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
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¶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
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¶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
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¶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 billionkyat (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
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¶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 repliedthat one of its goals is to reduce the budget deficit by addressing the main causes:
weak revenue collection, losses from inefficientSOEs 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’sprediction 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
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¶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 oversightor 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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