Identifier
Created
Classification
Origin
08CHIANGMAI96
2008-06-23 07:03:00
CONFIDENTIAL
Consulate Chiang Mai
Cable title:  

AFTER NARGIS, A BORDER TRADE BOOM IN THAILAND'S FAVOR

Tags:  ECON ETRD PREL EINV EAID EAGR TH BM 
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VZCZCXRO0704
PP RUEHCN RUEHDT RUEHHM
DE RUEHCHI #0096/01 1750703
ZNY CCCCC ZZH
P 230703Z JUN 08
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0786
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHCHI/AMCONSUL CHIANG MAI 0849
C O N F I D E N T I A L SECTION 01 OF 02 CHIANG MAI 000096 

SIPDIS

E.O. 12958: DECL: 6/23/2018
TAGS: ECON ETRD PREL EINV EAID EAGR TH BM
SUBJECT: AFTER NARGIS, A BORDER TRADE BOOM IN THAILAND'S FAVOR

CHIANG MAI 00000096 001.2 OF 002


CLASSIFIED BY: Kevin Rosier, Econoff, , .
REASON: 1.4 (b),(d)



-------
Summary
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C O N F I D E N T I A L SECTION 01 OF 02 CHIANG MAI 000096

SIPDIS

E.O. 12958: DECL: 6/23/2018
TAGS: ECON ETRD PREL EINV EAID EAGR TH BM
SUBJECT: AFTER NARGIS, A BORDER TRADE BOOM IN THAILAND'S FAVOR

CHIANG MAI 00000096 001.2 OF 002


CLASSIFIED BY: Kevin Rosier, Econoff, , .
REASON: 1.4 (b),(d)



--------------
Summary
--------------


1. (C) Trade activity on the Thai-Burma border is bustling as
demand for relief supplies remains high in Burma after cyclone
Nargis. Thai exports to Burma through Mae Sot increased 75%
last month compared to May 2007, and officials do not expect
export volumes to drop to normal levels anytime soon. Besides
post-Nargis demand for supplies, contract farming and revenue
from remittances in Thailand are also helping to increase
exports to Burma. Thai businesses see the recent boost as an
opportunity to advance already existing plans to improve highway
infrastructure along the East-West corridor from Thailand to
Burma's Mawlamyine seaport. End Summary.

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Post-Nargis, Thai Exports Soar
--------------


2. (SBU) In the aftermath of cyclone Nargis, Thai exports to
Burma through the Mae Sot-Myawaddy border crossing have soared
amid increased demand for construction materials in Burma. Thai
Customs officials reported during a June 11-13 trip to Mae Sot
by ConGen officials that May's exports through Mae Sot to Burma
increased 75% compared to May 2007. The increased export volume
is composed primarily of construction materials, especially tin
sheets used as roofs. Export levels of these tin sheets were
already artificially low due to a Burmese import ban. Customs
officials told us that the Burmese have not been enforcing the
ban since Nargis.


3. (U) Besides purchased goods, donated goods such as small
tractors have expanded export levels through Mae Sot as well.
The RTG declared Mae Sot the main transit point for donated
goods because it is Thailand's closest border point to Rangoon
at 400 kilometers. Moreover, NGOs operating in Mae Sot are
buying large amounts of relief supplies from Bangkok producers
and exporting them via Mae Sot to Rangoon.



4. (C) The average value of exports to Burma through Mae Sot is
about $31 million monthly or $350 million yearly, including both
official and unofficial trade; and average annual export growth
is 30% in Mae Sot. The cyclone has changed the outlook for
2008, however. Expecting the recent surge in exports to be
sustained throughout the year, Customs officials estimate that
2008's export values will reach about $625 million by the end of
2008, an increase of 75% of the average annual level.

--------------
Explaining Export Growth Beyond Nargis
--------------


5. (U) While increased demand for construction supplies explains
the boom in exports from Mae Sot in May, Customs officials said
that there are other reasons for possible sustained export
growth in the future. One reason is that officials expect the
high prices of commodities to continue to rise, increasing the
face value of exports.


6. (SBU) A second reason is that demand is booming in
neighboring Karen State, where incomes are rising thanks to new
cash crops such as corn and beans grown under Thai contract
farming projects. Under the former Thaksin-led government,
foreign investment regulations were relaxed to allow Thai
investors to engage in contract farming in neighboring
countries. The policy's effects are being felt in Karen State,
where contract farming has become a popular cross-border
investment. Thai officials expect that Karen incomes will
continue to rise as farmers are now shifting to ethanol inputs
such as sugar cane and tapioca as main crops.


7. (C) Finally, officials also attributed high Burmese demand
for Thai exports to the remittances sent by Thailand-based
Burmese labor. This expands purchasing power in the bordering
states. One local Chamber of Commerce official (Tak Province)
gave such credence to the influence of these remittances on
bilateral trade that he believes the equal values of the
estimated $31 million in Thailand-generated monthly remittances
to Burma (septel) and the $31 million in monthly exports through
Mae Sot are no coincidence.


8. (C) The Tak Chamber of Commerce echoed Customs officials'
reports of high post-Nargis export levels; however, it cited a
potential obstacle to businesses being able to fully benefit
from the high demand. The Chamber reported that the Burmese
government contacted it to request that more tin sheets be
exported for reconstruction efforts. The Chamber said that

CHIANG MAI 00000096 002.2 OF 002


although Thailand is a major producer of these sheets, a current
supply shortage caused by limits in production capacity will not
allow it to honor Rangoon's request.

--------------
Imports Unchanged or Stagnant
--------------


9. (U) While Thai exports are reaping the benefits of high
post-Nargis demand in Burma, Burmese imports have remained
unchanged or have stagnated since May. Seafood imports, the
second largest from Burma through Mae Sot, have declined since
the cyclone destroyed much of the fishing sector. Other major
import categories, including wooden and agricultural products,
have remained at normal levels since most of these goods
originate in the unaffected border states of Karen, Shan, and
Mon.

--------------
Opportunity for Infrastructure Growth?
--------------


10. (C) Basking in unusually high export growth and noting the
growing intimacy of the Thai and Burmese governments, Thai
exporters are hoping that highway expansions in Burma can allow
for even higher trade levels. Customs officials believe that
now is a good time for the neighboring countries to advance
plans to expand the highway that connects Myawaddy to the main
seaport of Mawlamyine. The highway through Burma is the last
leg of the East-West highway that links Da Nang, Vietnam to
Moulmein, Burma. With the highway project's sponsor, the Asian
Development Bank, unwilling to fund construction of the Burma
portion, the former Thaksin-led government approved a $65
million soft loan to the GOB to finance and build this final leg
of the road.


11. (C) The Tak Chamber of Commerce reported that the first
phase of this project, which is the first 18 kilometers from
Myawaddy to Thingannyinaung, is already completed. The site
survey of the second phase, which plans for the construction of
another 32 kilometers onward to Kawkareik, is complete;
construction is pending negotiations between the RTG and GOB.
The two sides are deadlocked on a difference of opinion: the
RTG wants to expand and improve the already existing single-lane
32 kilometer dirt road; whereas the GOB wants to build an
entirely new and longer route further south where no
infrastructure currently exists.

--------------
Comment
--------------


12. (C) While no one in Mae Sot is rejoicing at the devastation
caused by cyclone Nargis, it is hard to ignore how the storm
caused this sudden boost in Thai exports to Burma. With
economic activity thriving at the border, Thai businesses are
inevitably looking to policymakers to expand trade even further,
with contract farming and the highway project leading the way.
However, amid domestic political turmoil in Thailand and an
ever-uncooperative regime in Burma, prospects for man-made trade
promotion on the border are dim.


13. (U) This cable was coordinated with Embassies Bangkok and
Rangoon.
MORROW