Myanmar's Military Still Hold the Purse Strings
The release of the official list of Myanmar’s 1,000 top taxpayers for 2013-2014 shows the wealthiest are still overwhelmingly tied to the old guard of military cronyism and elite government corruption. Many are on the US government’s blacklist.
The list, released by the Internal Revenue Department (IRD) of the Ministry of Finance in December, is an indication of how much – or how little –progress the Burmese political economy has made in terms of the separation between civilian versus military investment in Myanmar’s highest grossing companies. The reporting process remains frustratingly opaque to investors.
Despite the move away from military authoritarianism toward more democratic institutions in government in the political sphere, a similar move away from military-tied businesses which either have ties to or a part of the military toward completely independent trade, investment, and entrepreneurship in the economic sphere has yet to really begin.
The three public companies along with top taxpayers on the Internal Revenue Department lists serve to highlight the continued challenge of transparency and continued involvement of investments tied to military families.
For example, AGD Bank is part of the Htoo Group of companies, which has included at various times numerous other subsidiaries like Air Bagan, Htoo Wood Products, Elite Tech IT Services, Htoo Trading, and many others. The chairman of this conglomerate is U Tay Za, well known for his ties to the military elite, particularly Than Shwe, the former general who headed the junta from 1992 to 2011.
Both U Tay Za as an individual and his portfolio of companies are blacklisted by the United States government. For better or worse, this designation ends up trickling down to Htoo Group’s 30,000- odd employees and illustrates how cronyism at the highest levels becomes a system-wide problem affecting the middle and lower classes.
In fact, a comparison of the IRD top taxpayer lists with the most recent consolidated screening list for December 2014 of entities blacklisted by the US Departments of State, Treasury, and Commerce is striking. The US blacklist serves as a sobering indicator for the challenge ahead for Myanmar in decoupling the heights of its economy from military investment and influence.
About 620 of the 28,600 addressed entries of the US commercial blacklist are designated for companies or persons whose main business is in Myanmar. This comes out to a little over 2 percent of the list, which may not seem like much in the grand scheme of things. But when compared to Myanmar’s share of 0.08 percent of the total world gross domestic product (GDP) in 2014 by IMF’s estimate—that is barely 1/100 of 1 percent the total GDP of the world—then the amount of U.S. overt attention focused squarely on Burmese cronyism comes into sharper relief.
Another example of a public company bound for next year’s YSE and also known for military ties is the Myanmar Agribusiness Public Corporation (MAPCO). The chairman of MAPCO is U Chit Khaing, who is also blacklisted in the West. In 2010, the European Commission listed U Chit Khaing as a businessman who benefited from “government economic policies and other persons associated” with the military regime. Earlier in 2008, the U.K. government included his Eden Group of companies and subsidiaries as part of their targeted economic sanctions.
There are many other examples of continued ties between the military and business tycoons. This overlap between military connections and commercial enterprises does not mean, however, that every wealthy person in Myanmar is also a crony. There are those who are invested in Myanmar’s economy and who are exceedingly frustrated with this type of cronyism.
The Total E&P Myanmar joint venture, a subsidiary of Total of France, ranks No. 4 on the foreign IRD income taxpayer list (5-10 billion kyat paid in 2013-2014). An executive, speaking anonymously, acknowledged that previously it was difficult to step outside of the circle of military elites when trying to get any business done. Parliamentarian and Nobel laureate Aung San Suu Kyi has said on record that Total has been a “responsible investor in Burma.”
For other wealthy Burmese, fear may be the prime factor in forestalling the investment away from military-tied businessmen toward more private civilian engagement. First, some wealthy Burmese fear reprisal against military-tied oligarchs, or at the very least, fear that competition is still not as even a field as it could be.
Fear also materializes in the uncertainty of Myanmar’s ongoing regime transition. 2015 will prove to be something of a make or break year in national politics. Will the constitution change? What will happen if Aung San Suu Kyi cannot run for president? Will the military retain 25 percent of the seats in the lower house of parliament? What will happen if the National League for Democracy (NLD) comes to power? Will the military allow this final change of governmental power? What guarantees that the military will stay in the barracks this time?
The ease with which the Thai military circumvented representative democracy next door in Thailand in May 2014 and the lackluster response by the international community since then has many of Myanmar’s wealthiest non-military members nervous.
Overall, just as the political liberalization and democratization away from military authoritarianism in Myanmar has had setbacks and unexpected twists and turns over the last few years, the economic liberalization away from a military-controlled economy has not been without its share of challenges. As recently as October 2014, U.S. officials blacklisted parliamentarian Aung Thaung and affiliated companies of his like Aung Yee Phyo, IGE, and others. This is an ongoing process.
Even if one is tempted to use the word oligarchs or oligarchy, which emphasizes a cohort of wealth-based power brokers over other traditional elites to describe Burmese state and society, the empirics of material wealth should not shroud the fact that Myanmar’s richest citizens and Myanmar’s military leaders still overlap to an unusually high degree.
As important as it is that politics continue to liberalize and democratize, it will be as equally important for researchers and investors to continue to monitor the evolution of Myanmar’s national economy, specifically who owns the majority of it—soldiers or civilians.
That is slightly less difficult than in year past. The IRD has increased the amount of companies on their yearly top taxpayers list from 500 to 1,000 commercial entities for both income and sales tax. Although the IRD still doesn’t disclose the exact amount each entity paid, they have begun to at least bracket taxpayers, though these are somewhat random groupings, as in “above 130 billion kyat [MMK]” (US$130 million), “below MMK40 billion,” “less than MMK500 million” and so on.
The vast majority of commercial entities on this year’s list can also be found on last year’s, indicating no real domestic newcomers at the heights of Myanmar’s economy—regardless if that money came from civilian or military people. Any seemingly new companies that made the top taxpayer lists are either a result of a name change like Global Treasure Bank, formerly known as the Myanmar Livestock and Fisheries Development Bank or are a subsidiary like Hlaing River Golf & Country Club of better known conglomerates.
The top five income taxpayer entities in 2013-2014 were Kanbawza Bank at over MMK17 billion, Asia World, Shwe Taung Development, and Max Myanmar Construction at 4 to 5 billion kyat, and Global Treasure Bank at MMK3 to 4 billion paid. The top five sales taxpayer entities were Myawaddy Trading and Dagon Beverages at over MMK10 billion, Denko Trading and International Beverages Trading at MMK5 to 10 billion, and City Mart Holding at just under MMK5 billion paid.
Without resort to third-party accredited financial statements, it is difficult to verify the actual holdings of these commercial entities. Aside from ranking them by the amount they chose to declare in income or sales tax, these lists serve more to remind researchers and investors that the state of financial transparency in Myanmar’s business community is still rudimentary at best.
A lack of transparency in the commercial economy, whether the company is privately or publically held, is a prime indicator that funds are not being utilized to maintain market efficiency. Regardless of the role of economic neoliberalism in international development, a commitment to transparency serves both the acolyte and opponent in making informed analysis and decision. Without hard data, this is less an accusation of outright nefariousness than it is recognition of incompetent investment, probable nepotism, and latent culture of disregard for commercial law and order.
The fact that none of the above mentioned enterprises or any of the top 50 companies on these taxpayer lists provides any third-party accredited financial statements for review on their websites indicates that this is a system-wide failure across the entire economy. For the researcher or foreign investor of Myanmar’s political economy, the increasing representative democratization and growing transparency of legislative debate in Myanmar’s bicameral parliament is at best only half the picture.
Without reference to accurate and verifiable material holdings and income of commercial entities, there is no way to measure the traditional flow of goods and services, let alone fight against corporate corruption or illegal financial activities.
In short, just as no political state can function without an economy, no analysis of Myanmar’s political liberalization and democratization is of much value without reference to material realities. There is no public stock exchange, one possible way of increasing transparency of commercial income and holdings in an economy.
T. F. Rhoden is a Ph.D. Candidate in the Department of Political Science at Northern Illinois University and its Center for Southeast Asian Studies and Center for Burma Studies. He is currently based in Southeast Asia with a Boren Fellowship grant to learn the Karen language.