Hong Kong scheduled a major event at the Lotte Hotel Yangon, which is built on Myanmar military-owned land that's the subject of Western sanctions. Junta opponents who have formed an alternative government are angry with the government and business interests in the Chinese special administrative region. Photo: Lotte Hotels

Hong Kong has sparked a huge diplomatic row in Myanmar after being warned by Myanmar’s self-proclaimed “parallel” government for choosing to celebrate the 25th anniversary of the former British colony’s handover to China with a party held in a military-affiliated hotel that stands on land sanctioned by the West.

Opponents of the generals see the Hong Kong action as recognizing the military regime that took power in February 2021.

Following a growing backlash from civil society and activists, Myanmar’s “National Unity Government” (NUG), in a furious statement, lambasted the Hong Kong government and Yangon-based business body Myanmar-Hong Kong Chamber of Commerce and Industry (MHKCCI), the Thai Business Association of Myanmar and the Singaporean Association of Myanmar for legitimizing the Burmese junta.

Members of the ‘parallel government’ as of April 2021: Top, from left: President Win Myint, State Counselor Aung San Suu Kyi, Vice President Duwa Lashi La, Prime Minister Mahn Win Khaing Than, Minister of Foreign Affairs Zin Mar Aung, Minister of Home Affairs and Immigration Lwin Ko Latt and Minister of Defense Yee Mon. Bottom, from left: Minister of Federal Union Affairs Dr. Lian Hmung Sakhong, Minister of Planning, Finance and Investments Tin Tun Naing, Minister of Humanitarian Affairs and Disaster Management Dr. Win Myat Aye, Minister of International Cooperation Dr. Sa Sa, Minister of Education and Minister of Health Dr. Zaw Wai Soe, Minister of Natural Resources and Environmental Conservation Dr. Too Khaung (aka-Tu Hkawng) and Minister of Women, Youths and Children Affairs Naw Susanna Hla Hla Soe. Photo: RFA

Activists say this row is the latest to have raised questions about the practices of the Hong Kong government, the Hong Kong Trade Development Council and Hong Kong investors and regulators in the coup-torn Southeast Asian country.

The background

Hong Kong was the third-largest foreign investor in Myanmar prior to the coup according to the junta-controlled newspaper Global New Light of Myanmar. Hong Kong companies have investments in several sectors including electricity, power, real estate development, tourism, insurance and logistics.  Some of the investors were Chinese companies registering with their Hong Kong branches, such as the Bank of China.

Following Myanmar’s military coup in 2021, Hong Kong businesses met and greeted the junta and they have retained their links with the military since then. According to legal and Myanmar experts, this says as much about Myanmar’s risky environment for businesses as it does about changes to Hong Kong’s approach to doing business in the aftermath of the 2020 National Security Law.

Beijing’s National People’s Congress passed the Hong Kong National Security Law on June 30, 2020. It criminalized activities including “undermining the power of the central government. Under that law, at least 166 activists have been arrested, among them Cardinal Joseph Zen, the Roman Catholic bishop emeritus of Hong Kong.

The Myanmar pro-democracy movement in its earlier days found support from the Milk Tea Alliance, a friendship-and-solidarity grouping formed among activists from Hong Kong, Thailand and Taiwan.

Myanmar also learned from the tactics of Hong Kong protesters when demonstrating and facing military security forces in the first two months of the coup. But the Hong Kong government’s actions after the coup seem to suggest that it would engage with the regime more than with the parallel government.

The business environment in Hong Kong worsened rapidly after the imposition of the National Security Law in 2020. Although there is no evidence that companies were forced to do so, Western multinationals published newspaper ads congratulating the security chief – who was selected by a government-vetted panel – on becoming the Chief Executive of the city. The Big Four accountancy firms along with conglomerates Swire and Jardine Matheson were among those placing ads on state media.

Activists say the latest episode is one more indication that many Asian investors and business groups aren’t aware of the realities of the situation in Myanmar and the reputational risk dimension.

The Hong Kong government’s leanings could be seen during Chief Executive Carrie Lam’s historical visit to Yangon in 2017 amid the Rohingya crisis. She promoted Beijing’s Belt and Road Initiative and the ASEAN-Hong Kong free trade agreement as a priority but wouldn’t go beyond “wishing peace” when asked about the Rohingya issue.

Critics questioned the timing of the visit, at a time when other international leaders called for an end to persecution and the UK government announced a halt to its training of Myanmar’s armed forces.

While the West placed sanctions on businesses with ties to the junta, and even Singapore’s bourse moved to suspend trading of a military-linked company, companies listed on the Hong Kong Stock Exchange with deals involving the Myanmar military have continued to do business without questions asked.

Hong Kong-listed VPower Group, one of Myanmar’s biggest LNG plant operators, has two liquefied natural gas power stations in Yangon on land leased from the military. Shangri-La Asia, also listed on HKEX, was criticized by Myanmar protesters for operating a mall and office development in Yangon – the Sule Square development – on military land. HKEX has not acted on the controversies.

Singapore’s stock exchange acted swiftly against companies alleged to be financing the Myanmar military, in stark contrast to the inaction of the HKEX.

Yadanar Maung, spokesperson for local advocacy group Justice For Myanmar, described the lack of action from HKEX and the Securities and Futures Commission (SFC) as “shocking.” Maung urged the Hong Kong government to take action to stop Hong Kong businesses from financing the junta. “Their business aids and abets atrocity crimes,” she said, and that “should send alarm bells to their investors, who should divest from both companies.”

Phil Robertson, Deputy Director of Human Rights Watch’s Asia Division, said that organizations that continue to engage with the Myanmar military are “on the wrong side of history” and their interests are going to be severely impacted by economic boycotts when their connection with the military is exposed.

He added that the economic boycotts have shown tremendous tenacity and will continue, while the sanctions lists will continue to be expanded. “Staying in place and doing business with military-affiliated entities is a crapshoot,” he added.

But Dennis Kwok, a former member of the Legislative Council of Hong Kong, held out no hope that Hong Kong would join forces with the Myanmar opposition. He said that Western sanctions are no longer relevant to the former international financial center, following the implementation of the National Security Law in Hong Kong.

Kwok, now a Senior Fellow at Harvard Kennedy School, said HKEX would view it as “politically incorrect” to follow international standards as defjned by the West. He added that investigating these companies would go against Beijing’s recent alliance with the junta. “The National Security Law signaled the end of the city’s semi-autonomy status,” said Kwok.

Anatomy of a brouhaha

Earlier this month, the Hong Kong government arranged a business networking event – to celebrate the 25th year of the British handover of the Chinese special administrative region – to be held at the military-linked LOTTE hotel in Myanmar’s commercial capital.

The reception was initially co-organized by multiple chambers of commerce, including the Myanmar-Hong Kong Chamber. But after activist group Justice for Myanmar (JFM) condemned the arrangements, the Myanmar Chinese Chamber of Commerce opted to drop out.

The Myanmar-Hong Kong Chamber was set up in February 2019 and its members include Marga Group and VPower.

The Lotte Hotel is built on land owned by the Myanmar military. The land is leased from the Office of the Quartermaster General (QMG) under a build-operate-transfer agreement by the South Korean consortium that operates the hotel, POSCO International.

The US, UK, and Canada had slapped sanctions on the QMG on December 10. Lotte Hotel has also been a target of boycotts by activists due to its affiliation with the military, via the land and via a local partner, International Group of Entrepreneurs, which is owned by Nay Aung, son of Lieutenant Colonel Aung Thaung, who was the industry minister under the previous regime.

“We are particularly disappointed to see that the Hong Kong Economic and Trade Office, an official arm of the Government of Hong Kong, is sponsoring this event,” said the statement from the NUG’s Ministry of Planning, Finance and Investment.

The NUG branded the decision to do business and host an event with a military-affiliated hotel as “reprehensible.”

Despite the escalation of the row of the networking event, Beijing or Chinese state media have not weighed in to support the Hong Kong chamber’s position.

Rights group JFM called on the Hong Kong government to “withdraw their support for the networking event and take action to stop Hong Kong companies financing the junta.”

The word from several diplomatic and business sources in Yangon is that the event has been postponed due to the backlash. Hong Kong Economic and Trade Office and MHKCCI have not replied to inquiries.