Myanmar coup: The shadowy business empire funding the Tatmadaw.
Myanmar’s military – the leaders of its recent coup – are funded by an enormous chunk of the national budget. But the soldiers also draw a huge and secretive income from sprawling business interests:
At Yangon’s popular Indoor Skydiving Centre, visitors can experience the joys of jumping out of a plane from the security of a vertical structure .
But few people spiralling through this high-flying attraction may realise that it’s a part of an enormous , military-run business empire – one completely woven into the material 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 about an environment like “Sicily under the Mafia”, while activists say that democratic reforms can only be possible only “the military [is] back to barracks”.
Two conglomerates bankrolling the military
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.
While this practice has been phased out, two military-run conglomerates were established within the 1990s because 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 also , and are subject to sanctions within the past.
Aung Pyae Sone – the son of coup leader Gen Min Aung Hliang – owns several companies, including a beach resort, and features a majority stake in national telecoms carrier Mytel.
The full extent of those business interests is tough to quantify. But experts say that the military’s business clout remains significant, despite recent democratic reforms, and therefore the coup could partly be an effort to guard these financial interests.
‘Insulated from accountability’
The little we do realize 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 hold out human rights abuses with impunity.
Through a network of conglomerate-owned businesses and affiliates, the UN said the Tatmadaw had been ready 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 opposite leaked by activist groups Justice for Burma and Amnesty International.
They showed that the conglomerate is travel by the military’s administration , including several leaders of the continued coup. Around a 3rd of all shareholders are military units, while the remainder 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, consistent with official exchange rates at the time.
It also suggested that the military uses MEHL shares to reward loyalty and punish bad behaviour. One table lists 35 people that were stripped of their dividends for reasons like desertion and imprisonment.
The MEHL has not commented publicly on the leaked report.
Renewed involves sanctions
In the wake of the coup, advocacy groups have issued further involves targeted sanctions against the military and its access to the worldwide economic system .
Many activists want to ascertain the conglomerates dismantled also .
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 unrolled fresh sanctions against military and government figures, along side three mining companies. Canada, New Zealand and therefore 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 hold out the coup and to continue alleged human rights abuses.
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But experts have told the BBC there’s a robust appetite to build up sanctions – at the proper time.
“The world remains waiting to ascertain how this plays out,” says George McLeod, director of Access Asia, a risk management firm specialising within the region. “From what I’ve heard from people on the within , Norway is trying to make some quite groundwork to cause a negotiated solution.”
In the meantime, there’s increasing resentment among some local business figures about the conglomerates’ power.
“They almost describe it within the same way that a business owner operating in Sicily would mention the Mafia,” Mr McLeod told the BBC. “You need to affect them if you cross their radar. But you do not want to.”
‘They want to be a world player’
The Tatmadaw are already beginning to feel the pressure from foreign investors.
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 during a tobacco firm linked to the conglomerate.
Local protesters, meanwhile, are boycotting companies with ties to the new government – including jewellery shops and cigarette brands.
Calls for international sanctions aren’t universal, however. China and Russia have rebuffed efforts by other members of the UN Security Council to condemn the Tatmadaw.
Experts agree that while sanctions are a crucial piece of the puzzle, they need to add tandem with legal and diplomatic pressure, and arms embargoes.
The Tatmadaw’s deputy chief, Soe Win, has told the UN that they’re able to face international pressure if necessary.
Without multilateral action, Myanmar could become a pariah state another time , says Peter Kucik, a former sanctions advisor at the US Treasury.
“This group of generals in power immediately is more or less an equivalent group that was in power under the SPDC regime (a junta which ruled Myanmar from 1997-2011), and they’ve shown that they are perfectly comfortable living in an isolated country,” he told the BBC.
But while the country could recline on trade from partners like China, local business figures are wary of this prospect, adds Mr Kucik.
“They want to affect top-tier Japanese companies, they need to affect Western companies, and that they want to be a player on the international stage within the same way as Thailand,” says Mr Kucik.
Whatever happens next, advocacy groups say that pulling on the military’s purse strings, and reforming their conglomerates, are going to be essential to democratic reform.
“That’s what the people of Burma want,” says Anna Roberts, director of Burma Campaign UK. “They want the military back to barracks, and that they need a civilian economy and a civilian federal that respects their wishes.”