In March 2020 the Yangon Stock Exchange (YSX) began allowing international trades for the first time ever. The YSX may be small – it only has six listed companies – but it is hugely symbolic of Myanmar’s continued opening up to the world. And now, there’s potential for it to play an even greater role in the country’s economic development – for better or worse.

YSX was founded in 2015 and made its first trade the year after, following the establishment of a partial democracy in Myanmar and the lifting of some international sanctions. It is run by the Myanmar Economic Bank and two publicly-listed prestige Japanese companies, Daiwa Institute of research – a subsidiary of Daiwa Securities Group, Japan’s second biggest securities company – and Japan Exchange Group, which operates the Tokyo Stock Exchange.

According to media reports, Daiwa Securities’ then-president first entered Myanmar in 1993, building relationships with the military dictatorship and establishing the Myanmar Securities and Exchange Centre (MSEC) with Myanma Economic Bank in 1996. The MSEC was initially set up to support Japanese business in Myanmar during the dictatorship and to provide brokerage for treasury bonds, a further source of revenue for the military. The MSEC also worked to establish a stock exchange and assist drafting securities regulation.

These companies are in a powerful position to influence the direction of Myanmar’s economy. Stock exchanges worldwide are expected to do due diligence on the companies they list and ensure they adhere to certain guidelines – such as not funding corruption or human rights abuses. However, this does not appear to be happening at YSX. Justice For Myanmar has uncovered evidence that the YSX’s sixth listing – Ever Flow River (EFR) – is involved in a large-scale development project that will enrich the Myanmar military, which is currently accused by the UN of genocide, war crimes and crimes against humanity.

In addition, it appears that EFR’s project also presents a substantial corruption risk. Many figures within the military still hold public positions, which EFR’s military partnerships will allow them to benefit financially from.

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How is the Myanmar military funded?

The Myanmar military took power and established a dictatorship via a coup d’etat in 1962. As well as persecuting indigenous ethnic communities and violently suppressing civilian uprisings, it fully exploited the resource-rich country for the personal financial gain of top generals.

Two major military businesses were established – Myanmar Economic Holdings (MEHL) and Myanmar Economic Corporation (MEC); conglomerates with a whole range of subsidiary businesses including hotels, breweries, banking, tobacco, manufacturing, transportation and logistics, agriculture, international trade, mining, jade and gems. These operate like a cartel, keeping as much wealth in the hands of the generals as possible.

In 2008, the military imposed a constitution, granting them unchecked power independent of civilian oversight. Then in 2010 it began to slowly open the country up to the world in a bid to boost the economy, releasing Aung San Suu Kyi from house arrest and establishing a partial democracy. This led to the lifting of most of the international sanctions. Foreign investors soon flooded into one of the world’s last markets to open up. In 2015, Aung San Suu Kyi’s party won national elections by a landslide.

MEHL and MEC are still running, as well as a vast number of intermediaries and proxy companies. The Aung San Suu Kyi-led civilian government has no oversight of the funds raised through these businesses and has no power to demilitarise the economy. A UN fact-finding mission in August 2019 recommended that no enterprises should enter into or maintain a relationship of any kind with the Myanmar military, specifically naming MEHL, MEC and their subsidiaries, including MEHL’s joint project with EFR. The Fact-Finding Mission clearly recommends against investments of capital in MEHL subsidiaries and their business relationships. While MEHL is a public company, it only allows regiments and brigades, current military officials, war veterans organisation and veterans to hold shares.

In August 2017, the military launched a campaign of genocide against the Rohingya, a Muslim minority group. Over a million people have been forced to flee to Bangladesh, and both local and international civil society organizations have called for military commanders to be tried for genocide and crimes against humanity.

In January 2020, the International Court of Justice declared the Rohingya are still at risk of genocide and that Myanmar should take “all measures within its power” to prevent this. However, as our research shows, the military is still profiting from its massive business network – and many international businesses are complicit.

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What role does EFR play in all this?

EFR is a transportation and logistics conglomerate. During the dictatorship it was heavily involved in shipping and customs brokerage, and these still make up important strands of its business.

It is also making no secret of the fact it is currently working with Lann Pyi Marine, an MEHL subsidiary, to develop an integrated complex in Yangon that will include a port, container depot, logistics services and warehouses. EFR is financing the project through funds raised via the YSX. 

Justice For Myanmar has been reviewing EFR’s own disclosures about the project, which name Hlaing Inland Terminal and Logistics Co. Limited. MEHL subsidiary Lann Pyi Marine hold a 51 percent stake, and we have spotted many concerning details. For one, neither company has disclosed how MEHL acquired the 40 acres of prime Yangon real estate the project is being developed on – a worrying omission given the military has a history of land grabs and theft of public assets. It also states that MEHL holds “unlimited concession rights over [the project land].” This is not a legal term. Like many other countries, it is only the government in Myanmar that has eternal rights to land – private property owners typically have long-term leases. This needs more investigation. 

Furthermore, the inclusion of a port, a customs-bonded warehouse and customs clearance services at the project present huge corruption risks. One of MEHL’s Directors is retired Brigadier-General Kyaw Htin, who is also Director-General of the Myanmar Customs Department. Another MEHL director, Major Ni Aung, is Director of the Myanma Port Authority, which operates and regulates ports. This means they will both stand to benefit financially from their public positions.

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What next?

Stock exchanges should ensure the companies they list meet certain ethical standards. But this doesn’t appear to be happening at YSX. Justice For Myanmar is calling on the YSX to do due diligence on the companies it allows to trade and reject any companies that partner with the Myanmar military, according to the recommendations of the UN Fact-Finding Mission. By approving EFR’s listing, it is currently perpetuating military corruption and continuing human rights violations.

The Myanmar military and its many enterprises and business partners deliberately move money around and conceal ownership. Justice For Myanmar is working to expose this network and end the profiteering military cartel. Those responsible for genocide, war crimes and crimes against humanity must be held to account and the military institution must be democratised and be brought under civilian control, to bring justice for all the people of Myanmar.

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Explore some of the evidence:

Ever Flow River Disclosure to the YSX: (English) (Burmese)

Interview with Myanmar Securities Exchange Centre Acting Managing Director in MJ+

Announcement of Ret. Brigadier-General Kyaw Htin's transfer from Ministry of Defence to Customs in Union of Myanmar Gazette, 29 April 2016 (Burmese)

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