Burma gained independence from British rule in 1948. In September 1988 the army under the General U. Saw Maung assumed control and brutally repressed dissent, killing; its believed thousands of students and civilian. General Maung replaced the government with the State Law and Order Restoration Council, a group of military officers. In 1990 the SLORC allowed free election and felt win confidently, but 80% of majority seats in the proposed new government were won by civilian opposition party led by Suu Kyi, then SLORC refused to turn over power to a civilian opposition party by annulling the election, outlawing the opposition party and arrested its leaders.
The country was attractive for several reasons such labor extremely cheap, high value on education, worker literacy rates were very high, oil resources were an irresistible, and its many untapped resources presents major opportunities. Because of these reasons, the SLORC invited foreign private investors and companies to invest in Burma with the hopes of improving the economy.
PepsiCo was one of many American companies that respond favorably to the invitations of the SLORC. Others included Eddie Bauer, Liz Claiborne, Spiegels, Levis Strauss, Reebok, Amoco, Unocal, and Texaco. In 1991 PepsiCo decided to enter a joint venture with Myanmar Golden Star Co., by PepsiCo would own 40% and Myanmar Golden Star Co., would own 60%. In 1995 PepsiCo reported that the revenues made $20 million of which PepsiCos share was $8 million, and estimated the revenues would be increase 25% in 1996.
However, during doing business in Burma, many groups including the U.S department of State accused the SLORC of numerous human rights abuses. Also many companies that invested in Burma, were questioning the ethics of doing business. There were many students pressure the universities to purge their portfolio of any business in Burma. Several cities put ban on purchasing products of those companies invested in Burma. There were students from about 100 campuses launched a boycott of Pepsi products. The students at Harvard University also pressure the university not to buy product from Pepsi which cost about $1 million. PepsiCo also received many letters from its shareholders asking PepsiCo to stop investing in Burma as well.
The critics against this investment claimed that by investing in Burma means the American companies are supporting the military government. The military would fail and will be pressured to reform instituting democratic if those American companies do not invest there.
Moreover, many of the American companies in Burma engaged in a practice called counter trade, according to critics, was associated with the forced labor that was now rampant in rural areas. Burma money was worthless outside of the country, making it virtually impossible for an American company to transfer its profits out of Burma and into the United States, so to solve this problem many companies traded their Burmese profit for Burmese agriculture commodities.
PepsiCo and other companies responded to the critic that by staying in Burma, it would also pressure the military to change to democracy. If it stays in Burma, it would improve the economic condition. This would increase the number of middle class people that could bring in the democracy for the country. PepsiCo used the slogan Free trade leads to free societies. As result in 1992, Levi Strauss had withdrawn from Burma. In 1994, Reebok and Liz Claiborne also had withdrawn from Burma too.
In 1996, PepsiCo sold its holding in the plants to its partner, but PepsiCo decided to continue to honor its 10 years license allowing the bottler to sell Pepsi in Burma. Critics objected that the half way move meant that PepsiCo was still doing business in Burma and vowed to keep up the pressure on the company.