Myanmar’s army – the leaders of its recent coup – is funded by much of the national budget. But the military also draws a large and secret income from vast business interests:
In Yangon’s popular Indoor Skydiving Center, visitors can experience the thrill of jumping out of a plane from the safety of a vertical wind tunnel.
But few people who move through this high attraction may realize that it is part of a large, military-run business empire – one that is completely intertwined in the fabric of national life.
Critics argue that this lucrative network has made Myanmar’s coup possible and put military responsibility in freefall.
Civilian enterprises speak of an environment such as’ Sicily under the Mafia ‘, while activists say democratic reforms can only be possible when’ the army’s [is] back to barracks “.
Two conglomerates controlling the army
Myanmar’s army – the Tatmadaw – began its involvement in affairs after Ne Win’s socialist coup in 1962.
For years, military battalions had to be self-sustaining and encouraged to develop interests in local businesses to finance their operations.
While this practice was being phased out, two military management conglomerates were formed in the 1990s when the government began privatizing the state industries.
Both organizations – Myanmar Economic Corporation (MEC) and Myanmar Economic Holdings Limited (MEHL) – have since become a major source of wealth for the Tatmadaw, with interests in everything from banking and mining to tobacco and tourism. MEHL also operates the army’s pension fund.
Several military leaders and their families also have extensive business interests and have been subject to sanctions in the past.
Aung Pyae Zone – the son of coup leader Gen. Min Aung Hliang – owns several companies, including a beach resort, and has a majority stake in the national telecommunications service Mytel.
The full extent of these business interests is difficult to quantify. But experts believe that the business world of the military remains important, despite recent democratic reforms, and that the coup may in part be an attempt to protect these financial interests.
‘Isolated from liability’
The little we know about the financial reach of the military has only come to light in the last few years.
A 2019 UN report, spurred on by Myanmar’s repression of Rohingya communities, concluded that operating revenues had improved the army’s ability to carry out human rights violations with impunity.
Through a network of conglomerate-owned enterprises and affiliates, the UN said the Tatmadaw could succeed in “isolating themselves from accountability and oversight”.
Details of MEHL’s structure and finances were also revealed in two internal reports – one was submitted by the conglomerate in January 2020, and the other was leaked by activist groups Justice for Burma and Amnesty International.
They showed that the conglomerate is led by the army’s top buyer, including several leaders of the ongoing coup. About a third of all shareholders are military units, while the rest are owned by former and current Tatmadaw personnel.
According to the leaked report, MEHL paid 108 billion kyats in dividends to shareholders – worth $ 16.6 billion, according to the then official exchange rates.
It also suggested that the military use MEHL shares to reward loyalty and punish bad behavior. One table contains a list of 35 people who were exempt from their dividends for reasons such as abandonment and imprisonment.
The MEHL did not publicly comment on the leaked report.
Renewed calls for sanctions
In the aftermath of the coup, advocacy groups have called for further sanctions against the military and its access to the global financial system.
Many activists also want to see the conglomerates dismantled.
In a statement to the BBC, Justice for Myanmar accused the military of being in an “illegal conflict of interest”.
“The wealth stolen by the army and their businesses belongs to the people of Myanmar and must be returned to them,” they added.
The US added both conglomerates to a trade list and introduced new sanctions against military and government figures along with three mining companies. Canada, New Zealand and the United Kingdom also introduced their own targeted measures, although none of them focused directly on the conglomerates.
Campaign argues that historically weak sanctions have encouraged the Tatmadaw to carry out the coup and to continue alleged human rights violations.
But experts have told the BBC that there is a strong appetite for sharpening sanctions at the right time.
“The world is still waiting to see how it plays out,” said George McLeod, managing director of Access Asia, a risk management firm specializing in the region. “According to what I have heard from people inside, Norway is trying to form a kind of basis for a negotiated solution.”
Meanwhile, there is growing resentment among some local business people over the power of the conglomerates.
“They describe it almost in the same way as a business owner working in Sicily would talk about the Mafia,” Mr McLeod told the BBC. “You have to deal with them when you cross their radar. But you do not want to.”
‘They want to be an international player’
The Tatmadaw is already beginning to feel the pressure from foreign investors.
The Japanese liquor company Kirin ended two lucrative deals with MEHL that helped it dominate the Myanmar beer market. Singapore businessman Lim Kaling has also cut his investment in a tobacco company linked to the conglomerate.
Local protesters are boycotting companies with ties to the new government – including jewelry stores and cigarette brands.
However, calls for international sanctions are not universal. China and Russia have refuted efforts by other members of the UN Security Council to condemn the Tatmadaw.
Experts agree that while sanctions are an important piece of the puzzle, they should work with legal and diplomatic pressure and arms embargoes.
Tatmadaw’s deputy chief, Soe Win, told the UN they were ready to face international pressure if necessary.
Without multilateral action, Myanmar could once again become a pariah state, says Peter Kucik, a former sanctions adviser to the US Treasury.
‘This group of generals currently in power is more or less the same group that was in power under the SPDC (a military junta that ruled Myanmar from 1997-2011), and they have shown that they live quite comfortably in an isolated country, ‘he told the BBC.
But while the country may rely on trade from partners such as China, local business figures are wary of this prospect, adds Mr. Kucik by.
“They want to deal with Japanese companies at the highest level, with Western companies and they want to be a player on the international scene in the same way as Thailand,” he said. Kucik.
Whatever happens next, advocacy groups say it is essential for democratic reform to pull the purse strings of the military and reform their conglomerates.
“This is what the people of Burma want,” said Anna Roberts, director of Burma Campaign UK. “They want the army to return to the barracks again, and they want a civilian economy and a civilian federal government that respects their wishes.”