29 March 2019 globalwitness.org
Last week the news broke that Frontier Services Group (FSG), the private security contractor run by Erik Prince and backed by China’s state-owned Citic Group, is setting up shop in Myanmar. A closer look at FSG’s partners in Myanmar suggests possible links to the country’s multi-billion dollar jade business, which fuels corruption, human rights abuses and environmental devastation. It is hard to see how any of this is good news – either for Myanmar’s citizens or for China’s reputation.
China Inc. in Myanmar – an inauspicious history
China’s hefty economic footprint in Myanmar has arguably been a pilot for its Belt and Road Initiative. Back in the 1990s, Myanmar’s military dictatorship was hemmed in by western sanctions, had no friends and few sources of financing. Beijing stepped in and, from the turn of the century, Chinese investments in Myanmar proliferated. These sketched out priorities now hard-wired into the Belt and Road Initiative globally: access to natural resources and access to infrastructure to convey them to China.
Myanmar has offshore gas, timber, minerals and precious stones, not least jade – the country’s most valuable natural resource – whose main beneficiaries have been military hardliners, crony tycoons, drug lords and shadowy Chinese financiers. It also has a strategic location which enables resources not just from Myanmar, but other parts of the world too, to be transported into China via a land corridor, rather than a much longer and riskier seaborne route.
But it has been far from plain sailing. Chinese investors in Myanmar have encountered many of the same difficulties they have faced in other Belt and Road countries, for many of the same reasons, notably:
Chinese investors’ reliance on high-level relationships with corrupt and abusive leaders whose unpopularity then rubs off on them. One illustrative case is the Letpadaung Copper Mine project, where Chinese mining firm Wanbao teamed up with infamous military-owned company, Myanmar Economic Holdings Limited (MEHL). While the violent crackdowns on people protesting the venture have been carried out by Myanmar’s security forces, the Chinese company has shouldered much of the blame.
Entanglement in conflict dynamics that jeopardise both the investments and China’s self-styled ‘non-interference’ foreign policy. Chinese hydropower schemes in conflict-affected Kachin State exacerbated tensions that culminated in the breakdown of the ceasefire between the Kachin Independence Army and Myanmar armed forces in 2011. Yet Chinese officials continue to push for the resumption of the most contentious of these – the Myitsone mega dam – risking its own goal of securing stability along its border.
Failure to engage with local people affected by Chinese investment and use of corrupt and unaccountable local officials as an interface. The Myanmar China Pipeline Watch Committee (MCPWC) has documented over a hundred cases showing how Chinese oil giant CNPC’s approach of enlisting local officials, as a substitute for engaging with local people, facilitated theft of compensation funds. Once again, the Chinese company has been the target of the public backlash that followed.
Erik Prince, a dubious partner
As my colleague Paul Donowitz argued in a blog a few months ago, if China prioritises Belt and Road development in Myanmar over peace, it risks alienating those communities in the firing line as the Myanmar military attempts to seize territories controlled by ethnic armed groups. Involving Erik Prince and FSG, which has stated that it wishes to “capitalise on” Belt and Road, is unlikely to improve matters.
Erik Prince is best known for his Blackwater private security firm, which in 2007 killed 14 unarmed Iraqi civilians in Baghdad. More recently, he has hit the headlines for his plans to invest in cobalt, lithium and copper in what he calls “generally weird, hard-to-access places” and his efforts to persuade President Trump to privatise the U.S.’ war in Afghanistan. His company FSG has been widely criticised over its contract to establish a training facility in Xinjiang, the same Chinese province where the authorities stand accused of systemic repression of the ethnic Uighur population.
Links to the corrupt jade trade
Then there is the issue of FSG’s partners in Myanmar. As reported by the Myanmar Times, the directors of the locally incorporated FSG (Myanmar) Security Services Co. Ltd include Sandar Win, whom the paper says is believed to be the sister of ‘crony’ tycoon Kyaw Win. (Sandar Win and Kyaw Win have near-consecutive ID card numbers, which in Myanmar can indicate a familial relationship.)
Kyaw Win is best known for his Skynet satellite TV company, which boasts a partnership with CNN. Sandar Win has been a director at many of the companies which Kyaw Win appears to control. One of these is Than Lwin Aye Yar Gems, a business that earlier Global Witness investigations linked to the Ever Winner group of jade mining companies. Kyaw Win was also previously director of another firm Global Witness has identified as part of the Ever Winner group.
The Ever Winner group – around a dozen firms in all – is one of the two biggest jade mining syndicates and the family that runs it has close ties to the family that owns Myanmar’s largest bank, KBZ. Across 2013 and 2014 companies in the group collectively recorded sales of jade of over US$300 million. Some Ever Winner firms have a poor safety and environmental record and it is far from clear how Myanmar’s citizens benefit from their exploitation of some of the country’s most valuable natural resources.
This isn’t to say that Erik Prince and FSG are poised to major on the jade business. In fact, no one knows what their plans for Myanmar are, because they have declined to disclose them. But the associations with jade underscore the questions they face regarding their commitment to respect human rights and the environment. Just how Prince and FSG “capitalise” on Belt and Road will likely have consequences not only for Myanmar’s citizens but also the long-term reputation of Chinese investment in the country.