A Response to POSCO’s Statement

JUSTICE FOR MYANMAR

Korean Civil Society in Support of Democracy in Myanmar

On 10 March 2021, POSCO issued a statement regarding the press conference of Korean Civil Society Organizations and claimed that “the land of the Lotte Hotel in Yangon is owned by the Myanmar government, and because rent payments are made to the Ministry of Treasure in accordance with Article 2 of the Union Budget Law, the military cannot use it arbitrarily.” POSCO added that POSCO C&C is in no way supplying illegal funds to the MEHL and POSCO C&C has not paid dividends after 2017.

With regards to POSCO’s statement, Korean Civil Society and Justice for Myanmar would like to respond as follows.

Re. the Hotel Business of POSCO International

First, Myanmar military junta owns the site of the Lotte Hotel that POSCO refers to and the rent payment goes to the bank account of the Ministry of Defence (MoD).  Moreover, the contract is signed with the Quartermaster General Office, affiliated with the MoD, is that of Build-Operate-Transfer. Thus, ownership of the hotel will be transferred to the military after fifty years, thereby contributing to their profits. This issue has been raised by the UN Fact-Finding Mission on Myanmar.

Second, as suggested by POSCO, the Myanmar military should submit the rent payment to the Union budget, in accordance with Article 2 of the Union Budget Law. However, under the Constitution of Myanmar, the military are not subject to parliamentary and external audit. It is also confirmed that there is no line item where the Ministry of Defence discloses land lease payments.

The Myanmar military enjoys autonomy, operates with total impunity and is exempt from scrutiny by the civilian government. According to Chapter 1 Article 20a of the Myanmar Constitution, the Ministry of Defense has the right to independently administer and adjudicate all affairs of the armed forces. The Ministry of Defence is under control of the Myanmar military and the Defence Minister is appointed by the Commander-in-Chief. According to Section 39 of the Union Auditor General Law, the Ministry of Defence is exempt from audit. The parliament cannot audit the Ministry’s budget. According to JUSTICE FOR MYANMAR, there is no line item on land lease payments in the budget data of the Ministry of Defence. (https://www.justiceformyanmar.org/stories/myanmar-military-budget-and-procurement-files)

Third, it is even less convincing after the military coup that the land payments made to the Union budget are out of reach from the arbitrary use by the military. The military junta, which has taken over the government, are capable of arbitrarily using the land payments. POSCO must immediately halt the payment.

Like Posco, Emerging Towns & Cities Singapore Ltd. has maintained a business tie with the military under a Build-Operate-Transfer contract. However, after Singapore’s stock exchange took regulatory action following the military coup, the company is reviewing rent payments through an independent professional. In the meantime, the company requested their stock exchange listing be suspended. We urge that POSCO disclose any measures it has taken so far or planned measures in the future. 

Re. Business tie between POSCO C&C – MEHL 

POSCO stated yesterday that it admitted paying dividends to MEHL in 2017.  That is the year of the military’s campaign of genocide against the Rohingya and dividends to their partners, Myanmar Economic Holdings Limited (MEHL) are distributed to military regiments and battalions, including the very units responsible for genocide.

POSCO C&C is located in a special economic zone owned and operated by MEHL. POSCO C&C entered the contract allowing it to do business in the zone by exchanging 30% ownership in the business to MEHL as an in-kind payment for land. POSCO C&C maintains that it is not problematic since no dividends have been paid because the business was not profitable. Should this be the case, will Posco C&C pay dividends once it starts generating profits? Considering the attitude of POSCO C&C to date, the company’s position regarding dividends payment is untrustworthy, without it ending its business relationship with MEHL.

MEHL is a company established by the military. The company is owned and controlled by the military. By continuously maintaining a business relationship with MEHL, POSCO C&C is delivering a negative message that it acknowledges the legitimacy of the military junta responsible for gross human rights violations.

POSCO C&C has received Grade A in the 2020 ESG evaluation conducted by Korea Corporate Governance Service. The company must take measures that reflect its reputation. Receiving an official letter from MEHL that dividends paid so far have not been used for human rights violations is a mere evasion of responsibility. Kirin of Japan, based on an independent expert’s due diligence, has taken measures in accordance with the international human right standards and will end its partnership with MEHL. Posco C&C must similarly terminate its business relationship with MEHL.