Myanmar’s ‘Khaki Commerce’ Set to Flourish Under Junta

By Bertil Lintner 28 May 2021

Khaki commerce is not uncommon in Asia but it generally rests on marriages of convenience between the military and domestic plutocracies, as it has in countries like Thailand and Indonesia. In Myanmar it went beyond that as far back as the 1950s when the military established itself as a business conglomerate, which eventually, in 1962, staged a coup and ousted a democratically elected government.

Despite economic reforms, which were introduced after a nationwide uprising against the dictatorship of then strongman General Ne Win in 1988, the military’s general approach to business has not changed. The 1962-88 military-controlled Burmese Way to Socialism has been replaced by the Myanmar Way to Capitalism with very distinct military characteristics. According to a 2019 UN fact-finding mission, revenue generated by two military-run companies, Myanmar Economic Holdings Limited (MEHL) and the Myanmar Economic Corporation (MEC), “dwarf that of any civilian-owned company.”

A main benefactor of that arrangement is none other than the present commander-in-chief, Senior General Min Aung Hlaing. He may lack charisma as well as leadership qualities but has managed to amass a considerable private fortune for himself and his family. Not surprisingly, they also became the first targets of sanctions imposed by the US after the Feb. 1 coup and subsequent killings of more than 800 pro-democracy protesters, and the arrest and torture of thousands of others.

It is now illegal for any US citizen to engage in business partnerships with MEHL, of which Min Aung Hlaing is a major shareholder and chairman of its Patron Group. US citizens are also forbidden to do business with MEC and its subsidiaries.

Min Aung Hlaing personally is on the sanctions list and so are his son Aung Pyae Sone and daughter Khin Thiri Thet Mon, who are both in their 30s. On Jan. 30 this year, when Min Aung Hlaing had begun talking about ousting the elected government and two days before he actually did it, the campaign group Justice for Myanmar issued a detailed report on the military’s involvement in business, saying that the general’s “financial interests must be considered as a motive for his coup threat.” Min Aung Hlaing “has also abused his power to benefit his family, who have profited from their access to state resources and the military’s total impunity,” the group said.

A March 10 US Treasury Department press release stated that Aung Pyae Sone and Khin Thiri Thet Mon “have a variety of business holdings, which have directly benefited from their father’s position and malign influence.” Six companies owned by the son and daughter have been blacklisted by the US, among them A&M Mahar, which, according to Justice for Myanmar, “offers foreign pharmaceutical companies access to Myanmar’s market by obtaining approvals from Myanmar’s Food and Drug Administration.” The five other blacklisted entities owned by Min Aung Hlaing’s children are also well known: Sky One Construction, The Yangon Restaurant, The Yangon Gallery, Everfit and 7th Sense Creation. In 2013 Aung Pyae Sone, according to the US Treasury, “won a 30-year permit…to lease land for Yangon Restaurant and Yangon Gallery in Rangoon [Yangon] without facing any competing bids. From 2013 to 2018, Aung Pyae Sone paid less than 1 percent of the rental rate compared with other properties in the same township.”

Khin Thiri Thet Mon owns 7th Sense Creation, a media production business. According to the same US Treasury Department press release, 7th Sense Creation has an “exclusive contract with Nay Toe, an actor who features prominently in marketing for Mytel, the mobile telephone operator established by Min Aung Hlaing.” Mytel was established under Min Aung Hlaing’s watch in 2017 as a joint venture between the Myanmar military and the Vietnamese Defense Ministry.

In an April 19 dispatch, the German News Agency Deutsche Welle identified three additional companies controlled by Aung Pyae Sone and Khin Thiri Thet Mon: Pinnacle Asia Company, Photo City Company and Attractive Myanmar Company. The latter two are controlled by the son and Pinnacle Asia, which built mobile phone towers for Mytel, was established by the daughter. Khin Thiri Thet Mon resigned from Pinnacle Asia after sanctions were imposed on her but according to an April 21 Justice for Myanmar statement, she remains a major shareholder in the company.

Aung Pyae Sone and Khin Thiri Thet are not the only children of high-ranking military officers who have benefited from their parents’ powerful positions. The US Treasury has also identified three more beneficiaries of corruption and nepotism: Hein Htet and Kaung Htet, whose father General Maung Maung Kyaw is the chief of the Myanmar Air Force, and Yin Min Thu, the daughter of naval commander Admiral Tin Aung San. Maung Maung Kyaw and Tin Aung San are members of the junta that seized power in the Feb. 1 coup. Tin Aung San is also minister of transport and communications in the junta-appointed government.

But few high-ranking military officers have shown as much greed as Min Aung Hlaing, and there is little doubt that he is clinging to power to protect his and his family’s economic interests. And more crucial to his hold on power may not be companies owned directly by his children but the influence he exercises over the mighty MEHL. It was established in 1990 when the then military junta, the State Law and Order Restoration Council, began what was supposed to be a privatization of state-owned enterprises. For the first time since 1962, it became possible for private citizens to run their own businesses; more to the point, a number of corporations that previously had been solely the property of the then socialist-military machinery were transferred to military-run MEHL and, later, also to MEC, which was set up in 1997. Those two companies benefited even further from a 2009-12 privatization drive launched before and after ex-general U Thein Sein became the country’s president.

In the beginning, MEHL was called the Union of Myanmar Economic Holdings and was along with MEC sanctioned by the US Treasury in 2008 for “providing support to a military regime that it described as “systematically oppressing the Burmese people.” Those sanctions remained in place even when, in May 2012, the US suspended such actions against other Myanmar entities. Four years later, when the National League for Democracy had formed Myanmar’s first truly elected government since 1960, UMEH dropped “Union” from its name and the company was officially “privatized”. In reality, however, that meant that the company’s profits were diverted away from the national budget and any kind of civilian oversight.

Now, sanctions have been reimposed but given the opaque nature of its operations and ownership, it is uncertain how much those will have an impact on military-run businesses in Myanmar. MEHL has its own bank, the Myawaddy Bank, and it controls the Five Star Shipping Company and the Pyin Ma Bin Industrial Park north of Yangon, and has a monopoly on the country’s lucrative gems sector. And that is apart from its portfolios in real estate development, transportation, mining, supermarkets, the tobacco industry and tourism. When it became the official owner of the Five Star Shipping Line in 2011, it also acquired the Bo Aung Kyaw Port in Yangon.

And MEHL’s ownership is entirely military. Forty percent of its shares are believed to be owned by the Directorate of Defense Procurement, which buys guns and weapons for the country’s armed forces, while the rest belong to serving and retired military personnel. Among MEHL’s 1,793 known institutional shareholders are regional military commands and subordinate battalions, divisions, platoons, squadrons and even border guard forces. According to the US Treasury: “Shares are distributed across the armed forces with no public accountability, creating slush funds that the military uses to augment its operational budget.” MEHL as well as MEC are exempt from paying income and commercial taxes.

The peculiar type of economic system that prevails in Myanmar can be traced back to the 1950s, when then commander-in-chief Gen. Ne Win established an entity called the Defense Services Institute (DSI), which had its own retail stores in Yangon and elsewhere, and controlled the lucrative importation of coal for the railroads, electric supplies and inland water transport. The Five Star Line was established by the DSI. It took over a British-owned bank and renamed it the Ava Bank. A newspaper, the Guardian, and a publishing house were also controlled by the DSI.

The army was becoming a state within the state, but few paid much attention to it. After all, the vast majority of the population had faith in the then democratic system, the basically federal constitution and the rule of law. The international community by and large shared that view, but a rare exception was a CIA analyst who had predicted with remarkable foresight as early as 1951 that there was a possibility that the highly ambitious Gen. Ne Win “might attempt a military coup, which could lead to protracted violence.” And that did happen on March 2, 1962. Gen. Ne Win’s tanks rolled into Yangon and the entire cabinet was detained along with several ethnic leaders who had come to the then capital to negotiate a strengthening of the federal character of the constitution.

The “Burmese Way to Socialism” that Gen. Ne Win introduced was fundamentally different from the economic systems that then prevailed in Eastern Europe, the Soviet Union or China. In Myanmar, it meant that everything in sight was nationalized—and handed over to 23 military-run state corporations. Military coups were not uncommon in Asia at that time, but the difference in Myanmar was that the military in 1962 seized not only political but also economic power. Rather than following the examples of Thailand and later Indonesia, the old business community, which was mainly of Indian and Chinese origin, saw their properties taken over by the military. Hundreds of thousands left the country for India, Taiwan or elsewhere in Southeast Asia. And incompetence on the part of the military led to economic disaster and, eventually, the 1988 uprising.

While the current coup government has not nationalized any private enterprises, it clearly wants to perpetuate and even strengthen its economic power. After the coup it looks even more implausible than before that any private citizen would be able to build up and maintain a company without the blessings of the men in green. But the future is uncertain and it remains to be seen how much longer Min Aung Hlaing and his family can continue to enjoy their privileged positions in Myanmar society. What is certain is that he will fight to defend their interests—and the system that has made it possible for them and other military families to prosper.

Bertil Lintner is a Swedish journalist, author and strategic consultant who has been writing about Asia for nearly four decades.

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