Tag: Myanmar

  • Myanmar’s Military Conglomerates: How the Tatmadaw Funds a Junta Through Beer, Jade, and Steel

    Rank-and-file soldiers in the Myanmar military — the Tatmadaw — are required to invest a portion of their salaries in shares of a conglomerate called Myanma Economic Holdings Limited. They generally receive an annual dividend in September. The conglomerate they’re investing in owns the country’s dominant beer brand, controls the jade mining monopoly in Kachin State, operates a bank, runs a pension fund, and was sanctioned by the United States and United Kingdom in March 2021 for its role in funding a military that had just overthrown the elected civilian government. The soldiers buying shares are also the soldiers conducting the operations those shares help fund. MEHL is one of two massive conglomerates — the other is the Myanmar Economic Corporation, or MEC — that form the economic backbone of the Tatmadaw. Together they own at least 106 businesses and are affiliated with another 27 through corporate structures. They are the mechanism by which Myanmar’s military has maintained financial autonomy from civilian oversight for more than three decades, generating revenue streams that are not accountable to parliament and that have contributed directly, according to the United Nations, to “a wide array of international human rights and humanitarian law violations.”

    Two conglomerates, one army

    MEHL — originally named the Union of Myanmar Economic Holdings Limited, or UMEHL — was established in February 1990 under the Special Companies Act, two years after the 1988 military coup. It was created to generate profits from light industry and commercial trade during the junta’s transition from a socialist command economy. Initial capital was $1.6 billion. The conglomerate is jointly owned by two military departments: 40 percent of shares belong to the Directorate of Defence Procurement, and 60 percent belong to active-duty and veteran military personnel, including high-ranking officials from the ruling junta. MEHL has been exempt from commercial and profit taxes. By 2007, it wholly owned 77 firms, nine subsidiaries, and seven affiliated companies, spanning banking, construction, mining, agriculture, tobacco, food, transportation, real estate, and precious stones.

    MEC was established in 1997 by Lieutenant General Tin Hla with a complementary mandate: heavy industry. Where MEHL handles consumer-facing businesses — beer, cigarettes, trading, jade — MEC handles the industrial base: steel plants, cement factories, mining operations, manufacturing, telecommunications, and an insurance monopoly. By 2009, MEC operated 21 factories, including four steel plants, a cement plant, a bank (Innwa Bank), and supply operations providing raw materials directly to the military. The U.S. Treasury Department’s designation described MEC as “a holding company with businesses in the mining, manufacturing, and telecommunications sectors, as well as companies that supply natural resources to the military, and operate factories producing goods for use by the military.”

    The division of labor is clean. MEHL generates consumer revenue and distributes dividends to military personnel. MEC builds the industrial infrastructure the military needs to operate autonomously. Together, they create a self-funding military apparatus that doesn’t depend on civilian government budgets, doesn’t answer to parliament, and can survive — as it demonstrated in February 2021 — the overthrow of the civilian government that nominally controlled the country.

    The jade monopoly and the beer partnership

    MEHL’s most valuable asset is its monopoly on jade mining in Kachin State, a conflict zone where the military has fought Kachin independence forces for decades. Myanmar produces an estimated 70 percent of the world’s jade, an industry valued at an estimated $31 billion annually — a figure larger than the country’s official GDP. MEHL controls access to the most lucrative mining sites in Hpakant, the heart of the jade belt, alongside approximately 20 Chinese-owned companies or their proxies. The jade revenue doesn’t appear in public budgets. It flows through MEHL’s corporate structure directly to military accounts.

    The beer business generated international headlines. MEHL held a 45 percent stake in Myanmar Brewery Limited, which controlled over two-thirds of the country’s beer market and manufactured Myanmar Beer, Kirin Beer, ABC Stout, and Anchor Beer. The other 55 percent was owned by Japan’s Kirin Company, which acquired the stake from Fraser and Neave in 2015. A 2019 United Nations report on MEHL’s military ownership prompted sharp international criticism of Kirin’s financial relationship with the Tatmadaw. In 2017, Myanmar Brewery Limited — Kirin’s subsidiary — had made a $30,000 donation toward the military’s “clearance operations” in Rakhine State. Those clearance operations are what the rest of the world calls the Rohingya genocide, which the International Court of Justice has ordered Myanmar to prevent under the Genocide Convention. Kirin announced it would cut ties with MEHL in February 2021, immediately following the coup.

    The sanctions gap

    Following the February 2021 coup, the United States sanctioned both MEHL and MEC, impounding U.S.-held assets and forbidding American nationals from doing business with either entity. The United Kingdom followed promptly. But Myanmar’s principal trading partners — China, Thailand, India, Singapore — declined to impose sanctions. MEHL’s and MEC’s revenue streams are overwhelmingly regional. The beer is sold domestically. The jade goes to China. The steel stays in Myanmar. The construction projects serve the domestic market. Western sanctions can freeze assets in Western banks, but the conglomerates’ operating revenue comes from Asian markets that remain open.

    The sanctions also can’t reach MEHL’s shareholder structure. The U.S. Treasury noted that MEHL has 1,793 institutional shareholders, including regional military commands and subordinate battalions, divisions, platoons, squadrons, and border guard forces. Shares are distributed across the entire armed forces with no public accountability, creating what Treasury described as “secret slush funds that the military uses to augment its operational budget.” The shareholders are the military. The military is the government. The government controls the regulatory apparatus that would enforce any domestic accountability. The circularity is the design.

    In 2016, during the brief democratic interlude under Aung San Suu Kyi’s government, UMEHL announced it would “transition into a public company” — moving from the 1950 Special Companies Act to the 1914 Myanmar Companies Act, supposedly introducing transparency and tax obligations. Observers noted that if the Ministry of Defence remained a shareholder, dividends would still be tax-exempt under existing tax law. The restructuring changed the corporate registration. It didn’t change the ownership, the revenue flows, or the relationship between the conglomerate and the military that created it. The 1998 China Poly Group “divestiture” and the UMEHL “transition” are the same play: change the organizational chart, keep the personnel, keep the money, and announce reform.

    What MEHL and MEC tell you

    Stasi KoKo generated 25 billion Deutsche Marks through 180 front companies to keep East Germany solvent. MEHL and MEC do something structurally similar but more audacious — they don’t hide behind front companies. They operate in plain sight, under their own names, with shareholding structures that explicitly list military units as investors and coup leaders as board members. The British South Africa Company needed a royal charter to merge corporate and sovereign authority. The Tatmadaw doesn’t need a charter because it is the state. When you are both the government and the corporation, the distinction between public revenue and private profit ceases to exist — and the soldiers buying shares in the conglomerate that funds the operations they’re ordered to conduct become simultaneously the workforce, the investors, and the product.

    We cover MEHL and MEC alongside Wagner Group’s resource extraction model, BCCI’s financial architecture, and 21 other case studies of covert institutional power across our Shadowcraft course — where Myanmar’s military conglomerates are the case study that proves you don’t need secrecy to operate without accountability. You just need to be the one writing the rules.

  • China Poly Group: The PLA-Linked Conglomerate With a $100 Billion Portfolio

    On any given day, China Poly Group might ship arms to Myanmar, announce plans to build a highway from Iraq to Syria, auction a Song Dynasty vase for eight figures, break ground on a luxury apartment complex in Shenzhen, or win the Chinese distribution rights for Ferrari. The company owns the world’s third-largest art auction house. It is one of China’s largest real estate developers. It manufactures civilian explosives. It exports missile systems, military drones, laser defense platforms, and anti-riot equipment to countries across Africa, the Middle East, and South Asia. It operates in over 110 countries, employs more than 120,000 people, and generates annual revenues of approximately 215 billion yuan. A 1997 Rand Corporation report called its parent organization “a front company for the PLA.” Analysts at the Heritage Foundation have described it as “essentially another PLA front company.” Amnesty International has spotlighted its failure to apply human rights standards to weapons exports. And the company that does all of this was founded in 1983 by the Equipment Department of the People’s Liberation Army’s General Staff Department, staffed by the children and sons-in-law of China’s revolutionary military elite, and “divested” from the PLA in 1998 in a process that observers across the political spectrum describe as largely cosmetic.

    The princeling machine

    China Poly Group traces its origins to 1983, when the PLA’s Equipment Department created Poly Technologies as a subsidiary of China International Trust and Investment Corporation — CITIC, the state-owned investment firm established at the direction of Deng Xiaoping in 1979. CITIC was designed to be China’s window to international capital markets. Poly Technologies was designed to be the PLA’s window to international arms markets. The distinction between “state-owned investment firm” and “military arms export vehicle” was blurred from inception, and the blurring was the point.

    The company was run by princelings — the children and spouses of China’s founding military elite, whose family connections provided the political cover necessary to conduct arms sales that would have been politically impossible through normal state channels. Deng Xiaoping’s son-in-law, He Ping, a former army major general, was made president. Major General He Pengfei, son of the late Marshal He Long, served as a director of the Equipment Department that created Poly and oversaw its operations from 1986 to 1992. The princeling network provided the guangxi — the personal relationships and political connections — that shielded Poly from regulatory scrutiny and gave it the clout to make deals that other state-owned enterprises couldn’t touch.

    The 1980s were the era of PLA Inc. — a period when the Chinese military was encouraged to enter commercial business to supplement its budget. By the mid-1990s, the PLA operated roughly 10,000 companies across everything from agribusiness to electronics to tourism to arms exports, generating an estimated $1-3 billion annually. Poly was the most profitable, with assets exceeding $1 billion. The top 20 military conglomerates earned 80 percent of total PLA business profits. The revenue streams were divided among personal accounts, lavish lifestyles for military elites, reinvestment in the companies, and — nominally — contributions to military modernization. The system was functionally a kleptocracy with a defense budget attached.

    The arms portfolio

    Poly Technologies exported defense products, specialized military technology, vehicles, telecommunications and radar equipment, and chemical industrial machinery. It conducted government-to-government sales through the Bureau of Military Equipment and Technology Cooperation under the General Staff Department. Its most consequential known deal was the sale of CSS-2 intermediate-range ballistic missiles to Saudi Arabia in 1987 — a transaction reportedly worth $3-3.5 billion that gave the Saudis their first strategic missile capability and earned the PLA a windfall that dwarfed the company’s entire annual revenue from conventional operations.

    The arms export client list reads like a Shadowcraft syllabus. Poly supplied weapons to Myanmar’s military junta, Zimbabwe under Mugabe, Sudan during the Darfur crisis, and various regimes across the developing world — often in exchange for resource extraction concessions that gave Chinese state-owned firms access to raw materials. The pattern — arms for resources, with Poly as the intermediary — is structurally identical to what Wagner Group would later replicate in the Central African Republic, Mali, and Sudan: provide security services or military equipment to a regime, extract mining or resource concessions in return, and use the commercial relationship to lock out competitors.

    In 1996, Poly employees were implicated in an attempt to smuggle 2,000 AK-47 assault rifles into the United States — an operation that resulted in federal charges and the Clinton administration’s 1994 decision to ban Chinese munitions imports. U.S. intelligence also suspected that China Poly Ventures, a subsidiary, delivered American-made specialized metal-working presses and a special furnace to Pakistan’s National Development Center — a missile production facility — possibly in 1999. The company maintained U.S. subsidiaries involved in technology acquisition, along with representative offices in Rangoon, Bangkok, and Islamabad.

    The “divestiture”

    In 1998, President Jiang Zemin — concerned about the rampant corruption that PLA Inc. had generated — ordered the military to divest its business interests. The PLA would receive budget increases in exchange for surrendering its commercial operations. The divestiture was declared a success. Poly Technologies was restructured. The company was placed under the supervision of the State-owned Assets Supervision and Administration Commission. China Poly Group Corporation was formally established in 1992 as the parent entity, and by the late 1990s it was nominally a civilian state-owned enterprise.

    The divestiture was largely cosmetic. Poly’s arms-trading entities were believed to have been retained by the newly created General Armaments Division of the PLA, where they were not easily subject to civilian oversight. The company continued to be run by former PLA officers and their relatives. Derek Scissors of the Heritage Foundation described Poly’s post-divestiture behavior — its go-it-alone approach, its reluctance to answer to Foreign Ministry officials on the ground, its powerful connections shielding it from reproach — as “completely normal” for Chinese state-owned enterprises with princeling ties. The company changed its reporting line. It didn’t change its operational culture, its personnel, or its relationship to the military establishment that created it.

    Military-civil fusion

    China Poly Group now exemplifies Beijing’s military-civil fusion strategy — the national policy of integrating civilian enterprises with military objectives to accelerate technology transfer, resource sharing, and dual-use capabilities. The concept sounds bureaucratic. In practice, it means that a company that generates 90 percent of its revenue from real estate development also exports missile systems, operates defense procurement channels, and channels commercial profits toward PLA modernization. The real estate is not incidental to the defense work. It’s the revenue engine that funds it — and the commercial legitimacy that makes international operations possible.

    The Poly Museum, housed inside the company’s Beijing headquarters — a 90-meter atrium designed by Skidmore, Owings & Merrill — showcases Chinese cultural antiquities, many of which Poly has purchased at international auction as part of a state-backed effort to repatriate art looted during the 19th and early 20th centuries. The cultural program serves multiple functions simultaneously: it generates nationalist goodwill, it provides a soft-power export vehicle, and it gives Poly a public identity as a cultural institution rather than what the Rand Corporation and the Heritage Foundation and Amnesty International all separately describe it as — a PLA-linked conglomerate that exports weapons to authoritarian regimes in exchange for resource access.

    What Poly tells you

    The British South Africa Company operated under a royal charter that made a corporation sovereign. Stasi KoKo built a commercial empire to fund a police state. Poly Group does both simultaneously — it’s a state-owned enterprise that functions as a military-intelligence vehicle, a real estate developer, an art auctioneer, and an arms exporter, all housed in the same corporate structure, all supervised by the same princeling networks that created it in 1983, and all operating under a “divestiture” that multiple independent analysts describe as cosmetic. The question isn’t whether Poly is a front company. The question is what the word “front” means when the company doesn’t bother hiding what it is — when the arms exports, the resource extraction deals, the missile sales, and the real estate developments all appear on the same corporate website, and the only people who pretend they’re unrelated are the diplomats whose job requires it.

    We cover China Poly Group alongside BCCI, Crypto AG, sanctions evasion networks, and 20 other case studies of covert institutional power across our Shadowcraft course — where military-civil fusion is just the Chinese term for what every great power has been doing since a diamond magnate got a royal charter in 1889.