Gateway to prosperity

Long a port of call on one of the region’s most popular smugglers’ routes, will Asean’s last trading frontier finally be brought in from the cold?

Steve Finch
November 17, 2012

Long a port of call on one of the region’s most popular smugglers’ routes, will Asean’s last trading frontier finally be brought in from the cold?

By Steve Finch
The Asian Development Bank  (ADB) in 2001 predicted it would be possible to travel on an “all-weather road” from Da Nang in Vietnam to Mawlamyine, a run-down port on Myanmar’s Bay of Bengal coast, within three years.

Photo: Reuters/AFP.   Off the back of a lorry: a militarised mafia are making a killing in cross-border contraband trade.
Photo: Reuters/AFP.
Off the back of a lorry: a militarised mafia are making a killing in cross-border contraband trade.

More than a decade later, this 1,320-kilometre trade route – the East-West Economic Corridor – comes to a grinding halt at a bridge across the Moei River connecting the Thai border town of Mae Sot to Myawaddy in Myanmar. This is the gateway to Kayin State, scene of the world’s longest-running civil war at 60 years and counting.
Foreigners are barred from travelling overland beyond this town. Beneath the bridge on the Myanmar side, proxy militias in cahoots with the army man sand-bagged sentry posts day and night and the rural landscape surrounding the town is littered with anti-personnel mines. Still, this war economy looks to be on the verge of a much-needed makeover.
A third round of ceasefires in mid-September not only brought the Myanmar government closer to a lasting peace deal with the Karen National Union – the political wing of the insurgents – it  also prompted calls to rejuvenate business on the Myanmar side of the border through the establishment of factories and commercial farms.
In the wake of the ceasefire the ADB, which has not offered direct funding to Myanmar since 1987, is considering re-engaging with the country while other key donors are contemplating financing the rehabilitation of this trade route.
“We are taking a very early look at the road [from Myawaddy],” said Jamie Leather, ADB’s principal transport specialist who toured Myawaddy and its surrounding areas in late September. In recent years, only Thailand has helped fund improvements to the road out of Myawaddy, and then only the first 18-kilometre stretch.
Equally promising is the renewed vigour with which Myanmar and Thailand are cooperating on trade after years of tit-for-tat border closures, the most recent of which lasted for 17 months up to the end of 2011.
In signs of warming relations between the two sides, Mae Sot mayor Terdkiat Shinsoranan recently met with Than Sein, a leading trade official from Myawaddy, in what is expected to become a monthly economic cooperation meeting. A new bridge is in the pipeline, along with Thai investment in a new Myawaddy Special Economic Zone “ahead of the start of the Asean Economic Community” at the end of 2015.
While infrastructure is important in boosting the local economy, customs procedures and legal agreements between the two countries must be established for the full benefits of the economic corridor to be realised, said Leather. Long transit times are currently slowing the movement of trucks crossing the border, mostly to Myanmar.
Thai state media reports that trade increased nearly 30% to about $700m for the first five months of the year belie a darker truth in this frontier town when the sun goes down.
A symptom of Myanmar’s bad old days, this border – the country’s second-largest in terms of trade volume – is a well-oiled smuggling operation on a massive scale. Soldiers on the Myanmar side have turned kilometres of riverfront into demarcated smuggling fiefdoms secured by guards cradling automatic weapons.
Most are run by the Democratic Karen Buddhist Army (DKBA), former insurgents who have cut a deal with government forces to man these lucrative trade routes in exchange for peace. The Myanmar Army runs a smaller number of these illicit compounds; others are shared operations.
All of these unofficial trading posts serve the same purpose. Government and DKBA soldiers collect unofficial fees from smugglers ferrying illicit goods worth millions of dollars across the border every year.
The large contraband trade zones  that dot the river are abuzz with activity, as smugglers and traders pay off soldiers holding the goods in transit. Outside the largest of these zones on the Myanmar side, a DKBA billboard tells passersby that the gated, secured compound visible behind an armed sentry post is boosting the economic development of Kayin State. A smuggler who declined to be named disagreed: “This is only for themselves,” he said.
On the Thai side, rich businessmen run the show, a much subtler operation that relies on money doled out to police and customs officials, according to the smugglers.
Kyaw Soe, who drives smuggled Thai goods from the river at Myawaddy all the way to Yangon – a journey he said takes two days due to the terrible roads – estimates that only 20% of trade across this border is legal.
“Now that there is peace, soldiers are turning to smuggling and trade is rising,” said Kyaw Soe.
Smuggling routes offer a faster and cheaper alternative means of shifting goods than official channels, which are likely to inspect vehicles. As such, any bid to improve customs procedures is likely to meet resistance from soldiers manning the illicit trading routes.
Than Sein, the leading trade official from Myawaddy, declined an interview on reforming customs procedures, while Tun Win, the Ministry of National Planning and Economic Development official responsible for international negotiations over the East-West corridor project, did not respond to emailed questions.
Manpower, the other key commodity traded across the border illegally, is also likely to have a major bearing on whether the Myanmar government can clean up the trading post and realise Kayin State’s economic potential, analysts said.
Thousands of illegal economic Myanmar migrants work just across the border, contributing to Thailand’s economy as garment workers, maids and help on commercial farms.
A 2008 study by researchers at the University of North Carolina in the US found these workers in Mae Sot were making just under $2.20 per day, less than half of the average in Tak – about 100km away – and nearly a third of the average pay packet in Bangkok, the destination for many of the goods. Yet for many of these women, this pay is still preferable to the situation on home soil, where a peace plan has yet to stablise, unmarked mines litter the earth, mistrust of the government is rampant and basic infrastructure is poor even by Myanmar’s standards. The country ranks near the bottom in Asia when it comes to development indicators such as rural electrification.
“As soon as the situation improves they said they want to go back… not only the political situation, but also the economic situation,” said Dr Kyoko Kusakabe, co-author of the new book Thailand’s Hidden Workforce: Burmese Migrant Women Factory Workers.
The development of Kayin State requires the return of its people, skilled workers, labourers, consumers and traders, who represent the driving force of any economy.
The problem is, said Dr Kusakabe, “they [Myanmar workers in Mae Sot] said that there is no way to earn a living back home”.

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