Myanmar cronies still pull the strings as economy creaks open

Hotels, harbours or mines, Myanmar's big-ticket industries are still in the grip of military-linked tycoons, who will remain gatekeepers to the country's opening market whoever wins Sunday's crunch polls.

The globe's fourth fastest-growing economy, according to the World Bank, is a tantalising prospect to international investors but sections of it are firmly off-limits.

These are the realms of the nation's infamous "cronies" -- a business elite who gobbled up state contracts and carved out monopolies under the corrupt former junta, which rewarded loyalists.

"Cronies are the main winners," says Sean Turnell, an expert on Myanmar's economy who has advised Aung San Suu Kyi's National League for Democracy (NLD).

"They dominate in industries in which the government gives them special concessions, and protects them from competition."

One such tycoon is Aye Ne Win, grandson of Myanmar's notorious dictator Ne Win, who like many of the financial elite has risen through entrenched networks of privilege.
Sporting a crisp monogrammed shirt at his villa in Yangon, the magnate insists his family have always operated within the law.

"I have connections so it's easy to make business," he told AFP.

Unlike others, however, his family fell out of favour with the former military regime -- Aye Ne Win and his two brothers were jailed for a decade in 2002 as part of a purge by Than Shwe, Myanmar's last serving general.

But in the years since he and his siblings have staged a comeback, steadily building a vast empire that spans construction, hotels and banking.

"None of our family has ever been restricted from travelling or prohibited from entering anywhere in the world," he said.

"That's why most of our family's old friends have been willing and offering to support us in doing business (with us)," he added.
- Detoxifying reputations -
Yet many of the country's biggest tycoons do remain on a Washington blacklist, forbidding American companies from doing business with them even though most western sanctions have been dropped.

Steven Law is one such businessman. A leaked US diplomatic cable from 2007 described him as a "top crony" to the former regime's generals and the son of a drug lord.  

He owns Asia World, a sprawling conglomerate with stakes in sectors including tourism, shipping and construction.

The company also benefits from the generals' successors -- in 2013 it won a multi-million dollar government contract to upgrade Yangon's international airport.

The military itself retains a significant hold over business through its Union of Myanmar Economic Holdings, a vast conglomerate that remains under US sanctions with major stakes in gems, brewing, real estate and transport.

But in a sign of the changing times, some tycoons have begun cosying up to Suu Kyi's NLD, which is expected to make sweeping gains if the November 8 elections are free and fair.

Zaw Zaw -- a US-sanctioned tycoon who owns the Max Myanmar conglomerate and has interests in gems, real estate and tourism -- has made large donations to the party, as has Tay Za, the flashy owner of the formerly US-sanctioned Asia Green Development Bank.

The family of another crony, Kyaw Win, head of media giant Skynet, paid nearly $50,000 for a jumper knitted by Suu Kyi at a 2013 fundraiser.
- Growing competition -
Whether the tycoons can make an ally of the NLD is yet to be seen.

The party has vowed to double-down on the economy, promising jobs and higher taxes to benefit the poor, while Suu Kyi has made clean government the centrepiece of her campaign.

Aware of the country's evolution, many moguls are trying to detoxify their reputations.

"A few have begun to manage their public image and speak of their support for a new democratic Myanmar," says Htwe Htwe Thein, a Myanmar expert at Australia's Curtin University.

Although the cronies still enjoy primacy, business figures say a more competitive environment is slowly emerging.

"Under the military regime, it was impossible to win against the cronies," Kyaw Kyaw Hlaing, chairman of the Smart Group told AFP, praising comparatively greater transparency in tender processes now.

But while some "60 percent" of government contracts still lack transparency over how they are awarded, he said, this has not deterred foreign investors.

Since the lifting of outright army rule in 2011, Myanmar has seen a flood of investment and a consumer boom, hitting 8.5 percent growth in the last financial year.

The World Bank says $8 billion of overseas cash poured into Myanmar over this period, more than twice as much as the previous year.

Source: AFP