THE BURMA-THAI BORDER TRADE CHRONICLES: PART II,

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000497 SIPDIS STATE FOR EAP/BCLTV, EB COMMERCE FOR ITA JEAN KELLY TREASURY FOR OASIA JEFF NEIL USPACOM FOR FPA E.O. 12958: DECL: 04/21/2014 TAGS: ETRD ECON PREL PGOV PHUM BM TH SUBJECT: THE BURMA-THAI BORDER TRADE CHRONICLES: PART II, THE FRIENDSHIP BRIDGE REF: A. RANGOON 488 ¶B. RANGOON 138 AND PREVIOUS ¶C. 03 RANGOON 1552 ¶D. 03 BANGKOK 7434 Classified By: DCM Ron McMullen for Reasons 1.4 (B,D) ¶1. (C) Summary: A recent visit by Bangkok and Rangoon Econoffs to Mae Sot and Myawaddy, the largest trading point on the Burmese-Thai border, shows trade volumes that are flourishing despite U.S. sanctions and increasingly ludicrous Burmese trade policy. Even more than it does the sleepy Kawthaung-Ranong border (ref A),Rangoon relies on Mae Sot as a source of daily consumer items as well as more crucial industrial inputs -- like diesel. Coming the other way, more than 2500-4000 Burmese a day cross legally into Thailand at this border point, with many more crossing illegally across the trickle of a river that demarcates the border. Some come as day laborers, others looking for more permanent illegal work. Though the business environment is tough, both Mae Sot and Myawaddy businesspeople look forward to a long and profitable relationship between the two sides -- whatever it takes. End Summary. Crossing By Land ¶2. (U) To assess the current environment along the Thai-Burma border, Bangkok and Rangoon Econoffs traveled to two of the three major border trade points. The first of these was discussed in ref A (septel will look at broader border issues). The second -- Mae Sot, Thailand and Myawaddy, Burma -- is 140 miles east of Rangoon and 240 miles northwest of Bangkok and is separated only by a trickle of a river. This crossing, the largest by trade volume of the three, has a long history of legal and illegal commerce. The third crossing is in northern Thailand at Mae Sai and Tachileik (in Burma's Shan State). ¶3. (U) Mae Sot-Myawaddy, joined seven years ago by the "Friendship Bridge," is a classic land border crossing with trucks stuffed with consumer goods rumbling into Burma's still somewhat unstable Karen State, toward the Andaman Sea coast or Rangoon. Coming in the other direction are some Burmese agricultural products and raw materials and about 2,500-4,000 Burmese workers -- mostly ethnic Karen, Mon, and Burman -- per day. Many more Burmese likely cross illegally into Thailand near Mae Sot across the Moei River. Trucking to Rangoon: Mae Sot and Myawaddy ¶4. (U) Unlike the somewhat shaky state of the Kawthaung-Ranong dynamic, the Mae Sot and Myawaddy economic relationship is extremely vigorous and hugely in Thailand's favor. The road west from Myawaddy to Rangoon is still poor, running one way on alternating days, and passing through regions still controlled by insurgent groups. It is nonetheless the closest border crossing to Rangoon and is thus a magnet for exports to Burma -- often illegal -- from Mae Sot, elsewhere in Thailand, and from third countries via Bangkok. The Mae Sot Chamber of Commerce estimated that only 30 percent of goods that cross into Burma at Mae Sot originate locally in Tak Province. These goods are trucked to Mae Sot, over the bridge (or across the shallow Moei River) into Myawaddy, and then hauled on Burmese vehicles onward to Moulmein or Thaton on the Andaman coast or to Rangoon. ¶5. (C) According to Thai Customs and Mae Sot Chamber of Commerce numbers, the total trade volume is now about 800 million baht (USD 20 million) per month with 95 percent of that Thai exports. Official statistics show the trade made up of Thai consumer products, vegetable oil, MSG, plastic pellets, textiles, construction inputs, and diesel fuel trading for Burmese frozen and dried seafood, livestock, peanuts, bamboo, non-teak wooden furniture, and fish maw. Burmese legal exports were cut in half in 2003 when the RTG banned the import of teak furniture and teak logs without a GOB certificate of origin. Thai businesspeople had been secretly sending Thai teak, the cutting of which is currently SIPDIS banned, to Burma to be re-imported as "Burmese" furniture or logs. ¶6. (C) Smuggling is a major component of the Mae Sot-Myawaddy trade. Because the GOB bans most of what Thailand exports to Burma (especially consumer goods),only 10 percent of the Thai exports, mostly construction inputs, enter Burma at the GOB Customs checkpoint on the Friendship Bridge. The remaining 90 percent is checked out of Thailand legally at one of the 16 RTG Customs docks stretching 5 km along the Moei River, and then smuggled into Burma on the other side. Smuggling is not as active coming from Burma, though Thai businesspeople estimate that contraband teak products and gems add another 10-20 percent per month to the Thai import numbers. Thai Customs told us that there are also periodic seizures of amphetamines -- including a shipment in October 2003 of 9.4 million pills. Strangely, Myawaddy businesspeople complained it was necessary to smuggle Thai cement into the border areas, as RTG authorities purportedly ban this border trade to avoid giving the GOB material to build bunkers. ¶7. (C) Another boon to Mae Sot and Myawaddy border traders is the weaker GOB hand in Karen State. Though the Friendship Bridge is controlled by the Burmese army and "NaSaKa" inter-agency border force, the smaller riverine border trade crossings and the transportation network once inside Burma have been left in the hands of the ethnic Karen armed groups -- especially the pro-Rangoon Democratic Karen Buddhist Army (DKBA). Though there are countless DKBA and anti-Rangoon Karen National Union (KNU) checkpoints on the Myawaddy-Rangoon road, Thai exporters and Burmese importers alike say they are content with the arrangement as a single payment to an ethnic broker in Myawaddy is usually adequate to ensure a safe journey. Contrast this to trade routes firmly in the GOB's hands such as Kawthaung where, Burmese importers complain, multiple payments are required though they do not guarantee hassle-free passage. Thai exporters were unanimous, though, that business would be even better if there were a cease-fire agreement completed between the SPDC and the KNU. Comment: ¶8. (C) The relentless movement of goods from Mae Sot to Myawaddy is one of the major sources of lifeblood for Burma's troubled economy and government (ref C). Though the trade flows we examined are solidly in Thailand's favor, the products sold are generally not unique and are easily replaced -- even in Myawaddy's marketplaces -- by Chinese goods. Thailand's border entrepreneurs often look westward for natural resources off limits or not available domestically or from other bordering states. Thus, a Thai-Burma border closing, as occurred in 2002, would hurt the Mae Sot Thai exporting community as much or more than the Burmese. End comment ¶9. (U) This is a joint Embassy Rangoon-Embassy Bangkok cable. Martinez