[June 01, 2013]YANGON, Myanmar
(AP) -- Zaw Zaw, one of Myanmar's most successful and notorious businessmen, likes to pick his way at odd hours around the hulking skeleton of his new hotel, rising beside Yangon's main airport road.
The 366-room Novotel holds a story of how one man, who remembers being too poor to afford a soccer ball, built an empire by befriending the military government in what was one of the most oppressive and isolated countries on earth; and how, as Myanmar opens up, he is quickly breaking with the past to embrace a prosperous, cosmopolitan future in which one thing seems certain: He will not lose.
"I am friends with everybody," Zaw Zaw says, a big smile spreading across his youthful face.
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EDITOR'S NOTE -- This story is part of "Portraits of Change," a yearlong series by The Associated Press examining how the opening of Myanmar after decades of military rule is
-- and is not -- changing life in the long-isolated Southeast Asian country.
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The 45-year-old tycoon, who built his fortune capitalizing on Myanmar's old networks of patronage and power, has demonstrated an agility in reconfiguring his business
-- and image -- to suit a new global audience, and at a speed few have matched. As the country emerges from a half century of military rule, his Max Myanmar Group is on track to more than double revenues, according to data he has not made public before.
His ability to ride the waves of change suggests that the old economic order may not be overturned as Myanmar opens its markets and deepens its embrace of democracy. Just as the former military leaders have taken off their uniforms to refashion themselves as civilian lawmakers and bureaucrats, many of Myanmar's dozen or so economic giants are rebranding themselves as entrepreneurs and working hard to take the stink out of the word "crony."
Zaw Zaw, widely regarded as among the cleanest of the bunch, has moved faster
-- and more publicly -- than his peers to take advantage of Myanmar's reintegration with the global economy. Though he remains on a U.S. blacklist that bans American companies from doing business with friends of the old regime, the Max Myanmar Group is one of the nation's most successful conglomerates, employing 11,000 people in sectors from hotels and banking to cement and construction.
France's Accor Group has a deal with him to manage the Novotel in Yangon and an MGallery hotel in Naypyitaw, the capital. Zaw Zaw says he is pursuing a joint venture with a Thai cement company, and trying to get his Ayeyarwady Bank in shape so he can bring in a foreign partner. He also made a bold effort to list his energy subsidiary on the Singapore Stock Exchange, though that was rejected in April over lingering concerns about his past.
Zaw Zaw acknowledges being friendly with the old military regime, arguing that there was no other way to succeed. "Only the government has projects," he says. "If I don't do projects with them, who will I do projects with?"
His only crime as he sees it? "In this poor country, I have become rich."
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Zaw Zaw was not born to power. The youngest of six children, he grew up in a two-room wooden house in Yeygi township in Myanmar's southern delta. His father was a government servant, and his mother sold food and household sundries from their home.
In 1988, during his final year at the University of Yangon, he was swept up in student protests against the military government that galvanized the nation. When the government began rounding up student leaders, he hid in the countryside for four months, then went to Singapore with the help of a cousin who found him a job as a sailor. He had $80 in his pocket. It was the beginning of a six-year odyssey abroad.
While Myanmar's xenophobic government sank deeper into isolation, Zaw Zaw saw the world, earning $200 a month as a deckhand. He went to Australia, Hong Kong, Iran, Taiwan, Japan and Africa. He learned English. He saw the development in other countries and grew ashamed of the poverty and repression of his own.
He saved $8,000 and headed to Bangkok, where he blew most of it at nightclubs with friends. In 1991, he bought a ticket to Japan with his last $650.
In Tokyo, he worked three jobs, as a cook, a dishwasher and a waiter. He learned Japanese. Determined to go into business, he began flipping through the yellow pages and cold-calling used car dealers. One was named Max Trading Co. Zaw Zaw became friendly with the owner, bought two Nissan sedans and sold them to his friends.
Thus was born the Max Myanmar Group. Zaw Zaw exported used cars to Myanmar and other developing countries. Taking advantage of a Burmese law that allowed each citizen living overseas to import one car, he snapped up other people's import permits on the black market for around $500 each.
He also met his future wife, a woman from Myanmar then working in Japan too. "She was buying the car from me," he says. "At the end, she bought me."
The couple moved back to Myanmar in 1995 to marry. Zaw Zaw kept importing cars, then added more profitable sales of heavy construction equipment. From there, he went into construction, first as a subcontractor and then winning government contracts himself.
His businesses thrived on connections he developed with the military rulers. He founded a construction company in 2005 that laid the roads for Naypyitaw. Five months later, he started a hotel company that built hotels in the same city in exchange for coveted vehicle import licenses. He developed a jade mine in 2007 in a joint venture with the government.
In 2010, the ruling junta oversaw a rush of privatizations before handing power to a nominally civilian government. Max Myanmar acquired 12 gas stations, part of the land for the coming Novotel hotel and a banking license, putting Zaw Zaw in good position to capitalize on the ensuing opening of Myanmar's economy.
Today, the Max Myanmar headquarters in downtown Yangon are outfitted with sleek burnished wood. Zaw Zaw welcomes visitors in royal red chairs rimmed with ornate silver. He is surrounded by a coterie of assistants, young men with firm handshakes, bright smiles and perfect English, some of whom left successful careers abroad to join Zaw Zaw.
He says he wants to become a global, or at least regional, player. "In Myanmar, we don't have any single brand to compete in the world, or even the region," he says. That quest is forcing him to break many of the old rules. He has courted the political opposition and Western diplomats, both of which were anathema to the former military government. And in a system that long prized secrecy, he agreed to open his books, first to 48 inspectors from the Singapore Stock Exchange, and then to The Associated Press.
The revenues of the privately-held Max Myanmar Group, as reported to Myanmar's tax authorities, show the direction Zaw Zaw is steering his empire, as well as the extent to which he has benefited from his friends in the former military government.
Revenues grew to $240 million in the year ended March 31, 2012, the latest full-year data available, up from $180 million a year earlier. They then jumped to an estimated $293 million in the six months through Sept. 30, thanks to a surge in construction income.
The banking license Zaw Zaw got three years ago has given rise to the fastest growing part of Zaw Zaw's empire.
He and three other tycoons were summoned to a meeting with the government in June 2010 and given the licenses, he says. "Maybe they trust me," says Zaw Zaw, who had no prior experience in the field. "I really don't know why they gave me the license."
Revenues at Ayeyarwady Bank grew to $20.2 million in the year ended March 31, up from $7.5 million the prior year, while net income surged from about $825,000 to $7 million.
The Max Myanmar Group's business is shifting away from areas traditionally associated with cronyism. Revenues from his jade mine, which is nearing the end of its productive life, plunged to $1 million in the first half of this fiscal year, after totaling $17 million the prior year. His construction business still accounts for more than 90 percent of group revenue, but it is weaning itself from government projects in favor of private ones such as the Novotel. And he stopped importing cars in 2010.
Zaw Zaw says he has long admired opposition leader Aung San Suu Kyi and began cultivating a relationship with her after her release from house arrest in November 2010. Her rapprochement with him and other crony businessmen has dismayed some of her allies.
"My objection is up till now what they are practicing is not good business, but making monopolies," says Win Tin, a journalist who spent 19 years as a political prisoner and helped found the National League for Democracy, the party led by Suu Kyi. "We can't forgive them."
But he commends Zaw Zaw for handing back some disputed land for public use and for his high-profile charity projects
-- which totaled $2.3 million from 1993 through 2012, according to a glossy 75-page company brochure. "As far as I know, Zaw Zaw is the best one," he says of the cronies.
Despite his outreach and pro-reform rhetoric, Zaw Zaw remains on the U.S. sanctions list, which makes it harder for him to access foreign capital. The U.S. Embassy, in a June 2009 cable released by WikiLeaks, described him as "one of several mid-level cronies actively attempting to curry favor with the regime."
The sanctions list does not allow for redemption. It is designed to hold people accountable for past wrongs, regardless of whatever good work they may be doing now, a U.S. State Department official said on condition of anonymity, because he was not authorized to speak to the media.
The Singapore Stock Exchange's top concern in rejecting Zaw Zaw's bid to list Max Energy
-- which now operates 31 gas stations -- was his presence on the U.S. sanctions list and the "lack of clarity" as to why he was placed there, according to a filing by the Singapore-based company that would have been his partner. The exchange also flagged unresolved allegations of human rights violations and tax evasion.
Zaw Zaw insists he has done nothing wrong and was placed on the U.S. blacklist based, in part, on inaccurate information. "If somebody did wrong, they should be punished," he says. "But don't create rumors."
The Accor Group, for one, is happy to do business with him. Patrick Basset, a senior vice president for the region, said in an email that the hotel group sees its partnership with Zaw Zaw partly as a way "to encourage positive changes."
And, as the glowing financial results in his books suggest, the U.S. sanctions may be hurting Zaw Zaw's pride more than his pocketbook.
