The Diplomat
Overview
Funding Myanmar’s Spring Revolution
Associated Press
Cover Story

Funding Myanmar’s Spring Revolution

War isn’t cheap. How has the National Unity Government funded itself – and its military efforts?

By Zachary Abuza

Following the February 1, 2021 coup d’état in Myanmar that overthrew the country’s democratically elected government, a shadow parliament and government were established. After eight months of sustained civil disobedience, in September 2021, the National Unity Government (NUG) declared a defensive war, an armed insurrection against the junta. By May 2022, the NUG claimed to control 15 percent of the country, while affiliated ethnic armed organizations (EAOs) controlled approximately 30-35 percent.

But war isn’t cheap, especially without any state sponsors.

While several key EAOs, including the Kachin Independence Organization and the Karen National Union, provided some initial training, a limited amount of arms, and assistance, the NUG’s military campaign against the government has been self-funded. While the NUG government has received limited amounts of foreign assistance for humanitarian needs and has made appeals for international assistance for the basic governance of the regions it does control, it has received no external funding for armed operations. The NUG and its 250 affiliated People’s Defense Forces (PDFs) have used an array of funding mechanisms to support their shadow government operations as well as their armed insurrection.

So how has the NUG funded itself?

In short, the NUG and its parliament, the Committee Representing the Pyidaungsu Hluttaw (Union Parliament), have relied on a range of very clever and sophisticated means that take advantage of their overwhelming legitimacy among the public and their technical prowess. They’ve made funding a patriotic endeavor, and all the while have eschewed the ubiquitous production and trade of illicit narcotics, the traditional source of funding for insurgencies in Myanmar, even at a time when drugs are flooding out of the country in record amounts. The NUG has taken advantage of new technologies and put in place some of the most progressive financial systems in Southeast Asia.

But the bottom line is that the NUG is trying to raise revenue as if they are the proper state they claim to be. They’ve used fundraising as an important means to create a bond between the people and the NUG, while at the same time, delegitimizing the State Administrative Council (SAC), as the junta is known.

The Early Days: Funding Civil Disobedience

Immediately after the February coup, a civil disobedience movement (CDM) broke out across the country. It was hoped that a sustained nationwide general strike, together with non-violent protests, would force the military to relinquish power.

Although the NUG would quickly be established, the priority throughout most of 2021 was to channel funds to support the civil disobedience movement, which erupted spontaneously. The CDM’s general strikes brought the country to a standstill. Financial support was necessary to support striking civil servants, medical sector employees, and railway and port workers.

Both the CDM organizers and the NUG have been able to rely on the patriotism of the population, whose views of the military have gone from fear to disgust.

Support for the CDM strikers largely came from donations, both domestic and from the diaspora. Domestic contributions moved quickly, but the grassroots fundraising done by the diaspora, an estimated 200,000 in the West and over a million in India and Southeast Asia, has also been impressive.

Voluntary contributions were necessary but insufficient, especially as the military increased repression and made clear that they had no intention of surrendering power. A steadier stream of resources became necessary to support what was turning into a protracted conflict.

But there was another reason: The NUG leadership was well aware of the economic burden, especially in the face of the economic implosion that followed the coup. As a result of the coup, the ensuing violence, mismanagement of the COVID-19 pandemic, and the SAC’s economic malpractice, the country’s economy withered. GDP contracted by 18 percent in 2021; the kyat, at the lowest point, lost 60 percent of its value. Currency controls restricted imports, foreign investors fled en masse, inflation spiked, and over half the country fell under the poverty line.

In short, the coup eviscerated 10 years of economic progress in a few short months. The ability of domestic supporters to continue to support the CDM out of their own pockets became increasingly limited. The diaspora has remained committed, but their resources are not limitless either and the SAC spent considerable time trying to shut down financial pipelines into the country.

The SAC has become increasingly focused on stopping domestic donations. In a series of recent police actions, the government arrested students for making donations under $10, via online banking services such as KBZPay or Wave Money, for which they received seven- to 10-year sentences. The anti-terrorism law, rewritten by the junta, now has 10-year sentences for financing proscribed groups and most have been tried in military tribunals. In one recent case, seven individuals received 10-year sentences for donating the equivalent of $8 to their local PDFs.

Raising Revenue Like a State

Donations could not support the resistance indefinitely, and the NUG made revenue generation a top priority.

Immediately following the coup, the United States government seized $1 billion in Myanmar government reserves that had been deposited in the Federal Reserve Bank of New York. Myanmar was estimated to have roughly $6 billion deposited in overseas accounts, including in Tokyo and Singapore. No other country followed the U.S. lead in freezing reserves.

Even with the United States viewing the NUG as the legitimate government, the NUG has been unable to secure the frozen $1 billion. The NUG has, likewise, tried to borrow against that $1 billion, but to no avail. This has been a key talking point every time the NUG leadership has the opportunity to meet with senior U.S. government officials.

As such, the NUG’s fundraising has had to be adaptive, creative, and sustained.

The NUG immediately stood up a Ministry of Planning, Finance, and Investment (MPFI), which has three broad objectives: to raise funds for the NUG; to intercept, deny, and deter sources of revenue for the military regime; and to coordinate donations, both domestic and foreign.

From the start, NUG Minister of Planning, Finance and Investment Tin Htun Naing was insistent that the NUG could not rely on donations alone. There was a strong sense that if the NUG was going to act like a state, then it had to raise money like a state. It is the first major substate actor in Myanmar’s violent history that has tried to support itself completely through lawful means, including the issuance of bonds, establishing a formal taxation system, the selling of assets through open tender, and lotteries. In addition, it coordinates bilateral aid and donations. By the end of June 2022, the NUG claimed to have raised $44 million.

The Spring Lottery

The first revenue generation program the NUG began was to raise funds through lotteries. The first online lottery was held in August 2021 and its 50,000 tickets sold out within hours, despite junta threats against those who participated. The goal of the “spring lottery” was to raise 20 billion kyat ($11 million) to support 5,800 striking civil servants.

Only $8 million was raised, but in a sign of patriotism, 55 of the 78 lottery winners donated their winnings back to the NUG. The problem was that the SAC government quickly figured out what was going on and froze the accounts that were being used domestically to raise funds for the NUG. The NUG expected that if successful, lotteries could raise $11 million a month.

The spring lottery had an additional benefit and one that supported the MPFI’s charge of denying sources of funding to the SAC. At the same time people were supporting the NUG’s spring lotteries, public boycotts of the SAC’s state lottery, Aung Bar Lay, increased. The junta was so short of cash that it had to reduce its 1.5 billion kyat payout ($911,000) to 500 million kyats. Overall, the SAC’s revenue from the lottery fell from $90 million in FY2020 to $48 million in FY2021.

The problem with the lotteries was that the military immediately understood what was happening, and used its control over the banking system, including teams of regulators installed in all the private banks, to freeze the accounts that were being used to move the money. The spring lottery could not work without access to the formal banking sector.

Sovereign Debt for an Uncertain Sovereign

States routinely issue bonds for both domestic and international investors. What is much less common is for a substate actor to successfully do so. While the NUG believes it is the de jure and lawful government, in the eyes of the international community, its status is less clear.

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The Authors

Dr. Zachary Abuza is a professor at the National War College, in Washington, D.C., where he focuses on Southeast Asian politics and security issues, including governance, insurgencies, democratization and human rights, and maritime security.

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