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Viewing cable 09RANGOON378, BURMA: UPDATE ON CRONY ZAW ZAW’S ACTIVITIES

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Reference ID Created Released Classification Or

09RANGOON378 2009-06-19 05:05 2010-12-06 15:03 CONFIDENTIAL Em

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
Currently released so far... RUEHCHI/AMCONSUL CHIANG MAI 2221
1060 / 251,287 RUEHCI/AMCONSUL KOLKATA 0691
RHHMUNA/CDR USPACOM HONOLULU HI
Articles RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 2527
Brazil RUEHGV/USMISSION GENEVA 4533
RUEATRS/DEPT OF TREASURY WASHDC
Sri Lanka RUEKJCS/DIA WASHDC
United Kingdom RUEAIIA/CIA WASHDC
Sweden RHEHNSC/NSC WASHDC
Editorial RUEKJCS/SECDEF WASHDC
United States
C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000378
Browse latest releases
SIPDIS
2010/12/07
2010/12/06 STATE FOR EAP/MLS, INR/EAP, EEB/TFS
2010/12/05 PACOM FOR FPA
2010/12/04 TREASURY FOR OASIA, OFAC
2010/12/03 EO 12958 DECL: 06/19/2019
2010/12/02 TAGS ECON, EFIN, ETRD, PREL, PINR, BM
2010/12/01
2010/11/30 SUBJECT: BURMA: UPDATE ON CRONY ZAW ZAW’S ACTIVITIES
REF: A. 07 RANGOON 1107 B. RANGOON 298 C. RANGOON 355 D. RANGOON 3
2010/11/29 RANGOON 00000378 001.4 OF 004
2010/11/28
Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.
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Summary
66 72 75 79 86 88 89 90 -------
03 04 05 06 07 08 09 10
¶1. (C) Regime crony Zaw Zaw continues to expand his businesses in Bu
addition to Max Myanmar Group of Companies, Zaw Zaw owns a beverage b
Browse by origin company, a cement plant, a trading company, a jade mine in Phakhant,
plantation in Mon State, and a professional soccer team. Embassy Rang
A B C D F H I J recommends OFAC add Zaw Zaw’s additional companies and key management
K L M N O P R S (listed in paragraph 5) to the targeted sanctions list. End Summary.
T U V W Y
Additional Business Ventures
Browse by tag ----------------------------

A B C D E F G H ¶2. (C) Zaw Zaw, one of Burma’s up-and-coming cronies, continues to e

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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
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¶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
Cable Viewer http://213.251.145.96/cable/2009/06/09RANGOON378.html

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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