Cablegate: Burma: How the Well-Connected Make Money

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SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS; PACOM FOR FPA, TREASURY FOR OASIA:AJEWELL

E.O. 12958: N/A
TAGS: ECON PGOV SNAR BM
SUBJECT: BURMA: HOW THE WELL-CONNECTED MAKE MONEY

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1. (SBU) Summary: Aik Htun acknowledged that his position
stems from his comfortable relations with major government
and business players built on 30 years of experience working
deals through the regime. He denied the widespread
allegations connecting him to narcotics trafficking and money
laundering. Aik Htun enjoys the regime's confidence, and
benefits handsomely from its business. Nevertheless, Aik
Htun shared with us many of the same complaints we hear from
less well-connected business reps about Burma's poor business
climate and its citizens' low purchasing power caused by
regime policies. Although he may lose some business
opportunities from the GOB's economic mismanagement, he
continues to profit from close ties to the SPDC. End summary.

2. (U) Aik Htun employs 3,000 workers in multiple companies
in the construction, real estate, retail trading, agriculture
and concrete sectors, and has profited handsomely from good
relations with regime leaders. Signs for his brand of
concrete, High Tech, adorn most large construction projects
in Rangoon, while his construction company, Olympic, built
major projects in Nay Pyi Taw and Rangoon. On January 23,
Aik Htun described for econoff his perspective on the current
economic climate.

Even Cronies Feel the Pinch
---------------------------
3. (U) The move to Nay Pyi Taw caused real estate values and
consumer demand in Rangoon to plummet, Aik Htun said. Some
of the downturn was offset for his businesses by new
contracts for construction services and supplies in the new
capital. Massive construction in Nay Pyi Taw created huge
demand for his businesses and continues to drive increased
sales. Private construction companies bought almost all
their concrete for projects in Nay Pyi Taw from Aik Htun's
High Tech. When government officials could not obtain
adequate cement from state factories for their own projects
in the capital, they also bought from High Tech.

4. (U) Aik Htun imports materials for his concrete from
Thailand and Malaysia. High Tech is one of only a few
companies granted permits to import cement. He receives
preferential treatment in the import process, and said he has
experienced no delays or difficulties, either in obtaining an
import license from the Trade Policy Council chaired by Vice
Senior General Maung Aye, or in customs clearance procedures.
This contrasts sharply with the experiences of less
well-connected businesspersons, who complain about routine
delays, unpredictability, and corruption in the import
license and customs clearance processes.

5. (U) Aik Htun's construction and real estate development
firms -- Olympic, Golden Tristar, and Shwe Taung -- built
many of the largest projects around Rangoon, including
housing complexes, shopping malls, schools, and medical
facilities, as well as some buildings in Nay Pyi Taw. He
said the government instructed private firms to construct
buildings in the new capital but paid very little for the
work. He preferred not to build in the new capital, but
added that construction firms had no choice but to obey. He
told how he lost a great deal on money on an earlier
government road project, when the GOB reneged on a commitment
to allow builders to charge tolls to recoup their costs. The
government plans to build a new highway from Rangoon to Nay
Pyi Taw, he said, but will use state-supplied cement. Other
builders tell us that construction materials in Nay Pyi Taw
are now more expensive than those in Thailand due to high
demand.

6. (U) Describing the construction industry overall, Aik
Htun said the GOB does not award projects through a tender

RANGOON 00000114 002.2 OF 003

process, but rather, gives contracts to its favored firms,
such as Tey Za's Htoo Construction company. While Aik Htun
claimed he did not have close personal ties to regime
leaders, he has received approvals to develop many prime
residential and commercial real estate locations in Rangoon.
He said his Rangoon real estate development business slowed
considerably after the capital moved to Nay Pyi Taw, and that
many firms have halted construction projects until the market
turns up again. Purchasing power is low, according to him,
and he can sell a 1,000 sq. ft. apartment in one of his
buildings for only $5,000-10,000, when he had expected to
offer them for $20,000 - $30,000. His trading business,
which mostly exports marine products, however, still earns
strong profits. He predicted that current economic
conditions would continue through 2007, but that the
situation might begin to improve in a few years.

7. (SBU) Aik Htun is Chairman of the International Business
Promotion Center (IBPC), a group of "the top 50 companies in
the country," he claimed. IBPC activities primarily support
visiting foreign delegations and the travel of Burmese
business delegations to other countries. Relations with
Chinese business interests are the most active, he said,
through investments, joint ventures, trade and other business
deals, and many IBPC members are second and third generation
Chinese. Acknowledging this importance, the IBPC 2005 and
2006 Directories listed members' names in both English and
Chinese. While many members are leaders in their industry,
most are not in Aik Htun's league.

Bio Information
---------------
8. (U) Aik Htun was born in 1948 in Mine Kaing, southern
Shan State. He attended middle school in Mandalay and high
school in Rangoon. Although he has been called by some a
"shadowy figure who emerged from in the early 1990's from
Kokang," Aik Htun said he moved to Rangoon permanently in
1970, and began work as a driver, biscuit shop owner, and tea
trader, before he moved into agricultural trade, attracting
investors and traded products between Burma, Thailand and
China. In 1991, he established Olympic Company with three
other investors and retained 50% ownership. In the
beginning, Olympic imported cars and other commodities and
exported marine products and timber. The government,
however, banned private exports of timber a short time later.

9. (U) In the mid-90s, Aik Htun moved into the property
development business and constructed many large commercial
and residential projects, including the first shopping center
in Rangoon and some of its first housing developments. Close
ties with the SPDC government were required to gain approval
for all large projects, and the regime handed Aik Htun some
of the most profitable properties. At the end of 1996,
Olympic had invested $700 million in property development
projects, and Aik Htun said he earned substantial returns.
Olympic is still considered one of the most successful
construction firms in the country.

10. (U) With eight other shareholders and approximately $1
million in capital, he opened Asia Wealth Bank (AWB) in 1995
and become its Vice Chairman. Annual profits rose steadily
from $108,000 in 1995-96, and by 2000-01, AWB was the largest
private bank in the country, with profits of $6.7 million,
deposits of $333 million, and assets worth $367 million.
Suspicious that the bank was laundering proceeds from drug
traffickers and organized crime groups in Shan State, US
Treasury designated Asia Wealth Bank a "Financial Institution
of Primary Money Laundering Concern" in 2003, and cited Aik
Htun as "having connections with the narcotics trade".
Treasury rules prohibited covered institutions from

RANGOON 00000114 003.2 OF 003

maintaining banking relations with Asia Wealth, and in 2005,
the GOB closed the bank for violations of banking
regulations. At a November 29, 2006, press conference,
Police Chief Khin Yi stated, "though the investigation was
unable to discover concrete evidence of money laundering,
circumstantial evidence...indicates the possibility, and
accordingly...(the bank license) was revoked."

11. (SBU) Much speculation surrounds Aik Htun, including
claims that has close ties to drug traffickers, who use
Olympic to launder money. Some local business
representatives believe Aik Htun could not have amassed such
profits at AWB without drug money. Law enforcement agencies
continue to suspect he was a drug trafficker, despite his
claims to the contrary. Others believe he is a front-man for
Chinese businessmen, and that AWB provided a comfortable
avenue for Chinese investors to enter the Burmese market and
earn significant returns.

12. (SBU) Aik Htun clearly enjoys the support of SPDC
leaders, but does not have the close relationship enjoyed by
the most privileged, such as Tey Za. Aik Htun complained
about treatment he received from the regime when officials
closed AWB and banned most private companies, including his
own, from the timber export trade. When asked why some
private businesses, e.g., Htoo Trading, continued, Aik Htun
said that only very close friends of the regime can export
timber now. Despite these setbacks, he has managed to amass
a great deal of wealth with GOB backing, and has good access
to regime leaders.

13. (SBU) Aik Htun meets the criteria in the Presidential
Proclamation on Burma that restricts visa issuance. He is
annoyed that he is still subject to U.S. provisions, while
the EU lifted its visa ban on him when AWB closed. He seeks
every opportunity to profess his innocence to Embassy
employees. Aik Tun's son, Aung Zaw Naing, and one daughter
work in his family businesses. His second daughter studies
business. His wife's family has moved to Hong Kong, and his
family travels there regularly. He also maintains residences
in Rangoon and in his home village in Shan State.

14. (SBU) Comment: Business representatives, such as
individual business leaders, the IBPC, and the Myanmar
Chamber of Commerce and Industry have no power to influence
government policy makers. Rather, it is the close
relationships nurtured with regime leaders that allow top
firms to dominate the economy as they are awarded coveted
construction contracts, export and import licenses, and
purchase orders to supply the productive sectors, which are
almost entirely controlled by SPDC leaders. End Comment.
VILLAROSA

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