[Myanmar] Crony Capitalists Vying For Oligarchy

[News_Editor]

A petrol station of the Max Myanmar Group owned by Burmese tycoon Zaw Zaw. (Photo: Reuters)

Unless Burma’s transition from a buttoned-down military dictatorship to a more liberal market economy is well managed, the country could end up going down the path taken by oil-rich Nigeria.

Instead of a nationwide share-out in wealth creation and the emergence of a business-owning middle class, Burma could end up being run by oligarchs—super-rich businessmen with close links to the ruling elite.

That is the worry voiced by American strategist and former Washington government expert Brian P. Klein, a former director of Southeast Asia affairs at the Office of the United States Trade Representative which advises the White House.

“If the former military leaders who dominate the government, many in their 50s and early 60s, have their country’s future in mind, then policies focusing on supporting a vibrant middle class will help [burma] far more than a short-term race to riches,†says Klein in a commentary for the Council on Foreign Relations in the US.

His warning comes as one of Burma’s leading controversial junta-era big business figures, Zaw Zaw, appears to be making plans to reposition his companies in the new Burma, despite remaining on a US government blacklist.

More than any of the other so-called crony capitalists whose wealth ballooned under the junta generals, Zaw Zaw is preparing himself for the country’s sharp change in political and economic direction.

His business empire built around the Max Myanmar Group has previously focused on construction infrastructure, rubber, timber and gems. Zaw Zaw had concessions to help build Naypyidaw, and his influence also won him the Burmese concession to partner major Thai construction group Italian-Thai Development in the grand plan for a new economic zone to be built around Dawei (Tavoy) on the southeast coast.

But he has since let it be known quietly that he thinks big-scale construction projects are passé and is instead gearing up for an expected burgeoning of service industries such as tourism and finance.

Zaw Zaw’s official reasoning for dramatically scaling down Max Myanmar’s involvement in the multibillion dollar Dawei port-industry development is to allow other companies to participate.

However, in an interview with Reuters in April, Zaw Zaw signalled his likely withdrawal from an industry which made his fortune during the junta years by saying that construction contracts were a “big headache.â€

“We have to look at which business is good for the future, which business we can partner with foreign companies,†he told the news agency.

It appears that one of those new lucrative businesses is tourism as a formerly locked-up Burma opens its doors to potentially unlimited travel dollars.

With quality accommodation for foreign visitors in desperately short supply, Zaw Zaw is building a 400-room hotel in Rangoon and is seeking a foreign partner to provide it an international brand image.

The Max Myanmar boss is also focusing on banking and retail services such as roadside fuel stations in anticipation of a rise in vehicle ownership and greater mobility. Like other members of the crony elite, Zaw Zaw secured a big step-up into both of these businesses when he was awarded licences by the Than Shwe regime in a disposal of state assets two years ago just ahead of the political changes.

He was given the right to start up a private banking enterprise, the Ayerwaddy Bank. It opened in mid-2010 but will begin to come into its own as Burma’s financial system is reformed amid plans to establish a stock exchange by 2015.

His concession to retail vehicle fuels in an expanding economy dovetailed nicely with his domination of the auto import market in Burma, said Reuters.

Reports suggest that the expansion of Zaw Zaw’s fuel station chain—conveniently ahead of plans by foreign firms such as Thailand’s energy giant PTT to enter the Burmese market—is linked to the curious reverse takeover for US $47 million of a Singapore company, Aussino Group.

Fashion textiles business Aussino will absorb a Max Myanmar subsidiary, Max Strategic Investments (MSI), which would eventually see the Singapore bed linen specialist become a petrol and diesel retailer.

In the process, which could take months in view of Zaw Zaw’s US blacklisting, the Burmese tycoon would gain some respectability with a listing on the Singapore Stock Exchange. Aussino is currently quoted on the exchange.

“We will have to conduct a very rigorous due diligence exercise on MSI, including its controlling shareholders,†Mark Liew, a senior manager at Singaporean asset management firm PrimePartners told the city-state’s Channel News Asia.

PrimePartners is advising Aussino on how to handle the deal.

“But simply because the promoter, Zaw Zaw, is on the [uS banned] list, it does not disqualify MSI from doing its listing in Singapore,†Liew said. “It is an issue that we will have to address, but we don’t think that it is an issue that cannot be addressed.â€

Zaw Zaw has been on the US sanctions list for more than three years and there is little evidence that it has done him, or any of the other 20 or so businesspeople who were close to the Than Shwe regime, much harm, at home at least.

American firms hoping to benefit from Washington’s suspension of the main economic sanctions against Burma will still have to avoid him and the other cronies and their interweaving business empires—a difficult task in a country with so little economic diversity.

When US Secretary of State Hillary Clinton visited Naypyidaw earlier this year she stayed at the Thingaha Hotel, owned by Chit Khaing, another “oligarch†who has been on various US and European blacklists linked to the Than Shwe era.

“Unless the transition from pariah state to fledgling, albeit limited, democracy is well managed, [burma] may end up dominated by oligarchs,†says Klein. “A host of hard-to-control problems that only exacerbate social and economic inequality would follow.

“[burma] has arrived at the crossroads where fast growth and balanced growth diverge … policies focusing on supporting a vibrant middle class will help Burma far more than a short-term race to riches,†he added.

Source: Irrawaddy.org