US embassy cable - 04RANGOON967

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000967 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, INR/B 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 07/29/2014 
TAGS: PGOV, ECON, MCAP, PINS, PINR, BM, KBIO, Economy 
SUBJECT: ECONOMIC TENSIONS IN THE BURMESE MILITARY 
 
REF: A. RANGOON 247 
     B. 03 RANGOON 1552 
     C. 03 RANGOON 1417 
 
Classified By: COM Carmen Martinez for Reasons 1.4 (B,D) 
 
1. (C) Summary: There has been much talk recently of 
perceived "rifts" in the senior military leadership of Burma 
and between the regional commanders and the central command 
structure.  Some claim that these rifts are based on starkly 
differing views on the best political path for Burma to take. 
 However, they are likely more deeply rooted in a 
long-standing and complex web of friction over economic 
interests and fundamental intra-military rivalries.  In any 
event, we see no way that these economic and other 
differences will lead to any systemic change.  End summary. 
 
Political Differences are Skin Deep 
 
2. (C) It has become popular lately to blame perceived 
frictions among the senior leaders, between combat troops and 
military intelligence (MI), and between field commanders and 
the central command on fundamental political differences.  We 
are skeptical that any such differences would go very deep. 
Military leaders across the board are in the same boat 
politically.  It's hard to envision any democratic political 
system in which any military leader would be better off than 
he is now.  Thus we believe it is more appropriate to look at 
traditional academic and economic rivalries when seeking to 
explain any internecine conflict. 
 
My Old School 
 
3. (C) The long-standing rivalry between graduates of various 
military officer programs cannot be ignored but shouldn't be 
overstated.  Traditionally there were four ways to become an 
officer: do four years (now three years) of university study 
at the highly selective Defense Services Academy (DSA); do a 
post-graduate year-long course at the Officers Training 
School (OTS); do a two-year post-high school apprenticeship 
program followed by a year in the field; or, make your way up 
the ranks based on merit, connections, or luck.  The latter 
two systems have the fewest representatives in the top 
echelon, and the apprenticeship program was reportedly 
scrapped a few years ago.  Thus, the most politically 
important actors in Burma are generally DSA graduates (who 
view themselves as the elite "West Pointers" of the Tatmadaw) 
and those of the OTS (who have some jealousy of the DSA grads 
but think of themselves as more worldly as they've attended 
university outside the military sphere).  There is also a 
particular bond between graduates of DSA, who call each other 
"brother," and in particular those of like classes (or 
"batches") who have regular reunions. 
 
4. (C) The current leadership is well divided between the 
different schools.  SPDC Chairman Senior General Than Shwe 
(1954) and Prime Minister General Khin Nyunt (1960) are OTS, 
while SPDC number two Vice Senior General Maung Aye (1959) 
and rising star Lieutenant General Shwe Mann (1969) are DSA. 
This could explain some of the purported tension between Khin 
Nyunt and Maung Aye.  However, it cannot be assumed that 
differing military educational background is the most 
important element in intra-service relationships.  Graduates 
of different schools also often make good bedfellows: Shwe 
Mann (DSA) is known to be a right-hand man of Than Shwe 
(OTS).  Also, graduates of the same schools can be rivals or 
enemies.  For example Maung Aye and Shwe Mann (both DSA) are 
thought to be competing to succeed Than Shwe and there are 
rumors that Khin Nyunt and Than Shwe (both OTS) don't see eye 
to eye on some issues.  Outside of the SPDC, we note that a 
similar trend is visible.  For instance, Senior General Than 
Shwe's most trusted toady in military intelligence is a DSA 
grad -- MI Deputy Chief Major General Kyaw Win.  Similarly, 
Khin Nyunt's closest deputy, Brigadier General Kyaw Thein, is 
DSA. 
 
MI and the Army: Economic Divisions of Labor 
 
5. (C) The business interests of the regional commanders and 
other combat troops (the "Tatmadaw"), championed on the 
national level by Vice Senior General Maung Aye, are based 
largely on graft and muscle.  These officers, often tasked by 
their superiors to be self supporting, skim from local 
businesses, sell off military supplies (particularly food and 
fuel), force private entities to partner with them 
(especially in extractive industries), collect road tolls, 
offer protection services, etc.  General Maung Aye, as 
chairman of the Trade Policy Committee also has significant 
authority over extremely lucrative import licenses, which he 
doles out to favored civilian and military cronies.  Two 
enormous exceptions to the Tatmadaw's normal, more mercenary, 
approach to business come with the military-controlled 
corporations: the Myanmar Economic Corporation (MEC) and 
Myanmar Economic Holdings, Ltd. (MEHL).  The latter 
conglomerate in particular, whose shares are majority owned 
by the various regional commands, runs business ventures 
across the spectrum either independently or in a joint 
venture partnership (ref C). 
 
6. (C) In contrast to the regional commands, the vast MI 
apparatus (controlled by Prime Minister Khin Nyunt) is a far 
more sophisticated "mafia-like" operation.  Aside from taking 
graft and running protection rackets, MI divides up its 
territory and is very active running its own small business 
fronts, especially hotels and restaurants, and controlling 
essential junctures of the economy -- such as the informal 
financial remittance system and border trade smuggling.  It 
also has a hand deep into the entertainment industry -- 
gambling, karaoke, nightclubs, and some prostitution. 
Regional MI commanders can also use their leverage over 
regional commanders to horn in on the economic rents being 
earned by these Tatmadaw officers -- who are usually much 
higher rank than their MI colleagues.  This is much resented, 
but there is little the regional commander can do if he 
wishes to avoid a bad report going into his MI file. 
 
Turf Wars 
 
7. (C) Aside from MI "poaching," another factor generating 
tensions in the ranks is the expanding economic role of 
ethnic cease-fire groups (CFGs) -- given economic concessions 
a decade or more ago by Prime Minister, then Secretary One, 
Khin Nyunt in exchange for peace.  These groups -- such as 
the Wa, Kokang, Kachin, and Pa-O -- are seen as affiliated 
with the MI because of the primary role played by General 
Khin Nyunt in the negotiation of the cease-fire accords and 
the long animosity between these groups and the combat troops 
against whom they fought for many years. 
 
8. (C) As the CFGs grow wealthier from their local 
concessions, they have expanded outside of their designated 
"special regions" and are bringing their capital and 
connections into ethnic Burman areas, stealing market share 
in areas that were traditionally the feeding trough of the 
regional commanders.  One active Rangoon businessman told us 
that when he wanted to set up shop in Bago, about 50 miles 
northeast of Rangoon, he engaged a transplanted ethnic Wa 
fixer rather than dealing directly with the regional 
commander.  Another Rangoon businessman agreed with this 
decision, saying the CFG leader is likely to be a much 
longer-term business partner than a regional commander who 
could be transferred anytime. 
 
9. (C) This is a new phenomenon and has the potential of 
expanding MI-Tatmadaw acrimony in the future.  Despite any 
anger the regional commander might feel, these CFG reps are 
seen as "untouchable" because of their close ties with the 
Prime Minister and MI.  This area of conflict is only 
lessened now, we have been told, by CFG desires to minimize 
antagonism with the regional commanders to reduce 
interference in any ongoing illegal activities. 
 
Business and Family are Key for Big Three 
 
10. (C) This business-based conflict between various elements 
of the military trickles up, with complaints at the local 
levels eventually reaching the ears of respective "champions" 
in Rangoon.  Friction ensues as the Prime Minister and Maung 
Aye try to maximize their respective civilian patronage 
networks and keep their respective troops fat and happy.  The 
veto power of Senior General Than Shwe, who is very weak in 
business and economic matters, adds to the discord and 
confusion. 
 
11. (C) Some retired military officers now in business argue 
that Than Shwe abhors business and does not like his 
subordinates involved in it.  Supporting this theory, Than 
Shwe's children, with one notable exception, are not involved 
in large economic concerns as are most other privileged kids 
of senior military officials.  Most of Than Shwe's known 
offspring are in the foreign ministry, others just lazily 
reap the low-lying fruit granted them as progeny of "Number 
One."  On the contrary, General Khin Nyunt has been described 
by Rangoon businessmen as a "Thaksin-like" Prime Minister, 
seeking to dominate both the economic and political worlds. 
He and his MI apparatus are like economic octopi trying to 
take a leading role in all the perceived "cutting edge" 
sectors like tourism, IT, etc.  The PM has set up two of his 
three sons (the third is a senior MI officer) in powerful 
economic positions: one is the head of the country's dominant 
IT firm and another is the publisher of a respected business 
magazine (among other business interests). 
 
12. (C) Vice Senior General Maung Aye is deeply interested in 
business, but has thus far his family has been incapable of 
competing with Khin Nyunt's for economic dominance.  Maung 
Aye's daughter runs Queenstar computer business, which has 
not flourished in competition with Khin Nyunt's 
well-organized control of the industry (either directly or 
through an MI-managed Computer Association of private firms 
who were allocated market share). 
 
Comment: Will They Play Nice? 
 
13. (C) The bottom line is that there is no evidence to 
support the conclusion that high-level frictions are caused 
by differing views of the country's destiny or the path to 
it.  There are other areas of rivalry that have been a source 
of friction for many years and will likely continue to be so. 
 Rivalries over dividing the economic pie are manifold and 
complex and will continue to grow if the economy becomes more 
open to regional foreign trade and investment and as the CFGs 
continue to edge up to the table.  While these areas of 
disagreement may be bad for morale, and cause anxiety among 
the top echelon, they are not serious enough to upset the 
apple cart.  As long as the regime continues to run its 
country according to plan, with little successful 
international or domestic pressure, the desire to maintain a 
common political front will surmount any other areas of 
discord.  End comment. 
Martinez