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Myanmar - Corruption

Kachin, around 950 kilometers (600 miles) northeast of Yangon, Myanmar's biggest city, is home to some of the world's highest-quality jade and the industry brings in billions of dollars every year. Global Witness, an organization that investigates the misuse of revenue from natural resources, put the value of Myanmar's jade production as high as $31 billion in 2014.

The group says "This figure equates to nearly half of the entire country's GDP [gross national product], and over 46 times national spending on health, yet the local population sees little benefit." According to Global Witness, Myanmar's jade trade is "secretly controlled by networks of military elites, drug lords and crony companies" tied to the country's "darkest days of junta rule."

Due to a complex and capricious regulatory/legal environment and extremely low government salaries, rent-seeking activities are ubiquitous. Bribes are expected – and given – to facilitate many official transactions, from the smallest to the largest. Most citizens view corruption as a normal practice and requirement for survival.

Many economists and business people consider corruption one of the most serious barriers to investment and commerce in Burma. In its 2014 Corruption Perceptions Index, Transparency International rated Burma 156th out of 177 countries, a jump up from the 2013 ranking of 157 and the 2012 rating of 172nd out of 177. In their Doing Business 2015 report, the World Bank and the International Finance Corporation ranked Burma 177 out of 189 countries, a jump from the 2014 ranking of 182 out of 189 countries on ease of doing business. The report cites corruption as a major disruptive force in conducting business in the country, and that the major areas where investors run into corruption are when seeking investment permits, in the taxation process, when applying for import and export licenses, and when negotiating land and real estate leases.

The World Bank’s 2014 Myanmar Enterprise Survey, however, contained a surprising survey result that business owners and managers did not cite corruption as a major constraint for doing business in Burma. The survey – which included survey results from business owners and managers from 632 private firms in five urban areas in Burma - cited access to financing as the top constraint facing businesses. Less than one percent of businesses owners and managers cited corruption as the top business constraint facing their firms. World Bank officials stressed that the World Bank continues to view corruption as a serious problem in Burma, adding that perceptions among local businessmen of corruption as a “fact of life” may have contributed to the low figure.

According to Transparency International's index of perceived corruption, Burma was tied with as the Afghanistan world's second most corrupt nation [Somalia is first]. Poor policymaking, minimal rule of law, outdated equipment and technology, inadequateinfrastructure, and a weak education system combine to hinder economic growth inBurma. Political intervention, corruption, and central state control obstruct mosteconomic sectors. The government controls all official trade in goods, extractiveindustries, sources of capital, educational institutions, movement of labor, and access toinformation.

The 2010 CPI ranked the most corrupt country as perceived to be Somalia, followed by Myanmar and, successively, Afghanistan, Iraq, Sudan, and Uzbekistan. Corruption is endemic in Burma. Many economists and businesspeople consider corruption the most serious barrier to investment and commerce in Burma. Due to a complex and capricious regulatory environment and extremely low government salaries, rent-seeking activities are ubiquitous. Very little can be accomplished, from the smallest transactions to the largest, without paying bribes. Transparency International rated Burma third worst in the world in 2009 in its annual Corruption Perceptions Index.

Since 1948, corruption is officially a crime that can carry a jail term. However, the ruling generals apply the anti-corruption statute only when they want to take action against a rival or an official who has become an embarrassment most notably in October 2004, when the SPDC arrested then-Prime Minister General Khin Nyunt and many of his colleagues and family members for corruption. In 2006, authorities arrested over 300 Customs officials, charging them with corruption. Most citizens view corruption as a normal practice and requirement for survival. The major areas where investors run into corruption are when seeking investment permission, in the taxation process, when applying for import and export licenses, and when negotiating land and real estate leases.

Burma's multiple exchange rates and currencies make conversion and repatriation of foreign exchange very complex, and ripe for corruption. The official rate of approximately 6 kyat to the dollar is grossly overvalued. The unofficial market exchange rate as of December 2009 wasapproximately 1000 kyat to U.S. $1. The unofficial exchange rate fluctuates according to the season as well as domestic and foreign effects. The government also issues Foreign Exchange Certificates (FEC) which are nominally valued at $1=1FEC but ostensibly trade at a fixed rate of 1FEC=450 kyat via a small number of licensed exchange counters, but that rate is still significantly overvalued and in practice the counters will buy FEC at that rate but will never sell them at the 1FEC=450 kyat rate.

Burma lacks regulatory and legal transparency. All existing regulations, including those covering foreign investment, import-export procedures, licensing, and foreign exchange, are subject tochange with no advance or written notice at the whim of the ruling generals. The country's decision-makers appear strongly influenced by their desire to support state-owned enterprises and meet the needs of the military-controlled Myanmar Economic Corporation and Myanmar Economic Holdings, Ltd., as well as wealthy cronies.

The GOB established a Tourist Police Unit in 2006, but a lack of proper funding and training,as well as pervasive corruption, prevents the unit from being effective. Despite the creation ofa Tourist Police Unit, law enforcement services are generally unresponsive, under equipped,and poorly trained. Corruption is pervasive, and some GOB officials collaborate with criminalsor carry out crimes themselves under protection of their official status. Most criminal acts gounreported and/or are not investigated. Response time can be extremely long, if any responseoccurs at all. Police often blame lack of transportation for their slow response.

The Government of Burma appears to recognize the international community’s perception of corruption in the country. Consequently, on March 7, 2013, the Government of Burma enacted an Anti-Corruption Law (which stipulates the specific offenses and accompanying punishment in bribery cases as well as includes language on an anti-bribery enforcement mechanism), and followed implementation of the law with its February 25, 2014 formation of a national commission to address bribery and graft (as mandated under the law).

The government continued efforts in 2014 to curb rampant corruption. The law provides criminal penalties for corruption by officials. In February 2014, following the passage of the national Anti-Corruption Law in 2013, parliament appointed a 15-member anticorruption commission led by one of the country’s two vice presidents. On August 4, the government formed an Anti-Money Laundering Central Board to take action and adopt polices related to money laundering and terrorism financing. But private firms indicate that the incidence of corruption as measured by bribe payments is one of the highest in the region.

Although the law calls for an independent judiciary, the judiciary was characterized by institutionalized corruption and remained under the de facto control of the military and government. According to studies by civil society organizations, payments were made at all stages in the legal process and to all levels of officials, from routine matters, such as access to a detainee in police custody, to determining the outcome of a case. The court system and its operation were seriously flawed, particularly in the handling of political cases.

Unlike in previous years, in 2014 the government took action in some cases against judges accused of corruption. For instance, on October 21, the Sagaing Region Court sentenced Homemalin township judge Tin Sein to 10 years in prison after the Anti-Corruption Commission found Tin Sein guilty of extorting bribes from convicts between December 2013 and January 2014.

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Page last modified: 22-11-2015 21:39:47 ZULU