While calls mount for sanctions on the Myanmar military’s cash flows, analysts believe such tactics will not help change the junta’s actions.
By Umair Jamal
A recent report by Independent Economists for Myanmar (IEM) says that targeting the junta’s sources of foreign currency could force the regime to spend less on military expenses and instead prioritize the public’s needs.
The paper, which has not been publicly released, reportedly underscores that international sanctions could have a profound impact if they cut off the military’s main sources of income. The Myanmar military controls a large network of business interests and manages hundreds of companies.
But it is open to debate whether sanctions on the military’s businesses could really push the junta to capitulate to international pressure.
Economists’ report says sanctions could force junta to cut military spending
The authors of the IEM paper argue that coordinated international sanctions against the junta’s foreign currency sources could reduce the regime’s revenues by US$2 billion annually.
“Such actions, and preventing military businesses from accessing foreign inputs, could help pressure the military to compromise on its own needs,” and could force the junta to spend more on public service needs, the IEM report says, according to a copy seen by Nikkei Asia. The report further notes that actions to freeze “deposits linked to state-owned Myanmar Foreign Trade Bank and Myanmar Investment and Commercial Bank” can have a significant impact.
The report also argues that economic fallout due to the coup and the COVID-19 crisis is already having an impact on the military’s spending priorities. “Even without forceful targeted sanctions in place, the military is already being forced to choose between its own priorities and providing financing to import the fuel and equipment needed to generate electricity, and [the] food, fertilizers and medications people need to survive,” the report notes.
The report concludes, “The military has already starved public services and the private sector of foreign exchange, so further reductions in its access to foreign currency are likely to predominantly impact the military rather than civilians.”
The Myanmar military manages hundreds of businesses worth billions of dollars
The authors of the IEM report believe that the military controls foreign currency reserves of US$4 billion or “roughly two-thirds of Myanmar’s stock of foreign currency.”
The military draws the majority of this foreign currency from sources such as natural gas, real estate, banking, mining, telecommunications fees, agriculture and other trade businesses. The report says that these businesses generate around US$2.5 billion annually and that, in addition, “The military also likely retains its ability to borrow from sympathetic creditors.”
In 2020, Amnesty International published an investigation into the military-run conglomerate Myanmar Economic Holdings Limited (MEHL) based on a shareholder report provided by local civil society group Justice for Myanmar. The investigation showed that the military received as much as US$18 billion from MEHL between 1990 and 2011. In 2019, a UN Fact Finding Mission found that around 100 businesses in the country were linked to MEHL and another military enterprise, Myanmar Economic Corporation (MEC).
Mark Dummett, Amnesty’s head of Business, Security and Human Rights, said “The perpetrators of some of the worst human rights violations in Myanmar’s recent history are among those who benefit from MEHL’s business activities.”
He added that the documents included in the Amnesty report “provide new evidence of how the Myanmar military benefits from MEHL’s vast business empire and make clear that the military and MEHL are inextricably linked.”
The Amnesty report notes that Senior General Min Aung Hlaing, the leader of Myanmar’s junta, has been one of the direct beneficiaries of MEHL’s businesses and that he received roughly US$250,000 in payments between 2010 and 2011 alone. Other military commanders reportedly received payments of around US$208 million during the same period.
Analysts debate whether economic pressure on the military will prove effective
After the February 1 coup, many inside Myanmar and abroad called on the international community to sanction military-run businesses. The US, the UK and the EU have targeted military-linked businesses in recent weeks and the US Treasury Department has also blocked the assets and transactions of a state-run gem company, one of the key sources of income for the Junta.
But some believe that the sanctions are too weak to force any difference. “It’s unclear just how big the impact of the sanctions will be on the military’s cash flows since Myanmar’s Asian neighbors—its biggest investors and trading partners—have shied away from imposing their own restrictions on doing business with the junta,” Elaine Kurtenbach, AP Asia business editor, notes.