Chinese companies urged to cease Myanmar mines investments amid escalating violence

• As the junta’s bloody crackdown intensifies, experts and advocates say that firms should withdraw their investments

• A recent study showed Myanmar’s military earned an estimated US$725 million from Chinese-run mines

By Raquel Carvalho (SCMP)

Chinese mining companies are facing calls to take a more responsible approach and pull out their investment from Myanmar, amid an increase in human rights abuses and civilian deaths since the military took power about a year ago.

The push from experts and advocates came after a recent report by Publish What You Pay Australia showed the junta raked in an estimated US$725 million in revenues from Chinese-run mines during the 2020-2021 financial year.

“The mining sector is a very lucrative one for the junta in terms of revenues and royalty payments,” said Clancy Moore, national director of Publish What You Pay Australia, which is part of an international coalition advocating for transparency and accountability in the extractive industries.

“Given the junta’s lack of money and lack of foreign currency, we think that there is a strong chance that the revenues from mining could be used for weapons and hardware, which is being used against the people of Myanmar.”

Moore added that “the role of the Chinese regime is significant” because “they are the biggest player in the mining sector”.

The three largest mines in the Southeast Asian nation are run by Chinese state-owned enterprises.

Myanmar has been in turmoil since a coup last February, with more than 1,400 people killed in a bloody crackdown by security forces, according to the Association for Assistance of Political Prisoners rights group.

Thousands have been arrested and civilian leader Aung San Suu Kyi, who was detained after the power grab, has been convicted of crimes including incitement against the military.

We, Myanmar people, are not getting any benefits from these mining projects” Ko Awng, researcher

Deeper pockets

The Publish What You Pay Australia report, released last November, predicted that the military’s main sources of revenue will increasingly depend on the country’s natural resources, such as oil and gas, gemstones and metals mining.

The findings were based on multiple sources, including both leaked and public documents. The research took into consideration different factors like projection of royalties, corporate income tax and production rates.

Ko Awng (not his real name), a local researcher who contributed to the study, pointed to the lack of transparency under the military junta.

“There is no way for us to know if there are any changes to the contractual [agreements] or the licenses,” he said

“But the local communities say that the mines are still operating … If there are no changes or amendments, they will be generating the same money this year.”

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Moore said an opaque system also made it difficult to track Chinese investment in Myanmar’s mines.

“[There’s] no clear mapping of the involvement of Chinese actors, and there is probably a lot of illicit financial flow that we are just not aware of,” he said.

Moore highlighted a skewed revenue sharing model related to a copper mine controlled by Chinese investors and a military-owned conglomerate.

“The production sharing and the way the money is split up in this project is different from other projects. We don’t know why,” he said, suggesting that the contractual agreement favoured the military company instead of public coffers.

The junta’s access to mining resources seems to have only increased following the coup.

Moore noted that in Myanmar most royalty payments, revenue payments and taxes flow through a state-owned enterprise, which usually makes joint ventures with foreign companies – such as the ones from China. And that “is now under the control of the military,” he said.

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‘Not getting any benefits’

Myanmar’s Chinese-run mines have been embroiled in controversy over land acquisitions that have forced villagers to relocate. The deployment of Chinese workers in the quarries further compounded the problem, researcher Ko Awng said.

“This created a conflict with the local community because they had been given false hopes,” he said, adding the situation has worsened in recent months.

“Before the coup, there were many limitations … But under the regime, we can say that people in Myanmar will not benefit from the projects because the money will be used to buy military equipment.”

“We don’t see revenues going to community projects, we don’t see anything. We, Myanmar people, are not getting any benefits from these mining projects,” Ko Awng said, expressing concern that economic ties between Beijing and the military could deepen as seen during the previous junta rule in the 1990s.

Myanmar jade traders caught between the military junta and anti-coup dissidents

Myanmar jade traders caught between the military junta and anti-coup dissidents

Dr Htwe Htwe Thein, an associate professor in international business at Curtin University’s school of management, Australia, said that the Chinese companies should respond to the call from the pro-democracy movement to cut ties with the junta.

“All investors must know that they should not provide finances to the military given the conflict and violence in Myanmar,” she said, adding that “providing revenue to the regime will also harm their reputation with other firms and investors internationally”.

But Thein said it remains to be seen whether Chinese companies would “heed calls to suspend their operations in Myanmar for ethical reasons and to avoid reputational damage or whether they will be driven by short-term goals of extracting resources”.

Regional stability at risk

The professor, who has researched extensively on corporate responsibility, said that “the Chinese government and businesses have an enormous leverage over the military in Myanmar”. Doubts remain “if they would have a political interest to pressure the generals”.

“If Myanmar has become ungovernable – and it currently appears that the military regime is failing to stabilise the country – then a destabilised Myanmar could start to threaten the security and sustainability of Chinese investment in Myanmar,” Thein said.

“The Chinese government and businesses would not be happy about that either,” she added, stressing that operations should be suspended until Myanmar’s democracy is fully restored.

Moore also said the worsening violence could lead to attacks on infrastructure including mines and transport routes, displacing more people and pose a threat to regional stability.

“This would affect Chinese investments and it’s against the whole region’s interests,” he said”

“If they [Chinese investors] can use their influence for peace and democracy in Myanmar, that is going to benefit the economic climate, their business interests, and the geopolitical stability.”