US embassy cable - 04RANGOON1503

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001503 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
COLOMBO FOR ECON MANLOWE 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 11/23/2014 
TAGS: ETRD, ECON, PGOV, BM, Economy 
SUBJECT: BURMA: TATMADAW TAKES AWAY M.I.'S KEYS 
 
REF: RANGOON 1462 AND PREVIOUS 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: Since former Prime Minister Khin Nyunt was 
ousted in mid-October, the SPDC has been striking at areas of 
economic graft formerly controlled by him and his Military 
Intelligence (MI) apparatus.  One of the most visible 
crackdowns is on the illegal import of cars from Thailand and 
China, something MI controlled for years.  Though the aim of 
the regime is to punish MI, such importing was also a 
lucrative business for ethnic cease-fire groups.  Thus the 
military runs the risk of antagonizing these groups while 
striving to assert control over illegal border trade and 
embarrass Khin Nyunt.  End summary. 
 
Doing Without "Withouts" 
 
2. (SBU) Since the GOB stopped issuing import licenses for 
motor vehicles in 1996 (except to a select few individuals, 
including senior Buddhist monks, and organizations) it has 
been immensely expensive to import or purchase a car.  The 
resale price of one of the few import licenses granted is 
upwards of 50 million kyat (about $50,000 at market rates) 
and import tariffs for motor vehicles remain extremely high. 
Thus the market price is steep for cars imported legally, 
even for small or very used cars. 
 
3. (SBU) Those seeking a vehicle, but without the funds to 
buy a legally imported and licensed one, often looked to 
illegally imported and unlicensed (known as "without") 
vehicles.  Smugglers, in cahoots with Military Intelligence 
(MI) and its affiliated interagency border-control force 
NaSaKa, imported tens of thousands of cars, trucks, and 
motorbikes through porous borders and then used local 
cease-fire groups (CFGs), especially the GOB-allied 
Democratic Karen Buddhist Army (DKBA) active across from Mae 
Sot, Thailand, to deliver the vehicles to purchasers 
throughout the border regions and as far inland as Mandalay 
and Rangoon.  Although smugglers had to pay significant 
bribes to MI and NaSaKa and $1,500 or more in "handling 
charges" to the CFG facilitators, these "without" cars 
retailed for a fraction of their legal counterparts. 
However, purchasers of these illegal cars remained forever in 
the pocket of MI, who could shake them down as necessary. 
 
4. (SBU) For several years another option for car smugglers 
was to bring in the "without" vehicle and take it to a chop 
shop inside Burma where it was converted into a "domestically 
produced" vehicle and licensed legally.  This ruse went on 
until early 2004, when the SPDC leadership instructed the 
Ministry of Industry (2) to crack down on cars "manufactured" 
in the country's industrial zones. 
 
5. (C) Since the ouster of former Prime Minister, and MI 
chief, Khin Nyunt in mid-October the regime has been actively 
targeting areas of MI economic control.  The trade in 
"without" vehicles is one of the most prominent.  Military 
and Customs officials at multiple checkpoints near the Thai 
and Chinese borders have been scrutinizing inbound vehicles 
to ensure they are legally licensed.  On November 9, the 
Director General of the national police told a large group of 
businesspeople that those surrendering their "without" 
vehicles would not be prosecuted -- though the cars would be 
impounded.  Since mid-October owners have been hiding their 
cars in hopes this campaign will blow over.  To cut off one 
refuge for scofflaws, on November 5 the Sangha Council (the 
top Buddhist religious body in Burma) instructed all 
monasteries to refuse donations or temporary storage of 
unlicensed cars. 
 
Targeting the Ethnics? 
 
6. (C) Because the "without" car business was such a money 
earner for the CFGs there is some concern that the crackdown 
on this trade, and illicit border trade in general, is as 
much an attack on MI-allied CFGs as it is on MI itself.  One 
Karen source in Rangoon told us the founder of the DKBA, a 
Buddhist abbott, traveled to Rangoon in early November to 
complain about the cut-off.  However, to date, according to 
an active Thai-border trader, the military and Customs 
officials remain vigilant.  One local newspaper reported that 
the police have seized several hundred "without" cars in 
Mandalay since Khin Nyunt fell. 
 
Comment: Pushing the Envelope 
 
7. (C) Despite the impact on the DKBA and other ethnic 
cease-fire groups (CFGs) previously benefiting from the 
illegal car trade, we believe the campaign is not 
specifically intended to punish those ethnics who allied with 
the former PM.  Instead we think the regime's motivations are 
twofold: (1) to identify areas of economic graft previously 
controlled by MI for takeover by the military; and, (2) to 
build up evidence of MI-controlled corruption to further 
discredit and/or prosecute Khin Nyunt and other former MI 
officials.  Most border traders still predict that all will 
be back to normal by year's end, with military and Customs 
officials firmly in charge of "facilitation services." 
However, the SPDC takes the risk of antagonizing some CFGs in 
the meantime by taking away their economic bennies in order 
to punish MI.  Another immediate-term ramification of this 
campaign is surging retail car prices, a fact that some 
sources blame for an unprecedented wave of car thefts in 
Rangoon.  End comment. 
MARTINEZ