Forget Democracy, Myanmar Coup Was To Protect Tatmadaw Businesses, Hide Corruption And Avoid ICC Prosecution

Coup leader Gen Min Aung Hlaing is a major shareholder of military's conglomerate MEHL.

Myanmar’s military – the leaders of its recent coup – are funded by a huge chunk of the national budget. But the armed forces also draw a vast and secretive income from sprawling business interests.

From SIM cards to beer, skydiving and jade mining, there are few areas of Myanmar’s economy that escape the long arm of its military, the Tatmadaw.

At Yangon’s popular Indoor Skydiving Centre, visitors can experience the thrill of jumping out of a plane from the safety of a vertical wind tunnel.

But few people spiralling through this high-flying attraction may realise that it is part of a huge, military-run business empire – one completely woven into the fabric of national life.

Critics argue that this lucrative network has made Myanmar’s coup possible and put the military’s accountability into free fall.

Civilian businesses talk of an environment like “Sicily under the Mafia”, while activists say that democratic reforms can only be possible only when “the military [is] back to barracks”.

Myanmar’s military – the Tatmadaw – began its involvement in business after the socialist coup of Ne Win in 1962. For years, military battalions were required to be self-sufficient and encouraged to develop stakes in local enterprises to fund their operations.

Aung San Suu Kyi defended Myanmar’s military against accusations of genocide and other crimes during proceedings at the United Nations International Court of Justice in December 2019.Credit…Koen Van Weel/Agence France-Presse — Getty Images

While this practice has been phased out, two military-run conglomerates were established in the 1990s as the government began privatizing state industries.

Both organisations – Myanmar Economic Corporation (MEC) and Myanmar Economic Holdings Limited (MEHL) – have since become a key source of wealth for the Tatmadaw, with stakes in everything from banking and mining to tobacco and tourism. MEHL also operates the military’s pension fund.

Several military leaders and their families hold extensive business interests as well, and have been subject to sanctions in the past.

Aung Pyae Sone – the son of coup leader Gen Min Aung Hliang – owns several companies, including a beach resort, and has a majority stake in national telecoms carrier Mytel.

The full extent of these business interests is hard to quantify. But experts say that the military’s business clout remains significant, despite recent democratic reforms, and the coup could partly be an attempt to protect these financial interests.

British, Australian And Indian involvement

Several reports in the past month suggest foreign companies are failing to take that direction seriously.

Two British banks, HSBC and Standard Chartered, have reportedly lent US$60 million to a Vietnamese company building a mobile network in Myanmar. The Tatmadaw-controlled Myanmar Economic Corporation owns 28% of the network, known as Mytel. An Israeli technology company, Gilat Satellite Networks, has also reportedly been doing business with Mytel.

The Australian government has also been indirectly implicated. Its Future Fund has invested A$3.2 million (about US$2.5 million) in a subsidiary of Indian multinational Adani, which is doing business with the Myanmar Economic Corporation.

The subsidiary, Adani Ports and Special Economic Zones, is funding the rail link to connect Adani’s controversial Carmichael coal mine in Queensland to a port on the Great Barrier Reef. It is also building a container port near Yangon on land owned by the Myanmar Economic Corporation.

Avoided ICC Prosecution

“Min Aung Hlaing led a genocide against the Rohingya and the international response has been almost nothing really,” said Anna Roberts, executive director of the Burma Campaign UK. “He’s probably calculated that there will be a small response, but that it will be a price worth paying.”

Rohingya refugees react as aid is distributed in Cox’s Bazar, Bangladesh, September 21, 2017. Photo: Agencies

Aung San Suu Kyi, and other senior members of the National League for Democracy (NLD), which won reelection in a landslide in November’s election, have been detained for more than three weeks with the military making unsubstantiated claims of fraud to justify its power grab.

The United States has already announced financial sanctions to prevent the military from tapping into billions of dollars deposited in the US, as well as targeted moves against individual generals including Min Aung Hlaing, adding to the measures imposed after the 2017 crackdown that prompted an exodus of more than 740,000 mostly Muslim Rohingya into neighbouring Bangladesh.

Stealing State Funds

The military began getting involved in the business when Ne Win moved to nationalize the economy as part of his “Burmese way to Socialism in the wake of the 1962 coup.

As the military abandoned the planned economy, it began to nurture a form of crony capitalism with senior generals and military officers able to secure preferential access to many sectors of the economy, including some of the country’s most lucrative industries. In some areas, military companies and their affiliates were the only ones allowed to operate.

The process gathered momentum with the asset sales of 2011 when senior generals and their families were able to take advantage of the opening of the economy to secure control of some of Myanmar’s main assets.

“It’s really the elite and the business cronies who benefit from this massive theft of state resources,” Roberts said. “Rank and file soldiers don’t benefit, and obviously ordinary people suffer because the money that that should be spent on health and education is being funnelled into buying military equipment instead.”

While the armed forces’ business interests remain largely a “black box” according to Clare Hammond, Global Witness’ London-based researcher on Myanmar, recent reports and document leaks have revealed more details of two giant conglomerates that are key to their wealth – Myanmar Economic Holdings Ltd (MEHL) and Myanmar Economic Corporation (MEC).

The Ministry of Defense established MEHL in April 1990 to “provide for the economic welfare for soldiers, war veterans, and the Burmese people, as well as to support the economic development of the state.”

The company “epitomizes the reach and breadth of the military’s domination over Burma’s economy,” the US Embassy said in a cable back in 2009 that recommended sanctions on MEHL, all its wholly-owned units, board members and general managers. “Its influence and holdings are key components of the elaborate system of patronage the regime uses to maintain power.”

Analysts say the military’s business clout remains significant even with the reforms of the past 10 years, and that the coup could be seen as an attempt to protect the military’s wealth and interests from potential reforms by the civilian government.

In 2019, the NLD managed to secure civilian control of the general administrative department, which oversees key bureaucratic appointments, and had also introduced changes to the law on gemstones and jade.

“Many were shocked that the military had been forced to relinquish control,” wrote Htwe Htwe Thein, an associate professor at Australia’s Curtin University, in an article published in The Conversation. “It was a sign of the weakening grip of the military over the government administration and patronage – which had been at the heart of its ability to accumulate and protect its wealth.”

Battalions of shareholders

The United Nations Fact-Finding Mission, set up in the wake of the Rohingya crackdown, detailed the military’s business interests in a 110-page report that was published in August 2019.

The report laid bare the extent of the armed forces’ involvement in the economy – exposing 106 MEHL and MEC-owned businesses as well as 27 close affiliates to the military – and the armed forces’ domination of Myanmar’s natural resources, including jade mining.

The Tatmadaw’s web of commercial interests enabled it to “insulate itself from accountability and oversight,” the UN said. “Through controlling its own business empire, the Tatmadaw can evade the accountability and oversight that normally arise from civilian oversight of military budgets.”

“The military’s tentacles spread across the board,” said Montse Ferrer, the business and human rights adviser at Amnesty International, which published a report last year estimating the military enjoyed dividends from MEHL alone of some $18bn (based on the official exchange rate of $1 to 6 Myanmar kyat) in the 20 years until 2011.

Tatmadaw military parade

Amnesty, working from never-before-seen documents obtained by Justice for Myanmar, said that the conglomerate was not only controlled by the military’s top brass – the people who led the February 1 coup – but also the different wings of the armed forces – the army, the navy and the air force – and even combat battalions.

“It’s quite unique when you have a battalion that’s on the front lines and they are shareholders of MEHL,” Ferrer told Al Jazeera.

The Myanmar Centre for Responsible Business, which tracks transparency and standards of corporate governance in Myanmar through its annual Pwint Thit Sa report, said it had met 15 members of MEHL management in August last year to discuss its 3 percent score in the 2020 report.

They highlighted discrepancies in shareholdings, and the fact senior officers were not identified as politically exposed persons. MEHL, with which a number of foreign companies do business, told the MCRB that the company aimed to pay a 30 percent dividend and that institutional shareholders such as battalions spent their dividends on “welfare and not military purposes”.

The report noted that as of last November, MEHL had seven directors, and one alternate director, all of whom were active or retired military personnel. About one third of shares were held by battalions, with individuals owning the rest. The company’s constitution, it noted, also showed the existence of a “Guiding Board” – to oversee the Board – headed by Min Aung Hlaing.

The Pwint Thit Sa report, meanwhile, described MEC as a “military owned enterprise controlled by the Tatmadaw”, subject neither to civilian control, or the oversight of the auditor general.

MEC scored just 2% for transparency, underlining the challenges faced by anyone trying to understand or follow the military’s business dealings.

Insulated from accountability

The little we do know about the military’s financial reach has only come to light in recent years.

A UN report in 2019, spurred by Myanmar’s crackdown on Rohingya communities, concluded that business revenues enhanced the military’s ability to carry out human rights abuses with impunity.

Through a network of conglomerate-owned businesses and affiliates, the UN said the Tatmadaw had been able to “insulate itself from accountability and oversight”.

Details about MEHL’s structure and finances were also revealed in two internal reports – one filed by the conglomerate in January 2020, the other leaked by activist groups Justice for Burma and Amnesty International.

They showed that the conglomerate is run by the military’s top brass, including several leaders of the ongoing coup. Around a third of all shareholders are military units, while the rest are owned by former and current Tatmadaw personnel.

The leaked report said that, between 1990 and 2011, MEHL paid its shareholders 108bn kyats in dividends – worth $16.6bn, according to official exchange rates at the time.

It also suggested that the military uses MEHL shares to reward loyalty and punish bad behavior. One table lists 35 people who were stripped of their dividends for reasons like desertion and imprisonment.

The MEHL has not commented publicly on the leaked report.

Japanese beverage firm Kirin has ended two lucrative deals with MEHL that have helped it to dominate Myanmar’s beer market. Singaporean businessman Lim Kaling has also cut his investment in a tobacco firm linked to the conglomerate.

Local protesters, meanwhile, have been boycotting companies with ties to the new government – including jewellery shops and cigarette brands.

Renewed calls for sanctions

In the wake of the coup, advocacy groups have issued further calls for targeted sanctions against the military and its access to the global financial system.

Many activists want to see the conglomerates dismantled as well.

In a statement to the BBC, Justice for Myanmar accused the military of being in “an unlawful conflict of interest”.

“The wealth stolen by the military and their businesses belongs to the people of Myanmar and must be returned to them,” they added.

The US has added both conglomerates to a trade blacklist, and rolled out fresh sanctions against military and government figures, along with three mining companies. Canada, New Zealand and the UK have also introduced their own targeted measures, though none of them has focused on the conglomerates directly.

Campaigners argue that historically weak sanctions have emboldened the Tatmadaw to carry out the coup and to continue alleged human rights abuses.

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