BURMA'S PATRONAGE SYSTEM: THE DOG WAGS THE TAIL

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000247

SIPDIS

STATE FOR EAP/BCLTV, EB, PM
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA

E.O. 12958: DECL: 02/24/2014
TAGS: ECON MCAP PGOV MARR MOPS BM
SUBJECT: BURMA'S PATRONAGE SYSTEM: THE DOG WAGS THE TAIL

Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D)


1. (C) Summary: Burma's military leadership thrives atop a
flourishing patronage system that dates back hundreds of
years. The junta holds the key to huge success or crushing
failure for those in business, the military, or civil
service, but only rewards the most loyal and pliable. Such
an environment breeds fear, suspicion, and above all
begrudging support for the status quo. Unfortunately this
climate makes it very difficult to expect that the generals
will be challenged by disgruntled members of the military or
business community. After all, who will be the first to risk
his position and family's future welfare by taking a stand?
End summary.

Patronage Makes the World Go 'Round


2. (C) As the Burmese kings did for hundreds of years, the
current ruling military State Peace and Development Council
(SPDC) relies on a strict system of patronage to secure its
power. The regime controls nearly all the country's
resources and means of production. Loyalty and political
"correctness" are rewarded by the junta well before
competence, strategic vision, upright moral behavior, or even
seniority. Everyone knows very clearly that unquestioning
obedience to the regime's leaders is the difference between a
lucrative promotion or contract and sudden retirement or
arrest. This applies to across ethnic lines to people in the
three key segments of Burmese society: military, business,
and civil service (including the government-dominated worlds
of arts and academia).


3. (C) Ensuring the success of this patronage system,
particularly in the business world, is what could be called
the "Rainy Day" strategy. The business climate and legal and
regulatory frameworks for entrepreneurs here are so arbitrary
and protean that most would-be businesspeople find it
extremely difficult to carry out their affairs in full
compliance with Burmese law. Any business would soon go
under if it abided scrupulously by often conflicting
currency, tax, registration, trade, and other laws and
regulations. However, the regime and its minions, which use
the Byzantine business climate for rent-seeking purposes,
turn a blind eye to most transgressions unless they want to
exert pressure. At such time Military Intelligence will show
up with a file full of misdeeds and threaten confiscation
and/or deportation. Thus most booming businesses, especially
those of the cronies, become reliant on pleasing the
government to keep the money flowing and avoid that midnight
knock on the door.


4. (C) From our contacts in the three key segments of
society, it's clear that few in Burma, even those with
significant wealth and power, are happy with the way the
country is run. However, despite some misconceptions to the
contrary, we see no signs that this unhappiness will
materialize into open opposition to the SPDC. Who will be
the first to risk his position and family's future welfare by
taking a stand? After all, the regime's leaders do not rely
on their business cronies, senior civil servants, and senior
military officers for support. It is the other way around.

Business: Offers They Can't Refuse


5. (C) There are many illustrations of the patronage system
at work in the business world. The chairman of one of the
country's largest construction companies told us he spent a
great sum of money (he wouldn't say exactly how much) to
upgrade the Rangoon-Mandalay highway under what he thought
was a build, operate, transfer (BOT) arrangement with the
government. When the renovations were complete he was
summarily dismissed by the senior SPDC leadership, his BOT
"contract" ignored. Despite this outrage, he could not
complain or break with the SPDC because there is no other
source for preferential future access to prime deals for his
construction and other businesses.


6. (C) Another example is the case of Senior General Than
Shwe's current golden boy, U Tay Za. Tay Za, who despite his
lack of business knowledge (he is a military academy drop-out
who pimped for various GOB elite before marrying into a
venerable Burmese business family),runs a large conglomerate
active in Burma and Singapore and has been given essentially
the monopoly on lucrative private timber exporting, brokerage
services for the GOB's weapons purchases, and other money
makers. In exchange, though, "Godfather" Than Shwe will ask
Tay Za from time to time to personally fund special services
such as medical trips to Singapore for the generals and their
families and building and stocking a glitzy "prestige
project" shopping mall in downtown Rangoon -- selling luxury
products at prices very few in the country can afford. In
addition, there are rampant rumors that Than Shwe has pushed
Tay Za to the altar with the Senior General's ugly duckling
eldest daughter, with whom the business mogul has carried out
a poorly concealed affair. No matter that the favorite son
is still married to his first wife.

The Military: Kiss Up, Kick Down


7. (C) There are also examples of the patronage system at
work in the military ranks. The highest profile is the story
of current Prime Minister, and chief of intelligence, General
Khin Nyunt. The General made his way up the ranks ahead of
more senior, more battle-hardened, and perhaps more competent
officers because of his reliable service as, quite literally,
"umbrella boy" to the longtime dictator of Burma General Ne
Win (who ruled from 1962-88).


8. (C) As a matter of policy, the SPDC ensures its military
officers are fat, if not happy. Lower-ranking officers get
free cars, a tremendously valuable commodity, and extra
gasoline to sell on the black market. After attaining the
rank of Lieutenant Colonel, an officer gets his first taste
of the really good life: a plot of land in Rangoon, access to
free building materials, and low interest government loans to
build a house. Once completed, the new house can be rented
out and loan payments safely ignored.


9. (C) Access to these money-making positions are limited,
though. Former military officers told us that promotions to
the ranks and billets with access to the best graft and
thievery opportunities are reserved for the most loyal
subjects. Soldiers who slog through the lower ranks, often
acting as no better than laborers or servants to senior
officers, understand quickly that toeing the line is the only
way to get a taste of the pie. Like in the business world,
the senior leaders prefer to promote those to top military
and ministerial jobs (almost always held by senior military
officers) who have skeletons in the closet, which can be used
at an opportune time to ensure good behavior.

You Better Watch Out


10. (C) The system works because the SPDC leadership means
business. No one, no matter how big, is safe if he
embarrasses the leadership or, worse, threatens it. The most
notable case is the arrest and sentencing to death in 2002 of
the son-in-law and grandsons of General Ne Win. With their
patron di tutti patrons on his death bed, the Ne Win
relatives were swept up without hesitation by the SPDC for
allegedly plotting a coup.


11. (C) In another very recent example, the previously
untouchable mayor of Rangoon U Ko Lay was fired and may be
facing prosecution (septel). The exact reason is not clear,
but a well-placed business source told us it was because of
egregious graft and corruption that proved embarrassing to
the senior leaders. The Mayor was notorious in the business
community for his arrogance and for constantly requiring
"gifts," even if just a $5 plastic clock.

Comment: Core is Rotten, But Solid


12. (C) The nature of this patronage arrangement makes us
doubt the conventional wisdom that splits within the military
ranks will bring down the system. Though few may be
satisfied with the SPDC's policies or direction, they also
know they are an integral part of the system and thus may not
survive its dismantling. The patronage system also militates
against influencing the senior generals by leaning on their
business cronies. The cronies have little inherent value to
the generals except their pliability and willingness to do
the GOB's bidding -- in exchange for valuable recompense.
Others could, and have been, found to replace anyone falling
from favor. End comment.
Martinez