US embassy cable - 04RANGOON1518

C O N F I D E N T I A L RANGOON 001518 
 
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: 11/29/2014 
TAGS: ECON, PGOV, BM, Economy 
SUBJECT: BURMA: KHIN NYUNT'S CRONIES FEELING THE SQUEEZE 
 
REF: A. RANGOON 1503 AND PREVIOUS 
 
     B. RANGOON 1470 
     C. RANGOON 542 AND PREVIOUS 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: The purge of those close to ex-PM Khin Nyunt 
is spreading to economic cronies -- no matter their "worth" 
to the economy.  This purge, combined with the ongoing 
crackdown on smuggling, will certainly cause some economic 
disruption.  How much, and for exactly how long, remain 
unclear.  However, by early 2005 all should be "back to 
normal" -- Burma style.  End summary. 
 
Internal Economic Destructionists Feel the Squeeze 
 
2. (C) According to reliable sources, top business cronies 
close to ousted Prime Minister General Khin Nyunt are 
starting to pay for having backed the wrong horse.  Initial 
indications were that the regime would allow some top 
business cronies to survive intact if they were providing key 
economic services to the state.  However, this may no longer 
be the case.  Though the sources said that none of Khin 
Nyunt's closest non-family business associates has yet been 
arrested, the GOB has apparently seized some of the assets of 
at least two of the most prominent.  These assets had been 
used as collateral for private bank loans that went unpaid 
after the private banking system collapsed in February 2003 
(ref C).  Despite defaults on the loans, these cronies had 
used their ties to Khin Nyunt to save their properties. 
 
3. (C) Meanwhile, the picture is growing clearer as to the 
fate of Khin Nyunt's eldest son, and prominent businessman, 
Dr. Ye Naing Win.  According to business and ASEAN diplomatic 
sources, the son, until mid-October the managing director of 
Burma's major private IT firm Bagan Cybertech (ref B), is now 
incarcerated at an unknown location.  Likewise, according to 
the new Singaporean ambassador, Dr. Ye Naing Win's wife, a 
Singaporean national, is in detention at her home and 
Singaporean diplomats have not been granted consular access. 
As reported previously (ref A), Bagan Cybertech was taken 
over by the Army's signal corps almost immediately after Khin 
Nyunt's downfall on October 19. 
 
Comment: A Cleansing of Undesirables 
 
4. (C) The regime's desire to root out Khin Nyunt's broad and 
deep influence is spreading from the political-military 
(where dozens of top Military Intelligence officers have 
already been purged) to the economic sphere.  Our sources 
speculated that the SPDC would financially ruin Khin Nyunt's 
top economic allies, and some lower-level ones as well. 
However, they did not see the campaign spreading to the 
economic arms of the ethnic cease-fire groups allied 
previously with Khin Nyunt -- though attacks on cronies are 
already collaterally damaging some of these groups' business 
interests, which could cause unexpected political 
consequences.  This economic purge, along with the tougher 
line on illicit border trade (ref A), will cause some degree 
of chaos and economic slowdown for the immediate future (as 
during the months following implementation of new U.S. 
economic sanctions in July 2003).  However, we still believe 
business will be "back to normal," though with new 
taskmasters, by early 2005.  End comment. 
MARTINEZ