NO BIG POWER STRUGGLE BEHIND CUSTOMS ARRESTS

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000052 SIPDIS SIPDIS STATE FOR EAP/MLS; PACOM FOR FPA, TREASURY FOR OASIA:AJEWELL E.O. 12958: DECL: 09/21/2016 TAGS: ECON PGOV ETRD BM SUBJECT: NO BIG POWER STRUGGLE BEHIND CUSTOMS ARRESTS C-AL6-02207 REF: A. RANGOON 1803 ¶B. RANGOON 1466 ¶C. RANGOON 982 RANGOON 00000052 001.2 OF 002 Classified By: Econoff TLManlowe for Reason 1.4 (b,d) ¶1. (C) Summary: Since June, police have arrested over 300 customs officials in an ongoing corruption investigation, including the Director General, reportedly a Than Shwe favorite. While some speculate that the regime acted to increase revenues that were lost through bribes to customs officials, others suspect a power struggle between top leaders, Than Shwe and Maung Aye, to be the underlying cause. While Maung Aye may relish the removal of one of the Senior General's men from the lucrative customs post, the arrests do not signal a shakeup of the power structure or broader campaign to crack down on corruption. End summary. ¶2. (U) Over the past six months, the Special Branch (SB) investigation of corruption in the Customs Department has resulted in the arrest of over 300 customs officials at the air and seaports, as well as land border crossings (refs B,C). Many other customs officials, along with traders and their families, have gone into hiding to avoid arrest. Members of the business community were surprised that the Customs Director General (DG),Col. Khin Maung Lin was detained, because of his well-known close relationship to regime leader Than Shwe's family. Untouchable -------------- ¶3. (C) This close relationship explained for many how he got the post at the young age of 43 over the more experienced Deputy. This relationship had provided an aura of protection, which he exploited. Business contacts told us a number of stories that highlight his previous immunity. According to sources, business reps paid him the equivalent of $3000 to bring in each unlicensed container. Another contact told us that members of the Timber Entrepreneurs Association, angered by the DG's calling them a group of thieves, gathered photos and other evidence of illegal imports, which they referred to authorities, including Than Shwe. A few lower level customs officials were dismissed initially, but Khin Maung Lin was left untouched. In another case, Special Branch investigators identified customs officials who took bribes to allow unlicensed beer and soft �00A;drink imports into Burma. SB was forced to close the case since Kyaing Than Shwe, son of Than Shwe, was part owner of the importing supermarket. No Longer -------------- ¶4. (SBU) One contact told us that the current investigation was prompted by a trader who brought in a photocopy machine through the 105 Mile China/Muse border crossing point in May. When meeting with customs officials, the trader recorded the conversation, including about bribes, on his small MP3. He then distributed letters noting his recorded conversations to Than Shwe, Maung Aye, cabinet members and regional authorities. Some speculate that Maung Aye took this opportunity to remove Than Shwe's favorite from the post, knowing it would be difficult for Than Shwe to object in the face of such clear evidence. History of Corruption -------------- ¶5. (U) Much of the investigation focuses on the Customs point called 105 Mile, near Muse just inside the Chinese border. Corruption here also reportedly led to the ouster of former PM Khin Nyunt in 2004. Under Khin Nyunt's direction, RANGOON 00000052 002.2 OF 002 Military Intelligence (MI) took control of border trade, claiming that the Customs, Immigration, Police and Army officials who staffed the checkpoints were corrupt. Once MI took over, the level of bribery soared. In 2004, MI officials at Muse confiscated wireless communication sets bought by an Army Colonel from Lashio Command. The Northern Commander reported this to Than Shwe and Maung Aye. Maung Aye reportedly got permission to raid MI compounds where army troops found large amounts of kyat, foreign currency, and unlicensed cars. Khin Nyunt was ousted shortly thereafter, with. Maung Aye and Than Shwe highlighting these raids and Khin Nyunt's corruption as the primary justification. No Increase in Customs Revenue -------------- ¶6. (SBU) While it may be true that the regime wanted to capture more customs revenue, the remedy, devised by decision makers lacking economic expertise, may be no better than the original problem. According to sources, the GOB has not increased its revenue from the customs crackdown, because it has replaced the arrested or absent experienced officers with 400 inexperienced recruits, most from the military. The new officials have no knowledge and are afraid the make decisions. The volume of trade has slowed as many business reps have reduced or stopped their trade in the uncertain environment (ref A). Each imported container is carefully inspected, which adds to delays. Nevertheless, old habits die hard. Customs officials inspect all imports, sources tell us, but containers belonging to powerful cronies get faster, more cursory service. ¶7. (C) Comment: Although Maung Aye may have enjoyed removing a Than Shwe favorite from a lucrative post, we do not see any evidence that it signals any larger plans to crack down on corruption. Rather, it is a reshuffling of lower level staff, who will inevitably succumb to temptation given their low salaries and the lucrative stakes. We have seen no evidence that the generals are willing to crack down on the most serious corruption in their own ranks. Such as step would jeopardize the cohesiveness of the senior leadership. They acted in concert to take out Khin Nyunt, not because of his corruption, but because they feared a power grab. End comment. VILLAROSA