Viewing cable 09RANGOON378, BURMA: UPDATE ON CRONY ZAW ZAW’S ACTIVITIES
Reference ID | Created | Released | Classification | Origin |
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09RANGOON378 | 2009-06-19 05:05 | 2010-12-06 15:03 | CONFIDENTIAL | Embassy Rangoon |
VZCZCXRO3931 OO RUEHCHI RUEHDT RUEHHM RUEHNH DE RUEHGO #0378/01 1700706 ZNY CCCCC ZZH O 190706Z JUN 09 FM AMEMBASSY RANGOON TO RUEHC/SECSTATE WASHDC IMMEDIATE 9139 INFO RUCNASE/ASEAN MEMBER COLLECTIVE RUEHBK/AMEMBASSY BANGKOK 2975 RUEHBJ/AMEMBASSY BEIJING 2332 RUEHBY/AMEMBASSY CANBERRA 2076 RUEHKA/AMEMBASSY DHAKA 5253 RUEHLO/AMEMBASSY LONDON 2177 RUEHNE/AMEMBASSY NEW DELHI 5550 RUEHUL/AMEMBASSY SEOUL 9146 RUEHTC/AMEMBASSY THE HAGUE 0807 RUEHKO/AMEMBASSY TOKYO 6724 RUEHCN/AMCONSUL CHENGDU 1843 RUEHCHI/AMCONSUL CHIANG MAI 2221 RUEHCI/AMCONSUL KOLKATA 0691 RHHMUNA/CDR USPACOM HONOLULU HI RUEKJCS/JOINT STAFF WASHDC RUCNDT/USMISSION USUN NEW YORK 2527 RUEHGV/USMISSION GENEVA 4533 RUEATRS/DEPT OF TREASURY WASHDC RUEKJCS/DIA WASHDC RUEAIIA/CIA WASHDC RHEHNSC/NSC WASHDC RUEKJCS/SECDEF WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000378 SIPDIS STATE FOR EAP/MLS, INR/EAP, EEB/TFS PACOM FOR FPA TREASURY FOR OASIA, OFAC EO 12958 DECL: 06/19/2019 TAGS ECON, EFIN, ETRD, PREL, PINR, BM SUBJECT: BURMA: UPDATE ON CRONY ZAW ZAW’S ACTIVITIES REF: A. 07 RANGOON 1107 B. RANGOON 298 C. RANGOON 355 D. RANGOON 330 RANGOON 00000378 001.4 OF 004 Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons
1.4 (b and d). Summary ------- ¶1. (C) Regime crony Zaw Zaw continues to expand his businesses in
Burma. In addition to Max Myanmar Group of Companies, Zaw Zaw
owns a beverage bottling company, a cement plant, a trading company,
a jade mine in Phakhant, a rubber plantation in Mon State, and a
professional soccer team. Embassy Rangoon recommends OFAC add Zaw
Zaw’s additional companies and key management personnel (listed
in paragraph 5) to the targeted sanctions list. End Summary. Additional Business Ventures ---------------------------- ¶2. (C) Zaw Zaw, one of Burma’s up-and-coming cronies, continues
to expand his businesses. His Max Myanmar Group of Companies,
which overseas his construction and tourism operations, is already
designated on the Department of the Treasury’s sanctions list (Ref A).
We have confirmed Zaw Zaw also owns Pinya Manufacturing Co. Ltd.,
which produces beverages including Max Cola for the local market.
Pinya Manufacturing began operating in 1998 with an initial
investment of 12.5 million kyat (approximately USD 41,000 in 1998)
and currently employs more than 70 workers. Pinya Manufacturing Co. Ltd.
has 13 distribution branches throughout Burma. ¶3. (C) Embassy business contact XXXXXXXXXXXX confirmed that Zaw
Zaw is expanding his business ventures under the Max Myanmar
umbrella, including construction of a cement factory in Nay Pyi
Taw, which allegedly will provide cement to Steven Law for Asia
World’s airport project (Ref B), a concrete block factory in
Nay Pyi Taw, a jade mine in Phakhant, and a rubber plantation
in Mon State. According to XXXXXXXXXXXX , Zaw Zaw operates the
Lone Khin jade mine in conjunction with the Ministry of Mines
and recently received an additional 50 acres of land in Phakhant
for jade mine development. Zaw Zaw allegedly sold several lots
of jade at the March 2009 government jade and gem auction,
[name removed] noted. ¶4. (C) Zaw Zaw is currently Chairman of the Myanmar Football
Federation, and he owns Delta United, one of the professional
soccer teams in the new Myanmar Football National League (Ref C).
Contacts confirm that Zaw Zaw hired Senior General Than Shwe’s
grandson to play on the team (Ref D). Zaw Zaw has also begun to
develop plans for the construction of a new soccer stadium in
Pathein, Irrawaddy Division, the future home of the Delta United
team,XXXXXXXXXXXX . XXXXXXXXXXXX estimated the stadium
construction cost will be more than USD 1 million, and should
be completed by 2011. ¶5. (SBU) Below is information on additional companies owned
by Zaw Zaw. RANGOON 00000378 002.8 OF 004 -- Delta United Football Club; Pathein, Irrawaddy Division. Listed
owner and partner: U Zaw Win Shaine, owner of Ayeyar Hinta Co., Ltd. -- Lone Khin Jade Mine; Phakhant, Kachin State. -- Max Myanmar Cement Factory; near Taung Phila Limestone Deposit,
Leiway Township, Nay Pyi Taw. -- Max Myanmar Concrete Block Factory; Nay Pyi Taw. -- Max Myanmar Rubber Plantation, Belin, Mon State. -- Pinya Manufacturing Co. Ltd.; 37/38 Baw Maw An Twin
Wun Street, Industrial Zone 3, Hlainthaya, Rangoon; phone:
95-1-681-745, 95-1-685-75, 95-1-685-15; fax: 95-1-680-669.
Managing Director: U Kyi Lwin, a.k.a. U Kyan Khinn. Embassy Recommendation ---------------------- ¶6. (C) Zaw Zaw is one of several mid-level cronies actively
attempting to curry favor with the regime and to use his
government ties to expand his commercial enterprises. He,
his family, and many of his companies are already listed on
OFAC’s targeted sanctions list. Embassy Rangoon recommends
OFAC also designate the above-mentioned companies and senior
management under the JADE Act. DINGER RANGOON 00000378 003.2 OF 004 ¶6. (SBU) The Burmese government usually releases a
supplementary budget later in the fiscal year reflecting
higher expenditures; its total annual deficits are thus
greater than in the initial official budgets. For example,
the FY08-09 supplementary appropriation added an additional
743.9 billion kyat (approximately USD 743 billion at current
rates) to that year’s budget, raising expenditures by more
than 15 percent over projected totals. ¶7. (SBU) As in previous years, “Government” received the
largest allocation of additional funding (USD 282 million),
approximately half of FY08-09’s supplemental appropriation.
Businessmen explained that money likely funded ongoing
construction costs in Nay Pyi Taw, as well as other government
infrastructure projects. SOEs received the second largest
amount - 185 billion kyat (USD 185 million), a 65 percent
budget increase. The Ministry of Defense received an additional
9 billion kyat (USD 9 million) and the Ministry of Finance
received 53 billion kyat (US 53 million). In response to
Cyclone Nargis, the GOB allocated an additional 77 billion
kyat (USD 77 million) to the Ministry of Agriculture while
the Ministry of Social Welfare received 44 billion kyat
(USD 44 million). Weak Revenue Generation ----------------------- ¶8. (SBU) During last year’s IMF Article IV consultations,
IMF representatives highlighted the need for the Burmese
Government to improve its tax administration and modify its
widespread discretionary tax exemptions. According to IMF
officials, the GOB replied that one of its goals is to
reduce the budget deficit by addressing the main causes:
weak revenue collection, losses from inefficient SOEs and
SEEs, unrestrained government spending, and budget expenditures
for non-productive uses, such as defense and construction.
However, business contacts reported that the GOB did little to
modify its tax structure in 2008, leading them to question the
government’s prediction of a 27 percent increase in tax
revenues in FY09-10. ¶9. (SBU) Over the past few years, authorities have attempted
to increase revenues through stricter enforcement of income
taxation and through an informal 2007 Customs valuation rate
hike from 450 kyat/$1 to between 800 and 1200 kyat/$1, depending
on the product and its origin. While GOB officials privately
argue that this rate hike indicates an effort to reconcile the
various exchange rates, it instead complicates Burma’s already
complex informal exchange rate system. ¶10. (SBU) According to the FY09-10 budget data, most SOEs will
operate at a loss. Even with extractive industries presumably
posting sizable profits, the net SOE loss is predicted to be
roughly 484 billion kyat (USD 484 million) -- though this
estimate could be too low. State-Owned Enterprises registered
a loss of 601 million kyat in FY08-09, substantially more
than GOB initial estimates of 450 billion kyat. According to
budget publications, SOEs lost 800 billion kyat in FY07-08,
436 billion kyat in FY06-07, and 549 billion kyat in FY05-06. ¶11. (SBU) Corruption at all levels remains a problem in Burma,
which affects the GOB’s ability to collect revenue. RANGOON 00000378 004.2 OF 004 While the government cracked down on crooked Customs officials
in 2006, the payment of bribes on the borders continues,
according to business contacts. Corruption is also rife in
other GOB agencies, including the Internal Revenue Department,
Immigration, and the Yangon Central Development Committee. Comment ------- ¶12. (SBU) While the published budget provides a general
guideline of how the GOB will allocate its funds, the lack
of details in the document -- and the general unreliability of
GOB statistics -- make it impossible to obtain an accurate
picture of Burma’s fiscal situation. This problem is compounded
by the lack of spending discipline by senior leaders, who will
likely continue allocating money for pet projects with little
oversight or regard for planned appropriations. Despite the GOB’s
stated intention to reduce the budget deficit, another increase
is far more likely due to uncontrolled spending, SOE losses,
and the lack of tax reform. Burma’s economic future remains troubled. DINGER
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