By Shwe Yee Saw Myint and Aung Hla Tun

YANGON (Reuters) - Two Myanmar labor rights groups looking after migrant workers said Myanmar authorities had blocked them from operating in Thailand because they had criticized recruitment practices as "legal human trafficking".

Up to 3 million people from Myanmar are working in neighboring Thailand, many doing menial jobs, and contributing a significant portion to total remittances that amount to 5 percent of gross domestic product, according to a World Bank estimate.

The two groups, Aid Alliance Committee for Myanmar Workers (AAC) and Myanmar Association in Thailand (MAT), need permission from their government to operate.

But the groups said permission had been revoked after they called in a news conference last week for their government to crack down on Myanmar employment agencies, whose practices they said led to the mistreatment and even imprisonment of workers.

"The embassy revoked the license it issued to us," Ye Min of the AAC told Reuters late on Tuesday.

"We've decided to stop operations since we can't do anything without a license," Ye Min said, adding the AAC believed the embassy action was in response to their criticism at last week's news conference.

The embassy did not respond to requests for comment but the permanent secretary at the foreign ministry, Aung Lynn, denied that the embassy in Bangkok has anything to do with the affair.

He blamed the problem on infighting among activists and denied that their licenses had been revoked.

Last week, the labor groups criticized arrangements for workers and called on the government led by democracy champion Aung San Suu Kyi, who met migrant workers in Thailand on a visit there in June, to overhaul the system.

"Only corrupt Myanmar officials and dishonest job agencies close to them are benefiting from existing policy and practices," Kyaw Thaung of the MAT told the news conference.

The MAT likened the system to "legal human trafficking".

Officials at the Myanmar Labour Ministry, which oversees arrangements for migrant workers, were not available for comment.

Kyaw Thaung said that after the news conference, police told him an organization of employment agencies sending workers abroad had filed a defamation case against him.

"I feel intimidated because of our open criticism of the malpractice and corruption by officials and job agents,” he said.

Kyaw Zaw, general secretary of the Myanmar Overseas Employment Agencies Federation confirmed it had reported Kyaw Thaung to the police.

Suu Kyi's National League for Democracy (NLD) party is drafting a law giving more legal protection to overseas workers, said Myo Zaw Aung, an NLD lawmaker.

(Editing by Antoni Slodkowski and Robert Birsel)