As Myanmar’s Aung San Suu Kyi makes historic U.S. visit, industry lobbying and vested interests jeopardize Obama foreign policy

By Global Witness • September 13, 2016

U.S. industry lobbying to roll back sanctions on Myanmar (Burma) before critical reforms in the country have kicked in risks undoing the country’s fragile progress towards democracy, prosperity and peace, Global Witness said today. The warning comes as President Obama prepares to welcome fellow Nobel Laureate Aung San Suu Kyi to the United States for the first time since her party’s landslide election victory.

Global Witness investigations have revealed Myanmar’s vast, murky jade industry to be of particular concern. Treated as a war chest for generals during the darkest days of military rule, the trade has long been a target of U.S. sanctions. Worth up to $31 billion in 2014 alone – a figure equivalent to 48% of GDP – it remains firmly in the grip of military elites, U.S.-sanctioned drug lords and crony companies, while local people see almost no benefit. Jade was kept largely off-limits from the former government’s reform efforts, and the industry now stands as one of the key obstacles to progress under the new civilian-led government.

The murkiness of the jade trade also poses risks to U.S. companies looking to engage in Myanmar, as machine giant Caterpillar Inc. has discovered. Global Witness investigations have uncovered a web of jade companies controlled by drug lord Wei Hsueh Kang– a figure so notorious the U.S. has put a $2 million bounty on his head and targeted him with narcotics sanctions and indictments. The public face of this company network, a Myanmar business manager, enjoys a cozy relationship with Caterpillar, and is linked to a tractor company which describes itself as “Myanmar’s premier Caterpillar dealership” (see here for a diagram of these connections). Caterpillar Inc. has been a vocal proponent of lifting general sanctions on Myanmar, now reportedly up for discussion during the historic meeting of U.S. and Burmese leaders.

“For decades the United States has led the charge against Myanmar’s brutal military junta”, said Juman Kubba, Global Witness’ Senior Analyst. “American politicians repeatedly put aside party differences to back the fight for peaceful democracy, and today a civilian-led government holds the reins. This is an historic legacy – but we cannot let so much great work come undone at the final hurdle. Sanctions provide an essential tool for reformers against the powerful elites which still threaten the country’s future, they must not be eased until they’ve served that purpose.”

Global Witness research has shown how Myanmar’s jade mines have been enriching those with most to lose from real change whilst taking a terrible toll on the local population. The insatiable exploitation has triggered a spate of landslides which claimed at least 150 deaths last year alone, and waves of local protests over the abuses and destruction caused by jade companies. The industry is also fuelling one of the country’s most intractable conflicts in Kachin State, where jade is mined, with the struggle for control of this lucrative resource and local grievances representing serious obstacles to peace.

In its first months,Myanmar government announces ground-breaking reforms of toxic jade business Myanmar’s new civilian led government has taken important action on jade. It has called a halt to new permits and permit extensions until a reformed legal framework is in place, environmental concerns are being reviewed, and a more inclusive peace process has been initiated. These are important initial steps, but there is a long way to go. Sanctions remain a crucial tool to support the clear out of a powerful and entrenched elite, and turn jade into an industry which benefits Myanmar’s people.

There are, however, growing concerns that industry pressure could lead to President Obama announcing a premature lifting of remaining U.S. sanctions on Myanmar, which could seriously undermine efforts to reform this major industry. The Caterpillar connection to a figure identified as a front man for a sanctions-listed drug lord reflects the risks that international investors face in Myanmar. It illustrates why using sanctions to increase transparency and tackle corruption is key to improving the business environment and serving Myanmar’s long term interest.

“Once sanctions are lifted, there is no going back,” says Kubba. “Myanmar stands at a crucial juncture, and the United States must not falter in its commitment to supporting the democracy, peace and prosperity which Myanmar’s people have worked so hard for. President Obama is setting his legacy for Myanmar – let it be a positive one.”

Caterpillar Inc. has stated that, in line with its Code of Conduct, it carries out “robust screening procedures to ensure that its transactions do not violate relevant US export control laws”, and that their due diligence into the individual and companies identified by Global Witness does not demonstrate that they feature on U.S. sanctions lists or are owned or controlled by “a sanctioned party”. Global Witness research indicates, however, that Wei Hsueh Kang and his associates have used an array of corporate vehicles and straw men precisely in order to avoid U.S. sanctions and indictments. As such, there is a very good reason why the ‘public faces’ of their jade ventures do not appear on current U.S. sanctions lists and it is necessary to dig deeper.

Caterpillar Inc. is not the first U.S. company to find uncomfortable links to Myanmar’s jade trade arising from the opaque business environment and due diligence failures. Last year, Global Witness alerted Coca Cola to the fact that its only local director also had a stake in a jade company, which was a long-term partner of an army company sanctions-listed by the U.S. The drinks giant has, however, taken a responsive approach to revelations over its local partner, facilitating direct inquiries, carrying out further discussions, and reporting publicly on its relationships and activities in Myanmar.

Tags: Business and Human Rights, Economy, Global Witness, International Relations, Laws

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As Myanmar’s Aung San Suu Kyi makes historic U.S. visit, industry lobbying and vested interests jeopardize Obama foreign policy

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