Corruption In The Defense Sectors Of Southeast Asia

On July 16 2007, Bangladeshi Police escorted Prime Minister Sheikh Hasina of Bangladesh to a Dhaka court. Hasina was facing $4 million graft charges, was taken to a court but the hearing was adjourned after defence lawyers said she was ill and asked for bail. Photo: REUTERS

LONDON (GDC) — Defense procurement corruption in Southeast Asia has been accessed to be “high”, with a large mass of its procurement shrouded in secrecy with low levels of accountability.

Corruption in defense procurement in Southeast Asia such as China, Thailand, Laos, Vietnam, Malaysia, Indonesia, Bangladesh, Myanmar, Sri Lanka and Pakistan have been found to be “very high”.

The Global Defense Anti-Corruption Index to be announced by Transparency International revealed that the Chinese military spending has increased by 441 per cent in the last decade, India by 147 per cent, South Korea by 106 per cent, Pakistan by 107 per cent, Bangladesh by 202 per cent, and Sri Lanka by 197 percent.

Within ASEAN, there have been huge increases as well: Indonesia by 189 per cent, Thailand by 207 per cent, Cambodia by 311 per cent, and the Philippines by 165 per cent.

Indian Military Businesses – hiding kickbacks from accountability

According to India Today, the Indian army was found to be illegally running golf courses on government-owned land while the air force officials diverted land acquisition project for building unauthorised shopping malls and cinemas. It also says that India’s defense institutions have been found to be involved in the exploitation of natural resources.

Citing an example, the report says awards for contracts by Riflex, the paramilitary force in north-east India, were essentially bought through personnel for kickbacks amounting to 35 per cent of the tender cost.

“India has no designated body tasked with responsibility over ethics or anti-corruption within the ministry of defence. There is no Inspector General position.The Public Accounts Committee, the CAG have held the MoD to account for the illegal use of land for private golf clubs,” the report says.

According to the report “as the second largest military spender in the region, India distinguishes itself through independent institutions with clear mandates for overseeing defence agencies.The CAG along with the Public Accounts Committee have exercised active oversight”.

The report also has praise or India. It says, “The use of integrity pacts have been a powerful binding instrument, involving independent monitoring by the Central Vigilance Commission.”

Bangladesh Military Businesses – A diversion of defense budget

Following the Pakistani military’s business model, Sena Kallyan Sangstha (SKS), a concern of the Bangladesh Army, operates a dairy farm and an ice cream factory. The BBC reveals that the Bangladeshi military has stakes in food, textile, jute, garment, electronic, real estate, automobile, shipbuilding, manufacturing, and travel businesses. The military also operates Trust Bank and the Ansar VDP Bank, and has a record of giving illicit loans from these institutions to top officers. According to the BBC investigation, the Bangladesh Army’s business interests further include power plants, roads, infrastructure, and bridge projects, amounting to billions of dollars of private assets.

In 2009, the Bangladesh Rifles (BDR) mutiny “was partly fuelled by resentment among the BDR’s rank-and-file over the corruption of army officers engaged in the retail sale of consumer items,” BBC notes, citing Bangladesh’s official report on the incident.

Some leading Bangladeshi figures in the business sector have admitted that military-owned businesses are virtually indistinguishable from other commercial enterprises in the way they operate. The irony is that military business interests have thrived more under the civilian rule than under the martial law regime of General Hossain Mohammad Ershad.

Myanmar Military Businesses – Insulated from accountability

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:

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.

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

Malaysian Military’s Corruption – A Russian mafia syndrome

Former director-general of the Defense Intelligence Division at the defence ministry, Lieutenant-General (Rtd) Sheikh Moksin Hassan, and two senior officers of the Malaysian Armed Forces were charged in the Sessions Court here today with soliciting and accepting gratification in connection with the awarding of the defence ministry’s projects to a company.

Sheikh Moksin, 59, faces seven charges, while Lieutenant-Colonel Che Ahmad Idris, 54, and Brigadier-General Mohammed Feizol Anuar Ayob, 50, face five charges each.

They pleaded not guilty after the charges were read out separately before judge Sabariah Othman.

Che Ahmad was charged in his capacity as the then head of the Strategic Cyber Warfare Branch with soliciting and agreeing to accept RM500,000 in gratification, as well as three counts of accepting RM105,000 from FEHM Entity Sdn Bhd managing director Elias Jemadi Tajudin as an inducement to appoint the company through direct negotiation to carry out maintenance services at the division.

Former Prime Minister Najib Razak in prison.

A separate trial that began last August looks at accusations the former prime minister illicitly obtained 2.28bn ringgit ($550m, £448m) from 1MDB between 2011 and 2014.

He is facing 21 counts of money-laundering and four of abuse of power including $73 million kickbacks for buying 18 Russian-made Su-30MKM fighters.

His wife, Rosmah Mansor, also faces money-laundering and tax evasion charges, to which she has pleaded not guilty.

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