US embassy cable - 04RANGOON247

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000247 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB, PM 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 02/24/2014 
TAGS: ECON, MCAP, PGOV, MARR, MOPS, BM, Economy 
SUBJECT: BURMA'S PATRONAGE SYSTEM: THE DOG WAGS THE TAIL 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
1. (C) Summary: Burma's military leadership thrives atop a 
flourishing patronage system that dates back hundreds of 
years.  The junta holds the key to huge success or crushing 
failure for those in business, the military, or civil 
service, but only rewards the most loyal and pliable.  Such 
an environment breeds fear, suspicion, and above all 
begrudging support for the status quo.  Unfortunately this 
climate makes it very difficult to expect that the generals 
will be challenged by disgruntled members of the military or 
business community.  After all, who will be the first to risk 
his position and family's future welfare by taking a stand? 
End summary. 
 
Patronage Makes the World Go 'Round 
 
2. (C) As the Burmese kings did for hundreds of years, the 
current ruling military State Peace and Development Council 
(SPDC) relies on a strict system of patronage to secure its 
power.  The regime controls nearly all the country's 
resources and means of production.  Loyalty and political 
"correctness" are rewarded by the junta well before 
competence, strategic vision, upright moral behavior, or even 
seniority.  Everyone knows very clearly that unquestioning 
obedience to the regime's leaders is the difference between a 
lucrative promotion or contract and sudden retirement or 
arrest.  This applies to across ethnic lines to people in the 
three key segments of Burmese society: military, business, 
and civil service (including the government-dominated worlds 
of arts and academia). 
 
3. (C) Ensuring the success of this patronage system, 
particularly in the business world, is what could be called 
the "Rainy Day" strategy.  The business climate and legal and 
regulatory frameworks for entrepreneurs here are so arbitrary 
and protean that most would-be businesspeople find it 
extremely difficult to carry out their affairs in full 
compliance with Burmese law.  Any business would soon go 
under if it abided scrupulously by often conflicting 
currency, tax, registration, trade, and other laws and 
regulations.  However, the regime and its minions, which use 
the Byzantine business climate for rent-seeking purposes, 
turn a blind eye to most transgressions unless they want to 
exert pressure.  At such time Military Intelligence will show 
up with a file full of misdeeds and threaten confiscation 
and/or deportation.  Thus most booming businesses, especially 
those of the cronies, become reliant on pleasing the 
government to keep the money flowing and avoid that midnight 
knock on the door. 
 
4. (C) From our contacts in the three key segments of 
society, it's clear that few in Burma, even those with 
significant wealth and power, are happy with the way the 
country is run.  However, despite some misconceptions to the 
contrary, we see no signs that this unhappiness will 
materialize into open opposition to the SPDC.  Who will be 
the first to risk his position and family's future welfare by 
taking a stand?  After all, the regime's leaders do not rely 
on their business cronies, senior civil servants, and senior 
military officers for support.  It is the other way around. 
 
Business: Offers They Can't Refuse 
 
5. (C) There are many illustrations of the patronage system 
at work in the business world.  The chairman of one of the 
country's largest construction companies told us he spent a 
great sum of money (he wouldn't say exactly how much) to 
upgrade the Rangoon-Mandalay highway under what he thought 
was a build, operate, transfer (BOT) arrangement with the 
government.  When the renovations were complete he was 
summarily dismissed by the senior SPDC leadership, his BOT 
"contract" ignored.  Despite this outrage, he could not 
complain or break with the SPDC because there is no other 
source for preferential future access to prime deals for his 
construction and other businesses. 
 
6. (C) Another example is the case of Senior General Than 
Shwe's current golden boy, U Tay Za.  Tay Za, who despite his 
lack of business knowledge (he is a military academy drop-out 
who pimped for various GOB elite before marrying into a 
venerable Burmese business family), runs a large conglomerate 
active in Burma and Singapore and has been given essentially 
the monopoly on lucrative private timber exporting, brokerage 
services for the GOB's weapons purchases, and other money 
makers.  In exchange, though, "Godfather" Than Shwe will ask 
Tay Za from time to time to personally fund special services 
such as medical trips to Singapore for the generals and their 
families and building and stocking a glitzy "prestige 
project" shopping mall in downtown Rangoon -- selling luxury 
products at prices very few in the country can afford.  In 
addition, there are rampant rumors that Than Shwe has pushed 
Tay Za to the altar with the Senior General's ugly duckling 
eldest daughter, with whom the business mogul has carried out 
a poorly concealed affair.  No matter that the favorite son 
is still married to his first wife. 
 
The Military: Kiss Up, Kick Down 
 
7. (C) There are also examples of the patronage system at 
work in the military ranks.  The highest profile is the story 
of current Prime Minister, and chief of intelligence, General 
Khin Nyunt.  The General made his way up the ranks ahead of 
more senior, more battle-hardened, and perhaps more competent 
officers because of his reliable service as, quite literally, 
"umbrella boy" to the longtime dictator of Burma General Ne 
Win (who ruled from 1962-88). 
 
8. (C) As a matter of policy, the SPDC ensures its military 
officers are fat, if not happy.  Lower-ranking officers get 
free cars, a tremendously valuable commodity, and extra 
gasoline to sell on the black market.  After attaining the 
rank of Lieutenant Colonel, an officer gets his first taste 
of the really good life: a plot of land in Rangoon, access to 
free building materials, and low interest government loans to 
build a house.  Once completed, the new house can be rented 
out and loan payments safely ignored. 
 
9. (C) Access to these money-making positions are limited, 
though.  Former military officers told us that promotions to 
the ranks and billets with access to the best graft and 
thievery opportunities are reserved for the most loyal 
subjects.  Soldiers who slog through the lower ranks, often 
acting as no better than laborers or servants to senior 
officers, understand quickly that toeing the line is the only 
way to get a taste of the pie.  Like in the business world, 
the senior leaders prefer to promote those to top military 
and ministerial jobs (almost always held by senior military 
officers) who have skeletons in the closet, which can be used 
at an opportune time to ensure good behavior. 
 
You Better Watch Out 
 
10. (C) The system works because the SPDC leadership means 
business.  No one, no matter how big, is safe if he 
embarrasses the leadership or, worse, threatens it.  The most 
notable case is the arrest and sentencing to death in 2002 of 
the son-in-law and grandsons of General Ne Win.  With their 
patron di tutti patrons on his death bed, the Ne Win 
relatives were swept up without hesitation by the SPDC for 
allegedly plotting a coup. 
 
11. (C) In another very recent example, the previously 
untouchable mayor of Rangoon U Ko Lay was fired and may be 
facing prosecution (septel).  The exact reason is not clear, 
but a well-placed business source told us it was because of 
egregious graft and corruption that proved embarrassing to 
the senior leaders.  The Mayor was notorious in the business 
community for his arrogance and for constantly requiring 
"gifts," even if just a $5 plastic clock. 
 
Comment: Core is Rotten, But Solid 
 
12. (C) The nature of this patronage arrangement makes us 
doubt the conventional wisdom that splits within the military 
ranks will bring down the system.  Though few may be 
satisfied with the SPDC's policies or direction, they also 
know they are an integral part of the system and thus may not 
survive its dismantling.  The patronage system also militates 
against influencing the senior generals by leaning on their 
business cronies.  The cronies have little inherent value to 
the generals except their pliability and willingness to do 
the GOB's bidding -- in exchange for valuable recompense. 
Others could, and have been, found to replace anyone falling 
from favor.  End comment. 
Martinez