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UPDATE 1-Kirin undecided on Myanmar beer business after inconclusive third-party probe

(Adds details, background on Kirin and Myanmar; attempt to reach MEHL)

TOKYO, Jan 7 (Reuters) - Japan’s Kirin Holdings said on Thursday it was undecided on the future of its Myanmar beer business after a third-party probe into its local partner’s military connections ended with inconclusive results.

Kirin had hired Deloitte Tohmatsu Financial Advisory to investigate after the United Nations identified owners of its local partner, Myanmar Economic Holdings Public Company (MEHL), as members of the Myanmar military which has been accused of genocide and other war crimes against the Rohingya.

Myanmar denies genocide, saying its military was carrying out legitimate operations against Rohingya insurgents who attacked police posts.

“Unfortunately, the assessment was inconclusive as a result of Deloitte being unable to access sufficient information required to make a definitive determination,” Kirin said in a statement.

MEHL officials were not available for comment.

Groups such as Amnesty International have called on Kirin and other companies to cut ties with MEHL. Kirin said in November it was halting payments from the beer ventures to MEHL, a suspension it said would continue until a solution was found.

Kirin acquired a majority stake in Myanmar Brewery in 2015, part of billions of dollars in foreign investment which flooded into Myanmar that year with the partial lifting of international sanctions. Later that year, pro-democracy figure Aung San Suu Kyi’s party won the first free election in 25 years.

But many foreign investors have since grown wary about Myanmar amid worries about stalled political reforms and the persecution of the Rohingya Muslim minority, even as some eye its emerging consumer market with interest.

It was unclear what steps Kirin will take next, and aid groups have said exiting Myanmar is not necessarily the answer as that leaves the beer venture’s ties to the military intact.

“It is certainly possible to do business in Myanmar without enriching the military and companies should engage in human rights due diligence to ensure that they do not enter into a business relationship with MEHL or any other Myanmar military entity,” William Nee, Business & Human Rights Advisor at Amnesty International, told Reuters ahead of Kirin’s announcement.

Myanmar accounts for less than 5% of Kirin’s global beer sales, but it is one of the few growing beer markets for Kirin as sales in its home market, Japan, continue to shrink due to an ageing population.

Kirin’s beer business in Myanmar follows other overseas ventures that have posed challenges for the firm.

In 2017, it sold its unprofitable Brazilian unit including the Schincariol brand to Heineken after losing market share.

In November, it finally sold its Australian dairy business to Bega Cheese Ltd after a two-year struggle to offload the relatively low-margin business. An earlier deal to sell it to a Chinese food conglomerate had to be scrapped after Australian regulators blocked the deal amid geopolitical tensions. (Reporting by Ritsuko Ando; Additional reporting by Thu Thu Aung in Yangon; Editing by Chris Cushing and Jacqueline Wong)

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