International businesses linked to the Quartermaster General
On December 10, the US, UK and Canada imposed sanctions on the Office of the Quartermaster General (QMG), a key unit of the Myanmar military that oversees major military business interests and is responsible for the purchase of arms and other equipment.
As a result of the Human Rights Day designation, a number of international businesses linked to the QMG through real estate and hotel developments are now at risk of violating US sanctions.
POSCO International, LOTTE, Shangri-La Asia, Daiwa House Industry, Tokyo Tatemono, Okura Hotels & Resorts, Emerging Towns and Cities Singapore and Hilton Worldwide are involved in businesses with the QMG, knowing that the Myanmar military commits atrocities with total impunity. Banyan Holdings has signed an agreement with crony company Htoo Group to manage a hotel on land owned by the QMG, but plans are currently suspended.
The QMG is part of the Myanmar army, under the Office of the Commander-in-Chief (Army), a position currently held by Vice Senior General Soe Win, who is also sanctioned by the USA, EU and Canada. According to the UK sanctions list, the QMG “plays a crucial role in procuring equipment for the Myanmar Armed Forces, including ammunition, bombs and jet fuel. This directly enables serious human rights violations, and the repression of the civilian population including peaceful protestors and ethnic minorities”.
The Myanmar military’s campaign of terror is enabled by its business interests. Following the attempted coup, the Myanmar military junta has murdered more than 1,300 people, including children, and arrested over 11,000, according to the Assistance Association for Political Prisoners. The Myanmar military continues to carry out violent attacks across Myanmar, with recent indiscriminate bombings and shelling, and the burning alive of 11 villagers in Salingyi.
Business partners of the QMG are supporting the military’s crimes through direct and indirect payments, and by developing assets that the Myanmar military can use to generate future revenue on completion of the land leases.
Since the UN Independent International Fact-Finding Mission on Myanmar published a report on the military’s economic interests in 2019, these companies have been put on notice to cut ties with the Myanmar military and its related businesses, or risk aiding and abetting international crimes, and to not enter into new relationships with the military. Yet these companies have so far failed to end their business with the Myanmar military.
Companies that continue to make US dollar payments to the QMG may be in violation of US sanctions. Justice For Myanmar urges the US Treasury to investigate any possible breaches and take action.
Y Complex is a mixed-use real estate development on prime Yangon land leased from the QMG under a build-operate-transfer agreement.
The project, still under construction, is for a mixed-use real estate complex that will include an Okura Prestige Hotel, to be operated by the Japanese company Okura Hotels & Resorts.
The development is led by Japanese companies Fujita Corporation (a subsidiary of Daiwa House Industry), Tokyo Tatemono and the Japanese government, private sponsored infrastructure fund Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN).
The local partner in the project, crony company Yangon Technical & Trading Co. Ltd., holds the lease with the QMG, with annual lease payments of US$2.163 million payable to the Ministry of Defence. The majority of the lease payments are provided by the Japanese consortium into a jointly held US dollar rent reserve account, according to the draft Land Lease Agreement, leaked by Distributed Denial of Secrets.
YTT is part of the Ayeyar Hinthar conglomerate, which has interests in banking, energy, trading, property development and agribusiness.
The Y Complex project has been suspended following the military’s attempted coup. The Japanese companies involved in the project risk violating US sanctions if US dollar payments resume.
Justice For Myanmar asked Fujita Corporation, Tokyo Tatemono and JOIN whether they intend to continue their involvement in the Y Complex project and to respond to the US sanctions risk.
Fujita Corporation and Tokyo Tatemono both replied, “We are seriously concerned about the recent sanctions imposed by the United States and other countries and will continue to monitor the situation, including its possible impact on the Project.”
JOIN replied, “As Y Complex Project is a JV project with other private partners, we share the same view with Fujita Corporation.”
See the joint press release, Japanese investors in Y Complex development risk violating US sanctions.
A South Korean consortium led by POSCO International operates a luxury hotel on land leased from the Office of the Quartermaster General under a build-operate-transfer agreement.
POSCO’s listed subsidiary POSCO International holds a 55.47% stake in the consortium, with POSCO subsidiary POSCO Engineering & Construction holding 26.03% and LOTTE holding 18.49%, according to company disclosures.
The local partner in the project is crony conglomerate International Group of Entrepreneurs (IGE). IGE is headed by Ne Aung, son of Lt Col Aung Thaung, the former Minister for Industry-1 under the previous military dictatorship and former Secretary 1 of USDP. Aung Thaung, who died in 2015, was sanctioned by the US Treasury in 2014 for undermining Myanmar’s reform process and “perpetuating violence, oppression, and corruption”.
Ne Aung is the brother of Admiral Moe Aung, Commander-in-Chief of the Myanmar Navy and a former director of military conglomerate Myanma Economic Holdings Limited, and retired Major Pyi Aung, son-in-law of former army chief Vice Senior General Maung Aye. Pyi Aung co-founded IGE with Ne Aung. According to a 2008 US Embassy cable leaked by Wikileaks, Ne Aung and Pyi Aung “use their family connections and close ties to the regime to amass great wealth.” Citing a “well-connected businessman”, the cable, which recommended sanctions against the family, stated that Ne Aung and Pyi Aung “are also close to Senior General Than Shwe, who allegedly regards them as family.”
In February, the IGE-owned project company for LOTTE Hotel, IGE-Sin Phyu Shin Company Limited, wrote to Justice For Myanmar regarding their links to the Myanmar military.
In the letter, the company's Managing Director stated that IGE does not have commercial ties to the military and that the company won a 2012 Ministry of Defence bid to develop the land where the Lotte Hotel stands. “The land rental fee is paid via the Ministry of Defence account by the Company according to the BOT-LLA (Build-Operate-Transfer with Land Lease Agreement).”
Should US dollar payments to the QMG continue, POSCO and LOTTE risk violating US sanctions.
Justice For Myanmar asked POSCO and LOTTE whether they intend to continue their involvement in the LOTTE Hotel project and to respond to the US sanctions risk.
Neither company responded.
Singapore Exchange-listed company Emerging Towns and Cities Singapore Co. Ltd. (ETC) is the lead investor behind the Golden City real estate development in Yangon, a complex of luxury apartments and offices on land leased from the QMG under a build-operate-transfer agreement.
Payments to the QMG include a US$6.3 million “land use premium” and annual payments of US$2.8 million. The lease is paid by ETC through the Myanmar-based project company Golden Land Real Estate Development.
ETC’s local partner is Nature Link Co. Ltd., part of Jewellery Luck, a crony-owned group of companies that develops real estate, operates hotels, and has mining and forestry interests.
ETC has suspended trading since February as a result of regulatory actions initiated by the Singapore Exchange, following a Justice For Myanmar investigation into their business with the QMG.
In response to regulatory actions, ETC commissioned an independent review into transactions, which identified payments to the QMG in 2018 and 2020 totalling US$5.035 million. According to the summary of findings, payments to the QMG were communicated “verbally and there were no formal written invoices”.
The lease agreement with the QMG specifies that payments can be made in US dollars or Myanmar kyat, and the review, conducted by Nexia TS, found that past payments were made in kyat but translated back into US dollars for accounting recognition. The bank receipts specify both Myanmar kyat and US dollars. It is likely that the funds payable to the QMG are kept in a US dollar rent reserve account.
Any further payments to the QMG for Golden City risk violating US sanctions.
A legal memo on international legal issues arising from ETC’s listing on the Singapore Exchange, written before the designation of sanctions on the QMG, concluded that “it is desirable that SGX assess the risk of being sanctioned itself, or its risks arising from listing companies at risk of sanction.”
Justice For Myanmar asked ETC whether it intends to continue its involvement in the Golden City project and to respond to the US sanctions risk.
ETC did not respond.
Sule Square is a retail and office complex in central Yangon, operated by Shangri-La Asia Limited.
In 1996, the same year that student democracy protests were brutally crushed by the military, the Kuok Group signed the land lease for Sule Square with the QMG. Kuok Group is a business of the Kuok family, who are the majority owners of Shangri-La Asia.
In 2012, the ground-breaking ceremony for Sule Square was held, attended by Kay Kuok Oon Kwong and the quartermaster general of the army, evidence of close and direct ties.
Sule Square was opened in 2017 under management of Shangri-La Asia, which is also the majority owner of the Myanmar-based project company Traders Square, according to company disclosures. Traders Square shareholders include shell companies in the British Virgin Islands and one company registered in Samoa, which are offshore tax havens. Shangri-La Asia is listed on the Hong Kong Stock Exchange.
Neither Shangri-La Asia nor the Myanmar army have disclosed details of the land lease payments the QMG receives for Sule Square. Given the high value of the land, payments could be substantial and risk violating US sanctions.
Justice For Myanmar asked Shangri-La Asia whether it intends to continue its involvement in the Sule Square project and to respond to the US sanctions risk.
Shangri-La Asia did not respond.
Hilton Ngapali Resort & Spa
Hilton Worldwide Holdings operates a beachfront resort at Ngapali in Arakan State. The resort site is leased from the QMG by the crony company Eden Hotels & Resorts Company Limited, Hilton’s local partner.
The land for the hotel was confiscated from villagers by the Myanmar army in 1996 for an infantry base. In 2015, Eden Hotels signed a build-operate-transfer agreement, leading to the development of the site into a Hilton resort.
The resort is temporarily closed for “seasonal and COVID-19 pandemic” reasons.
In March, a Hilton Asia Pacific spokesperson justified their indirect links to the QMG, telling tourism industry website TTR Weekly that “Our presence in any country has always meant that we work for the greater good of the local community, and our experience in Myanmar is no different.”
Justice For Myanmar asked Hilton Worldwide whether it intends to continue its involvement in the Ngapali resort and to respond to the US sanctions risk.
A Hilton spokesperson replied, “Hilton is aware of the sanctions recently imposed by the US government on individuals and entities in Myanmar. Hilton does not have a relationship with any sanctioned party and will continue to operate in a manner consistent with all applicable trade sanctions.”
Banyan Tree Holdings Limited
Singapore Exchange listed company Banyan Tree Holdings signed a joint venture agreement with crony conglomerate Htoo Group in March 2020 for the joint management of hotels and resorts across Myanmar.
One of the hotels that Banyan Tree has agreed to manage is Aureum Palace Hotel & Resort Ngapali, on land leased from the QMG through a build-operate-transfer agreement.
According to the contract with the QMG, leaked by Distributed Denial of Secrets, Htoo Group subsidiary Htoo Trading is required to pay 22.7 million MMK and 13,850 USD annually to the QMG.
The hotel is to be rebranded as a Banyan Tree and managed by Myanmar Hospitality Management Company, a joint venture between Banyan Tree Holdings and Htoo Group subsidiary Myanmar Treasure Hotel & Resort Group Company.
Htoo Group, and the company’s head, Tay Za, have been sanctioned by the UK for being a “key business associate of the military junta, and his network of companies for providing financial support and arms to the military.”
Justice For Myanmar asked Banyan Tree Holdings whether it intends to continue its planned business with Htoo Group and to respond to the US sanctions risk.
Renee Lim of Banyan Tree Group replied, “Due to the present situation, the JV’s operations are not active, and there are no executives from Banyan Tree Group currently in Myanmar. We will be closely monitoring every development whilst taking the lead from international organizations to ensure that we uphold our position as a responsible global citizen.”
Stop financing terror
Justice For Myanmar welcomes US, UK and Canadian sanctions against the QMG, which recognise the abhorrent conduct of the QMG.
It is untenable that the international companies listed above continue to do business with the QMG, whether directly or indirectly. Any material support for the QMG makes a business complicit in the Myanmar military’s atrocities and must be condemned.
Many of these businesses are publicly listed and we reiterate the call for institutional shareholders to take action through divestment, or they too risk being linked to the Myanmar military's atrocity crimes through their investee companies.
Targeted sanctions on the QMG do not go far enough. Further sanctions are urgently needed to target junta businesses and their significant associates, including Myanma Oil and Gas Enterprise.
According to international expert opinion, the Myanmar military junta is a terrorist organisation under national and international law. The QMG plays a key role in the provision of funds and equipment needed for the junta to wage its campaign of terror. The international community must now take concrete steps to stop the flow of funds to the QMG and all other military entities.