On 15 February 2022, Fair Finance Guide Japan (FFGJ) published a report named “Who is Financing the Myanmar Military? Tracking Monetary Flows from Japanese Businesses and the Institutions that Finance Them” (in English and in Japanese).
Below is a summary. You can read the full report on FFGJ’s website: https://fairfinance.jp/bank/casestudies/myanmar2021/
In Myanmar, where a military coup d’etat took place on February 1, 2021, subsequent brutal acts by the Myanmar military have drawn international attention and condemnation. Within the country, labor unions, and LGBTQ organizations, as well as many private citizens, including medical workers and teachers expressed opposition to the restoration of military rule. However, since the first person was shot to death by security forces on February 9 in the capital, Naypyidaw, the military has intensified its use of violence against unarmed citizens. As of August 2, half a year after the coup, 945 people have been killed and 5,474 people are under arbitrary detention. The death toll includes children and people who were not participating in demonstrations.
While much attention has been paid to these brutal acts by the Myanmar military committed after the coup, it needs to be understood again that crimes against humanity and human rights violations stemming from military operations and “security operations” had been going on since long before the coup.
Although it may seem as though “democratization” of Myanmar has made progress since 2011, in fact, the military was always granted a high degree of independence from the elected civilian government. In other words, in Myanmar, a dual power situation existed where the civilian government without an armed wing and the military both held power. As such, it is assumed that human rights violations have occurred with the military’s involvement due to the absence of civilian control.
For example, in August 2017, an extremely intense military action was taken against Rohingya Muslims in Rakhine State. Multiple international human rights organizations stated that killings, rapes, arbitrary arrests, and mass arson of homes were committed in hundreds of predominantly Rohingya villages in Rakhine State. Regarding this humanitarian crisis in Rakhine State, on November 11, 2019, a case was filed against the Myanmar government at the International Court of Justice (ICJ) for alleged violation of the Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention). At the same time, the UN Human Rights Council appointed an independent international “Fact-Finding Mission on Myanmar.” The Mission in 2018 criticized the Myanmar military for its crimes against humanity and stated that the atrocities “constitute serious violations of international humanitarian law amounting to war crimes”.
However, even while these acts were being committed, Myanmar on the other hand was called “the last frontier” in reference to economic growth opportunities. The country, whilst experiencing horrific human rights violations, was at the same time flooded with investment and loans from overseas. The growth reached beyond the range of control of the civilian government and brought prosperity to the military, as well as companies with close ties to the military. The Fact-Finding Mission concluded that Myanmar Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC) and their subsidiaries generated more revenue than any civilian-owned company in Myanmar. Senior military officials are deeply involved in the operation of MEHL, and all shares in MEHL are held by current or former military officers, regiments and units, and former servicemembers. The Mission reported that much of the vast revenue generated by MEHL and MEC and their subsidiaries is not captured by the official budget, and is funding the military which is highly likely to be committing crimes against humanity.
Given this situation, entities conducting business or investing in Myanmar must understand the dual structure where an independent military holds power, be fully aware of the beneficiaries of the business relationship, and conduct appropriate human rights due diligence. If they do not take action, they may indirectly be complicit in crimes against humanity.
This is particularly evident in the Y Complex development project, which is led by Tokyo Tatemono Co. Ltd. and Fujita Corporation, a subsidiary of the Daiwa House Group. There is a strong suspicion that USD2.18 million in annual land rent for the project site has already been paid to the Office of the Quartermaster General of the Myanmar Army. Furthermore, everything developed on the land will be transferred to the military upon termination or expiry of the land lease. This project is co-financed by Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation and the Japan Bank for International Cooperation (JBIC) for the amount of USD144 million (about JPY16.3 billion).
Furthermore, the local corporations that Kirin Holdings Company, Ltd. acquired to operate in Myanmar are both joint ventures with MEHL, which as mentioned, is closely affiliated with the military. In both joint ventures, Kirin holds 51% and MEHL holds 49% of the shares, which means that in a situation where dividends are paid normally, Kirin and MEHL will divide the profits equally. If Kirin generates profit through its operation in Myanmar, it means that a corporation with close ties to the military will benefit. This issue has been pointed out by NGOs inside and outside Japan. Although in response Kirin Holdings has conducted human rights due diligence, it was in effect no more than a misguided investigation, and a second investigation by an external evaluator failed to obtain useful evidence.
Fair Finance Guide Japan seriously considers the fact that Japanese public and private banks have provided funds for business operations where human rights risks were fully foreseeable, and demands that due diligence be strengthened from now on. Specifically:
It has been confirmed that MUFG Bank, as the principal bank for Kirin Holdings, has provided a total of JPY90 billion in underwriting and corporate loans. As the bank that has more influence over Kirin than a normal lender and investor, MUFG Bank should exercise its leverage so that Kirin Holdings will dissolve the joint ventures with a company closely affiliated with the Myanmar military without delay.
It has been confirmed that Mizuho Bank and Sumitomo Mitsui Banking Corporation provided a total of USD97 million in financing for the Y Complex development project, even though they were in a position to be fully aware of the details of and stakeholders involved in the project. Both banks should make sufficient efforts before and during lending to ensure that the project they are financing do not negatively affect local people and communities, in accordance with the Equator Principles which they have both adopted. If there is no improvement, they should demand cancellation of the loan or early repayment, on humanitarian grounds.
It has been confirmed that both Sumitomo Mitsui Trust Holdings and Norinchukin Bank have provided investment and lending to Kirin Holdings. Both banks should reconsider whether such financing is in accordance with their human rights policies. It has been confirmed that Sumitomo Mitsui Trust Holdings in particular has made a large investment in Kirin Holdings. Even if it gains investment profit through the operations in Myanmar, it should recognize again that those operations benefit not only the company and its shareholders, but also a company closely affiliated with the Myanmar military unless the ongoing joint ventures are dissolved.
It has been confirmed that the Japan Bank for International Cooperation (JBIC) has provided a loan of USD47 million in for the Y Complex development project as well a loan for “a portion” of the USD560 million that was paid by Kirin Holdings in establishing the joint ventures in Myanmar. JBIC has established “Guidelines for Confirmation of Environmental and Social Considerations,” which applies to its loans and investments. The guidelines provide that “derivative and secondary impact” are to be examined and investigated “to a reasonable extent.” Given that an independent investigation by an UN-backed organization has exposed problems, JBIC is strongly urged to recognize those problems as a reasonable social risk and respond urgently.
