container deliveries have gradually restarted since May. Revenue from Myanmar is about 17 billion yen ($155 million) so it has little impact on our overall earnings. [Kubota earned consolidated revenue of 1.85 trillion yen for the year ended last December.] But we've learned that many farmers are awaiting our farm machinery. Since Myanmar's democratization, demand for farming machinery has increased sharply, as foreign companies have started operating in the country and lured workers away from farming to commerce and industry sectors.
Q: Kubota may be regarded as supporting the military government by continuing to operate in Myanmar.
A: We have no political motivation. We just keep doing our business. But we understand some employees have issues, and so we allow them to have days off whenever they want. Some of them have participated in protests, I understand. We even offer paid leave to employees as long as they complete the required procedures.
Q: What are the difficulties of doing business in emerging countries?
A: There's typically an invisible wall and you have to correctly understand the situation of the country. Our share in India's tractor market, which is the largest in the world [by volume], is about 2%. Our products initially did not sell much there because they were designed only to cultivate fields and were perceived as being relatively expensive. So we modified them so they could also tow a heavily loaded cart. We set up a company for purchasing components in a joint venture with a local company, which reduced costs for the first time. There's a culture of sharing work among people (in the country). We hire diverse people.
Q: The global community is focusing attention on the alleged abuse of human rights in China's Xinjiang region.
A: We have asked about 3,900 suppliers located in Japan and elsewhere to comply with international rules and our guidelines for respect for human rights. We also plan to ask the suppliers of our suppliers to comply with our rules, although we've yet to flesh out the plans.