Turmoil at the Top Prompts Business Uncertainty

By Kyaw Hsu Mon 24 August 2015

RANGOON — In Burma’s business environment, where many prominent firms have close ties to officialdom, political developments at the top can have major ramifications for the economy.

It remains to be seen how significantly the political turmoil that recently engulfed Burma’s ruling party will play out in Burma’s business sector.

When Union Parliament Speaker Shwe Mann was ousted from the leadership of the Union Solidarity and Development Party, local businesses feared the potential economic fallout as the former chairman’s two sons are part of a wide business network.

Speculation was rife that the government might probe the Shwe Mann family’s business empire, following junta-era strategies of the past in an attempt to discredit the embattled former general.

Almost immediately, the rumors began to spread.

There was speculation that the Ta Za-established Asia Green Development Bank would take a serious hit since Shwe Mann’s eldest son Aung Thet Mann was a majority shareholder.

Other companies, including Kanbawza (KBZ) Bank and Air Bagan, were also said to be heading for financial trouble because of their links to Shwe Mann.

Such speculation gained traction after the government forced the closure of Cherry FM, a radio station run by Shwe Mann’s daughter-in-law, shortly after the former chairman’s removal, prompting theories of a government-led gag order on his family and allies.

Shwe Mann’s two sons are well-known businessmen in Burma. Aung Thet Mann is still on the US Treasury Department’s blacklist from which Shwe Mann himself was only removed in September, 2012.

Aung Thet Mann is the CEO of Ayer Shwe Wah which received lucrative government contracts to supply fertilizers to farmers throughout the delta. His brother Toe Naing Mann owns Red Link Communications.

There are always economic implications after political turmoil, said Dr Soe Tun, the chairman of the Automobile Importers Association.

“We’ve experienced this in the past, after reshuffles or a change in politics, businesses related to affected officials usually fall down,” he said.

A pertinent past example is the case of Burma’s former prime minister and spy chief Khin Nyunt. Following his arrest in 2004, authorities moved in on his family’s business operations, including Bagan Cybertech of which his son, Ye Naing Win, was chief executive officer.

Khin Nyunt was subsequently accused of corruption. The general most vocally pressing that charge was the junta’s then third most powerful figure, Shwe Mann.

Khin Nyunt’s actions “could have led to the disintegration of the Tatmadaw [Burma’s armed forces] and posed extreme danger for the country,” Shwe Mann was quoted as saying at the time.

Dr Soe Tun said times have now changed and businesses involved in legal dealings should not be unfairly targeted due to their links to power.

“Now the political situation has changed, it should be like it was in the past. If a company is in a good line of business, even if it is related to such [high-ranking] people, the government should not mete out the same treatment as before,” he said.

Provided firms pay regular taxes, create jobs and have a modicum of transparency, they should not be punished, Dr Soe Tun said.

“Who knows who is behind some businesses? [Shwe Man’s family] might be linked with many other businessmen. Our country’s businesses are actually dependent on them in a way that is not [evident] in other countries,” he added.

Myat Thin Aung, chairman of Hlaing Tharyar Industrial Zone, said economic ramifications had always followed high-level political shifts in Burma, hitting not only the business sector but also the population at large.

“People who are close to government or are relatives of officials have good opportunities in business. They have many business links to each other,” he said.

Sean Turnell, an Associate Professor in Economics at Sydney’s Macquarie University, said firms with links to Shwe Mann would be anxious in the current climate.

“Financial markets hate instability of any form, and of late [Burma’s] has been at the serious end of concerns,” he said.

“I think it is not in as good shape as the government would have wanted. The wheels have fallen off rather and the reform narrative is looking decidedly ragged. Time for a reboot.”

Current economic anxieties in Burma come on the back of a weak kyat that has been in steady decline against the US dollar since May. Consequently, demand for the dollar has increased and the Myanmar Central Bank has been forced to lessen reliance on black market currency trading by selling US dollars to private exchange counters.

Senior researcher Tin Maung Than of the Myanmar Development Resource Institute said Burma’s economy was particularly vulnerable when shifts in the political landscape occurred. Good business conduct had yet to be established, he said.

“There is no rule of law if there are no established [modes of] conduct and institutions. If there is no institutional governance… the economy will be impacted whenever political turmoil arises,” he added.