Myanmar teak, or Tectona Grandis, is considered the highest quality teak available on the planet. Around half of the world’s wild teak grows in Myanmar. This valuable product is widely coveted by the marine sector, especially in the European Union’s luxury yacht market. Elegant and strong, this type of timber is one of the favoured materials in the superyacht industry. Europe’s rich like to enjoy the sun on Myanmar teak docks while sailing on to their next destination.

The importation of this material into the EU is regulated by the European Union Timber Regulation (EUTR). Teak importers are required to corroborate the legality of their source- effectively asking the exporter to disclose where the timber comes from, how it was harvested and how taxes were paid at the borders. Over the past four years, however, the common position among EU enforcement authorities has been that it is not possible to conduct adequate due diligence for Myanmar teak. As a result, any import of this product is effectively illegal.

Despite this strong stance illicit trafficking of Myanmar teak into the EU has not stopped. Plundering of Myanmar’s natural resources has regrettably scaled up during the coup. The military, also known as the Tatmadaw, has now full control of the country’s forests. The importance of tracing Myanmar teak’s unlicensed journey has never been greater. But where do we start?: in Myanmar forests.

In Myanmar: missing transparency, lacking oversight

Coen Van Der Veer is the Global Wood and Forestry Director at Building and Wood Workers International (BWI), a global union federation that helps wood and forest workers organize. He points out that if the military has full control of the forests, it also has full control of all illegal timber trade. This means that companies involved in this traffic are effectively doing the military a favour by helping it make a profit.

The problem with the extraction of Myanmar teak has always been a lack of transparency.

“In the global value chain of wood and forest products three-quarters of the people are working informally. This is closely connected to the illegal harvesting of wooden products”, Van Der Veer says.

Additionally, the teak industry in Myanmar suffers from a lack of oversight. Alec Dawson, Forest Campaigner at the Environmental Investigation Agency (EIA), highlights how it is increasingly hard to say who exactly is behind the plundering of natural resources. Because of the coup, most forest monitors are hiding or on the run.

Technically, the Myanmar timber enterprise (MTE) is the state entity in control of all harvesting and sales of timber. However, with protests in all major cities, the MTE is not operating properly. But even before the events of this year, this institution had been involved in several corruption scandals.

“Particularly when the military was previously in control, there were big problems with how the MTE was at times storing and logging timber above the limits set for it. And there were issues with subcontracts to private operators and corruption”, Dawson says.

The Environment Investigation Agency (EIA) has extensively scrutinized the illegal traffic of teak in the past, showing that EU countries are still importing this highly valuable material, circumventing the EUTR. Now, with a violent coup raging in the country, this practice becomes even more problematic.

Dawson confirms that during the coup few shipments have gone into the United States, and some have gone into Italy, which is currently the main European importer of illegal Myanmar teak.

From Myanmar’s forests to European yachts

Since the European Commission declared, back in 2017, that importing Myanmar teak is in breach of the EUTR, direct trade to some EU countries has stopped. We’re talking mainly about Germany, Belgium and the Netherlands, prominent countries in the yacht business.

But there are alternatives to direct trade. European companies have been buying indirectly from other Asian regional importers of Myanmar teak such as Singapore and Malaysia. Van Der Veer talks about a long and complicated chain of third countries that handle Myanmar teak before it enters the EU.

Moreover, the Environment Investigation Agency (EIA) was able to track another reason why direct trade was not detectable. Instead of importing directly from Myanmar, industries were shipping in from other European countries such as Italy and Croatia, where controls over teak imports were laxer. According to Dawson, Poland and Greece are also involved in this market.

European companies have embraced the use of a third body as the formal importer of the good. “It’s the third bodies address on the invoice; they are the official receivers of the good. So, when it enters the EU, the actual operator that has placed it on the European market can say ‘I have no obligation of due diligence, because I bought the product from a company in the EU’”, Van Der Veer says.

But often this company is a letterbox entity or one that has enough financial resources to pay whatever fine the EU authorities impose.

A further issue is tax evasion. The EIA was able to verify that the value and weight of the teak declared at the border in Myanmar did not coincide with the numbers given at European borders.

Dawson says that the problem sits mainly with the companies exporting the timber. “There were misdeclarations, to make the timber sound more processed than it actually was and to avoid the taxes supposed to apply”, Dawson says.

This kind of tax evasion makes it impossible to track the exact quantity of timber coming into Europe and to ensure transparency on the receiving end.

The EU position

The European Union has responded to the violent events in Myanmar with an embargo and several sanctions. Aikaterini Apostola, a European Commission press officer for Financial Stability, Financial Services and Capital Market Union, explains that the restrictive measures are twofold.

Firstly, the EU targets the military through an embargo on arms and equipment that can be used for internal repression and a ban on the export of equipment for monitoring communications. There is also a prohibition on the export of dual-use goods – items that can be used for both military and civil purposes – in case they end up in the hands of the military and the police.

Secondly, Apostola says, the EU has also implemented sanctions against 35 individuals and 2 entities connected to the coup. The sanctions consist of travel bans and asset freezing. These measures have been welcomed by many as a sign of long-awaited action on the part of the EU. However, as previously reported, embargoes can and happen to be circumvented.

While it is key to focus on and target the equipment used by the military against innocent protesters, the EU should be more assertive and target any commercial activity that benefits the military, including the plundering and sale of precious Myanmar teak.

Van Der Veer highlights how it is fundamental to ensure that the members of the military are not getting revenues.

“They use them for personal gain, but they also use them to buy weapons and systems to oppress the people even more”, he says. That’s why his organization has contacted the European Commission asking for the implementation of additional tailored sanctions.

Going forward

There are many aspects to the illicit trade of teak. First, the plundering of this resource is detrimental for the local communities in Myanmar. Van Der Veer says that when local communities play a sustainable role in forest management, additional jobs are provided, and the local economy benefits from the teak trade. But this is not what’s currently happening.

Indeed, it is not the Myanmar people who profit from teak trade and it’s been like that for a while. Dawson points out that since colonial times, outside actors have come in and taken the timber for their financial benefit. There was some improvement under the National League for Democracy (NLD) government who introduced logging limits and bans.

“The idea was that instead of all the timber just being taken out as logs, they could process it themselves to create a more high-value product. That was better for the economy because it meant more jobs and more money staying in Myanmar”, Dawson says.

Since then, the country has taken one step forward and two steps back. Dawson says that the military might be starting auctions to sell the teak to private companies again. In the last ten or twenty years, he adds, Myanmar has reached one of the highest rates of deforestation in the world. It really can’t afford to go back to unmitigated corruption and exploitation in this sector.

With the Tatmadaw currently cracking down on civilians and employing violence as a political tool, any direct and indirect purchase of Myanmar teak means supporting the military. The question of how to stop this practice from happening is an important one. According to the experts, the only way to do it is to tackle issues at both ends.

In Myanmar, there needs to be more focus on forest governance. Local communities need to be empowered with the necessary instruments to superintend the harvest and trade of timber. The Myanmar timber enterprise needs to be reformed to operate in compliance with the EUTR and with EU standards.

Equally, there needs to be more control over who’s buying the timber in Europe. Van Der Veer suggests that the focus on conducting due diligence should be on the company that makes the most money out of it. In this case, it’s always the yacht building companies.

Some progress has been made already. As reported by Mizzima, the Hamburg Regional Court has recently ordered WOB Timber, a German logging company, to pay a $4 million fine for illegally trading Myanmar timber between 2008 and 2011.

Decisions like this are a fundamental deterrent for other companies. But much more needs to be done. Teak is part of Myanmar’s identity, and it needs to be protected. Especially now, when trading it means financing a brutal and unlawful regime.