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Cablegate: Developing Economy of Taunggyi

VZCZCXRO1157
RR RUEHCHI RUEHDT RUEHHM RUEHNH RUEHTRO
DE RUEHGO #0186/01 0710730
ZNR UUUUU ZZH
R 110730Z MAR 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 7283
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1776
RUEHBY/AMEMBASSY CANBERRA 0984
RUEHKA/AMEMBASSY DHAKA 4788
RUEHNE/AMEMBASSY NEW DELHI 4536
RUEHUL/AMEMBASSY SEOUL 8075
RUEHKO/AMEMBASSY TOKYO 5636
RUEHCN/AMCONSUL CHENGDU 1382
RUEHCHI/AMCONSUL CHIANG MAI 1451
RUEHCI/AMCONSUL KOLKATA 0240
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3561
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1399
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000186

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958:N/A
TAGS: ECON EFIN PREL BM
SUBJECT: DEVELOPING ECONOMY OF TAUNGGYI

Ref: 07 Rangoon 817

RANGOON 00000186 001.2 OF 003


1. (SBU) Summary. Taunggyi, the capital of Shan State, is one of
the fastest growing cities in Burma. Unlike the rest of Shan
State's population, 90 percent of whom work in the agricultural
industry, Taunggyi's 200,000 people work in the industrial, trade,
and services sectors. Taunggyi's economy centers around the trade
of agricultural products, export of rubies from the nearby Mineshu
mines, and the production of cars and machinery from the nearby
industrial zone. According to local businessmen, Taunggyi's economy
has grown by more than 20 percent in the past few years, with new
businesses opening monthly. Despite Taunggyi's economic growth,
only the wealthy - Chinese-Burmese businessmen and Chinese investors
- can afford luxuries, such as cars, jewels, and entertainment. End
Summary.

Vibrant Capital of Shan State
-----------------------------

2. (SBU) The Shan State capital of Taunggyi, located more than 200
miles northeast of Rangoon, is home to a population of approximately
200,000 people. While Shan State is known best for its agricultural
products, which are sent to cities throughout Burma as well as
overseas, Taunggyi is anything but an agricultural city. Instead,
the Shan State capital's economy focuses on trade, manufacturing,
and services. These business ventres provide the some Taunggyi
residents - mainlyChinese investors and Chinese-Burmese businessmen- with a sizeable income compared to average Burmee. Unlike other
cities in Burma, Taunggyi is hoe to one movie theater, an Asia
Light grocery stre (owned by Steven Law), car dealerships, several
upscale restaurants, a winery (owned by Germans),and several music
and jazz cafes - all frequente by wealthy Burmese and Chinese
businessmen.

. (SBU) Although the economy of Shan State depens upon
agricultural production, the majority of usinesses in Taunggyi are
trading companies and/or wholesalers, many of which specialize in
shippig agricultural products throughout Burma and to ovrseas
destinations. According to Kanbawza Bank wner Aung Ko Win, more
than 50 percent of busineses in Taunggyi act as middlemen for Shan
State farmers. Those not involved in agricultural trade wrk with
the mining industry, purchasing rubies and other gemstones from
companies working in the Mineshu mines (100 miles outside of
Taunggyi). Many of the gem traders sell the rubies directly to
jewelry stores in Rangoon, although several Chinese-Burmese
companies cut the stones and sell them directly to tourists and
Taunggyi residents. The Mineshu mines continue to produce quality
rubies, making the gem industry one of the fastest growing sectors
in Taunggyi, Kanbawza Bank consultant U Nyo Myint told us.

4. (SBU) In the past five years, the number of businesses in
Taunggyi has increased by 20 percent, with new businesses opening
monthly, Kanbawza Bank consultant U Nyo Myint told us.
Entrepreneurs and the younger generation continue to find new ways
to do business, often looking to China for business opportunities.
The computer industry is one of the city's hottest sectors, and
people of all ages flock to computer training courses to improve
their computer skills. Taunggyi also has a vibrant internet
industry, and people visit the 15 internet cafes to check email and
use chat programs.

5. (SBU) The largest single business in Taunggyi is Kanbawza Bank,
with more than 183 employees working in the three-floor bank
building. According to Aung Ko Win, the Taunggyi branch of the bank
is its third most profitable branch, after Rangoon and Mandalay.
The bank boasts more than 20,000 different accounts, held by both
individuals and businesses, and has more than 200 safe deposit boxes
available for rent. Trade accounts for the majority of the bank's

RANGOON 00000186 002.2 OF 003


business, as local businesses use the bank for their transactions in
Rangoon and Mandalay. Additionally, the bank provides credit to
businesses, loaning between 10,000-1 million kyat (between $9-950)
per client.

Developing the Industrial Zone
------------------------------

6. (SBU) Taunggyi is also home to one of Burma's 18 industrial
zones (Reftel). Currently, 720 businesses operate in the Aye Thar
Yar Industrial Zone, although most are small operations with less
than 100 workers, rather than large factories found in Rangoon and
Mandalay. Workers' salaries are in line with national salaries,
with skilled laborers working 48 hours, 6 days a week and earning an
average salary of 30,000 kyat ($25) per month. Most businesses in
the Aye Thar Yar Industrial Zone work in the manufacturing sector,
building cars and light trucks, heavy machinery, spare parts, and
iron welding. Several companies process food for both human and
animal consumption. According to U Aung Too, General Manager of Mai
Tong Shan Star car factory, the industrial zone continues to expand,
with new factories opening each year. The GOB touts the Taunggyi
industrial zone as a success, noting that the development of the
industrial sector provides employment to more than 7,000 workers.

Enter the Chinese
-----------------

7. (SBU) Although Taunggyi has a relatively small population of
Chinese merchants and Chinese-Burmese businessmen compared to
Mandalay and Lashio (in Northern Shan State), the number of Chinese
businessmen living in Taunggyi has increased in the past five years,
U Nyo Myint told us. Accurate immigration statistics are
unavailable, he explained, but he estimated that the Chinese
population has increased approximately twenty percent since 2002.
Indeed, Chinese influence in Taunggyi is apparent, as many store
fronts have names in slogans in both Chinese and Burmese, there are
several Chinese schools in the city, and we saw five Chinese temples
on the main road of Taunggyi alone.

8. (SBU) According to Aung Ko Win, Chinese businessmen and
Chinese-Burmese entrepreneurs are active in the hotel and tourism
industry, own restaurants and computer stores, and work as gem
merchants and traders. Chinese businessmen frequently visit
Taunggyi, looking for investment opportunities in the gems and
mining sectors, he continued. The Regional Commander often meets
with them to encourage increased investment and partnerships between
Burmese and Chinese companies. During our trip, we observed two
Chinese businessmen visiting with Chinese-Burmese traders,
discussing new markets for Burmese agricultural products. U Tun
Aye, member of the Southern Shan State Chamber of Commerce, told us
that agricultural trade between Shan State and China has increased
during the past five years, as Burmese traders export sesame,
ginger, garlic, and onions to China.

Comment
-------

9. (SBU) Taunggyi's economic growth shows the importance of Chinese
businesses in Burma's economy. The wealthiest people in Taunggyi
either are of Chinese descent or are Chinese businessmen, speak
Chinese, or have business dealings with companies in China.
Although many of the businessmen we met spoke positively about
Chinese investment in Taunggyi, we observed some resentment of the
"rich Chinese" among the poorer workers in the industrial zones.
Resentment against the Chinese is growing throughout the country as
the Burmese see the Chinese move in and become wealthy while most
Burmese find it increasingly difficult to survive. Anti-Chinese
sentiment adds to the popular discontent against continued military

RANGOON 00000186 003.2 OF 003


rule in Burma.

VILLAROSA

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