The conspiracy behind Myanmar’s stolen teak

If the Environmental Investigation Agency (EIA) makes sufficient waves with its latest campaign against environmental crimes, the world’s luxury yacht market may soon face a teak shortage for their sleek outdoor decks.

EIA’s latest report, entitled the “State of Corruption, The top-level behind the global trade in Myanmar’s stolen teak”, is likely to make yacht builders and buyers in Europe, America and Australia nervous about the source of their teak trimmings and floors.

If those water resilient, insect-proof decks originated from the jungles of Myanmar, they are very likely the product of one of the longest running teak trade frauds in Asia’s recent history of deforestation.

EIA’s two-year investigation into Myanmar’s teak trade alleges that for the past 20 years a certain Cheng Pui Chee, alias Chetta Apipatana and also known as the “Second Forestry Minister of Myanmar,” has pilfered millions of dollars in lost revenue from Myanmar’s state and people from one of the country’s most prized natural resources – teak wood.

Cheng Pui Chee, a naturalized Thai citizen who was born in Hong Kong, died last year shortly before the release of the EIA report. The research casts a glaring light on his illicit trade and the alleged criminal network he left behind spanning Thailand, Hong Kong, Malaysia, Singapore and Taiwan.

“These people became the biggest teak traders on earth and the largest suppliers in the EU and US markets, and they still are today, even if the patriarch of the corrupt network has died,” said Jago Wadley, a senior researcher for EIA, a non-governmental organization that campaigns against environmental crimes and abuse.

According to the EIA’s investigation, Cheng got his first foothold in Myanmar’s timber trade when his firm, Thai Sawat, qualified as one of 35 Thai companies that in 1989 won 47 logging concessions in the Shan and Karen states, both of which neighbor Thailand.

The concessions were secured by former Royal Thai Army commander-in-chief Chavalit Yongchaiyudh, who was influential in persuading the Tatmadaw (Myanmar’s military) to open up to business following their brutal crackdown on a pro-democracy movement in 1988 that left an estimated 3,000 protesters dead. Chavalit later went on to become Thailand’s prime minister.

Former Myanmar military strongman Than Shwe ended the timber concessions in 1993, expelling all of the extractive Thai companies except for five, including Thai Sawat, which went on to become the main player in the valuable teak trade for the next two decades.

Cheng’s winning strategy in Myanmar was to collude closely with the Myanmar Timber Enterprise (MTE), a state enterprise under the Forestry Ministry that has a monopoly over the timber trade. Teak is classified as a “reserved species” in Myanmar, so all of the precious wood is officially owned by the state.

But the MTE, like all Myanmar state enterprises in the 1990s, lacked money, so instead of investing in timber concessions it farmed them out to the private sector. In return, these companies were required to give TME the highest grade teak they cut down, but allowed them to buy the remainder to sell abroad to make a return on their investments.

Cheng’s company, a concessionaire, systematically under-graded the teak in his logging areas in Myanmar and, with the collusion of high-ranking military and senior government officials, greatly undervalued his teak, allowing him to make millions of dollars in profits, according to EIA’s investigation that draws on interviews with several of the companies with which he did business.

“Grading fraud prevented the finest quality teak logs from being automatically drawn into MTE’s auction system,” EIA’s report said. The MTE is mandated to sell the top quality teak in a public auction, and gets payments from concessionaires for supposedly lower quality logs.

Cheng allegedly kept the best teak for himself, undervalued it and paid off high-ranking military and senior government officials to keep the scam going, EIA claims.

The alleged bribery included paying for the schooling, from high school to college, of the offspring of officials close to Than Shwe, and even buying animals to stock the Naypyidaw Zoo in the capital, EIA alleges, citing executives of companies that worked closely with Cheng.

Myanmar got a new elected government led by the National League for Democracy (NLD) following a November 2015 general election, but de facto national leader Aung San Suu Kyi’s party is shackled by the military, which controls 25% of the seats in parliament and claims three powerful portfolios – defense, home and border affairs – as stipulated by the military’s 2008 constitution.

The NLD slapped a ban on all logging in 2016, but lifted it after a year, reportedly bowing to pressure from military and business interests. There has been a ban on the export of uncut logs since 2014, and all timber exports are in theory limited to transit through Yangon’s government-monitored port.

The EIA report does not expose complicity between the NLD government and the timber traders, but notes that not much has been done to reform the sector with the transition to quasi-civilian rule.

“We are talking about vast sums of money,” said EIA forest campaign leader Faith Doherty. “I think it is naïve to expect the NLD or any other civilian government to be able to deal with this [business] when the core people involved are the military.”

Prior to the logging ban of 2016, MTE allowed massive over-harvesting of teak, which faces an annual harvest quota, in order to stockpile the prized wood in their warehouses and allow concessionaires such as Cheng to reap massive profits, EIA alleges.

“This company shipped hundreds of thousands of logs out to countries like Taiwan and Hong Kong in the month preceding the [2016] ban,” EIA’s Wadley said. EIA estimates that there is at least 200,000 tons of teak stockpiled in the country that Chen could not get out before the 2014 ban took effect.

Myanmar Forestry Department officials who spoke on condition of anonymity to Asia Times acknowledged the over-harvesting before the 2014 log export ban and the nationwide logging ban in 2016 could not have happened without the approval of the military, who ruled Myanmar under a junta between 1989 to 2010 and backed a quasi-civilian government from 2011-2015.

“The MTE was not able to follow the Forestry Department’s rules on annual harvesting when the country was ruled by the former junta,” said a forestry department director, who requested anonymity.

“If the junta decided they wanted 5-10 billion [US] dollars in revenues from the timber sector that year, the MTE had to harvest timber in order to earn that amount,” the official told Asia Times.

Given the nature through which the Cheng network amassed their teak – via over-harvesting, fraudulent grading and massive bribery – EIA says the still stockpiled wood is illegal and has called on the EU and US to enforce their own import bans against illegally harvested teak imports from Myanmar.

“Traders need to know that if you import this teak from Myanmar you are not complying with the laws in both Europe and the United States,” said EIA’s Doherty. “That is why the report is so important.”

China, India and Thailand imported a combined 4.04 million cubic meters of teak logs and sawn timber direct from Myanmar between 2007-17, worth $2.79 billion, according to trade statistics cited by EIA.

US aggregated trade records indicate that only 5,500 cubic meters of teak imports, worth $25 million, entered the US from 2007-2017 direct from Myanmar. However, far more Myanmar teak has been imported via third countries like India, Malaysia and Taiwan, EIA claims. The biggest importer – East Teak Fine Hardwoods – is known to have imported 13,000 cubic meters from a handful of companies in Malaysia and Taiwan alone, the EIA says.

EIA has called on Myanmar’s civilian government to crack down on the illegal timber trade, which still runs rife over the Myanmar-China border. It says the Suu Kyi government should abolish the MTE and investigate and prosecute high-level corruption involved in the timber trade “including by military and government officials as well as private sector actors.”

Although neither the Myanmar Forestry Department nor the MTE have yet to officially respond to the EIA report, junior officers say they welcome it.

“Honestly this report is very impressive and some information in the report will be useful in transforming the MTE and changing the teak trade, but most of the revelations are untold truths that almost all players in the industry know,” said the forestry department source.

The EIA report will also likely draw attention to illicit timber trafficking in the region, which the United Nations says remains one of the most lucrative illicit trades in Southeast Asia.

UN Office of Drugs and Crime (UNODC) regional program coordinator for wildlife and forest crimes Giovanni Broussard told a recent forum that Southeast Asia’s illicit timber trade was worth an estimated $17 billion annually, lagging only the illicit trades in opium and methamphetamines ($34 billion) and counterfeit goods ($25 billion).

Broussard called Myanmar’s forestry laws “obsolete,” noting that the highest penalty for people caught with illegally acquired teak was just $52. Myanmar’s anti-corruption agency, established in 2014, received about 10,000 complaints last year but only conducted 50 investigations.

“There is a severe lack of resources – not a single financial investigation [was conducted] into where money [from illegal logging] is going… because of the incapacity of law enforcement to take action,” Broussard said. He says that if properly policed, Myanmar’s timber sector could bring in revenues “equivalent to the whole [national] GDP.”

With additional reporting by Kyaw Lynn in Yangon