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Multiagency Burma Business Advisory: State-Owned Enterprises Benefiting the Military

I. STATE-OWNED ENTERPRISES BENEFITING THE MILITARY
A 2018 report by the Organization for Economic Co-operation and Development (OECD) found that corruption is disproportionately higher in the oil and gas, mining, postal, energy, and transportation and logistics sectors worldwide due to the heavy involvement of state and military entities as well as their high transactional value.7 Burma’s junta-controlled state-owned enterprises (SOEs) play a dominant role in these sectors of the economy and are responsible for generating about half of the regime revenue and spending half of the regime budget.
The largest of these SOEs are in the natural resources sector and include but are not limited to: Myanma Oil and Gas Enterprise (MOGE); Myanmar Mining Enterprises 1, 2, and 3; Myanma Gems Enterprise; and Myanma Timber Enterprise (MTE). Reports also indicate that state-owned Myanma Posts and Telecommunications (MPT) actively collaborates with the regime’s surveillance program. MGE and MTE were designated by OFAC under Executive Order (E.O.) 14014 in April 2021.8
The business community should further review and, as appropriate, consider updating their risk assessments associated with continuing to do business with Burma’s other SOEs as well. Burma’s SOEs not only generate revenue for a military regime that is responsible for lethal attacks against the people of Burma, but many of them also are subject to allegations of corruption, child and forced labor, surveillance, and other human and labor rights abuses.
Corruption – In 2018, the Burma National Risk Assessment concluded that corruption, including bribery, generates approximately 63 percent of the estimated $15 billion in annual criminal illicit proceeds in the country. Even excluding criminal activities in the country, the regime’s monopolization of resources and lack of transparency contributes to the significant corruption-related risks within the country’s economy.
Forced Labor and Child Labor – Burmese SOEs are significantly involved in industries that have been tied to human trafficking, child and forced labor, and the targeting of labor unions. In particular, teak, rubies and jade have been identified as goods made in Burma with forced labor and child labor; each of these goods are imported into the United States; and each has significant SOE involvement.
Surveillance and Internet Freedom Restrictions – In the months following the military coup, the regime seized control of telecommunications infrastructure, blocking social media, stripping the licenses of independent online news outlets, instituting partial and complete internet shutdowns, and forcing service providers to hand over personal data. Telecommunications and internet surveillance have contributed to violent crackdowns on the people of Burma, including reports of physical assaults and enforced disappearances in retaliation for their online and offline activities.
Other Human Rights Abuses – Aside from the human rights abuses during and after the military coup in February 2021, the military faces longstanding allegations of serious human rights abuses against members of multiple minority groups in Burma, including most notably in Kachin, Shan, and Rakhine States.9
Businesses and individuals involved in dealings with Burma’s SOEs run a high risk of furthering corruption within Burma. Considering the risks noted above, businesses and individuals involved in dealings with SOEs in Burma should conduct appropriate due diligence to ensure they are not furthering corruption within Burma, supporting child or forced labor, or contributing to arbitrary or unlawful surveillance practices, or any other serious human rights abuses.

Footnotes:

7 For additional information, see the OECD report State-Owned Enterprises and Corruption: What are the risks and what can be done? at https://www.oecd.org/corporate/SOEs-and-corruption-what-are-the-risks-and-what-can-be- done-highlights.pdf
8 Executive Order 14014, “Blocking Property with Respect to the Situation in Burma” authorizes the Department of the Treasury, in consultation with the Department of State, to impose sanctions on foreign individuals and entities identified, among other things, to be responsible for the undermining of democratic processes or institutions in Burma or to operate in the defense sector of Burma. More information at https://www.federalregister.gov/documents/2021/02/12/2021-03139/blocking-property-with-respect-to-the- situation-in-burma

9 The Department of Labor’s 2020 Findings on the Worst Forms of Child Labor report assessed Burma as having made no advancement because it demonstrated a practice of being complicit in the use of forced child labor. The Tatmadaw continued to force civilians, including children, to work in conflict areas, including Rakhine. The Tatmadaw has perpetrated violence against and unlawfully imprisoned trade unionists. Additionally, as for the repression of trade unionists, the military regime has targeted the labor union movement, arrested numerous union leaders and members, and declared 16 labor unions to be illegal.

Categories: Advisories Anti-Corruption Burma Sanctions Guidance Human Rights Sanctions Multiagency Advisories

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