If Burma's dictatorial ruler Snr-Gen Than Shwe left a legacy for the country's economy when he retired in March after handing over power to a civilianized government, it would be the growth of cronyism.
The best example of a crony business that flourished during the past 22 years of military rule is the Htoo Group of Companies (HGC), owned by Tay Za, a young tycoon well-known for his close personal ties to Than Shwe and his family since the heyday of the military junta.
Starting out in the timber business with the Htoo Trading Co., Ltd. in the late 1980s, Tay Za has used his good relations with the top general to turn the company into a massive business empire.
Helping Tay Za on his way to tycoon status was his later role as the junta's arm dealer. By giving the regime access to sophisticated military equipment, including helicopters and jet fighters, he proved his worth to the ruling generals, and was generously repaid with some of the country's most lucrative business concessions. At the same time, however, he also earned a place on US and EU sanctions blacklists.
But Tay Za hasn't allowed international censure to hold him back. In a recent article published by The Washington Times (“Burma's first billionaire no military bagman”), he is quoted by Stanley Weiss, the founding chairman of the influential Washington-based lobby group, Business Executives for National Security, as saying that Western sanctions “have virtually no effect on the rich” in Burma. As proof of this, he pointed to the growing wealth of the HGC.
Living in a palatial residence at the corner of Inya Road and University Avenue, where he parks his fleet of luxury cars, including a Lamborghini, a Bentley, a Ferrari, a Mercedes and a Lexus, Tay Za is now apparently eager to receive the title of Burma's first billionaire in the post-Than Shwe era. He also seems keen to raise his profile in the eyes of the international business community.
In a rare interview with Italian journalist Raimondo Bultrini, published in the Rome-based La Repubblica, Tay Za said: “The reason I’m talking to you—this is the first time I’ve spoken to a foreign journalist—is that I want it to be known once and for all that I am the wealthiest man in Burma.”
To make his point, Tay Za treats Bultrini to some wine worth about US $10,000 a bottle—an astounding price tag in any country, but all the more shocking in one of the world's poorest nations, the foreign journalist said, describing his encounter with the Burmese billionaire to the BBC Burmese Service.
Claiming that his business interests earn $500 million a year, Tay Za's HGC has invested in jade and gold mines, teak and wood products, hotels and resorts, Burma's first fully privately-owned airline, a logistics and heavy machine rental service, gas stations, construction projects, real estate and agriculture, a football club, and a shortwave radio station, according to a company profile obtained by The Irrawaddy.
In its latest venture, the HGC has established a private bank called Asia Green Development Bank, which expects to provide the first online banking service in Burma.
But the profile did not include all of HGC's many business interests. The company also has control over the domestic mobile phone market and major investments in communications technology at the Yadanabon Cyber City, near Pyin Oo Lwin in Mandalay Region. And in the energy sector, it is not only a major player in the oil and gas industry, but is also involved in the construction of hydro-power dams.
Despite its expansion into other sectors of the Burmese economy, HGC's mainstay remains the extractive industries. Its jade mines in Phakant, Kachin State, produced more than 3,000 tons of jade between 2007 and 2010. Given that a jade sale held in Naypyidaw earlier this year earned more than $2 billion, we can assume that HGC's profits from its operations in this industry have been enormous.
HGC also owns gold mines across the country. The company secured various licenses from the former junta to explore for gold ore in Singgu Township in Mandalay Region, Kalaw Township in southern Shan State, Mabein Township in northern Shan State, Bhamauk Township in Sagaing Region and Thein Zayat Township in Mon State.
Moreover, HGC has also started exploring for gold in the Chindwin and Uru rivers in Kachin State.
Although often referred to as the junta's arm dealer, Burma's first private airline owner or, more recently, the country's newest bank owner, most people seem to overlook the fact that Tay Za is also a landowner of astounding proportions, possessing hundreds of thousands of acres of land across the country.
HGC's earliest investment in the agricultural sector was in palm oil plantations in southern Tenasserim Region. The company now possesses 330,000 acres of land in Mergui Township, where it grows palm oil trees with seeds imported from Costa Rica, Thailand and Malaysia. It has also invested in a wide variety of other commercial crops, from sesame and mangoes to cotton and jatropha, a plant used in the production of biodiesel. It even grows thanaka, a tree whose bark is used domestically to make a paste applied to the face as a cosmetic.
In the first half of the 2000s, Tay Za expanded his investments in fruit plantations partly to meet the demand of the company's hotel and resort chains. The company secured 8,000 acres of land in Intaw Sub-township in southern Shan State to cultivate commercial mango and longan plantations. It also owns orange and dragon fruit plantations in Pyin Oo Lwin and Rangoon that use imported seeds from Thailand and central Mexico.
HGC's ownership of Air Bagan gives the company a unique foothold in the tourism industry. The airline currently operates 12 passenger airplanes flying to 8 major destinations, while HGC's Aureum Palace Hotels and Myanmar Treasure Resorts chains cater to tourists in Pagan, Ngapali, Ngwe Saung, Pyin Oo Lwin, Naypyidaw, Inle Lake, Putao, Pathein, Mount Popa and Rangoon. Charging between $800 and $1,200 per night, these hotels and resorts represent unimaginable luxury in a country where many live on less than a dollar a day.
One of HGC's earliest ventures is its logistics and heavy machinery rental service, which has been operating since 1992 with 400 heavy-duty trucks, a fleet of 33 cranes, eight sets of seagoing tugs and barges, and some chartered vessels. This service also profits from business deals with the government, for example with state-owned agro-based factories and steel mills operated under the Myanmar Economic Corporation (MEC).
In building his business empire, Tay Za didn't miss the opportunity to invest in real estate. HGC has invested in the Mindama housing project, Palm Court Villa and expensive residences in prime areas of Rangoon. The Mindama project includes three condominiums with a total of 150 rooms and 46 fully furnished villas, while Palm Court Villa includes 14 fully furnished villas.
Tay Za's vast role in Burma's economy shows that the country's ruling generals strategically nurtured crony businesses to help cement their hold on power. By allowing a handful of well-connected businessmen to dominate the economy, the junta leaders were able to resist the impact of Western sanctions and ensure that they would continue to control the levers of economic influence even after the ostensible transition to civilian rule.
However, with the retirement of Than Shwe, there has been some speculation in business circles that Tay Za's era of preeminence is coming to an end, while other cronies such as Zaw Zaw, owner of the Max Myanmar Group of Companies, Tun Myint Naing (alias Steven Law), owner of Asia World Co., Ltd., and Nay Aung, owner of International Group of Entrepreneurs (IGE), vie for a bigger piece of the pie.
Nevertheless, President Thein Sein and the new civilianized government will have to rely heavily on the crony businessmen to boost the economy. This means that there is little likelihood that it will move to create a level playing field in Burma's business world anytime soon, and even less chance that it will implement serious economic reforms capable of lifting the country out of poverty.
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