EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS

Following the attempted coup in February 2021, Myanmar’s military¹ has relied on an arsenal of weapons² to carry out summary executions, massacres and other human rights atrocities in response to peaceful protests and growing anti-coup armed resistance in Myanmar. Analysis of witness statements and of video and photographic evidence in relation to such human rights violations shows security forces armed with a variety of locally produced firearms, including sniper rifles,³ MA-1 semi-automatic rifles,⁴ and Uzi-replica BA-93 and BA-94 sub-machine guns.⁵ In addition, analysis of images of weapons used by soldiers and the military-controlled Myanmar police force shows that much of the small arms ammunition used against peaceful protestors in 2021 carries the headstamp marking of the Myanmar military’s Directorate of Defence Industries (DDI), confirming local manufacture.⁶

Since the late 1950s, and in particular with the coming to power of the so-called State Law and Order Restoration Council (SLORC) military junta in 1988, Myanmar’s military has invested significantly in strengthening its domestic capacity to produce weapons as a necessary means for releasing the military from a dependence on external supplies. This ambition is illustrated by:

• the initial establishment of weapon production factories in Yangon and in the central, Bamar- majority parts of the country and the continuous establishment of new factories, including some that have yet to become fully operational;
• the progressive increase in stockpiles of strategic raw materials to ensure adequate and uninterrupted supply for continuous in-country production of weapons;
• the modernisation of auxiliary industries – such as iron and steel plants – to provide necessary materials for production;⁷
• the continuous upgrading of existing weapons and diversification of production lines; and
• the strategic diversification of sourcing bases (countries and companies) to limit the impacts of current and potential future sanctions and embargoes.

As a result, Myanmar’s military has gradually become largely self-sufficient in manufacturing a range of weapons. By way of illustration, the DDI currently has an extremely robust production capacity for small arms⁸ to meet its operational needs,⁹ which are focussed almost exclusively on the brutal internal suppression of the Myanmar population.

As its atrocities mount, the military’s need to further insulate itself from economic and external diplomatic pressure will likely lead to increased efforts aimed at the modernisation of existing weapon factories, the construction of additional factories and the development of auxiliary domestic industries for supplying the factories with necessary raw materials.

Despite robust production capabilities, however, the DDI is still reliant on international supplies, including for a variety of raw materials, parts and components and end-items, as well as machinery and technology, for the sustained production – both licensed and un-licensed¹⁰ – of the weapons in its arsenal.

This report maps out the Myanmar military’s in-country weapon production which takes place at factories commonly referred to as KaPaSa (after the Burmese name for the Directorate of Defence Industries, Karkweye Pyitsee Setyone) or, in the military’s own terms, as “Defence Industry” factories (DI). The report provides an overview of some of the critical supplies that appear to enable this production, and it identifies companies whose products are currently used by the DDI to successfully sustain its weapon manufacturing at scale.¹¹ The report also identifies companies that enable the DDI to purchase products by brokering deals or otherwise acting as intermediaries for the DDI.¹² In doing so, these companies also enable Myanmar’s military to continue to commit gross human rights violations, amounting to crimes against humanity, war crimes and genocide.

This report by the Special Advisory Council for Myanmar (SAC-M) finds that:

• Some of the DDI’s production appears to be taking place under license (including expired licenses). However, the licensing situation for many of the weapons currently produced at the KaPaSa factories remains unclear. Whether licensed or unlicensed production, the DDI appears to have obtained the technology and know-how to produce a variety of its weapons through various types of transfer of technology (ToT) deals. Over the years, the types of ToT deals that the DDI has entered into with companies – including State-owned companies – from Italy and (then) West Germany, Singapore, Israel, South Korea, North Korea, China and Ukraine have included the receipt of entire weapon production plants (turn-key projects), receipt of direct support from engineers associated with the owner of the technology, joint venture agreements, and KaPaSa factory staff being trained by original license-holders. Some companies that have provided ToTs to the DDI appear to have received commercial contracts, including in Myanmar’s oil and gas sector, in exchange.
• While the DDI is able to partially produce and domestically source some of the critical raw materials used for its arms production, it still imports important quantities of such materials, including from China through the China State-owned company China North Industries Group Corporation Limited (NORINCO). China has also played an important role in supporting the establishment and operation of auxiliary industries, such as iron and steel plants and copper mines, that are either directly connected with weapon production factories in Myanmar or whose outputs feed the factories’ production. The DDI is currently also seeking to invest in iron and steel plants in the country, including in Pyin Oo Lwin, Mandalay Region. Consequently, foreign companies involved in the extraction and/or processing of certain raw materials in Myanmar may find themselves contributing to, or being directly linked to, sustaining the Myanmar armed forces’ arms production capabilities.
• The DDI also depends on imports of parts and components ready to be used in weapons made in the KaPaSa factories, including fuses, cast boosters, detonating caps, igniters and electric detonators. Available data indicates that many of these parts and components come from companies domiciled in India and China. Information obtained by SAC-M suggests that the poor quality of many of the Chinese products upon which the DDI depends has prompted the DDI to progressively turn to other countries, including India, for critical supplies, and that the DDI is planning for other countries, including India, to play an increasingly important role for the weapon production industry in Myanmar. Several companies domiciled in India have also been identified as supplying the DDI with end-items such as optical sights to be fitted to made-in-Myanmar small arms such as sniper rifles. The military’s need to import optical sights is likely to continue as the military is moving towards the increased use of optical sights in its small arms and light weapons design and manufacture.
• Automated machining is a critical step for weapon manufacturing at scale and modern Computer Numerical Control (CNC) machines with turning, milling and grinding functions, as well as electro-discharge machines, play a critical role. SAC-M has identified machines manufactured by companies legally domiciled in Austria, Germany, Japan, Taiwan and the United States (US) that are currently used by the Myanmar military at its weapon production factories. SAC-M has also identified various software programmes made by companies legally domiciled in France, Israel and Germany currently being used at KaPaSa factories for operating some of the CNC machines.
• Singapore functions as a strategic transit point for potentially significant volumes of items – including certain raw materials – that feed the Myanmar military’s weapon production. Companies domiciled in Singapore have been identified as brokering deals and exporting items to the DDI or to associated civilian front companies for the military in Myanmar. In addition, according to credible information received by SAC-M, Taiwan functions as an important transit point for the DDI’s purchase of high precision CNC machines, including from European manufacturers, for KaPaSa arms manufacturing. In addition, individuals formerly associated with Myanmar’s armed forces suggest that, with the assistance of Mottama Holdings Limited – a Myanmar-based conglomerate and reportedly the current intermediary between the DDI and Chinese arms industry company NORINCO – the DDI also regularly sends CNC machines from KaPaSa factories to Taiwan where they are serviced by technicians associated with the European manufacturers of the machines, after which they are shipped back to Myanmar and to the DDI. It appears as though the absence of Taiwanese sanctions on Myanmar facilitates these types of transactions and shipments to and from Myanmar for the performance of critical maintenance.

The leader of the Myanmar military, Senior General Min Aung Hlaing, and his top military leaders must be held accountable for the human rights violations that they have perpetrated. However, this report emphasises that concrete action must also be taken to address the corporate responsibility to respect human rights in Myanmar. This requires action both by the companies that have been identified in this report and by their home governments.

Under international human rights law, all States have a duty to protect against human rights abuses by third parties, including business enterprises, through appropriate policies, regulation and adjudication. In relation to the manufacturing and export of weapons and associated items and machinery specifically, this expectation is reflected in several multilateral agreements of relevance to the arms industry, including the Arms Trade Treaty¹³ and dual-use goods regimes, such as the Wassenaar Arrangement,¹⁴ the European Union (EU) Dual-Use Goods Regulation¹⁵ and current sanctions regimes that apply to Myanmar.¹⁶ For the home States of the companies that have been identified, adhering to these legal provisions requires them to apply export controls on a number of items – including sub-components, end-items and machinery and technology – that could be used for arms production.

At present, it is unclear to what extent the home States of companies have upheld this responsibility in relation to the products that have been identified in use at the Myanmar military’s weapon production factories and auxiliary industries. SAC-M recommends that the home States identified in this report investigate and, as relevant, initiate administrative and/or legal proceedings against the companies whose parts and components, end-items and machinery and technology are relied upon by the Myanmar military’s Directorate of Defence Industries. States should also adopt targeted sanctions against the KaPaSa, its leadership and its network of brokers that have been identified in this report.

Companies have a responsibility to respect human rights. This means that they should act with due diligence to avoid infringing on the human rights of others and to address adverse human rights impacts with which they are involved.¹⁷ The responsibility to respect is independent of States’ abilities and/or willingness to fulfil their human rights obligations. In practical terms, and in relation to the Myanmar military’s weapon production, meeting this responsibility means that companies are expected to apply their own due diligence in relation to the risks of potential harmful end-use of their products,¹⁸ and to put in place measures to prevent or mitigate such risks. For products that are covered by export controls, companies are not absolved of the responsibility to respect human rights by the mere fact that their home State has granted the necessary export permits. Companies identified in the report should immediately stop doing business with the Myanmar military’s Directorate of Defence Industries and associated military entities and civilian front companies for the Myanmar military, and they should investigate how their products have ended up being used for the manufacturing of arms by the military in Myanmar. Beyond this, companies should also take steps to prevent future harmful end-use of their products through robust due diligence to identify, prevent, and mitigate the risk of harm associated with the sale/licensing and deployment of their products. In relation to harms that have already been suffered by civilians in Myanmar, companies should provide for, or cooperate in, the remediation of such harms, including by collaborating with any future legal or administrative proceedings.

Lastly, it should be noted that this report does not undertake the immense task of mapping out the Myanmar military’s arms production and associated value chains¹⁹ in their entirety. Undertaking such an endeavour is a key recommendation of this report. Put differently, additional, longer-term research is needed to identify additional critical supplies with a view to disrupting the Myanmar military’s weapon production. This undertaking would fill an important gap in the current research on Myanmar’s armed forces, which tends to focus on the military’s acquisition of weapons from elsewhere, rather than weapons that are made in the country. To this end, SAC-M encourages interested parties to follow-up on the present research where it has left off. To sustain such future work, SAC-M invites the submission of information, on a continuous basis, that could lead to the identification of additional companies that supply or support the Myanmar military in its manufacturing of weapons.²⁰

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