Overview of corruption in Burma (Myanmar)

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Overview of Corruption in Burma (Myanmar)

Query: “Can you please give us an overview of the corruption status in Burma?”

Purpose: We are preparing an analysis of our development cooperation programs in Myanmar.

Content: Part 1: Forms and Extent of Corruption in Burma (Myanmar) Part 2: Anti-Corruption Efforts in Burma (Myanmar) Part 3: Further Reading Summary: After more than four decades of military rule, political violence and systematic repression of democratic opposition, the country’s political and economic environment has continued to deteriorate in recent years. Myanmar faces major challenges of endemic corruption, consistently ranking at the bottom of TI’S

Corruption Perceptions Index (CPI). Little is known on the specific forms and patterns of corruption in the country, but the scale of the informal and illicit economy suggests strong links between the ruling elite and organised crime activities, such as drug and human trafficking or illegal logging. In the absence of sound democratic institutions and an effective system of checks and balances, the legal and institutional frameworks against corruption appear rudimentary and likely to be misused by the junta for political reasons.

Money laundering is the only area where the country appears to have made some progress in recent years, resulting in its removal from the Financial Action Task Force’s list of Non-Cooperative Countries and Territories (NCCT) in October 2006. .

Part 1: Forms and Extent of Corruption in Burma (Myanmar) Background

Authored by: Marie Chêne, U4 Helpdesk, Transparency International, mchene@transparency.org Reviewed by: Robin Hodess Ph.D., Transparency International, rhodess@transparency.org Date: 23 March 2009 U4 Expert Answers provide targeted and timely anti-corruption expert advice to U4 partner agency staff www.U4.no

Overview of Corruption in Burma (Myanmar)

Burma, officially the Union of Myanmar1, has known more than four decades of military rule after Genral Ne Win’s coup in 1962. The country remains ever since under the tight control of the military led State Peace and Development Council (SPDC). The current head of state is the Chairman of the SPDC, Senior General Than Shwe, and the Prime Minister is Lieutenant General Thein Sein.

The country suffers from restrictive government controls, inefficient economic policies, fiscal instability, corruption, and rising inflation. The country is also affected by wiedespread poverty, especially in rural areas, and lost most of its development assistance after the military junta violently repressed the democratic movement in 1988, led by 1991 Nobel Peace Price winner Aung San Suu Kyi, and refused to honor the 1990 first held legislative elections in thirty years. The newly elected legislature has been powerless ever since. A new constitution was approved on 10 May 2008, and the junta has announced plans to hold elections in 2010.

In 2007, the government’s crackdown against a prodemocracy uprising, including thousands of monks, triggered a series of international economic and targeted sanctions. The European Union banned investment and trade in Burmese gems, timber, and precious stones, while the United States tightened existing economic sanctions on the regime leaders, their families and supporters, including asset freezing and travels restrictions against designated individuals responsible for human rights abuses and public corruption, as well as individuals and entities who provided material or financial support to designated individuals or the Burmese military government. These sanctions were further expanded to designated Burmese parastatal companies in 2008.

Extent of Corruption

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The Union of Burma was renamed Union of Myanmar in 1989 by the military junta. The United Nations endorsed the name while other countries such as the United States, the United Kingdom, Australia and Canada still refer to the country as Burma.

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Due to the closed nature of the military dictatorship, there are very few independent sources of data on the state of governance and corruption in Burma (Myanmar).

However, all sources and observers agree that rampant corruption pervades all levels of the political and administrative systems. The country has consistently ranked among the world's most corrupt countries in TI’Corruption Perceptions Index, since the country was first introduced in the ranking in 2003. In 2008, the country was ranked 178 out of the 179 assessed countries with a score of 1,3 on a 0 to 10 scale. (http://www.transparency.org/policy_research/surv eys_indices/cpi) The World Bank’s Worldwide Governance Indicators confirm these miserable performance indicators in terms of voice and accontability (0,5), control of corruption (1,4), regulatory quality (1,5), government effectiveness (2,4), rule of law (5,2) and political stability (12,5). (http://info.worldbank.org/governance/wgi/index.a sp)

The US Department of Sate’s 2008 Investment Climate Statement reports that levels of corruption appear to be worsening as inflation increases and investments decrease. Economists and business people consider corruption to be the most serious barrier to investment and commerce in Burma (Myanmar). (http://www.state.gov/e/eeb/ifd/2008)

Forms of Corruption Bureaucratic Corruption Burma generally lacks regulatory and legal transparency. The US Department of State’s Investment Climate Statement further states that rentseeking activities are supported by a complex and capricious regulatory environment and extremely low government salaries.

(Please see: http://www.state.gov/e/eeb/ifd/2008/100832.htm) All existing regulations, including those covering foreign investment, import-export procedures, licensing, and foreign exchange, are subject to change with no advance or written notice at the whim of the regime’s ruling generals. As a result of this unpredictable environment, very little can be accomplished, from the

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smallest transactions to the largest, without paying what is called “tea money.”

The 2009 Index of Economic Freedom considers corruption to be rampant and endemic, with most Burmese people viewing corruption as necessary for survival. Investors complain of official corruption in taxation, investment permission, import and export licences, and land and real estatte lease approvals. (http://www.heritage.org/index/country/Burma).

Sectors Most Affected by Corruption There is no research and data available on sectors most affected by corruption in Burma (Myanmar), probably due to the lack of political will for such scrutiny. However, specific forms of corruption derive from the nature of the local economy that suggests strong ties between the current regime and organised crime activities. According to the CIA’s World Factbook, official statistics are inaccurate and published statistics on foreign trade greatly understated because of the volume of off-book transactions, the size of the black market, illicit and unrecorded border trade - often estimated to be as large as the official economy. (http://www.theodora.com/wfbcurrent/burma/inde x.html) Burma is a resource-rich country. Agriculture and extractive industries, including natural gas, mining, logging and fishing provide the major portion of national income. The country appears to be plagued by traffic in narcotics, people, wildlife, gems, timber, and other forms of contraband that flow through Burma (Myanmar)’s permeable borders. Burma’s border regions are indeed difficult to control. In some remote regions active in smuggling, continuing ethnic tensions with armed rebel groups hamper government control.

Collusion between traffickers and Burma’s ruling military junta also allegedly allows organised crime groups to function with virtual impunity. (http://www.state.gov/documents/organization/102

588.pdf) Illegal Logging

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A major review conducted for the World Bank estimates illegal logging as equal or exceeding the legal harvest rates in Burma Myanmar by 80 %. (http://www.foresttrends.org/documents/publications/tech_briefs/9ille gal_logging.pdf).

This has resulted in major deforestation taking place in the country. Although Burma (Myanmar) remains one of the most forested countries in the Asia-Pacific region, the amount of land covered by forest in Burma (Myanmar) dropped from 57% in 1990 to 47% in 2005.

Large quantities of timber are being smuggled out of the country across the Chinese borders. A logging ban in Thailand has also resulted in Thai loggers crossing illegally through Myanmar. The sanctions imposed by the EU and US on the Myanmar military regime were extended in 2007 to prohibit the import of all timber products, but teak products from Myanmar are allegedly still being imported to the UK through other countries such as China or Indonesia. (Please see: http://www.illegallogging.info/sub_approach.php?approach_id=19& subApproach_id=80)

Drug Producing and Trafficking In spite of the government’s recent steps to tackle money laundering (see section below), Burma (Myanmar) remains a country at risk of drug money being funneled into commercial enterprises and infrastructure due to an underdeveloped financial sector and large volume of informal trade.

According to the CIA World Fact Book, the country remains world's second largest producer of illicit opium with an estimated production in 2008 of 340 metric tons, an increase of 26% from 2007. Burma (Myanmar) is also a primary source of amphetaminetype stimulants in Asia. According to UNODC, Myanmar’s share of opium production on the global market is declining. However, although the Burmese Government has expanded its counternarcotics measures in recent years, production and trafficking of narcotics remain major issues in the country. While the Burmese Government has actively pursued mid-level and independent traffickers, it remains reluctant to investigate, arrest, and prosecute high level international traffickers.

(Please see: http://www.state.gov/r/pa/ei/bgn/35910.htm) The CIA considers that the lack of government will to take on major narcotrafficking groups and lack of serious

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commitment against money laundering continues to hinder the overall antidrug effort.

A paper published in 2004 on the securty implications of Myanmar’s illicit drug trafficking further suggests that illicit drug trafficking in Burma (Myanmar) seriously threatens its national security as well as the entire South East region, as its borders become more permeable to illegal goods trafficking. (http://pkukmweb.ukm.my/~penerbit/jurnal_pdf/a kad65_02.pdf)

There is no in-depth research and analysis on corruption and anti-corruption efforts in the country and very little is known on the state of the anti-corruption legal and institutional framework in Burma (Myanmar), probably due to the lack of openess of the regime. The following section is based on the information that could be compiled within the time frame of this query. More research and resource would be needed to provide a comprehensive assessment of the corruption situation in Burma (Myanmar).

The Legal Framework Human Trafficking The CIA also reports that Burma (Myanmar) is a source country for women, children, and men trafficked for the purpose of forced labor and commercial sexual exploitation. Burmese women and children are trafficked to East and Southeast Asia for commercial sexual exploitation, domestic servitude, and forced labor. According to the 2006 US Department of State Human Rights Report, while there are no reliable estimates on the number of Burmese who are trafficked, most observers believe that the number of victims is at least several thousand per year. (http://www.state.gov/g/drl/rls/hrrpt/2006/78768.h tm) Some trafficking victims transit Burma from Bangladesh to Malaysia and from China to Thailand while internal trafficking occurs primarily from villages to urban centers and economic hubs for labor in industrial zones, agricultural estates, and commercial sexual exploitation.

The CIA report further states that Burma does not fully comply with the minimum standards for the elimination of trafficking as military and civilian officials remain directly involved in significant acts of forced labor and unlawful conscription of child soldiers (2008). The Burmese Government was placed in Tier 3 in the 2007 U.S. Department of State’s Trafficking in Persons Report for not fully complying with the Trafficking Victims Protection Act’s minimum standards for the elimination of trafficking and not making significant efforts to do so. (http://www.humantrafficking.org/countries/burm a)

Part 2: Anti-Corruption Burma (Myanmar)

Efforts

Public Initiatives Against Corruption

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The country apparently has a set of anti-corruption laws and since as early as 1948, corruption is officially a crime that can carry a jail term. Most relevant laws and legal instruments against corruption related offences include Burma Penal Code Volume 8, Public Property Protection Volume 2, the Money Laundering Law and the Anti-Drug Law. (http://www.blcburma.org/pdf/liob/liob20.pdf) However, according to many sources, it is common practice for the ruling generals to misuse anti-corruption laws as a means of ousting political opponents, as when the SPDC arrested then-Prime Minister General Khin Nyunt and many of his colleagues and family members for corruption in 2004. In 2006, authorities arrested over 300 Customs officials, charging them with corruption. (http://www.state.gov/e/eeb/ifd/2008/100832.htm) Burma is a party to the UN Convention against Transnational Organized Crime and ratified the UN International Convention for the Suppression of the Financing of Terrorism in August 2006. Burma signed the UN Convention on Corruption in December 2005, but has not yet ratified it.

The Institutional Framework Given the tight control of the military junta over government institutions, there is no fully independent anti-corruption institution in Burma (Myanmar). The SPDC power is not balanced by parliament or any other political institution. The junta rules with a combination of martial law and restricitve decrees. According to the Bertelsmann Index 2008, it remains speculative to assess the extent to which office holders abuse their

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positions or are held responsible for corruption and other abuses because of the closed nature of the regime. However, anedoctal evidence tends to suggest the levels of abuse are extremely high, while legal or political penalties do not exist. (http://www.bertelsmann-transformationindex.de/28.0.html?&L=1) The body in charge of corruption offences is the Bureau of Special Investigations that reports to the Ministry of Home Affairs. It adresses financial crime related cases, including cases involving trading, tax evasion and corruption of government officials.

The National Intelligence Bureau which was an an "umbrella organisation of intelligence departments” was abolished in 2004 following the purge of General Khin Nyunt and other high ranking officials and the subsequent dismantling of the military intelligence apparatus. Although the explanations given were that rampant corruption had pervaded the organisation, observers believe that Nyunt's departure was likely to be the result of a power struggle between hard-line military chief Than Shwe and Nynut, who was considered, "in strictly relative terms," more progressive.

(http://www.unhcr.org/refworld/country,,,QUERYR ESPONSE,MMR,,485ba87113,0.html) The Judiciary is of little recourse for victims of corruption as it lacks any kind of independence from the military. The junta appoints judges to the Supreme Court, which in turn appoints lower court judges with the approval of the junta. Courts adjudicate cases according to the junta’s promulgated decrees.

Administrative detention laws allow people to be held without charges, trial or acccess to legal counsel for up to five years for threatening the state’s security or sovereignty. The lack of independence of the judiciary allows officeholders to abuse their position without fear of judicial action.

(Please see:

http://www.bertelsmann-transformationindex.de/28.0.html?&L=1)

Money laundering is the only area where the government seems to have made some progress.

International governments and independent financial task forces have long condemned Burma for failing to meet international standards in combating money

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laundering, but the country was finally removed from the Financial Action Task Force’s list of NonCooperative Countries and Territories (NCCT) in October 2006.

Burma (Myanmar) enacted a “Control of Money Laundering Law” in 2002. It also established the Central Control Board of Money Laundering in 2002 and an investigating Financial Intelligence Unit (FIU) in 2003 whose size was increased to 11 permanent members, plus 20 support staff in 2005. The government also established a Department against Transnational Crime in 2004, staffed by police officers and support personnel from banks, customs, budget, and other relevant government departments.

The 2002 law created reporting requirements to detect suspicious transactions. It set a threshold amount for reporting cash transactions by banks and real estate firms. As of May 2007, over 40,000 cash transaction reports were filed. In 2004, the anti-money laundering regulations were amended to include eleven predicate offenses, including narcotics activities, human trafficking, arms trafficking, cyber-crime, and “offenses committed by acts of terrorism,” among others. Fraud was also added to the list of predicate offenses. AntiMoney Laundering regulations further expanded in 2006, requiring banks, customs officials and the legal and real estate sectors to file suspicious transaction reports (STRs) and impose severe penalties for noncompliance. In 2007, the Burmese Government amended its “Control of Money Laundering Law” to expand the list of predicate offences to all serious crimes to comport with FATF’s recommendations.

Please see the US Department of State ‘s 2008 International Narcotics Control Strategy Report on Burma.

The Potential for Other Anti-Corruption Initiatives The dictatorial nature of the regime provides little opportunity for public participation and for holding the government accountable for its actions and decisions.

All reports and country profiles consulted report that both civil society and the media are severely controlled, harassed and repressed, leaving no room for effective voice.

Civil Society

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Overview of Corruption in Burma (Myanmar)

Civil society development is restricted by the absence of civil liberties and very restrictive regulations.

According to the 2008 Bertelsmann Index, most civil groups or associations are co-opted by the military. The Unlawful Association Act allows the Head of State to declare any association unlawful without basing his decision on hard evidence and can punish its members with up to five years of imprisonment. According to 2008 Freedom House, an ordinance prohibits unauthorised outdoor gatherings of more than five people. Domestic human rights organisations are unable to operate independently, as activists face the constant risk of being jailed for criticising the regime. As a result, CSOs have very little room to manoeuvre and their activities are mainly limited to the provision of social services, especially in remote and ethnic conflict areas.

UNODC : Compilation of resources on Myanmar: Strategic framework for the UN Agencies in Myanmar (2005) The document provides an overview of UN assistance principles and priorities in Myanmar. Recognizing the multitude of often-contradictory information about the country, this document outlines the United Nations Country Team’s (UNCT) analysis of the major vulnerabilities of the population that the UN agencies operating in Myanmar are aiming to serve, and the priority areas of intervention to address those vulnerabilities. The analysis aims to provide this Strategic Framework for operational activities.

http://www.unicef.org/about/execboard/files/Myan mar_UNDAF.pdf

The Media According to both the 2008 Bertelsmann Index and 2008 Freedom House reports, press freedom is severely repressed. The junta either owns or exerts a tight control over both print and broadcast media.

Private media is subjected to strict censorship and the importation of foreign news periodicals is also restricted. Internet is also tightly regulated and controlled.

Part 3: Further Sources of Information on Myanmar Heritage Foundation: 2009 Index of Economic Freedom Freedom House: Freedom in the World 2008 – Burma (Myanmar) 2008 The Bertelsmann Foundation 2008: BTI Country Report Myanmar 2008 Transparency International: CPI 2008 World Bank Institute: WGI 2008 US Department of State: 2008 Investment Climate Statement - Burma Central Investigation Agency: CIA World Fact BookBurma

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