From Smugglers’ Paradise to Free Trade Gateway

By Kyaw Hsu Mon 26 May 2014

MYAWADDY, Kayin State — As the largest of five official checkpoints for overland trade between Myanmar and Thailand, Myawaddy has long been associated with commerce—often of the illegal kind.

These days, however, its reputation as a hub for smuggling is changing, as the town assumes new importance as a future gateway of the Asean Economic Community (AEC), set to be launched in 2015.

Located opposite the Thai town of Mae Sot on the Moei River, Myawaddy established itself as a major conduit for contraband during Myanmar’s socialist era, when it was one of the few places where foreign-made goods could make their way into the country.

“It was a very popular city for smuggling in the 1980s, when the Burma Socialist Program Party banned imports,” recalled U Aung Myo Shein, the manager for corporate social responsibility at the Parami Energy Group of Companies, during a forum on the AEC held in Myawaddy in early April.

“There were a lot of people involved in bringing goods from Myawaddy to other cities, especially Yangon, in those days. Now, of course, most of this trading is done legally,” he added.

Even after the collapse of the socialist regime in 1988, however, smuggling remained a way of life in Myawaddy, with ethnic armed groups such as the Karen National Union and the Democratic Karen Buddhist Army playing a major role. Only recently, with the return to quasi-civilian rule in 2011 and subsequent efforts to end conflict in the country’s border regions, has the growth of legal trade begun to outpace smuggling.

Official trade figures show that cross-border trade with Thailand increased by more than 20 percent over the past year, from US$3.7 billion in 2012-13 to $4.46 billion in 2013-14, with exports making up $2.7 billion of the total in the fiscal year that ended in March.

Myawaddy’s growth has been a more modest but still significant rise of nearly 9 percent, according to officials at the forum, which was hosted by Parami Energy.

“When the AEC is established next year and goods begin to flow freely across the border, Kayin State will become a major gateway. That’s why we decided that traders in Myawaddy needed to learn more about it, and start preparing for the challenges it will present,” said U Aung Myo Shein.

Myawaddy is not the only border town to get a crash course on what the AEC is likely to bring. Parami Energy has organized 12 similar events at various locations, including at the border crossing of Htee Khee (linking the deep-sea port and special economic zone of Dawei to the Thai border) and at Muse-Shwe Li (Ruili) on the Chinese border.

Once it is in place, the AEC will transform the 10 member states of the Association of Southeast Asian Nations (Asean) into a region where goods, services, investment, skilled labor and, to a lesser extent, capital can flow freely across borders. Following a master plan laid out in the Asean Economic Blueprint adopted in Singapore on Nov. 20, 2007, the AEC will have a major impact on trade throughout the region.

As a first step toward economic integration, the Asean countries have been reducing import duties on goods from fellow members to between zero and five percent since 2008.

As relative newcomers to the regional bloc, the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) will be allowed to continue imposing tariffs on some products for three years after the AEC is established. However, even these countries have already begun lowering trade barriers in line with the movement toward open borders.

“Myanmar is one of the CLMV countries, so we have been given until 2018 to eliminate obstacles to the flow of goods, but we have already reduced import taxes on some home appliances and marine products,” said Daw Tin Tin Htwe, a senior consultant with Parami Energy and former director of the Ministry of National Planning and Economic Development.

“The Thai government has been supporting their traders to prepare for the AEC, so we must do the same,” she added.

But Myanmar’s business community will need more than just helpful advice if it is to be able to compete successfully in an increasingly open marketplace. The country’s severe lack of energy and transportation infrastructure could also prevent local businesses from entering the AEC with a running start.

To help address this problem, the Asian Development Bank has funded construction of a section of the Asian Highway Network from Myawaddy to Kawkareik, also in Kayin State. According to Kayin State Chief Minister U Zaw Min, the new highway, which connects Myawaddy and Yangon, is due to be completed by the end of the year.

“Trade will increase more after the construction of the Asian Highway, which runs through Kawkareik and Myawaddy, and will link us up to other Asean highways,” he said, adding that some parts the road had already been finished by a Thai construction company and Myanmar’s Ministry of Construction.

Regarding his state’s readiness for the AEC, U Zaw Min expressed cautious optimism.

“If you ask me if we’re ready right now, I would have to say no. But we’re not that far behind, and I’m sure we can manage it, just like other countries,” he said.

“Challenges should not be something to worry about. If we know about the latest technology, knowledge and processes, we can turn challenges into opportunities. That’s why we’re training businesspeople to understand the trading process here,” he added.

To some extent, however, it will be up to Myanmar’s businesspeople to learn for themselves what they need to know in order to survive under the new rules. And in many cases, that will be largely a matter of common sense.

“If we want to do more business with the Thais, we’ll need to speak Thai,” said Daw Thin Thin Myat, chairwoman of the Myawaddy Border Traders Association.

“Most agricultural equipment and electronic products are imported from Thailand. If we can’t speak Thai when dealing with Thai traders, negotiating with them will be harder. Even when we’re selling thanakha, we have to use Thai.”

Meanwhile, workers also profess only the dimmest awareness of what the AEC will mean for them.

“All I care about is whether it will mean more business for Myawaddy,” said Ma Swezin Htet, a salesperson in a local shop. “As long as I can earn more money to support my family, I’m happy.”