Tay Za holds a child at a school funded by his Htoo Foundation. He claims U.S. allegations against him are groundless—and crippling his business. (credit: REUTERS/Jared Ferrie)
By Jared Ferrie
Myanmar tycoon Tay Za leans back and fulminates against the U.S. government as a playful pet bear cub scrambles up his alligator-skin chair. “They are world police,” he says, complaining that U.S. sanctions are stifling his businesses and officials are scrutinizing his every transaction.
As Tay Za speaks, attentive staff intervene occasionally to protect the carpet from spills wrought by the two rambling sun bear cubs that Tay Za adopted after tribesmen killed their mother in Myanmar’s remote north. Beyond the exotic animals and a continued opulent existence in his Yangon mansion, however, Tay Za says his business empire is suffering from the financial intrusions. He accuses American officials of “harassment,” including shutting down bank accounts of his Singapore investment firm on suspicion that it had made transactions involving North Korean-linked companies.
Tay Za, 50, embodies a dilemma for Washington. Investors and analysts say keeping sanctions on some of Myanmar’s most powerful businessmen undermines the goal of fostering economic growth in a land ruled for 49 years by an isolated military. A semicivilian, semireformist government is in power now, but U.S. officials are under pressure not to reward businessmen who supported the former junta, which was notorious for human rights abuses.
“These cronies only care about their pockets and status. They will bring no good to the welfare of the Burmese people,” said Steve Chabot, a Republican U.S. congressman who has sponsored a bill to scale back engagement with official Myanmar.
Tay Za argues that the repercussions of U.S. sanctions resonate far wider than his own family and associates; they also hurt the 30,000 employees of his Htoo Group, which reaches into almost every sector of the economy. For example, he says, he may be forced to shut down his Air Bagan airline, which has lost about $90 million over the past couple years, in part because he is not allowed to buy American-made spare parts at market prices.
He shows letters dated Apr. 17 from Singapore’s United Overseas Bank informing him that it was closing nine of his accounts. The letters gave no explanation, and UOB did not respond to a request for comment, but Tay Za says the bank became nervous after American officials raised questions about transfers he made to companies in China with alleged links to North Korea.
Some of those money transfers caught the eye of assiduous U.S. officials who contacted Tay Za to ask for further information on his Singapore-based company 4G Investment. Tay Za’s younger brother, Thi Ha, met with two U.S. embassy representatives in Yangon in June 2013.
“They mentioned about North Korea,” said Thi Ha. “We don’t know whether there is any relation to North Korea. We honestly don’t know.”
The embassy declined to speak about the meeting and forwarded queries to the U.S. Treasury Department, which said it has a “policy not to comment on specific cases.”
Tay Za provided FORBES ASIA with records from 4G and another of his companies, Asia Pioneer Impex, of transactions with the Chinese companies Fanwell, Goldtec Trading Group, Win Trade World Wide, Ocean Wide Trading (Hong Kong) and Fortune Sun International Trading.
The U.S. Treasury Department said at least one of them–Fortune Sun–was a front company set up by North Korea’s Tanchon Commercial Bank, according to a July 2009 diplomatic cable published by the whistle-blowing website WikiLeaks. The United Nations sanctioned Tanchon in 2009, calling it the main “financial entity responsible for sales of conventional arms, ballistic missiles and goods related to the manufacture of such items.”
Tay Za says he made the payments on behalf of Myanmar’s government. He heads the business association in charge of importing fuel, and he made $300 million in transfers for the government, blocked from buying on much of the global market. Transaction records show that most payments were made to Fortune Sun under the previous military regime, but one was made eight months after the new government assumed office in March 2011.
Information about past–or any present–Myanmar state ties to North Korea is difficult to come by. In any case, Tay Za insists he has no choice but to do what officials ask. “Whatever the government requests, I have to handle,” he says.
Myanmar’s former military rulers relied on tycoons like Tay Za to prop up the economy. Commonly known as “the cronies,” they became experts at circumventing sanctions and were richly rewarded by the junta, which granted concessions ranging from forestry to car imports.
Sean Turnell, an expert on Myanmar’s economy at Australia’s Macquarie University, says he was “not surprised at all” that Tay Za made payments to North Korea-linked companies for the military government, known as the State Peace & Development Council (SPDC).
“Making transactions such as this on behalf of the state was very much standard MO for the crony companies throughout the latter SPDC era,” he says. What isn’t known is whether such Burmese links to Pyongyang persist.
The U.S. Treasury put Tay Za on its list of sanctioned Specially Designated Nationals (SDN) in 2008 for providing support to the junta, including the purchase of military equipment and aircraft, according to a statement at the time. Washington’s objections are spelled out in more detail in a leaked 2007 U.S. diplomatic cable that accuses Tay Za of earning “hefty commissions from sales to the military of arms, ammunition, supplies, MI-17 helicopters, and MiG-29 [fighter jets].”
Tay Za dismisses the allegations, challenging U.S. officials to “show the evidence.” A U.S. government official, responding to questions submitted to the State and Treasury departments, admitted that “there wasn’t a specific evidentiary buildup” against Tay Za.
Win Aung, another SDN-listed tycoon, says the U.S. relied on “rumors” to place people on the list. “This is quite a big question mark–from where was the information they received? How authentic is the information that they are receiving?” he asks.
Tay Za admits to selling Russian-made MI-17s, and says he continues to hold the service contracts and provides spare parts to Myanmar’s military. But he denies other arms sales, saying that he introduced Russians to Myanmar’s ruling generals, but that they took over negotiations from there.
“They did it directly, government to government,” he says. “We could not even go into the meeting room.”
The 2007 U.S. cable, also from WikiLeaks, portrayed Tay Za as part of the former regime’s inner circle. It called him Myanmar’s “number one crony businessman” and said he entertained regime leaders “lavishly” to “curry favor and win the most lucrative contracts.”
Turnell says Tay Za’s crony image was exaggerated due to his flashy lifestyle in an impoverished economy: “He made such an ideal pantomime villain and, with all his bling, seemed to rather relish the role.”
The U.S. removed many former military officers turned civilian politicians from the SDN list, including President Thein Sein and parliamentary speaker Shwe Mann, a former general who in 2008 traveled to Pyongyang. But Tay Za and other tycoons remain listed–much to the chagrin of many U.S. businessmen who are clamoring to enter Asia’s hottest frontier market and see them as natural investment partners.
“Most American companies would prefer the list to be modified so those individuals and companies that are capable of being removed are removed,” said William Greenlee, a lawyer with the firm DFDL who also chairs the legal committee for the American Chamber of Commerce in Myanmar.
In mid-January chamber members gathered at an upscale restaurant in a refurbished British colonial-era building in Yangon. There U.S. Ambassador Derek Mitchell gave them some welcome news: The Treasury Department would soon take some names off the SDN list. “Last time I talked to Treasury they talked in terms of months,” Mitchell said.
Six months later no names have been removed, and Washington insiders say the delay has to do with shifting politics in both D.C. and in Naypyitaw, Myanmar’s capital. American politicians and human rights groups accuse Myanmar’s government of backtracking on promised reforms.
“There is a lot of domestic pressure not to remove anyone since there has been little progress on reforms in the past 18 months,” said Kelley Currie of the Project 2049 Institute, a D.C.-based think tank that focuses on security issues in Asia.
Among those lobbying against further engagement is Chabot, the congressman who sponsored a bill demanding greater pressure on Myanmar’s government to stop the persecution of the ethnic Rohingya Muslim minority who live under apartheidlike conditions. Chabot says delisting SDNs now would send the wrong signal. “I do not support U.S. companies partnering with these cronies in any way,” he says.
Yet, in late June officials from Treasury and State invited sanctioned individuals to a meeting in Yangon where they explained the process of getting off the list. The criteria include cutting ties to the military and demonstrating transparent business practices–perhaps an even bigger challenge for tycoons like Tay Za than political opposition in D.C.