Monday, August 24, 2015

Will business linked to Thura U Shwe Mann escape unscathed?

Myanmar Times   |   Monday, 24 August 2015
Thura U Shwe Mann has been ousted as head of the USDP. Photo: Aung Khant / The Myanmar Times
Thura U Shwe Mann’s removal from power has shaken Myanmar’s business elites and captured the attention of foreign investors.

Since the Speaker of the lower house was ousted from his post as leader of the ruling Union Solidarity and Development Party (USDP) after amidnight police raid on party headquarters earlier this month, some of country’s most powerful businesspeople have been on edge, according to sources at major conglomerates.

Many of the regime’s top cronies have relied on Thura U Shwe Mann for patronage – past beneficiaries include Htoo Group and Zaykabar Company among others, according to US diplomatic cables released by WikiLeaks.

However, despite widespread rumours to the contrary, few businesses belonging to Thura U Shwe Mann’s friends or relatives have yet been targeted. This is a departure from the norm, said Mark Farmaner of Burma Campaign UK.

“In the past, a general falling from favour was a catastrophe for [an official] politically, for his family economically, and for the business cronies who depended on him,” he said.

“In the case of Shwe Mann, so far the corruption angle hasn’t been used to bring him down, so the cronies associated with him seem to be more secure. Though it is also likely that they will be quietly reaching out to new patrons,” he said.

Parallels have been widely drawn between the fates of Thura U Shwe Mann and former prime minister and military intelligence chief U Khin Nyunt, who was purged in late 2004. However, a key difference is that after the former prime minister was ousted in 2004, his top business cronies were swiftly punished.

Thura U Shwe Mann led the accusations against U Khin Nyunt, publicly accusing him of deep involvement in bribery and corruption, according to a 2004 cable released by WikiLeaks.

He also issued a clear warning to those who had done business with U Khin Nyunt, his family or his cronies, urging them to write to the chief of military intelligence if they wanted to avoid “unnecessary interrogations”, according to the cable, entitled: “The Burmese regime airs its dirty laundry”.

In comparison, the USDP’s response to Thura U Shwe Mann appears subdued. Following the midnight raid on the USDP headquarters, twonewspapers seen as mouthpieces for the Pyidaungsu Hluttaw Speaker were closed. Known in English as the Union Daily (Pyidaungsu in Myanmar language) and the weekly The Leader (Shae Saung), the journals were suspended from publication indefinitely.

Radio station Cherry FM was then taken off-air under orders from Minister for Information U Ye Htut. The channel is managed by the Speaker’s son U Toe Naing Mann and his wife Daw Zay Zin Latt, the daughter of U Khin Shwe, chair of Zaykabar.

U Ye Htut said he had ordered the closure due to concerns the station might “air something to shock people … while problems are occurring inside the party”. Cherry FM has since re-opened and U Ye Htut has said there is no reason to shut down other businesses owned by relatives of Thura U Shwe Mann.

Other rumours about the closure of businesses linked to the Speaker have turned out to be false alarms.

Last weekend, for example, Air Bagan suspended flights, prompting speculation that the closure of the airline was linked to recent events. The airline was founded by U Tay Za, though he is no longer its chair. U Aung Then Mann, Thura U Shwe Mann’s son, has sat on the board of U Tay Za’s Htoo Group.

However, an airline spokesperson told The Myanmar Times the suspension was for maintenance reasons and that flights would resume in October. Businesspeople said they believed it was a case of unfortunate timing.

Rumours on social media on August 17 that some of the country’s major banks would close are also believed to be a coincidence, and not linked to events in Nay Pyi Taw. The Central Bank of Myanmar published a statement through state media last week refuting the speculation and confirming that all banks will remain open.

The threat of action
Despite the seeming calm, observers remain cautious.

“He had high ambitions and was bold. This annoyed the powers that be and I would be surprised if they allow him to save face,” said the managing director of a Yangon-based advisory company.

“He is no longer the party leader which is a risk for companies associated with him. I assume that they will either dismantle his businesses soon, or use the threat as a stick to keep him in line,” he said.

Andrew Wood, Myanmar specialist at BMI Research agrees. “Rumblings regarding Thura U Shwe Mann’s disrespect toward the military’s role in government suggest that a case could be made against him should he attempt to cross the aisle,” he said.

According to Mr Wood, some companies linked to the Speaker are more vulnerable than others. “It stands to reason that the businesses directly linked to his sons such as Ayer Shwe Wah and perhaps RedLink [Communications] could be more directly targeted,” he said.

The Speaker’s son U Toe Naing Mann owns local telecoms firm RedLink Communications which is also “cooperated with Yatanarpon Teleport [YTP]”, according to its website. YTP has long been tipped to receive Myanmar’s coveted fourth telecoms operator licence in one form or another.
Sources say that YTP has been a thorn in the side of some in government and that Thura U Shwe Mann’s ouster may provide a convenient way of solving the problem. Repeated calls to the company went unanswered by press time.

YTP has undergone significant government-led changes before. It was originally known as Bagan Cybertech and was owned by U Khin Nyunt’s son, before it was taken over by the military in late 2004, almost immediately after the former prime minister was purged.

The firm is now owned by a large number of high-profile shareholders, according to information published last year on the Directorate of Investment and Company Administration website. This makes matters more complicated, said Mr Wood, adding that many cronies with links to Thura U Shwe Mann also have other benefactors.

“It is hard to imagine the larger conglomerates such as Htoo Group or Zaykabar being hit too hard,” he said. “To the best of my knowledge the other business interests in these conglomerates, including U Khin Shwe and U Tay Za, retain strong relationships with top military brass, which remains all-important in Myanmar.”

International impact
Political analysts say that events are being closely watched by international investors.

“A number of investors who were looking at potential deals involving people close to Thura U Shwe Mann are now reconsidering their choice of local partner,” said a Singapore-based analyst with a Myanmar focus.

The close link between business and politics is always a risk in Myanmar, he added. “But the political earthquake that just happened was at the highest level. Thura U Shwe Mann was one of the most powerful people in the country. Investors are wondering what is next, and how far this will go.”

However, Ed Ratcliffe, consultant at political advisory firm Vriens & Partners, is more optimistic.

“The upcoming elections are somewhat uncharted territory for Myanmar, so any developments that call the democratic process into question raise concerns for the international community, including foreign investors,” he said.

“There is some concern about how local turbulence is impacting local businesses, but so far this does not seem to have had a knock-on effect for foreign investors.”
Others see the uncertainty as a problem. It still remains unclear whetherThura U Shwe Mann’s ouster will remain purely political or if the government has plans to follow up with criminal charges, said Ryan Aherin, senior analyst for Asia at Verisk Maplecroft.

“The use of military and security forces to remove the leadership of the USDP could also foreshadow the future use of strong-arm tactics by the military if the post-election government threatens the Tatmadaw’s political and business interests,” he added.

For Mr Wood too, the main concern is the military’s wiliness to flex its muscle. “The military retains significant control over the USDP and intends for things to stay that way,” he said.

Neither Htoo Group nor Zaykabar had returned request for comment by yesterday.