The case for revenue transparency in the oil and gas ... - La'o Hamutuk

Military enterprises controlling gas revenues?
UMEHL, the Union of Myanmar Economic Holding Limited (known
in Burmese as “U Pai”) is a military-run enterprise that manages the
Armed Forces’ pension fund. Formed in 1990 by the military and run by
military officials, UMEHL was the first military-run business enterprise
after the crackdown on student uprisings in 1988.
The company is well known as a major arms dealer for the military
regime as 40% of the company’s shares are owned by the Directorate
of Procurement at the War Office and a major shareholder is the
Ministry of Defence. 31 The remaining 60% of shares are held by
regional commands and active and retired military officers, in-service
military personnel, 1,467 military units, 6,069 military personnel, and
89 veteran organization committees. 32 As oil and gas revenues are the
single largest income source for the regime, it is widely believed that
UMEHL has access to these revenues for the purchase of weapons. 33
In this 2010 photo, Tin Aye,
former Chairman of UMEHL
(right), discusses cooperation
with Chairman Chung Joonyang
of POSCO company
(left), which recently
bought control of Daewoo
International of South Korea.
Many foreign investments
are channelled through the
military enterprise.
Photo er.asia.co.kr
In Burma the exploration, extraction, sale, and production of oil and
natural gas, as well as other natural resources, are undertaken by State
Owned Enterprises which are commonly chaired by active or former
military generals. There are 46 state-owned enterprises (SOEs) in
Burma which provide revenues for the regime from the sale of timber,
gems, oil and gas, and minerals. In 2007, according to the Burmese
Business Investment Group, SOEs earned more than US$ 3 billion in
profits. 34 UMEHL, together with the Myanmar Economic Corporation
(MEC), another military enterprise, have been involved in a majority
of business activities in Burma for over twenty years in sectors ranging
from gem production and garment factories to wood industries,
food and beverages, supermarkets, banking, hotels and tourism,
telecommunications, steel production, transportation, construction,
the cement industry, automobiles, cosmetics, and trade. 35 Many major
foreign investments are channelled through UMEHL, which since 1999
has set up 50 joint ventures with foreign firms. 36 UMEHL currently owns
a total of 38 businesses and maintains interest in nine joint ventures
with foreign companies. 37
UMEHL has enjoyed the privilege of tax exemption since it was formed.
In January 2011, Burma’s Internal Revenue Department announced
a new law targeting companies that evade taxes. However, UMEHL
and several other government enterprises remain exempt from this
regulation and are not required to pay taxes. 38
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