WASHINGTON (Thomson Reuters Foundation) – Burmese activists are urging the World Bank’s financing arm to reconsider its Myanmar investments, saying its support for luxury developments and projects linked to a businessman associated with the former military regime run counter to the World Bank’s mission of ending poverty and corruption.
The U.S. Campaign for Burma has asked the International Finance Corp (IFC), the World Bank's private sector lender, to postpone approval of $30 million to Yoma Bank for loans to small- and medium-sized enterprises, citing concerns over its owner Serge Pun and his ties to the military.
"This raises serious accountability concerns, particularly because U.S. officials recommended Yoma Bank’s owner Serge Pun for sanctions in 2008," the campaign said in a news release.
The campaign raises an issue that presents a serious challenge for investors and financiers wanting to do business in Myanmar as it emerges from half a century of military dictatorship.
Economic mismanagement, nepotism, rampant corruption and serious human rights abuses were widespread during those years, making it difficult to find business partners untainted by the former regime.
Contacted by Thomson Reuters Foundation, Serge Pun said the allegations over his ties to the military are unfounded, pointing out that he never faced sanctions for his contacts with the military.
The IFC said it has adequate safeguards in place and checks on its investments to ensure they do not violate international norms. Its financing is intended to strengthen the private sector to create jobs, which are desperately needed in a country where 30 percent of the population lives in poverty, it said.
The IFC is also considering lending Pun $75 million to redevelop 10 acres by Yangon’s old railway station into an upscale office, hotel and apartment complex.
The Landmark Myanmar, a $515 million development, is wholly owned by Yoma Strategic Holdings Ltd and First Myanmar Investment Co Ltd, which are subsidiaries of Serge Pun and Associates, according to the company and IFC’s websites.
If the two projects are approved, it would mean that 45 percent of IFC’s $232.5 million portfolio in Myanmar would be invested in companies controlled by Pun.
Six years ago, U.S. officials had proposed that Serge Pun and his Singapore-listed company Yoma Strategic Holdings be sanctioned, a diplomatic cable released by Wikileaks showed. Such a move would have banned him from business relationships with the United States as part of the international campaign protesting human right abuses by Myanmar’s government.
The cable said Pun was among those who provide succor to the regime.
"The GOB (Government of Burma) fosters a symbiotic relationship with select private Burmese companies, granting them joint ventures and lucrative contracts that guarantee profits in exchange for significant economic and political support," read the November 2008 communication from the U.S. embassy in Yangon.
The United States and most exiled campaign groups refer to Myanmar by its former name, Burma.
Pun was never added to the U.S. list, and most of the U.S. sanctions were suspended in July 2012, a year after Myanmar embarked on a political opening and a series of economic reforms.
Democracy activists say that by virtue of avoiding sanctions, Pun is able to leverage his extensive contacts with the generals, built up over the last 22 years to consolidate his economic power today, and that IFC lending would give him further legitimacy.
Pun - whose Burmese name is Theim Wai - returned to Myanmar in 1992 from China and under the junta, which ruled the country like a fiefdom, he built an extensive real estate, agricultural and banking empire, something critics say would have been impossible without connections to the military.
To this day, land and agriculture are flash points for human rights since a number of communities have been displaced and thrust into poverty to make way for logging, mining, plantations and other projects.
In an email response to inquiries by Thomson Reuters Foundation, Pun said he has been vetted and cleared by many international financial bodies.
"Many organisations are required to conduct thorough due diligence, including the likes of the World Bank, ADB (Asia Development Bank), IFC and the U.S. Embassy, and they have ongoing dealings with us because of our reputation. That would give clear evidence, over the circumstantial allegations," he said in the email.
The U.S. Campaign for Burma (USCB) has asked the IFC to recategorize the proposed Yoma Bank loan to require that it undergoes the highest level of scrutiny. "The IFC has the responsibility to use its financial influence to promote transparency and reform in Burma’s corrupt business environment," said USCB Policy Director Rachel Wagley.
Currently IFC categorises Yoma as a medium-risk borrower, which means the IFC checks whether Yoma adheres to national laws, complies with international labor standards and has the systems in place to assess the social and environmental impact of its lending.
The rank of high-risk borrower is usually reserved for big infrastructure projects such as highways or mining projects. In this category, the IFC must check on eight performance standards including whether operations could displace indigenous people, affect biodiversity or cultural heritage, cause pollution or affect health.
The IFC said the Yoma Bank package, by aiming at small-scale businesses, is expected to provide 1,000 loans worth $370 million for small and medium enterprises, which are not commonly high risk.
"The proposed support for Yoma Bank helps to address rates of access to financial services in Myanmar that are among the lowest globally, with only about 10 percent of the population being able to access formal financial services," said Serena Jweied, an IFC spokeswoman.
As for the hotel projects, the IFC said its tourism investments so far in Myanmar will create about 1,000 jobs.
Thin Lei Win contributed to this report from Bangkok.
Our Standards: The Thomson Reuters Trust Principles.