A Japanese government agency and a group of Japanese private investors are providing millions of dollars to a giant Yangon real estate scheme that enriches the Myanmar military.
Y-Complex, a US$320 million development which includes an Okura Prestige hotel, shops and offices, is being built on a historic site owned by the Myanmar military in Yangon city centre.
As Justice For Myanmar reported last year, the land was leased by the military in 2013 to a local private company called Yangon Technical and Trading (YTT) which, in turn, has sub-leased the land to Y Complex.
Now newly leaked documents from DDoSecrets indicate that the Japanese investors in Y Complex play a central role in funding and signing off land rental payments to the office of the quartermaster general of the Myanmar army. The quartermaster general is responsible for the purchase of arms, including the weapons used in the military's deliberate killings of peaceful protesters following the February 1, 2021 coup.
The Japanese investors, who control 80 per cent of Y Complex, are Fujita Corporation, Tokyo Tatemono and the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN). JOIN is controlled by the Japanese government.
Japanese Y-Complex money trail
Justice For Myanmar has examined a leaked land lease agreement for Y Complex, dated from December 2017. It says YTT, the local company, has to pay land rent of US$2.163 million a year to the military.
But the agreement indicates that YTT itself is not having to make these payments.
Instead, the military has to be paid from a bank account in Myanmar called the “rent reserve account” which is jointly controlled by YTT and Y Complex.
This bank account has to be kept topped up with money to cover future rent payments to the office of the quartermaster general. Y Complex – which is 80 per cent owned by the Japanese investors – is responsible for providing most of this money and also signs off on all payments out of the account.
YTT has to come up with much smaller sums to put into this account.
And according to the documents, YTT was also due to receive US$24.8 million in cash from the Japanese investors as an upfront payment for its own rights to the land, as well as a 20 per cent stake in Y Complex valued at US$35.2 million
So although the Japanese investors are not paying the Myanmar military directly to rent the land, they have indirect control over these payments and appear to provide most, if not all of the money.
Company and Japanese government officials have claimed to Reuters, which has also reported on these documents, that they thought the land rent was going to the Myanmar government and not to the military. Japan’s land ministry “had judged the project was not dealing with the military “directly or indirectly”, Reuters reported, because Myanmar’s defence ministry is a government department.
But Justice For Myanmar believes these are not credible responses because it is explicitly recognised in the lease agreement between Y Complex and YTT that the ultimate lessor of the land is the “Office of Commander in Chief, Army, Office of Quartermaster General”
The lease agreement says that the land rental payments are made to the Ministry of Defence - which is controlled by the military.
The military stands to make US$21.63 million in land rent between now and 2030. This is almost the same amount as the US$22.36 million which YTT is projected to earn in shareholder dividends during the same period, according to a leaked profit forecast.
The Japanese investors were forecast to make US$89.4 million in dividends from Y Complex by 2030.
In effect, the military is a silent partner of the Japanese investors in Y Complex but is collecting its profits in the form of land rents rather than shareholder dividends.
These investors include Japan’s government because of its control of JOIN.
The site of Y Complex was once home to Jubilee Hall, a grand building from the British colonial era where the country’s first constitution was drafted after World War Two.
The building was demolished in 1985, during the period of dictatorship, and the land fell into the hands of the military which built a museum there. In 2013, it leased the land to YTT so that it could build a hotel and offices there.
A free ride for YTT?
YTT is owned by the local conglomerate Ayeyar Hinthar. It has been generously rewarded for acting as a middleman between the military and the Japanese investors.
The local company earns its own rent of US$1.82 million a year from the land, on top of the US$60 million in cash and shares which it earned from the Japanese investors.
Yet despite these large profits, a leaked joint venture agreement from December 2017 says explicitly that YTT “is not required to make any capital contributions … in cash” towards the costs of the project.
YTT only has to shoulder some minor costs, such as clearing the site for construction, as well as dealing with the government and the military on behalf of the project.
All the US$320 million in financing costs are being shouldered by the Japanese investors and include a US$144 million bank loan, of which US$47 million is from the state-owned Japan Bank for International Cooperation.
Suspend Y Complex
As the military terrorises Myanmar civilians, revenue from businesses like Y Complex will support the illegitimate junta's rule and their atrocities. The project's investors must take immediate action to end their complicity in the Myanmar military's crimes. At a minimum, this has to include suspending the project until democracy is restored in Myanmar with the military under civilian control. The Myanmar military cartel must be dismantled.