Smart sanctions target Myanmar tycoon
By Brian McCartan
CHIANG MAI - The United States Treasury Department announced earlier this month
that it will expand the personal and business sanctions it imposed on
individual family members of Myanmar's ruling State Peace and Development
Council (SPDC) last year. Those included among the newly blacklisted were
members and individuals associated with businessman Tay Za's state-linked
commercial empire.
The recent sanctions are part of Washington's new so-called "smart sanctions"
regime, designed to target specific generals and their associated business
interests rather than the entire population. Before this month's announcement,
the US had
imposed sanctions on 30 individuals and seven businesses connected to the
junta.
Designed in response to the junta's continued human rights abuses and political
repression, including last year’s brutal crackdown on anti-government street
protests, the sanctions in effect freeze any assets of targeted individuals or
companies which might have parked them in US financial institutions and
prohibits any financial or commercial transactions between American individuals
and Myanmar firms named in the sanctions order. The persons named are also
barred from entering the US .
The latest set of sanctions specifically target Tay Za's Htoo Trading Company
Limited, also known as the Htoo Group of Companies. Tay Za was described by the
US Treasury's Office of Foreign Assets Control (OFAC) as "an arms dealer and
financial henchman of Burma's [Myanmar’s] repressive regime". In announcing the
latest sanctions, White House press secretary Dana Perino said on February 4
that "the actions of [junta leader] Than Shwe and his associates remain
unacceptable to all those who value freedom."
Tay Za, his wife, Thida Zaw, his eldest son Pye Phyo Za and five of his
companies were previously named in the US sanction order of October 18, 2007.
The new sanctions add Tay Za partners Aung Thet Mann, Thiha and U Kyaw Thein,
as well as the Htoo Group of Companies, which includes Ayer Shwe Wah Company
Ltd, Myanmar Avia Export Company Ltd and Pavo Aircraft Leasing Company Ltd, to
the list.
Aung That Mann, the son of General Thura Shwe Mann who is the Joint Chief of
Staff of the Myanmar armed forces and the third-ranking member of the SPDC, is
also a director of Ayer Shwe Wah Co Ltd and Htoo Trading Company Ltd. Thiha,
meanwhile, is Tay Za's brother and business partner, as well as a director of
the Htoo Group of Companies and Htoo Trading Co Ltd.
U Kyaw Thein is a Singapore resident and known to manage Tay Za's business
offices there. He currently serves as a director for Air Bagan Holdings Company
Ltd, Htoo Wood Products Company Ltd, Pavo Aircraft Leasing Co Ltd and Pavo
Trading Co Ltd. Also named in the new sanctions order were Khin Lay Thet, wife
of General Thura Shwe Mann, Myint Myint Ko, wife of Construction Minister Mon
Saw Tun, Tin Lin Myint, wife of Lieutenant General Ye Myint, the head of
Military Affairs Security, and Myint Myint Soe, wife of Foreign Minister Nyan
Win.
Junta's helping hand
Tay Za and his business empire have long been in the US's sights, due to the
tycoon's extraordinary wealth and perceived influence with Myanmar's ruling
Senior General Than Shwe and General Thura Shwe Mann, as well as other
high-ranking members of the military regime. Born in 1964, the 43-year-old Tay
Za originally aimed at a career in the military, for which he attended the
Defense Services Academy .
He dropped out before completing his studies in 1987 to elope with his
girlfriend, Thida Zaw, and subsequently took over her family's rice milling
business. He eventually set up his own company in 1990 to export timber with an
initial capital investment of US$333,333. By cultivating connections with
senior generals and government officials, some of whom he met during his time
at the academy, Tay Za gained logging rights to vast swathes of virgin hardwood
forest, including areas of the Karen State, Pegu Division and Tenasserim
Division which previously were under the control of the rebel Karen National
Union (KNU).
According to opposition groups, Tay Za reportedly maintains most of his wealth
in Singapore bank accounts. He is known to own several luxury apartments in the
city-state, where his sons, Pye Phyo Za and Htet Tay Za, both live and attend
elite private schools. Htet Tay Za attends the United World College of South
East Asia, one of Singapore's most expensive.
Apart from expensive tastes, Tay Za is also possessed by keen business acumen.
The businessman has greatly diversified his business empire since his initial
investment in timber exports. Through the Htoo Trading Company Ltd, his first
company and the group's flagship, his business interests now encompass property
development, construction, palm oil production, arms dealing and aviation.
He is also now bidding to move into telecommunications and banking. Htoo
Trading is currently Myanmar's fifth largest exporter, with official earnings
of US$65.1 million in the 2006-2007 fiscal year. The Ministry of Commerce's
website lists the company as the second largest in export earnings of the top
20 import-export companies in Myanmar in 2006-2007.
Htoo Trading was one of two main companies granted contracts for the
construction of Naypyidaw, the new capital city where in late 2005 the junta
abruptly moved all government offices from the old capital of Yangon. Another
controversial Htoo Trading construction project was the 60-meter-high tower and
nearby 150-room hotel in Bagan, the site of a famous temple complex and
renowned international tourist attraction. The tower came under harsh
international criticism by UNESCO and others for damaging the aesthetics of the
site.
The company's timber business has also been criticized for causing the
large-scale destruction of Myanmar's forests. A 2002 report by environmental
watchdog Global Witness stated that the Htoo Trading Company's logging
operations were largely responsible for much of the environmental degradation
in the country. The company has also been known to provide heavy machinery to
smaller logging operations, which in turn sell their logs to Htoo Trading for
exports. (The company also has one of the few government-granted export
licenses for raw timber.)
Since 2006, Htoo Trading has become increasingly involved in jade mining in the
Hpakant area of the northern Kachin State. The move has been done on the quiet
with the company gaining mining blocks through cooperative agreements with
other smaller mining companies. In a move similar to his logging business
deals, Htoo Trading provides the smaller operators with heavy machinery in
exchange for stones. In what may be designed to show a degree of corporate
social responsibility, according to the Kachin News Agency, Tay Za has provided
each family displaced by the mining operation one million kyat (US$755) in
compensation.
More recently, Htoo Trading has negotiated a concession from Alcatel Shanghai
Bell to cooperate on projects in the new Yadanabon cyber-city, currently under
construction in the vicinity of the new capital. The company has submitted a
proposal to acquire four acres of land for GSM telecom services and recently
submitted a proposal with Russia's CBOSS to acquire an "incubation center for
prepaid software", also in Yadanabon.
The company was recently granted a license to import fuel directly as a part of
the SPDC's efforts to privatize the fuel industry. In pursuit of that plan, the
junta rolled back fuel subsidies last August, which set in motion the mass
anti-government protests the junta cracked down on with brutal force.
Another of Tay Za's business concession gems is Air Bagan, Myanmar's first
privately invested airline and currently the country's third largest after Air
Mandalay and Yangon Airways. The budget airline initially flew only
domestically; it added international flights in 2007, first in May to Bangkok,
then in September to Singapore. Since then it has added routes to China,
Cambodia, and South Korea and has announced interest in establishing routes to
Osaka, Dhaka and Chennai.
Tay Za has several businesses in Singapore. Htoo Wood Products sells furniture
and other wood products. Pavo Trading is involved in the selling of wholesale
cut timber and plywood products and is involved in the frozen seafood business,
which one business listing site claims has annual sales in the US$10 million to
US$50 million range and is seeking distributors in China.
In Myanmar, Tay Za's other companies include Htoo Transportation Services,
which specializes in heavy duty land and marine transport, and he has built the
high-class Myanmar Shopping Center in Yangon, which sells top international
brands to Myanmar's military elite. Together with a French businessman, Tay Za
opened the Le Moliere French restaurant in Yangon in October 2004.
Controversial dealings
Tay Za has over the years endeavored to put a friendly face on many of his
business activities. He has claimed publicly that his companies have over the
past decade donated US$6 million to various social causes, including outlays
for schools, hospitals and pagodas. Funds have also gone to the sponsorship of
athletics and sports competitions and to scholarships for students to study
overseas. Air Bagan reportedly puts aside US$1 from each international ticket
and 500 kyat from each domestic ticket to fund future social projects.
On the other hand, several of his businesses have also propped the military
government which continues to enrich itself at the population's expense. In
particular his Yangon-based Myanmar Avia Export Company Ltd has come under
scrutiny and criticism. Tay Za apparently began the company in 1993 in order to
supply spare parts to the military for their aircraft. The US Treasury, along
with many independent Myanmar analysts, claim that Tay Za has since used the
company to buy aircraft and helicopters for the Myanmar Armed Forces.
Through Myanmar Avia Export Co Ltd, Tay Za is Myanmar's representative for
Russia's major state-owned military aircraft manufacturer MAPO, of which MiG is
a subsidiary, and for Russian helicopter company Rostvertol, which in 2006
merged with Mil and Kamov to become Oboronprom Corporation. Opposition groups
and military analysts say Tay Za’s position at Avia Export made him
instrumental in the military's purchase in 2001 of 10 MiG 29 jet fighters
valued at US$130 million. Tay Za was also included in a delegation headed by
SPDC number two and head of the army, General Maung Aye, when he visited Russia
to reportedly discuss arms purchases in 2006. Tay Za, for his part, has
consistently denied having any role as an arms broker for the SPDC.
Tay Za is known to have especially close ties to junta leader General Than Shwe
and has more recently cultivated a personal relationship with SPDC No 3 and
Joint Chief of Staff, General Thura Shwe Mann. General Shwe Mann is widely seen
as being groomed as Than Shwe's eventual successor and he currently holds a
position on the board of directors of Htoo Trading, as does his son, Aung Thet
Mann. Aung Thet Mann's company, Ayer Shwe Wah, came under the wing of Htoo
Trading in 1997 and the commercial relationship has been profitable for both
parties.
Tay Za's rise to prominence, however, has not come without controversy. Many
Myanmar businessmen are known to resent his close relations to senior junta
members - especially Generals Than Shwe and Shwe Mann - and the exclusive
business opportunities he has allegedly cornered in various sectors through
those personal ties. At the same time, he also has a potentially formidable foe
in General Maung Aye, the SPDC’s second-ranking official.
In 2006, Maung Aye used his position as chairman of the Trade Policy Council to
instruct the Minister of Finance and Revenue to raise taxes on several
businesses owned by Tay Za. A move to examine the accounts of Tay Za's
companies by state auditors, however, was apparently blocked by friends in high
places. Prior to this, in 2005, Tay Za's offices were searched, though no
wrongdoing was uncovered. It's unclear how his businesses might be affected if
Maung Aye rather than Shwe Mann takes power after the ailing Than Shwe fades
from the scene.
The US hopes that by targeting Tay Za's businesses it will - by association -
financially hit the SPDC. So far, the biggest impact the new sanctions imposed
last October have had is on Air Bagan, which was informed at the time by its
Singapore bank that it will no longer deal with the company. Although
Singaporean banks are not legally obliged to support US financial sanctions,
they apparently preferred not to risk their international reputation to
maintain relations with Tay Za.
The banking cut-off made it difficult for the airline to purchase spare parts
and pay staff, according to news reports. Those troubles were compounded by
falling bookings in the wake of the September crackdown in Myanmar and on
November 4 the airline was forced to cancel its Singapore flights. Singapore
Airlines, which had provided engineers to the airline, recalled them in
November.
Tay Za, at the time condemned the sanctions as "wrongful". At a gathering for
the third anniversary of Air Bagan, he claimed that they would hurt only
working people and would have little effect on the government they targeted. He
conceded that the sanctions had caused "myriad problems" at Air Bagan, but
stated the government owned no shares in the airline. He further said Air
Bagan's capital was in no way related to drug trafficking, arms sales or money
laundering and went on to promise to "tackle sanctions by fair and rightful
means".
Strong words, but Tay Za is on a European Union list of individuals blocked
from entry or transit through the EU. His Htoo Trading was targeted by enhanced
EU sanctions imposed against Myanmar in December 2007. His wife, brother and
oldest son are also on the list. In addition, he and his family members are
also named in a December 2007 Canadian Special Economic Measures Regulations
announcement that sanctioned imports and exports from Myanmar, including
investment, transfer of technical data and provisions for the freezing of
assets.
Whether these will be enough to upend Myanmar's top businessman and hit the
ruling junta's finances is yet to be seen. Following a June 2007 meeting
between Myanmar's Minister of Transportation Major General Then Swe and top
business leaders, Tay Za secured a US$10 million loan from the SPDC to buy a
used freighter and a tanker to start Myanmar's first private international
shipping line. He recently reportedly traveled to Pusan, South Korea, to
purchase the ships. Things are even looking up again for Air Bagan, which began
a new route to South Korea in December and has since announced that it will
resume its cancelled Singapore route in September.
Brian McCartan is a Thailand-based freelance journalist. He may be contacted
through brianpm@comcast.net.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road,
Hua Hin, Prachuab Kirikhan, Thailand 77110
