Myanmar's generals run a nearly sanctions-proof business empire

Mining and manufacturing companies make up more than half of the businesses owned by MEHL and MEC

Back when it looked like Myanmar had a chance at democracy, American lawyer Eric Rose opened a firm in Yangon to advise investors interested in the newly opened country. In 2014, a client asked him to evaluate a potential joint venture with several state-owned pharmaceutical companies, Rose got a glimpse at how the military ran business ventures.
 
As part of due diligence, Rose talked to the directors and reviewed the financials of the companies, which were under the control of a government still dominated by generals that had run Myanmar since the 1960s. The businesses were inefficient, the equipment outdated, the employees poorly trained veterans, he said. The companies’ leaders were former military officers without business experience. “They were losing money left and right,” he said. “There was no prospect of these businesses ever turning around.”
 
But in Myanmar, Western standards don’t always apply. The two major conglomerates founded by the Defense Ministry, Myanma Economic Holdings Public Company (MEHL) and Myanmar Economic Corp (MEC), have cemented the military’s role at the center of the economy. They offer a wide variety of civil society’s essential goods and services; they also employ thousands of civilian and military personnel, control industries including real estate, alcohol, tobacco and natural resources, and pay dividends to hundreds of thousands of soldiers.
 

As a result, traditional measures of business success are sometimes irrelevant, and international sanctions designed to put pressure on the junta after the February coup are likely to have minimal effect, according to analysts.
 
“Even if we have economic isolation and chaos on the ground, the military comes out of this a winner,’’ said Romain Caillaud, an associate fellow focused on Myanmar at Singapore’s ISEAS-Yusof Ishak Institute.
 
The military has linked its commercial and political interests since its first coup in 1962, when General Ne Win took power and nationalised major industries. After a crackdown on student led-protests prompted broad US sanctions, the junta established Myanma Economic Holdings Public in 1990, followed by Myanmar Economic Corporation seven years later. Sanctions on both companies were lifted in 2016, after Nobel laureate Aung San Suu Kyi’s National League for Democracy took power.

During the last decade’s brief period of democracy, investors began to see Myanmar as a market begging for development. But the civilian government struggled to rein in the military, and optimism had faded even before the recent coup. In 2020, Japanese brewery Kirin Holdings agreed to conduct a strategic review of its partnership with MEHL’s Myanmar Brewery and Mandalay Brewery—together, they produce about 80 per cent of the beer sold in the country. But even a majority business partner struggled to figure out how the company was using its profits. According to Kirin, the auditors couldn’t extract any information either. In January, the brewery described the report as “inconclusive” and, following the military takeover, announced its plans to end the joint venture.
 
South Korean steelmaker Posco, which has a JV with MEHL, is considering buying out its local partner or other ways to cut ties, the company said. The company believes profits are going to the government, he said, and added that about 20 per cent of the gas produced goes toward local power generation.
 
Western governments have imposed fresh sanctions on the two military conglomerates as well as on top military leaders in response to the junta’s takeover. But senior officials at Myanmar’s military-run firms minimised the impact of political or commercial pressure. “Our business is domestic-focused, so we don’t see many problems,” said Myint Than, the general manager of MEC until 2019, when he took mandatory retirement. He remains with the company as a consultant. “There could be some difficulties in the purchase of some raw materials, but we can buy them from China. It would be a lie if we say there is no impact (of the sanctions), but it’s not severe.”
 
Within Myanmar, protesters fighting the coup are encouraging consumers to stop paying for cigarettes, beer and everything else produced by the military’s businesses. Myanmar jade is highly sought-after in China, and trade in the vivid green mineral underpins the military’s empire. At least two global watchdogs have estimated that in various periods since 2014, Myanmar’s jade trade could have been worth more than $30 billion, nearly half the country’s GDP.