Myanmar Corruption Report

The security apparatus in Myanmar presents high corruption risks. Nearly half of citizens believe most or all police officers are corrupt (GCB 2017). The government does not effectively maintain control over the country’s security forces and police forces act with impunity (HRR 2016). Business executives do not feel they can rely on the police (GCR 2015-2016). The legal mechanisms that exist to investigate corruption are rarely used and ineffective (HRR 2016). About one in seven firms indicate they experience losses due to theft and vandalism (ES 2016). The police frequently require victims to pay substantial bribes to initiate criminal investigations and the police routinely extort civilians (HRR 2016). Outside of conflict areas, security forces generally respect the rule of law and a number of organizations have signalled a decrease in the pervasive and threatening influence security forces exert on the population under the new government (HRR 2016).

There is a very high risk of corruption when dealing with public services in Myanmar. More than a third of businesses expect to give gifts to get an operating license, nearly half expect to give gifts to get a construction permit, and more than a third expect the same when applying for an electrical connection (ES 2016). About one in seven businesses indicate they expect to give gifts “to get things done” (ES 2016). Corruption risks are also high in the process of seeking investment permits (ICS 2017). Around one in five citizens consider most or all government officials corrupt (GCB 2017). Connections to top bureaucrats and bribery are more important than personal skills in the selection process for the civil service (BTI 2016).

Business report a heavy burden of government regulations (GCR 2015-2016). There is a lack of regulatory and legal transparency; in the past, all regulations were subject to change without advance or written notice (ICS 2017). Presently, ministries have started to consult the public before issuing new regulations (ICS 2017). The recently passed Myanmar Investment Law which went into effect in April 2017 is intended to simplify regulations (ICS 2017). Starting a business takes more steps and the costs are significantly higher than the regional average, but the required time is significantly shorter (DB 2017).

There is a high risk of corruption in Myanmar’s land administration. Nearly half of firms indicate they expect to give gifts to obtain a construction permit (ES 2016). Foreign investors can enter into long-term leases with private land lords or relevant government agencies (ICS 2017). Businesses, however, report insufficient confidence in the government’s ability to protect property rights in the country (GCR 2015-2016). Investors should be careful when investing in large-scale land projects; property rights of large plots are commonly disputed because ownership rights are often not well-established following half a century of widespread military expropriations and land grabs (ICS 2017). Foreign firms often face complaints from communities about inadequate consultation and compensation (ICS 2017). The government announced a new National Land Use Policy in 2016 which includes provisions for, among others, improving public access to information about land use management and developing independent dispute resolution mechanisms (ICS 2017). Myanmar has not incorporated the principle of non-discrimination into its investment framework; there is no specific legislation that protects against expropriation without compensation (ICS 2017). Myanmar’s new Investment Law prohibits nationalization and states that approved foreign investments will not be terminated during the term of the investment (ICS 2017).

Registering property in Myanmar takes slightly longer than elsewhere in the region (DB 2017).

Companies face a high risk of corruption in the tax administration in Myanmar. Irregular payments in connection with tax payments are commonly exchanged (GCR 2015-2016). One in five companies indicate they expect to give gifts in meetings with tax officials (ES 2016). Roughly a third of citizens believe most or all tax officials are corrupt (GCB 2017).

Businesses make significantly more payments and spend significantly more time on paying their taxes compared to other places in the region (DB 2017).

There is a high risk of corruption at the border of Myanmar when importing and exporting goods (GETR 2014). Irregular payments when importing and exporting are commonplace (GCR 2015-2016). A quarter of firms indicate they expect to give gifts in order to get an import license (ES 2016). Bribing customs officials in order to avoid paying customs duties and avoiding regulations is also common (ISDP 2015). Import and export licenses are awarded on a case-by-case basis, leaving discretionary space to public officials (BTI 2016). Companies cite burdensome import procedures, tariffs, and corruption at the border as the most problematic factors for importing (GETR 2014). Trade misinvoicing is ranked as the predominant channel through which illicit funds are transferred to and from Myanmar; trade misinvoicing makes up 89.2% of total illicit inflows and 59.6% of total illicit outflows (GF Integrity 2015). Import under-invoicing was identified as the main type of trade misinvoicing. The total of potential tax revenues lost to deliberate trade misinvoicing over the period 1960-2013, is estimated to be between USD 2.9 and USD 3.6 billion (GF Integrity 2015).

Trading across borders became more difficult in Myanmar in 2017, due to a high number of delays and cost increases for processing of incoming cargo at the port of Yangon (DB 2017). The time required to comply with customs regulations is significantly higher than elsewhere in the region, while the costs are largely in line with regional averages (DB 2017).

There is a high risk of encountering corruption in Myanmar’s natural resources sector. The Natural Resource Governance Institute indicates that Myanmar has an environment that enables corruption, complicated by poor licensing procedures, low regulatory quality, and little accountability (NRGI 2017). Companies should note that Myanmar’s natural resource industries are commonly controlled by state-owned enterprises, but in practice, private investment is possible (ICS 2017). An investigation into allegations that almost USD 100 million in levies from the jade trade was misappropriated under previous governments is underway (FT, Jun. 2016). The jade trade in Myanmar is characterized by low levels of transparency and high levels of corruption (FT, Jun. 2016). Myanmar’s internal conflict is also said to have been fuelled by jade mining (NRGI 2017). Myanmar is an Extractive Industry Transparency Initiative candidate country (EITI 2017). Myanmar has disclosed some of the legal ownership of the oil, gas, and mining companies operating in the country (EITI 2017). EITI estimates that up to eighty percent of gemstone production goes undeclared and bypasses the formal system (EITI 2017).

The Myanma Timber Enterprise (MTE), a state-owned enterprise, has been widely accused of engaging in corrupt practices and failing to live up to international standards in the sector (Frontier Myanmar, Mar. 2017). Europe’s Environmental Investigation Agency (EIA) has warned that MTE’s use of subcontractors comes with high risks of corruption and bribery in the allocation of harvesting rights due to a lack of transparency in the required procedures (Myanmar Times, Aug. 2017). Because of the lack of transparency, Denmark has placed an injunction on all Danish companies preventing them from selling teak imported from Myanmar on European markets (Mongabay, Mar. 2017). There exists a large-scale illicit timber trade between China and Myanmar worth hundreds of millions of dollars every year (EIA & EU 2015).