A new listing on the Yangon Stock Exchange (YSX) Thursday morning risks further funding public corruption and supporting the military’s “ongoing war crimes,” experts and rights group warn.

On Thursday, Ever Flow River Group (EFRG) will become the YSX’s sixth publicly-listed company.

EFRG operates a joint venture company with Lann Pyi Marine - a subsidiary of the military conglomerate Myanma Economic Holdings (MEHL) - called Hlaing Inland Terminal and Logistics (HITLC).

HITLC is building a $43m inland port in Yangon’s Hlaing Tharyar township between the Aung Zeya and Shwe Pyi Thar bridges. The site is still under construction and not generating income for EFRG or its partners yet, but capital raised at the exchange may speed up that process.

EFRG is financing the project and will hold 49% equity in HITLC while Lann Pyi Marine is providing land for 51% equity.

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According to disclosure documents EFRG provided to YSX, the project will include customs clearance and customs-bonded facilities.

Retired brigadier-general and MEHL director Kyaw Htin is the director general of Myanmar’s customs department and retired major Ni Aung, another MEHL director, is the managing director of the Myanma Port Authority, the federal port regulatory body.

Kyaw Htin and Ni Aung “will be directly profiting from their public positions through MEHL’s business” with EFRG, the rights group Justice for Myanmar said in a statement Monday. “The inclusion of a customs-bonded warehouse, customs clearance and port services within the project adds heightened corruption risk.”

Chris Sidoti, an international human rights lawyer who has studied the military and its economic interests extensively, agreed.

Kyaw Htin and Ni Aung “have placed themselves in an untenable conflict of interest that will give rise to the possibility of corruption,” he told Myanmar Now. The government must make them choose, he said: “either they resign from their official positions or they resign from their directorships.”

EFRG CEO Aung Min Han was unavailable for comment. Kyaw Lwin Oo, the company’s chairman, did not respond to requests for comments.

MEHL general manager Hla Myo insists the regulatory roles of these retired military men have no influence on their business dealings, and that they play no role in HITLC.

The customs department operates under the control of the planning and finance ministry and the port authority under the transportation and communications ministry. Hla Myo told Myanmar Now both men had been cleared by their respective ministries to serve on MEHL’s board.

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But when Myanmar Now asked planning and finance ministry spokesperson Tun Tun Naing, he said he was not aware of Kyaw Htin seeking or receiving ministry approval, nor was he aware that Kyaw Htin was serving on MEHL’s board.

He said he would raise the issue with planning and finance minister Soe Win to discuss its legality.

“It is really for MEHL and the government, and not EFR, to decide whether that conflict of interest should be allowed, i.e. should Ni Aung and Kyaw Htin step down as directors of MEHL or should the government require them to quit their positions as regulators?” said Vicky Bowman, director of the Myanmar Centre for Responsible Business.

But the arrangement could hurt EFRG and its ability to raise capital on the exchange.

“For any company thinking of entering into a joint venture with Lann Pyi (or) MEHL, their due diligence of their potential partner should show this conflict of interest as a red flag,” she added. “For some companies, this would put them off. Clearly that was not the case for EFR… It’s a business choice for them to have done so, and it’s legal.”

In an otherwise lengthy and detailed section on potential business risks in its YSX disclosure document, EFRG did not mention that a UN fact-finding mission report in August 2019 named HITLC, MEHL and Lann Pyi Marine in a list of companies to avoid doing business with.

Since the National League for Democracy took power, the military’s official budget has been gradually reduced, leading it to increasingly depend on its vast network of domestic businesses to continue carrying out “the gravest crimes under international law” in Myanmar’s ethnic states - including rape, sexual enslavement and torture - the UN report said.

Sidoti, who served as one of three international experts on the fact-finding mission, said he is “deeply disappointed that EFRG is ignoring that recommendation.”

“EFRG is effectively a business partner of the Myanmar military,” he told Myanmar Now. “It is in bed with the generals.”

“Those thinking of buying shares in EFRG when it is listed should be aware,” he added. “They should understand that their investment will be used to further enrich the generals. And they should understand that the company in which they invest is in league with companies that may be engaged in corrupt conduct.”

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Despite omitting the fact-finding mission’s conclusions, “the EFR (listing) document is actually a pretty comprehensive document on risks by the standards of YSX listing documents,” said Bowman.

The company did include ongoing conflicts between the military and ethnic armed groups as risks to its future profitability.

“Ethnic and sectarian tensions may possibly hamper investor confidence, and the growth and stability of the economy,” it said.

It also warned of the impact of potential international sanctions, presumably arising from how the military handles these conflicts.

These “could all be read to cover the risks associated with their JV partner,” said Bowman.

Thet Htun Oo, YSX executive senior manager, told Myanmar Now that EFR has fulfilled all necessary requirements to be listed.

The company estimates its new terminal will have a handling capacity of 35,000 to 70,000 shipping containers annually.

In fiscal year 2018-19 EFRG reported 19bn kyat ($7.1m) in revenue.