US embassy cable - 05RANGOON682

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000682 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB, DRL 
STATE PASS USAID 
BANGKOK FOR USAID 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 06/06/2015 
TAGS: PGOV, PINR, ECON, EAID, KDEM, BM, Economy 
SUBJECT: BURMA: REAL POLITICAL REFORM NEEDS A STRONG, 
HONEST MIDDLE CLASS 
 
REF: A. RANGOON 333 
     B. 04 RANGOON 559 
     C. 04 RANGOON 465 
     D. 04 RANGOON 247 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: Burma's lack of a strong independent civil 
society and progressive middle class are fundamental 
obstacles to the ultimate success of any democracy movement. 
The SPDC's patronage system and a lack of good education 
opportunities make it difficult for the business community to 
develop into a politically effective civil society actor. 
However, there are some diamonds in the rough -- progressive 
capitalists -- who are looking for ways to make that 
transition occur.  Assisting this transformation, even at the 
micro-level, could help build a "second front" in the fight 
for meaningful reform in Burma as well as help to ensure the 
sustainability of future democratic regimes.  End summary. 
 
A Middle Class Built on Cell Phones 
 
2. (C) An alarming aspect of Burma's devastated economy is 
the lack of an educated, progressive, and globally minded 
business class.  Burma is enough of a market economy to 
encourage private actors to get rich, but still centrally 
controlled to the point where making an honest buck is 
difficult.  The result has been the evolution since 1988 of a 
middle class of entrepreneurs the vast majority of whom earn 
their keep via connections and taking advantage of economic 
distortions -- especially trading in goods and services made 
artificially scarce by poor government policy.  Most "modern" 
Burmese businessperson do not see the linkage between their 
own success and overall higher living standards and a 
developed economy -- much as members of the ruling SPDC does 
not see the importance of linking their well-being with that 
of the Burmese people.  Instead, the reigning philosophy in 
the business world -- particularly since the October 2004 
ouster of former Prime Minister and MI chief Khin Nyunt (ref 
A) -- is snatch and grab before the rules and/or patrons 
change.  This is hardly the best situation for a country 
aspiring to democracy and a market economy. 
 
3. (C) There are two major factors at fault here.  First, the 
ruling military regime relies on a strict system of patronage 
for securing its power base (ref D).  Loyalty to the regime 
leaders means the difference between a lucrative posting or 
concession and sudden retirement, banishment, or arrest. 
Thus, the regime leaders do not rely on their business 
cronies, senior civil servants, and senior military officers 
for support.  Instead, it is the other way around, with 
ascendant business, government, and military officials 
generally benefiting from the status quo.  From our contacts, 
it's clear that few in Burma, even those with significant 
wealth and power, are happy with the way the country is run. 
Particularly after the scorched-earth campaign against Khin 
Nyunt's closest friends and relatives, however, there is no 
sign that this unhappiness will materialize into open 
opposition to the SPDC.  Who will be the first to risk their 
position and family's future welfare by taking a stand? 
 
4. (C) A second major problem is the lack of solid education 
and access to the ideas of the outside world.  To succeed in 
the Burmese economy there's no need for a business education 
or even a rudimentary understanding of international 
principles of strategic planning, ethics, business law, 
investment, or management.  Some argue that the SPDC's 
intentional destruction of the country's educational system, 
keeping people ignorant and without prospects for economic 
improvement, is another strategy for remaining in power.  The 
fact that generally only the children of senior military 
officials, or of the wealthiest private citizens, are able to 
afford or arrange a good education (usually abroad or in 
military or private schools in Rangoon) supports this claim, 
and further illustrates how civilian and military cronies are 
more reliant on the government than vice versa.  Fortunately, 
this education gap is an area where there is room for 
improvement and for potential assistance. 
 
Can Democracy Come Without One? 
 
5. (C) With the SPDC daily strengthening its position vis a 
vis political parties, and traditional politically aware 
populations (students, intellectuals, monks, etc.) dispersed 
and intimidated beyond action, the prospective role of other 
sectors of civil society -- such as the business class -- 
becomes more important.  There is a need for a "second front" 
to push indirectly for political change, and a responsible 
middle class to help run a free country when that change 
comes.  Additionally, it is clear to us from our dealings 
with pro-democracy politicians across the spectrum that few 
are thinking about economic and business policy reforms that 
must be instituted if any future democratic regime is to be 
sustainable.  A more politically aware and active business 
community could help fill these holes. 
 
6. (C) Though recruits for this second front are thin on the 
ground, looking at the business community alone there are a 
handful of independent-minded, progressive businesspeople 
who, while working within the system, eschew corruption and 
admire principles of globalization and the American work 
ethic, economic system, and business model.  Though obviously 
focused on earning money and succeeding in Burma's byzantine 
business climate, they also feel a responsibility for 
educating their workforce and younger executives before they 
can become poisoned by the corruption of Burma's economy. 
They see clearly the connection between a globally connected, 
democratic, transparent, and market-based system and more 
durable prosperity.  Their reasons for wanting real change -- 
freedom of information, better economic situation for 
consumers and investors, openness to foreign technology and 
investment, etc. -- may be somewhat self-serving.  However, 
this class of progressive capitalists would be an important, 
and potentially influential, force for change that would 
co-exist with the political opposition, and push from another 
angle. 
 
7. (C) Using the business community as a vehicle for pushing 
for reform has a number of advantages.  First, businesspeople 
are given the most freedoms of any other "class" in Burma: 
comparative freedom to travel, associate, publish, and speak 
freely -- as long as the topics avoid overt political themes. 
 Because of these freedoms, businesspeople have access to the 
pulse of the nation and have more frequent and more dynamic 
relations with a broad array of Burmese of all classes. 
Second, successful businesspeople often have collegial 
contact and some influence with relatively senior government 
and military officials.  Though this makes "finding an honest 
man" more difficult, it makes businesspeople who operate with 
ethics, morals, and political awareness more effective 
actors, with their access to the potential "silent majority" 
of disaffected military officials and civil servants.  These 
contacts also mean businesspeople are viewed with less 
animosity by the leadership, and are given some level of 
protection. Third, because most businessmen are quite active 
across the country, especially in the border areas, they have 
significant knowledge of and close relationships with 
potentially like-minded colleagues from major non-Burman 
ethnic groups (Shan, Kachin, Rakhine, Karen, Mon, etc.) 
 
Comment: Can We Make a Difference? 
 
8. (C) By building intellectual capacity the U.S. government 
can play an important role in nurturing this potentially 
nascent democratic force of independent, international, and 
politically progressive businesspeople.  We are already using 
the limited tools at our disposal -- International Visitor 
grants, Fulbright Specialist programs, and regular 
consultations with embassy staff and American Center visitors 
-- to encourage the few willing to take the initiative.  A 
visiting Center for International Private Enterprise (CIPE) 
official (ref C) and an officer of the American Chamber of 
Commerce in Thailand (ref B) explained to attentive audiences 
the key role business should play in democratic civil 
society.  The NLD was supportive of CIPE's message that 
education and organization of non-crony businesspeople could 
be a shot in the arm for democratic reform. 
 
9. (C) More could be done if funds (from the annual Burma 
Earmark for example) were made available to carefully target 
and further build the capacity of these individuals.  In turn 
they could reach out systematically to a broader audience to 
teach responsible business practices and the poorly 
understood role of the business community in a functioning 
democracy.  This latter lesson could be the foundation of 
private and independent business associations. Such education 
would also do much to combat the negative lessons of Burma's 
current business climate and create a responsible 
business-minded populace with more at stake and more 
incentive to change the system.  End comment. 
Martinez