What Does the Future Hold for Aung Thaung & Sons?

By Seamus Martov 11 May 2012

Reports this week that Lower House MP Aung Thaung, a former general who served as Burma’s industry minister in the previous military junta, will no longer head efforts to reach a peace agreement with the Kachin Independence Organization (KIO) are just the latest twist in the long career of a man regarded as one of the country’s most corrupt officials.

According to an anonymous government official quoted by Agence France-Presse, Aung Thaung will not be included in a new Kachin negotiation team that will reportedly be led by President Thein Sein “because of a health condition.” Aung Thaung’s apparent ouster is similar to the fate of Vice President Tin Aung Myint Oo, who reportedly resigned last week, also for health reasons.

The move to sideline Aung Thaung from his position as chief of the parliamentary negotiating team, the Union Level Peace Committee, leaves many questions unanswered, including how much influence he still yields and whether more allies of former junta supremo Than Shwe will also be purged from influential positions in the new government. It is also unclear if the shakeup in the negotiating team will actually lead to better relations between the government and the KIO.

Burma’s army under the leadership of Commander-in-Chief Gen Min Aung Hlaing has twice over the past six months ignored Thein Sein’s public orders to halt the offensive against the KIO—a strong indication that Thein Sein and his allies have little control over the country’s armed forces.

Aung Thaung, who is widely believed to have profited immensely from corrupt business deals involving firms owned by his sons, is not known for his negotiating skills. A leaked September 2008 US diplomatic cable describe him as a “notorious hardliner” and noted his close relationship with Than Shwe.

Over the past six months Aung Thaung led a series of meetings with the KIO in the Chinese city of Ruili—talks that failed to reach any form of agreement to end the 11 month conflict between the army and Burma’s second-largest armed ethnic group.

Although Aung Thaung’s team successfully reached agreements with two relatively small groups, the Shan State Army—North and a breakaway faction of the Democratic Karen Buddhist Army, the parliamentary group’s failure to make a deal with the KIO stood in sharp contrast with the negotiating team led by Railways Minister Aung Min.

Aung Min’s team has concluded a flurry of high-profile ceasefire agreements with more than half a dozen groups since early January, when a deal was reached with the Shan State Army—South (SSA-South). The pact with the SSA-South was quickly followed by similar agreements with the Chin National Front, the Karen National Union (KNU) and the New Mon State Party. Aung Min’s tentative agreement with the KNU, which brought a pause to one of the world’s longest-running conflicts, gained international attention and praise from numerous Western governments.

While Aung Min recently traveled to Switzerland and Norway to discuss ways of ending Burma’s civil wars, Aung Thaung and his team continued to be largely shunned by Western governments. Although Aung Thaung, Aung Min and Thein Sein all served as senior figures in the notorious State Peace and Development Council (SPDC), Aung Thaung has had far more difficulty rehabilitating his image.

A key figure in the leadership of the Union Solidarity and Development Association (USDA), the pro-military group that was later transformed into the similarly named political party currently in power, Aung Thaung is often cited by opposition activists as one of the key architects of the Depayin massacre. This was the infamous May 30, 2003, incident in which a mob of stick-wielding USDA cadres attacked supporters of National League for Democracy (NLD) leader Aung San Suu Kyi while she was on a speaking tour in Upper Burma. The coordinated attack left several dozen NLD activists dead, a fate which Suu Kyi herself only narrowly escaped.

Although Aung Thaung and the other alleged organizers of the Depayin attack will likely never face trial for their involvement in this horrendous event, his association with one of the more notorious episodes in recent Burmese history is one possible reason that he has met with few international visitors to Burma, in stark contrast with the showering of praise Aung Min has received. The Norwegian government will reportedly spend millions of dollars over the next five years funding ceasefire-related development programs backed by Aung Min in Karen State and other areas of eastern Burma.

Reports from Naypyidaw suggest a rivalry between Aung Min and Aung Thaung, though as with many reports from anonymous individuals speaking about the small clique who run Burma, it is difficult to tell how far these tensions actually run and whether this led to Aung Thaung’s removal. Nirmal Ghosh, a correspondent for Singapore’s Straits Times, wrote on May 3 that “Sources said Mr Aung Thaung has been privately critical of Mr Aung Min for making too many concessions to the ethnic groups.”

These and other reports that Aung Thaung took a tougher line are hardly surprising given Aung Thaung’s role in escalating tensions with the KIO prior to the end of the group’s 17-year ceasefire with the central government.

During negotiations in early 2010, Aung Thaung and then Communications, Post and Telegraph Minister Thein Zaw gave the KIO until July of that year to join a Border Guard Force under Burmese military command. The decision by the KIO to ignore this deadline led to the 50-year-old organization being declared a terrorist group in state media shortly afterward. Thein Zaw, who has also made the transition from the army to Parliament, currently serves as the second-ranked member of the Union Peace Committee.

How Aung Thaung helped his sons become millionaires

Aung Thaung served as Burma’s Industry Minister (1) from 1997 until the official end of the ruling SPDC last year, a 14-year period in which Burma’s industrial sector came to be dominated by a small group of businessman connected to the military leadership, including Aung Thaung’s own children.

Although they may have not made as much money as billionaire Tay Za, two of Aung Thaung sons, Pyi Aung (also spelled Pye Aung) and Nay Aung are thought to have become multimillionaires using their father’s position in Than Shwe’s junta to advance their business interests, which include timber, oil, gas, electricity, banking, hotels and construction.

The brothers’ business empire is based on a series of interconnected firms, most prominently IGE Co Ltd (also listed as International Group of Entrepreneurs and IGE Pte Ltd). According to a company brochure UNOG Pte Ltd, which deals in oil, gas and mining (also UNOG Co Ltd and United National Oil & Gas), is also under the IGE umbrella, as is another firm that deals in timber called MRT Co Ltd.

A 2008 diplomatic cable states that Win Aung, owner of the timber company United International, told US diplomats that “IGE is the second largest timber company in Burma, earning more than
USD 75 million in 2007.”

According to the pamphlet, other parts of the IGE group of companies include FCGC Co, which deals in “infrastructure development,” and the Hotel Amara in Naypyidaw, where many recent international conferences have been held. Aung Thaung’s family also owns United Amara Bank, formed in 2010.

During the great asset sell-off that took place at the end of the SPDC regime, IGE gained control of what was previously a state-owned 50 percent stake in three upscale hotels in Rangoon—the famed Strand, the Dusit Inya Lake and the Thammada. Another firm, Aung Yee Phyoe Co (also Aung Yee Phyo), which deals in agricultural products, is also part of the family empire.

A US diplomatic cable from 2008 reports that IGE was formed in 1994 and later registered in Singapore in 2001. UNOG, which is also registered in both Burma and Singapore, was created in 2000.

The 2008 cable states: “Nay Aung’s best friend, Win Kyaing, is the Managing Director of IGE Co. and UNOG Co.” Recent reports in Burmese state-controlled media suggest that four years later, Win Kyaing remains managing director with IGE while his friend Nay Aung continues to serve as the chairman of both IGE and UNOG. In January of this year, the New Light of Myanmar listed a woman named Thazin Aung as the managing director of UNOG.

The revealing US diplomatic cable goes on to describe both of Aung Thaung’s sons as being “close to Senior General Than Shwe, who allegedly regards them as family.” The cable quotes a Rangoon-based businessman as stating that both men “use their family connections and close ties to the regime to amass great wealth.”

In addition to being the son of Aung Thaung, Pyi Aung is married to Nandar Aye, the daughter of Gen Maung Aye, who for many years was the second-highest ranking member of the SPDC. A US diplomatic cable dated June 2009 suggested that Maung Aye preferred his son-in-law over Tay Za when handing out lucrative business deals.

The 2009 cable cites another Rangoon businessman who told US diplomats that the Joint Chief of Staff Gen Shwe Mann and Vice Snr-Gen Maung Aye were favoring Nay Aung, Zaw Zaw (head of Max Myanmar) and Aung Thet Mann (Shwe Mann’s son) “for new projects and licenses in return for their ‘assistance.’”

The leaked 2008 cable also reports that IGE “was one of eight companies to construct buildings in Nay Pyi Taw. In addition to building several government housing complexes in the capital, the company built IGE Hotel [now Hotel Amara], a four-star hotel with thirty bungalows. As with other construction companies, the GOB [Government of Burma] did not pay IGE for its services, instead providing it with 15 vehicle import licenses, worth USD 200,000 each.”

According to business sources in Burma who spoke to The Irrawaddy last year, in early January 2011, IGE received an official permit from the government’s Trade Policy Council (TPC) to import pipeline material to be used for the Shwe pipeline project which will send fuel from the Arakanese coast to China’s Yunnan Province, literally cutting Burma in half. The billion-dollar project’s twin oil and gas pipelines will be operated by a consortium led by the state-owned Myanmar Oil and Gas Enterprise (MOGE) and the China National Petroleum Company (CNPC).

The route of the pipelines goes through a lengthy strip of northern Shan State controlled by the KIO, where heavy fighting is reportedly continuing between the group’s armed wing and Burma’s military. It is unknown if IGE’s involvement in the pipeline was a topic of discussion during the KIO’s negotiations with Aung Thaung.

IGE and UNOG may not major be players in Burma’s oil industry, however the Aung Thaung family empire is in a good position to receive a percentage of the lucrative royalties that will flow if the oil and gas blocks UNOG co-owns become operational.

In April 2012, UNOG and Petronas Carigali, the exploration and production arm of Malaysia’s state-owned energy firm, obtained the rights for two onshore blocks, RSF-2 and RSF-3. In 2010, Petrnoas Carigali and UNOG reached a similar deal for the rights to offshore blocks in the Gulf of Martaban, MD-4, MD-5 and MD-6. UNOG also currently co-owns the rights to the M1 offshore block with another foreign firm.

Norwegian firm ignored sanctions targeting Aung Thaung’s kids

In May and June 2011 Norwegian firm Seadrill conducted drilling work in the M1 offshore block despite the fact that the block’s co-owners, Aung Thaung’s sons, were subject to EU sanctions. Though Norway is not in the EU, Oslo officially adopted the EU’s Burma sanctions, which were in effect until last month.

Despite the notorious reputation of Aung Thaung and his sons, Seadrill did not appear to be concerned about being associated with them. The New Light of Myanmar reported that Seadrill staff attended a June 1, 2011, ceremony that was held on Seadrill’s West Juno drilling rig to mark the beginning of drilling at the M1 block’s test well, Shwepyitan No. 1. Left unreported in state media was any mention of the fact that the M1 block is located in the ecologically sensitive Irrawaddy delta, home to the increasingly rare Irrawaddy dolphin.

In March 2007, the New Light of Myanmar reported that UNOG Pte Ltd had teamed up with Rimbunan Petrogas (also known as RH Petrogas), a British Virgin Islands-registered firm to sign a production-sharing agreement with MOGE.

According to Burma’s paper of record “MOGE and the two companies will explore, drill and produce oil and natural gas at M-1 block in Mottama offshore.” Leaked US diplomatic cables state that the agreement signed in 2007 gave UNOG and their partner firm the rights to M1 for thirty years.

An August 2011 report produced by MOGE continues to list UNOG as co-owner of the M1 offshore block with its partner, Rimbunan Petrogas.

Seadrill’s regulatory filings with the US Securities and Exchange Commission (SEC) suggest that Rimbunan Petrogas was the lead operator in the venture between the Malaysian-owned firm and UNOG, a technicality that may have legally allowed Seadrill to circumvent restrictions on doing business with Aung Thang’s blacklisted progeny.

Seadrill’s 6 K filing dated August 2011 shows that West Juno was hired by Rimbunan Petrogas for a one-month contract beginning in May 11, 2011, at a day rate of US $124,500, a slight reduction from the $129,500 rate Seadrill received from Thailand’s PTTEP for a four-month drilling contract in Burmese waters from Jan. 11 to May 11, 2011.

The reputation of the Malaysian timber and media tycoon behind Rimbunan Petrogas is not much better than the family behind UNOG. While registered in the British Virgin Islands, Rimbunan Petrogas is part of Tiong Hiew King’s Rimbunan Hijau Group.

The ethnic Chinese billionaire has come under repeated scrutiny from international environmental groups concerned about his companies’ destructive timber practices in Malaysia and Papua New Guinea, both places where Tiong Hiew King uses his substantial ownership in the local media to advance his firm’s interests, a practice that has earned him comparisons with Rupert Murdoch.

Greenpeace has described the 75-year-old Tiong Hiew King as operating a “global logging empire” that is “responsible for the destruction of huge swathes of pristine rainforest in Southeast Asia.”

Offshore gas rules bent for Aung Thaung’s sons

Another US government cable dated June 5, 2009, describes how in late 2008 IGE was able to keep its partial ownership of potentially lucrative offshore gas exploration block A5 after the firm’s Malaysian partners Rimbunan Petrogas opted to pull out from the block.

According to the cable, under rules put in place by MOGE, when Rinmbunan Petrogas withdrew from the exploration block, MOGE should have made it available for auction again. Instead, it held on to the block and in early 2009 entered into an agreement with Indian’s Reliance Industries to develop it.

In April 2011 this block was taken over by Korea-Myanmar Development Co Ltd and Brilliant Oil Corporation Pte, a Singaporean firm controlled by Silver Wave Energy chief Minn Minn Oung, an individual described in a US cable as a front man for infamous regime crony Tay Za.

IGE involved in log export scam

Leaked US diplomatic cables from September 2008 reveal that IGE benefited from a blatantly corrupt practice in which the state-owned Myanmar Timber Enterprise (MTE) “pre-sells uncut timber to well-connected Burmese companies at below-market prices.” MTE has an official monopoly on the exporting of logs but the cronies, including IGE, were able to twist this to suit their own needs.

According to the US cable, IGE along with other crony-controlled firms, including Tay Za’s Htoo Trading, Win Aung’s Dagon Timber and Tin Win’s Tin Wun Tun Company, used “their connections to ensure they received the best quality timber, and often felled them in place of MTE.”

The cable said that IGE and the other firms “exported all logs under MTE’s name” and went on to report that firms in fact received the entire profit from the sale of the logs. According to the cable, the “companies, like others in the industry, exported all logs under MTE’s name, but in their case MTE did not take a percentage cut.”

In another cable from June 2009, a former senior official from the Ministry of Forestry told US embassy staff that although the government had given Htoo Trading and IGE Co Ltd permits to engage in reforestation programs, both firms were using the permits as an excuse to build plantations.

The cable noted that according to the official, “instead of promoting reforestation, these companies [Htoo Trading and IGE] are instead using the land for teak plantations, which he argues is not reforestation. The objective of these plantations, he noted, is to grow teak for future export.”