Myanmar: Australian mining companies put profit ahead of human rights and democracy

A Tatmadaw 'goodwill' delegation led by Senior General (now coup leader) Min Aung Hlaing visits Adani Ports and Logistics in India in 2019. Photo: Min Aung Hlaing's website

As protests grow against the February 1 military coup in Myanmar/Burma, the country’s military elites try to protect their ill-gotten gains, and Australian mining companies carry on as if nothing happened.

Myanmar military’s economic interests

Since 1988, when the Tatmadaw (the official name of the Myanmar armed forces) brutally cracked down on student protests, and Aung San Suu Kyi returned from Britain, they have been setting up companies to serve the interests of current and former soldiers.

The Tatmadaw currently owns two vast conglomerates: Myanmar Economic Holding Limited (MEHL) and Myanmar Economic Corporation (MEC). Commander-in-Chief Min Aung Hlaing and Deputy Commander-in-Chief Soe Win are key board members of both.

These men were responsible for gross violations of human rights; for the murder, rape and destruction of Rohingya communities in Rakhine State with what the United Nations calls “genocidal intent”. They are now running the country.

These conglomerates own between 106–133 subsidiary companies. MEHL owns businesses in tourism, transport, food and beverages — including Myanmar Brewery — agriculture, fisheries, logistics, gems and banking — including the country’s fourth largest bank, Myawaddy Bank. MEC owns businesses in mining, telecommunications, manufacturing, as well as corporations that supply equipment to the Tatmadaw.

These two companies and their subsidiaries generate more income than any other privately owned company in the country. In 2018–19, MEHL was the second largest local taxpayer and its subsidiary, Myawaddy Bank, was fifth.

In addition to these Tatmadaw-owned companies, many of the country’s remaining firms are owned by cronies, who have close business and/or family ties to the military. These crony companies support the Tatmadaw by providing “donations” while benefiting themselves for their “loyalty”. For example, as payment for permitting crony company KBZ Group to open Jing Hpaw Aung jade mine, MEHL was given 20% of the production.

Further topping up the coffers are investments from foreign companies in joint ventures with Tatmadaw-run companies. Companies from China, Japan, India, Hong Kong, Seychelles, South Korea, Viet Nam and Singapore have joint ventures with MEHL or MEC companies.

One example of such a joint venture is with the Adani Group — the Indian-based company that is building a new coal mine in Queensland — which has a US$290 million agreement with MEC for a 50-year lease to build a port near Yangon. Adani is, thus, directly lining the pockets of Myanmar’s military elite.

Moreover, with the armed forces now running the country, all state-owned enterprises (SOEs), which form a significant part of the economy, can be added as income streams for the Tatmadaw. Some SOEs, like Myanmar Gems Enterprise, are already run by former military officials.

Of the myriad of income sources, the extractive industries are by far the most lucrative and contentious.

Most of the jade and rubies on world markets are mined in Myanmar. In fact, 90% of all jade sold in the world in any year would have come from Myanmar.

A 2015 Global Witness report, Jade: Myanmar’s Big State Secret, estimates the value of the country’s jade trade at US$31 billion, which was nearly half the country’s official GDP that year. The bulk of this jade ends up, unaccounted and untaxed, in China, and the huge profits mostly end up in Tatmadaw pockets.

According to a 2019 UN Human Rights Council report, The Economic Interests of the Myanmar Military, “MEHL and MEC and 23 of their identified subsidiaries have numerous licenses for jade and ruby mining in Kachin and Shan States”.

Global Witness reported: “Companies owned by the family of former dictator Than Shwe and other notorious figures are creaming off vast profits from the country’s most valuable natural resource.”

Similarly, billions of dollars are funnelled to MEC and MEHL from the extraction of oil, gas, copper, rubies, amber and from forestry.

Illegal activity in the extraction industry, and the need for the Tatmadaw to protect its “assets” lies at the heart of the grievances of ethnic-based armed groups and the militarisation of these areas.

The UN report concluded: “The Tatmadaw’s business and military interests in the jade and ruby extractive industries benefited from and directly contributed to international human rights violations in conflict-affected areas in Kachin State.”

Why then do they need a coup?

Since the gradual democratisation of the country from 2011 and the National League for Democracy’s (NLD) electoral victory in 2015, none of the Tatmadaw’s assets or income sources have been touched. Moreover, with the country opening to tourism and foreign investment since 2015, many Tatmadaw-run companies may be even more profitable.

This was a key reason why the coup came as such a surprise to many observers, who generally thought: “They wrote the Constitution. They still have control over three key ministries. They still have 25% of the allocated seats in parliament, so they can veto any constitutional change. They still have all their businesses, and their assets have not been touched. Why then do they need a coup?”

The answer may lie in the Tatmadaw’s fear of changes to the most lucrative part of their portfolio: the extractive industry. With Suu Kyi prioritising peace in regions that have been at war for more than 60 years, the Tatmadaw would no longer be able to use the excuse of “controlling” the armed ethnic groups, while protecting their precious metals.

Since taking defacto power in 2015 (in the role of state counsellor, because the Constitution does not permit someone with foreign family members to be president), Suu Kyi has, understandably, lost support abroad, primarily for her defence of the Tatmadaw’s genocidal repression of the Rohingya population. In Myanmar, however, her support has grown.

After witnessing a landslide NLD victory in the November elections — the NLD won 396 seats to the Tatmadaw’s party’s 33 — the military elite may have feared an emboldened NLD would mean greater scrutiny of their economic interests.

Or, as activist group Justice for Myanmar suggests, “As June 2021 nears, when Senior General Min Aung Hlaing is required to transfer power to a new Commander-in-Chief [when he turns 65 and must retire], his financial interests must be considered as a motive for his coup threat.”

Either way, there are billions of dollars in ill-gotten gains at stake, mostly in the extractive sector.

296_myanmar_woodside_a-6-development-schematic_cr_woodside.com_.au_.png

A schematic of Woodside's A-6 gas extraction project in Myanmar. Image: Woodside.com.au

Australian companies in Myanmar

There are about 50 Australian firms operating in Myanmar in the energy, mining, financial services, education and construction sectors. ANZ, BlueScope and Woodside are the best-known.

The former economic counsellor at the Australian Embassy in Yangon, Nick Cumpston, explaining why the official investment figures look low, said: “Woodside alone has invested half a billion [Australian] dollars in gas exploration, and many other Australian firms have also invested through holding companies in Singapore.”

Woodside, Australia’s biggest oil and gas company, is heavily invested in Myanmar. It has been active there since 2013, seeking natural gas in the Rakhine Basin, west of Rakhine State. Its licences cover an area larger than any other company, with nine offshore blocks covering 56,600 square kilometres. For one of its blocks (A-6), it has approval for Myanmar’s first ultra-deep drilling project, at more than 2 kilometres down.

Joint ventures with national companies are considered a means to speed up the bureaucratic approval processes. Austrade’s advice to Australian mining companies looking to invest in Myanmar includes using joint ventures with local firms to “hurdle or sidestep some of the convoluted and time-consuming licensing and permit processes”.

A 2019 Myanmar Times report said: “With the aim of implementing the [A-6] project quickly, contracts were signed between MOGE, MPRL [an apparently private company registered in the British Virgin Islands], Australian LNG company Woodside Energy and French oil and gas company Total.”

The Extractive Industries Transparency Initiative noted that MOGE is Myanmar’s largest state-owned enterprise.

Rakhine State, where Woodside’s exploration is taking place, is one of the country’s poorest regions and, before 2016, was home to about 1 million Rohingya.

According to Reuters, following the coup, Woodside stated, “Our current drilling campaign remains on schedule,” because, “[i]n the ongoing development of Myanmar, economic stability and energy supply can play an important role.”

Another Australian mining company is active in Shan State. Myanmar Metals Limited (MML), formerly Top End Minerals, is an ASX-listed mining and exploration company based in Perth. It has a 51% majority interest in the Bawdwin silver, lead and zinc mine in Namtu, in northern Shan State.

This mine was first discovered some 600 years ago by Chinese miners and became the world’s largest silver and lead mine in the 1920s and 30s, after which production declined and the mine was neglected.

MML estimates that when Bawdwin is again in production it will be the world's third-largest lead producer, in the top 10 for silver and in the top 20 for zinc. This would make it Myanmar’s most lucrative mine.

MML paid local company Win Myint Mo Industries a US$1.5 million deposit for the option to acquire interest in the mine in 2017. It subsequently went ahead with the acquisition for US$20 million, with MML (51%) in a joint venture with Win Myint Mo Industries (24.5%) and second local partner, East Asia Power (24.5%).

Win Myint Mo Industries was initially a subsidiary of the Asia World Group, one of the country’s most renowned crony companies. It became a subsidiary of National Infrastructure Holdings in 2015, whose directors have close ties to Asia World Group.

The Irrawaddy reported in 2016: “Due to Asia World’s murky background, the director is believed to have set up new companies under different names to act as fronts for doing business with western companies. This is how National Infrastructure Holdings came to be in 2015.”

If this is correct, Australia’s MML is in bed with Tatmadaw cronies.

The Bawdwin mine is in one of the most volatile parts of the country. Shan State is one of the world’s top producers of crystal methamphetamine (ice), which is primarily produced in enclaves controlled by paramilitary units allied with the military, as well as in some areas controlled by non-state armed groups.

The trade in ice — as well as amphetamines and heroin — from Myanmar is worth billions and far outstrips Shan States’ formal economy. Some 70% of the ice reaching Australia comes from this region.

Drug production and mining is intimately linked to the decades-long conflict in the region. For six decades, the Tatmadaw has struck ceasefire deals with ethnic-based armed groups and set up pro-military militias, who enjoy the freedom to engage in criminal activities. At the same time, these militias protect the military’s mining interests and provide an excuse for the militarisation of these zones.

In Namtu, near the Bawdwin mine, fighting between the anti-Tatmadaw Ta’ang National Liberation Army and the Restoration Council of Shan State was reported as recently as December.

The Bawdwin mine is in the middle of this contested area and will inevitably be part of this conflict. There is no mention of this, however, in MML shareholder presentations.

John Lamb, Chairperson and CEO of MML said on February 4: “We are certainly seeing encouraging early signs that the new government will continue with the institutions and processes.” He expects the project to continue, “regardless of who’s in power in Myanmar.”

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The Bawdwin mine, located in northern Shan State’s Namtu Township, was once of the world’s largest source of lead, but today production there has largely ground to a halt. Photo: Theint Mon Soe aka J/Frontier

Calls to withdraw foreign investment

Justice for Myanmar and the Burma Campaign UK have called for “wide-ranging international action against the Myanmar military, starting with targeted sanctions against military-owned and controlled companies and their substantial business associates.” Debbie Stothard, founder of Alternative Asean Network on Burma, told Green Left, “the international community should be sanctioning the pants off these corporations.”

Following a long-term campaign by human rights groups, Japanese brewing giant Kirin Beer pulled out of agreements with Tatmadaw-owned brewers in Myanmar on February 5. It stated it was "deeply concerned by the recent actions of the military in Myanmar" leaving it "no option but to terminate" the partnership.

Human Rights Watch asked the corporate world: “Is your business funding Myanmar military abuses?” Even The West Australian asked: “How do [Woodside] justify investing in a country where the generals have seized back power and detained popular elected leader Aung San Suu Kyi?”

While Australian firms have no direct ties to military-owned businesses, those companies in extractive industries are, undoubtedly, indirectly contributing to the Tatmadaw’s brimming coffers, while closing their eyes to its attacks on ethnic minorities and its snuffing out of a nascent democracy.

[Allen Jennings lived and worked in Myanmar for four years.]

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