US embassy cable - 04RANGOON513

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000513 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB, DRL 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 04/22/2014 
TAGS: ETRD, PHUM, PREL, ECON, PGOV, BM, TH, NGO, Economy, Ethnics, Human Rights 
SUBJECT: THE BURMA-THAI BORDER TRADE CHRONICLES, PART III: 
SANCTIONS, PEOPLE, AND ASSISTANCE 
 
REF: A. RANGOON 497 
     B. RANGOON 488 
     C. RANGOON 138 AND PREVIOUS 
     D. 03 RANGOON 1552 
     E. 03 BANGKOK 7434 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: Despite predictions that new U.S. sanctions 
would cause major changes in border trade and migration, a 
recent visit by Bangkok and Rangoon Econoffs to two of the 
three major Thai-Burma border crossings (refs A and B) shows 
business as usual in the movement of goods and people. 
Though border trade has not spiked since the sanctions came 
into effect, it continues to grow because of the generally 
informal nature of the border trade.  The flow of economic 
migrants to Thailand has also not risen dramatically since 
the new sanctions took effect, but thousands of Burmese 
continue to flock across the border in search of better 
economic opportunity.  The Thai government has started some 
assistance programs aimed at developing Burma's border area 
economy.  However, local businesspeople on both sides are 
skeptical that such an approach will have much impact.  End 
summary. 
 
Border Trade Booms Despite Sanctions 
 
2. (C) Despite expectations of sharp spikes in border trade 
and economic migration due to new U.S. sanctions (which took 
effect in July 2003), on the Thai-Burmese border at Ranong 
(Thailand)-Kawthaung (Burma; ref B) and Mae Sot 
(Thailand)-Myawaddy (Burma; ref A) businesspeople said they'd 
seen few notable changes.  Since July 2003, the volume of 
trade has continued to rise in both areas, though there has 
been no unusual jump in volume either legal or illegal.  Thai 
traders in Mae Sot said they have noticed a more lax attitude 
at Burmese Customs to the free flow of goods in the last 
year.  However, a Burmese trader in Kawthaung said that, to 
the contrary, import licenses for border trade have become 
dearer since Rangoon re-asserted control over issuance -- a 
right previously devolved to local GOB Border Trade 
Department officials. 
 
3. (C) Border trade trends are independent from those of 
non-border commerce (which has fallen dramatically since last 
summer) because of the informal nature of border trade, even 
if done legally.  Businesspeople contract almost exclusively 
with friends, and payments are nearly always routed via an 
unofficial, and illegal in Burma, hundi system.  (The hundi 
system is an unofficial network that is used worldwide to 
send remittances and provide trade settlement across 
borders.)  For legal border trade imports into Burma, 
underinvoicing is the rule, with hundi payments used make up 
the difference.  Thai-Burma border traders are further 
insulated from the impact of the 2003 sanctions because they 
rarely use USD for their transactions, instead dealing in 
Burmese kyat or Thai baht. 
 
4. (C) Thai businesspeople on the border were universally 
negative about the U.S. sanctions.  Though they are unlikely 
democracy boosters and are no champions of the Burmese 
everyman, some pled the case of the "poor Burmese" suffering 
under sanctions-induced economic problems, making it 
impossible for them to "think of democracy."  Others were 
more parochial, saying sanctions induced increased illegal 
immigration which burdened Thailand.  Most supported PM 
Thaksin's decision to engage with the SPDC, saying the 
previous PM's support for U.S. policy on Burma had led to a 
GOB crackdown on Thai trade and businesspeople in general. 
 
5. (C) However, Thai and Burmese businessmen did not blame 
sanctions for the poor economic climate in Burma and the need 
for smuggling.  Instead they pointed to the mercurial trade 
policy of the GOB.  All agreed that nearly all products could 
be traded legally or illegally depending on the current GOB 
restrictions. 
 
Economic Migrants: An Unstoppable Flow 
 
6. (C) It is clear that Burma's major export to Thailand at 
both border points is people.  An international NGO in Ranong 
(Thailand) told us as much as 40 percent of the city's 
250,000 population is Burmese, the vast majority working  in 
fish processing factories and in construction.  Many more 
cross over and move further inland into Thailand seeking a 
better economic situation elsewhere.  Likewise in Mae Sot, 
the population of Burmese migrants is very high, with 
2,500-4,000 crossing into Thailand every day.  Many return to 
Myawaddy at night, but many others stay to work in shops, in 
the agricultural sector, or in the foreign-owned garment 
factories of Mae Sot. 
 
7. (C) Labor organizers in Mae Sot report that these 
migrants, even those few who register with the Thai labor 
authorities, face harsh working conditions and wages about 50 
percent of the Thai minimum wage (about USD 3.50/day). 
However, even this small sum is probably 100-250 percent what 
they would make as laborers in Burma so the inflow of Burmese 
workers is relentless. 
 
8. (C) Local representatives of World Vision, a USG partner 
in anti-trafficking and HIV/AIDS efforts in the region, 
report that while trafficking of Burmese women into Ranong is 
rare, Mae Sot does serve as a portal for trafficked persons 
and economic migrants to other destinations in Thailand.  One 
estimate from Ranong was that only 10 percent of migrants 
there were "trafficked," and few illegal Burmese in town were 
working as prostitutes.  Mae Sot has a more organized labor 
export business from Burma -- involving the private sector 
and authorities on both sides of the border -- which charged 
would-be migrants USD 175 a head to cross through the jungle 
and USD 375 a head to be smuggled in by truck. 
 
9. (C) Thai NGOs and local factory owners told us that there 
had not been a large increase in migrants since the new 
sanctions, which also banned imports of Burmese products, 
took hold last July.  However, the steady inflow of workers 
was certainly higher than the demand for cheap labor on the 
Thai side in both Ranong and Mae Sot.  One labor NGO leader 
in Mae Sot said that he had seen an increase in female job 
seekers from Rangoon and Mandalay since the sanctions, 
alongside the normal crowd from Karen and Mon States. 
 
Thailand's ECS Plan Has Little Impact at Border 
 
10. (SBU) Since the initiation of the Economic Cooperation 
Strategy (ECS) program in 2003 (ref E), the RTG has worked to 
spur bilateral trade and provide technical training and 
development aid to Burma.  The Thai Finance Ministry is 
currently considering eliminating import tariff rates on 751 
products from Burma under the ASEAN Integrated System of 
Preferences (AISP). According to Thai Ministry of Commerce 
(MoC) officials, the RTG will soon allow duty free entry of 
eight agricultural products -- maize, sweet corn, soybeans, 
potatoes, eucalyptus, sesame seeds, and cashew nuts -- from 
Burma, Laos, and Cambodia.  Under the ECS program, Thailand, 
a net importer of soybeans, plans to provide technical 
training to Burmese farmers to help improve quality; in Mae 
Sot, local businessmen opined that at some point in the 
future, contract farming might be a viable investment, 
boosting agricultural trade.  In addition, the RTG has vowed 
to build a road from Myawaddy to the base of the Karen hills 
18 km from the border as part of a larger effort to create a 
road link across central Burma, from Thailand to India. 
According to a Thai MFA source, this project is "well under 
way," with funding from the Asian Development Bank. 
 
11. (SBU) Businessmen in Ranong, however, complained that the 
ECS program favors large Thai companies with close ties to 
leaders in Bangkok, and will likely have very little impact 
on the realities of cross border trade in the provinces.  In 
any case, as both Thai MoC officials and local traders 
pointed out, the ECS program did little to improve the 
biggest hurdles in dealing with Burma -- the chronically 
uncertain investment climate.  The constant threat of 
appropriation by the GOB leaves little incentive for Thai 
businessmen to seek local partnerships.  A Thai MoC official 
noted that efforts to forge a bilateral investment and border 
trade agreement have been ongoing for almost ten years,  with 
little success.  Even if such an agreement were possible, she 
admitted, this document would still be "just paper." 
Comment: Squeezing the Balloon 
12. (C) The RTG's efforts to stimulate the border economy are 
logical considering the demand for some Burmese products and 
the desire to stem illegal migration.  However, the success 
of this project, like so many other traditional efforts to 
develop Burma's rudimentary economy, will depend on the will 
of the Burmese regime to take advantage of the proffered 
assistance.  For instance, the Burmese government is 
inexplicably banning the export of some of the products for 
which Thailand is thinking of allowing tariff-free access. 
Even if the ECS projects do not succeed in stimulating 
Burma's formal economy and legal trade, and U.S. sanctions 
continue, we are confident that the close personal links 
between businesspeople on both sides of the borders will 
ensure informal trade of goods continues to pick up a good 
deal of the slack.  Likewise, until employment opportunities 
in Burma increase drastically, the allure of even Thailand's 
worst-paying jobs will be significant for hundreds of 
thousands of poor Burmese.  End comment 
 
13. (U) This is a joint Embassy Rangoon-Embassy Bangkok cable. 
Martinez