Local politicians in a border region known for its frequent outbreaks of violence hope to transform it into the “next Macau”, but will have to overcome instability, politics and corruption to achieve their vision.


A group of heavily armed gunmen sneak into town and storm three casinos. A pitched battle ensues; one person is killed and almost 300 staff are taken hostage. When the shooting ends, about 20 burned-out cars lie on the road in front of the hotels. The gunmen make off with a huge sum – said to be many tens of millions of dollars.

It might sound like a scene from a Hollywood movie, but it’s not: the robbery took place just three years ago in Laukkai, the capital of the Kokang Self-Administered Zone in eastern Shan State.

On March 6, 2017, members of the Myanmar National Democratic Alliance Army, a rebel armed group, raided the Fully Light, Kyinfu and Kyin Kyan hotel casinos, all of which are linked to a rival armed group, the Kokang Border Guard Force, which is part of the Tatmadaw.

In a country where most people have little direct experience of armed conflict, the attack further cemented Laukkai’s reputation as a violent and crime-ridden frontier town.

But Laukkai’s leaders are determined to confine violent rebellion to history. They have a new vision: to make their region safe and prosperous, and turn Laukkai into a gaming mecca on par with Macau.

During a rare visit to the city in March, Frontier met representatives of the Kokang Self-Administered Zone government, the Kokang Border Guard Force, Kokang Militia Force, government officials, police, local politicians and migrant workers to learn about the proposal and how the Kokang region is changing on the back of gambling-related tourism from China.

Many of them declined to comment on the record due to concern about upsetting the Tatmadaw, which remains the most important political actor in the Kokang region.

Crucial to their vision for the future is being allowed to operate an airstrip at Laukkai, to run licensed casinos under the Gambling Law, and to welcome foreign visitors.

If the government approves these requests, local Amyotha Hluttaw lawmaker U Kyaw Ni Naing (Union Solidarity and Development Party, Shan-11) says it will unleash a wave of investment that will transform Laukkai.

“It will turn Laukkai into one of the top ten wealthiest towns in Myanmar,” he says. “It will create job opportunities and tax revenues. The government might not need to give any budget for Laukkai anymore – it will be able to use the money raised locally.”

Far from the rulers

The Kokang region is a thin sliver of high mountains and steep valleys wedged between the Thanlwin (Salween) River to the west and the Chinese border to the north and east.

In the 18th century, the Yang clan, loyalists of the former Ming dynasty, consolidated control over the Kokang region.

Remote and almost entirely inaccessible, Kokang ­– and, to the south, the Wa region – served as buffer between the Shan states and Yunnan province. For most of their history they have been virtually autonomous, paying only nominal tribute to leaders to the west or east.

After the British conquest of Burma, Kokang was briefly acknowledged as part of China, but in 1897 it was ceded to British Burma and became part of the Shan states.

The British paid little attention to one of its most far-flung outposts, and after independence in 1948 the Kokang region continued to enjoy a large degree of autonomy.

But the incursion of retreating Kuomintang forces from China into Shan State thrust it onto the global stage in the 1950s.

In the following decades, Laukkai was a stronghold of the Communist Party of Burma. But in early 1989, the ethnic guerrillas of the CPB began rebelling against their mostly Bamar commanders. The mutiny erupted first in the Kokang region, in March 1989, and quickly spread to the Wa and Mong La regions.

Read more: How a Kokang becomes a citizen

Almost immediately the notorious drug lord Lo Hsing Han, an ethnic Kokang who would go on to establish the Asia World conglomerate, helped to broker a ceasefire between Lieutenant General Khin Nyunt, the head of Military Intelligence, and a local Kokang commander, Peng Jiasheng (known in Burmese as Phone Kyar Shin).

Under the terms of the deal, Peng’s ex-CPB faction – now renamed the Myanmar National Democratic Alliance Army – was granted control over the area, designated as Shan State Special Region 1. The military regime allowed the group and its leaders to keep their weapons and pursue a wide range of business interests – including opium cultivation, and heroin production and trafficking.

This agreement held for two decades, despite internal struggles between Peng and the Yang clan and the purge of Military Intelligence in 2004. However, after Khin Nyunt’s removal, relations between the military regime and Peng grew increasingly icy.

In 2008, the military regime promulgated a new constitution via a sham referendum that required all existing non-state armed groups to become Border Guard Forces under the Tatmadaw. After Peng resisted pressure to transform the MNDAA into a BGF, then-Senior General Than Shwe sent in the Tatmadaw in August 2009.

Current Senior General Min Aung Hlaing led the offensive against the Kokang group, which sent more than 30,000 people fleeing over the border into China. Taking advantage of a split in the MNDAA, the Tatmadaw quickly routed Peng’s troops; a breakaway faction became a BGF and was installed to rule over the Kokang region, which was granted “self-administered zone” status under the constitution.

Kokang administrators have big dreams for Laukkai. (Photo: Fully Light Golden Triangle Media)
Kokang administrators have big dreams for Laukkai. (Fully Light Golden Triangle Media)

It wasn’t the last of Peng or the MNDAA, however. In February 2015, during the Chinese New Year holiday, the group ­– allied with the Ta’ang National Liberation Army and Arakan Army – launched a surprise attack against the Tatmadaw and the Kokang BGF in an apparent attempt to regain control of the Kokang region.

The Tatmadaw responded with a heavy counteroffensive and declared martial law in the Kokang region. After nearly 100 skirmishes, and countless loss of life, the Tatmadaw managed to reverse most of the MNDAA gains, but it was unable to eliminate the group.

The offensive upended negotiations between U Thein Sein’s government and ethnic armed groups towards a nationwide ceasefire. The Tatmadaw subsequently demanded that the three groups – the MNDAA, the TNLA and the AA ­– surrender as a precondition for joining the peace process. This demand was rejected, and armed groups along the Myanmar-China border refused to sign the NCA later that year out of solidarity with the three groups. 

Since then, the MNDAA has remained a constant threat to stability, frequently attacking the casinos and homes of senior Kokang officials, particularly those linked to the faction that ousted Peng in 2009.

But the MNDAA is a threat elsewhere in northern Shan State, too. In November 2016 the group, together with the AA and TNLA, launched major attacks on the Mandalay-Muse Highway and the border towns of Muse and Mong Ko. In August 2019, the three groups, dubbing themselves the Three Brothers Alliance, again attacked the highway, as well as a Tatmadaw institute in the Mandalay Region town of Pyin Oo Lwin, on the Shan plateau.

Read more: Terror and tears in northern Shan State

Bilateral ceasefire negotiations launched in December 2018 between the government and the three groups, along with the Kachin Independence Organisation, have stalled, in large part due to Tatmadaw demands that the groups give up territory.

As a result of the threat posed by the MNDAA, the Tatmadaw’s Regional Operations Command is the most powerful institution in Laukkai. The Kokang BGF, meanwhile, is less influential than BGFs in other parts of the country, and a separate Kokang Militia Force, with around 500 troops under its command, is also under Tatmadaw control.

However, administrative responsibilities – including the informal licensing of casinos – are at least nominally under the control of the Kokang Self-Administered Zone, know as the Leading Body.

The military-aligned Union Solidarity and Development Party controls the Leading Body, after winning all seats in the Kokang Self-Administered Zone in the 2010 and 2015 elections.

The body comprises at least 10 members, including the four Shan State Hluttaw representatives from the Kokang Self-Administered Zone.

Although the USDP is seen as close to the Tatmadaw, its lawmakers in the Kokang region have different policies from the military, and it is these politicians who are pushing for policy changes to enable the Kokang region to become the “next Macau”.

Their position reflects local antipathy towards the Tatmadaw and deep frustration at its inability to peacefully resolve the conflict with the MNDAA, which still has legitimacy in the area.

“Kokang local residents long for the return of the MNDAA, led by Peng Jiashin, rather than being under the control of the Tatmadaw,” said one source. “Members of the Kokang Leading Body want to see peace between the Tatmadaw and the MNDAA to guarantee security and improve the economy … they are scared of both the Tatmadaw, on whom they have to rely for security, and the MNDAA.”

 From a collection of shacks in the 1980s, Laukkai has grown into a thriving city with dozens of casinos and hotels. (Nanda | Frontier)
From a collection of shacks in the 1980s, Laukkai has grown into a thriving city with dozens of casinos and hotels. (Nanda | Frontier)

The business of Kokang

The Kokang region remains synonymous with drugs. For decades, narcotics were the engine of the local economy and provided the capital for ostensibly legitimate business empires in Yangon, Mandalay and other parts of the country. Opium production in 2002 stood at around 175 tonnes, yielding tens of millions of dollars for small growers and billions of dollars once it hit the streets of foreign markets.

But in the early 2000s, the region’s dependence on drugs ­– or at least opium – began to change. The MNDAA introduced a policy of becoming opium-free by 2003, and to encourage this transition – and replace the lost income – the military government allowed the group to licence casinos in Laukkai.

A United Nations Office on Drugs and Crime report following a visit to Laukkai in March 2003 observed that Peng’s Kokang administration had “allowed numerous gambling casinos and small games of chance operators to open, catering to Chinese from across the nearby border checkpoints with China”.

The shift to an economy focused around satisfying gamblers from China has transformed Laukkai into a permanent boomtown. When journalist Bertil Lintner visited in late 1986 he found a town that was “little more than a collection of ramshackle structures made from wood and bamboo”. By 2003, karaoke bars, massage parlours and “other night life businesses” had already come to dominate the downtown area, according to the UNODC.

Today Laukkai boasts around 30 casinos and 50 hotels, including some that are 20 storeys or more – comparable to the taller buildings in Yangon. Mercedes, Land Cruisers and other expensive vehicles – all without official registration – fill the streets.

A visitor to Laukkai’s central Tong Chaing ward would be hard-pressed to know they are in Myanmar. Mandarin is the lingua franca and the official currency is yuan. The buildings are built in a style similar to towns just across the border. There are just a few signs that this is Myanmar sovereign territory: government offices, the occasional person wearing a longyi, a signboard in Burmese (although often with at least one spelling error).

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The casinos operate inside large hotel compounds that cover many acres, and also feature shops, gardens and recreational spaces. The decor is both elaborate and kitsch, and the casinos have incongruous names ranging from Henry to Kint Kyan. Their customers are both rich and poor, placing bets of anything between 10 and 100,000 yuan (US$1.43 to $14,300).

Staff at the hotels said they are licensed by the General Administration Department rather than the Ministry of Hotels and Tourism, unlike hotels elsewhere in Myanmar.

The casinos also seem to operate in a legal grey area. Most of them predate Myanmar’s Gambling Law, which was enacted last year and enables the Union government to issue licences to casinos. Those in Kokang are licensed only by the Kokang Self-Administered Zone “Leading Body” and refer to themselves as “companies” rather than casinos.

The casinos operate 24 hours a day all year round. Although a 9pm to 5am curfew has been in place since the 2015 attack, those in the vicinity of a hotel after curfew are unlikely to be arrested.

During a tour of the smoke-filled gaming floors, Frontier observed Chinese gamblers with piles of tokens and thick wads of red 100-yuan banknotes, the largest note in circulation.

The number of gamblers was lower than normal, staff said, because of travel restrictions in China related to COVID-19.

But most expect it to be only a temporary blip. More hotels are under construction and some of the older ones are being renovated. The town is caked in a perennial layer of dust from all the construction work, which showed no signs of slowing.

Further evidence of the boom is available in nearby Siaw village, which is famous as the birthplace of Peng Jiasheng. Many restaurants have opened in the village, or are under construction.

From a collection of shacks in the 1980s, Laukkai has grown into a thriving city with dozens of casinos and hotels. (Nanda)
From a collection of shacks in the 1980s, Laukkai has grown into a thriving city with dozens of casinos and hotels. (Nanda)

Flying dream

But Kokang administrators have bigger dreams for Laukkai. In a strange twist, they have been partly inspired by a humanitarian project in remote mountains on the far opposite side of Myanmar

In the village of Lailenpi in in Chin State’s Matupi Township, a local and international NGO are developing an airstrip at a cost of $1.3 million with permission from Nay Pyi Taw.

Taking Lailenpi as an example, the Kokang Self-Administered Zone Leading Body applied to the Department of Civil Aviation in 2019 for permission to build a small airstrip capable of handling aircraft carrying up to 10 passengers.

They have proposed building the airstrip at the town of Shwe Htan, about 10 kilometres west of Laukkai, to encourage development in other parts of the Kokang region.

Kokang administrators have a very different purpose for their airstrip, of course; they want to bring gamblers from around the world to Laukkai, and transform it into the “next Macau”.

As well as permission to build the airstrip, they want the government to allow casinos to be licensed under the new Gambling Law so they can invite foreign investors to set up even grander casinos in Laukkai.

Read more: Investors in Myawaddy’s casinos are a law unto themselves

Local leaders also want the government to relax entry and travel restrictions for foreigners to encourage more visitors to come to Laukkai.

The Tatmadaw-controlled Ministry of Home Affairs currently restricts access to Laukkai, which means that for the time being the town’s casinos have to rely – officially at least – on gamblers from the neighbouring towns in China.

Although the Kokang Self-Administered Zone has two official border crossings on its 50-kilometre shared border with China – at Laukkai-Nansan and Chin Shwe Haw-Mengding –only Chinese who live close to the border are allowed to enter, on seven-day permits.

In practice, visitors from elsewhere in China cross the border at unofficial crossings that are common along many of Myanmar’s borders. They then exit through those gates, along with anyone who entered on a seven-day permit but overstayed, according to staff at the casinos.

“It is not difficult to enter Laukkai this way,” said a 30-year-old man who works as a driver at a Laukkai casino. “I used to help welcome people who came through these illegal channels.”

The crossings operate in the open. About two kilometres from a BGF security post near border post 125, Frontier was able to cross into China at an illegal checkpoint that was also guarded by members of the Kokang militia.

Kokang leaders say that if small planes are able to land at Shwe Htan and foreign visitors can enter more easily, the region might be able to attract 5,000 guests a day, or 1.8 million visitors a year.

Kokang leaders say this will create many job opportunities for locals in an area that still has significant levels of poverty.

Baopang Street in Laukkai is home to “Bamar Town”, one of the few places where you can use kyat and hear Burmese being spoken. (Nanda)

Chasing the dragon

Chinese gamblers are not the only ones who come to Laukkai to seek their fortune – or, at least, a better life.

Laukkai is 188 kilometres from Lashio, the largest town in northern Shan, and small vans bring a steady stream of migrant workers from other parts of Myanmar, particularly Yangon, Mandalay and central Myanmar.

Most live in an area known as “Bamar town” on Baopong Street, in front of the Myanmar-Kokang Peace Monument. Here you can hear Burmese spoken, buy traditional Myanmar goods and change kyat into yuan.

They are very much a minority, though; out of the town’s population of 75,000, fewer than 10,000 are Bamar.

Most work in the casinos, while some toil in the sugarcane fields that dominate the surrounding region. There are also a few Bamar civil servants.

“Here, those who don’t speak Chinese do farming,” said Laukkai resident U Liu Kwal Jing. “Those who speak Chinese work on the card tables and those who speak Chinese very well work as language teachers.”

Ma May Thu Hlaing, 25, came to Laukkai in 2017 from Yangon to work in a casino. She earns about $700 a month, including bonuses, but is studying Chinese so she can get a promotion and a higher salary. “If you don’t know any Chinese, you will not get very far here,” she said.

Some of the migrants who come for work find themselves unable to resist the many temptations that Laukkai offers. Gambling, drugs and prostitution are always within easy reach. Away from the palatial gaming floors, the walls of the toilet stalls are covered with the phone numbers of prostitutes. 

And although Myanmar nationals are prohibited from playing at casinos under the Gambling Law, and face a potential one-year prison sentence if convicted, it is common to see locals gambling.

“I want people to behave when they are here,” said Ko Aung Lin from Mandalay, who works at a car repair shop in Laukkai. “This town is a gold mine for us, but you need to be able to say no to drugs and gambling.”

The Kokang leaders’ dream of a gambling mecca face some challenges. (Supplied)
The Kokang leaders’ dream of a gambling mecca face some challenges. (Supplied)

Dreams and reality

The Kokang leaders’ dream of a gambling mecca face some challenges.

The first is building peace. Although the Tatmadaw regained control of Laukkai in the wake of the February 2015 offensive, the nighttime curfew remains in place because of the threat of further MNDAA attacks. The Tatmadaw has a large presence for security reasons, but rarely gets involved in administering the town.

MNDAA forces are still active in Konkyan Township, which is to the north of Laukkai and also part of the Kokang Self-Administered Zone.

“I’ve always encouraged the MNDAA to hold talks with the government and Tatmadaw,” said Amyotha Hluttaw lawmaker Kyaw Ni Naing. “If they can find a peaceful solution, it will be good for the whole region.”

The second challenge is a lack of skilled workers, particularly for the casinos.

Although there’s no shortage of willing workers, few can give the level of service that higher-end visitors expect, said one veteran casino employee in Laukkai who formerly worked in Macau. This is partly because staff turnover is high. “Many of the workers come here so they can earn money to send back to their families. Once they make enough money then they leave, and new, inexperienced workers arrive,” he said.

When Frontier approached government officials about the Laukkai BGF’s plans, it received a lukewarm response.

“If the Union government agrees to the plan then the Department of Civil Aviation will provide technical assistance,” said Deputy Minister for Transport and Communication U Kyaw Myo.

One senior immigration official based in Kokang, who asked not to be named, said the government was unlikely to allow visitors to enter the region with visas due to insecurity.

He said that in 2017, the MNDAA shot and killed two immigration officers at the Yanlong Kyaing gate between Laukkai and Nansan.

At least some in the government may also be put off by concerns that more casinos, even if regulated, could lead to an increase in criminal activity, particularly money laundering.

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The number of casinos in Southeast Asia has exploded since Macau began cracking down on corruption and money laundering in 2014, as operators began seeking out new jurisdictions with little or no oversight.

The United Nations Office on Drugs and Crime has warned of a “displacement” of organised crime to Southeast Asia, as criminal networks use these new casinos to launder cash from illicit sources.

As of January 2019, UNODC estimated there were 230 casinos in the region – not counting those that are unlicensed, such as the casinos in Kokang – with many more under construction.

“The region’s rapidly expanding network of casinos, many of which are lightly or not at all regulated, has emerged as a perfect partner or offshoot industry for organized crime groups that need to launder large volumes of illicit money,” UNODC said in a 2019 report.

Over the same period, profits from Myanmar’s drug trade have increased significantly. The same UNODC report estimated the regional market for illicit methamphetamine – in both tablet and crystalline form – to be as much as $61.4 billion a year. A large proportion is manufactured within Myanmar.

Myanmar’s failure to properly regulate casinos was also a factor in the Paris-based Financial Action Task Force placing it back on a “grey list” in February due to “strategic deficiencies” in its efforts to counter money laundering and terrorism financing.

A September 2018 evaluation of Myanmar found casinos were a “significant” money laundering risk, and said it was particularly concerning that there were “no measures imposed to prevent criminals and their associates from controlling casino operations”.

Although Myanmar has since passed a Gambling Law, it is yet to issue enabling regulations and most casinos remain unlicensed.

But members of the Kokang Leading Body say that some are likely to oppose its proposal precisely because they want to keep the status quo of dozens of unlicensed casinos.

“Organisations that are enjoying dividends from the illegal casinos will not want the casinos to be legalized, because the revenue from the casinos will go to the government instead,” said one official, who spoke on condition of anonymity and refused to say which “organisations” he was referring to.

Regardless, U Maung Maung Soe, an analyst of conflict in Myanmar, said the government would not agree to the Kokang proposal while the region was still unstable.

He said The Chinese government, too, would not like to see a new casino city right along its border.

“Kokang,” Maung Maung Soe said, “is daydreaming.”

This article was supported by The Asia Foundation and UK aid from the UK government via the X-Border Local Research Network. Travel costs were supported by Internews. All views are those of Frontier.

Pyithu Hluttaw lawmaker Daw Thet Thet Khine resigned from the ruling National League for Democracy in October last year and formed the People’s Pioneer Party, which will be contesting this year’s general election.

From a prominent gem and gold trading family, Thet Thet Khine was elected as the NLD’s representative in Yangon’s Dagon Township in 2015. However, she later quit the party after its central executive committee suspended her membership of the Dagon chapter’s executive committee in August 2018 for criticising the government.

Frontier’s Ye Mon sat down with Thet Thet Khine on June 25 for a wide-ranging interview about the PPP and the election.

What preparations is the PPP making for the election?

Although our party is young, it is attracting well-educated people with experience. I only choose such people to be members.

A carefully-drafted constitution is the foundation of our party, which will be programmatic with a definite policy and work plan.

Township offices are important basic organisations for a political party and we have opened 67 so far and another 90 will be opened soon. More than 110 offices will have been opened before the election.

We are also forming township executive committees, which are inviting applications from candidates. We have so far received about 200 applications for constituencies throughout the country. We will not be able to compete in all of the 110 townships where we have opened offices, but we expect to field candidates in more than 80 townships.

Which constituency will you contest?

I have not decided, but I will compete for a seat in the Pyithu Hluttaw.

Leaders of the NLD are advising voters to vote for a party that can form government. Why should voters support small parties?

We do not regard our party as being small. Our party is eight months old, but it has offices in more than one third of the country’s 330 townships and will contest a quarter of the constituencies. You cannot consider only the age of the party. The knowledge, wisdom and experience of party members are more important than the party’s age.

I don’t accept the advice that voters should vote for a party that can form government. If the people vote only for the party that can form government, the Hluttaw will be dominated by one party and it will be no different from totalitarianism.

The advice that people should vote for the party that can form government is not compatible with democracy. The essence of democracy is a multi-party system and the existence of an opposition. If an incumbent party becomes too dominant, an opposition party can function as a check and balance.

How do you assess the performance of the Hluttaw?

The Hluttaw defers to the government too much. The NLD has too much control over its MPs; individual opinions are not allowed. There is only the opinion of the party, which is too lenient towards the government. The Hluttaw favours the government and allows it to do as it pleases. There is almost no check and balance between the administration and the legislature.

We have had two elected governments [since 2010]. In the NLD government, the role of the party is too strong and there is no difference between the government and the party. The NLD exercises more control over its MPs than is needed. I experienced this.

Many parties have formed alliances. Who are the PPP’s political allies?

For the time being, we would like to have ethnic parties as our political allies. We want to make alliances with ethnic parties that are strong in the states. Our party is contesting mainly in the regions so there is little competition with ethnic parties. We want to make friends with them.

Since the NLD government took office, Myanmar’s ranking on the annual World Press Freedom Index has dropped several places. What’s your opinion about freedom of expression in Myanmar? 

The decline in press freedom is undeniable. Individual citizens as well as the news media are concerned and dare not speak out as freely as they did previously. If you want to nurture democracy you must acknowledge the need for press freedom. The NLD led a democratic revolution and has become government with the support of the people. I was surprised by how the NLD changed when it gained power. This should not be.

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Many people are being prosecuted for criminal defamation under section 66(d) of the Telecommunications Law and with causing or intending to cause fear or alarm to the public under section 505(b) of the Penal Code. Should these laws be reformed?

Yes, these laws are mainly used by organisations that have power. The application of these laws is different when used by a powerful organisation … and this highlights the need to reform them. In response to a question from a foreign journalist in 2015, I said the government’s first priority should be reform of the judicial sector. The judiciary remains under government control. It is not independent. It is a job left for the next government.

It was assumed when the NLD took office that it would abolish the Ministry of Information. What should be the ministry’s fate under the next government?

Reform is needed but we should not get rid of the Ministry of Information immediately. We need to be subtle when reforming this ministry. The role of state-owned media should be reduced and private sector media should be strengthened. 

What is your party’s view on the internet blackout that has been affecting parts of Rakhine and Chin states for more than year?

It is related to security concerns. Another problem is that people cannot decide what news is fake and what is real. Anybody can say what they like on Facebook. Most users do not use their real names and do not take responsibility for their posts. I think the internet has been cut off in some townships because of concern that inappropriate use of Facebook might worsen the security situation. At the same time, it is also blocking the right to information. It cannot be said that the blackout is 100 percent right or wrong. It is a difficult question.

How will COVID-19 affect your party’s preparations for the election?

If the Union Election Commission wants the 2020 election to be free and fair, it should postpone the election. Everything stopped for three months because of COVID-19 and political parties could not do anything until now. There is no obligation to hold the election in November. There will be more time for people to decide if the election is postponed.

How does your party raise funds?

As the party is new, we are relying on monthly fees from our central executive committee and rank and file party members. Our election candidates will be required to cover the cost of their campaigns.

However, we also want to nurture young candidates. So if a young person deserves to be a candidate, the party will bear the cost of their campaign.

If candidates have to cover their own expenses, does it mean that only rich people can run for office?

Every candidate must try to compete using the least amount possible. Because this is during the COVID-19 crisis, nobody is able to use much money. Also, people will not vote for a candidate just because they use a lot of money. The quality of a candidate is more important.

Editor’s note: This interview has been edited for length and clarity.

COVID-19 does not appear to have had a significant impact on monsoon planting for paddy despite some farmers facing financial difficulties, and the agriculture sector is expected to keep growing amid a slump in other parts of the economy.


Myanmar’s most important crop – grown on roughly half of its arable land – appears to have emerged relatively unscathed from the coronavirus pandemic.

When the country’s first COVID-19 cases were reported on March 23, harvesting had begun for the summer rice crop; three months later, as efforts continue to keep the coronavirus under control, planting has begun for the monsoon crop.

Overall, the agriculture sector, which accounts for 22 percent of GDP and 38pc of employment, had been “resilient”, the World Bank said in its June Myanmar Economic Monitor, and is expected to grow by 0.7pc for the year.

This is mostly due to strong production of crops, such as rice, and beans and pulses, with COVID-19 inflicting a much greater impact on export-oriented agriculture sub-sectors, such as livestock, fisheries and fruit production.

A World Bank survey in May found that while agriculture firms were the most likely to have experienced cash-flow shortages and reduced access to credit due to COVID-19, just 6pc of them were forced to close. In contrast, 12pc of manufacturers, 15pc of retail and wholesale businesses and 39pc of service companies shut their doors.

But the impact of the virus remains a threat, says the Myanmar Rice Federation. It has asked the government to take a range of measures to strengthen the sector during the pandemic and beyond, including mitigating the impacts of climate change, particularly flooding, along with increasing financial and technical support.

The government should ensure farmers have greater access to low-interest loans for buying inputs in order to ensure higher yields, the MRF said. It also urged greater flexibility on repayments so that farmers can wait a few months after the harvest, when overseas and domestic demand usually rises, rather than sell their crop at the same time to pay off debts, which pushes prices down.

“We want to work with the government to create a mechanism to [maintain price stability]; the situation requires smart intervention from the government,” said MRF chair U Ye Min Aung.

A worker at a rice warehouse in Insein Township. (Thuya Zaw | Frontier)
A worker at a rice warehouse in Insein Township. (Thuya Zaw | Frontier)

Exports and rice reserves

The government and private sector are confident that there will be no significant drop in production this year. Many paddy farmers have cultivated through the pandemic and rice is continuing to reach domestic and international markets.

Exports for 2019-20 to the end of June stood at $621 million from the sale of more than 2 million tonnes ­– about $100 million and 400,000 tonnes more than the same time last year.

“I think by the end of this fiscal year, at the end of September, we should be able to export more than 2.5 million tonnes,” said U Min Min, director general of the ministry’s Department of Trade. 

But exports did halt briefly as a result of the pandemic. After some panic buying in Yangon’s wholesale markets in March and April, the commerce ministry stopped issuing rice export licences on April 10. Because each licence has a one-time usage, the move essentially blocked all exports. 

“In such a situation, we could not allow traders to export as much as they want and we realised we needed to have reserve stocks for an emergency supply,” said Min Min.

In mid-May, the ministry allowed exports to resume but also began a policy for all exporters to sell 10pc of each shipment to the government at a fixed price.

For the first time since 2011, the government was stockpiling rice reserves in case of food emergencies or spiralling prices, perhaps prompted by the pandemic and a wake-up call about the fragility of supply chains.

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Initially, the private sector did not welcome the rice reserve plan because the government was buying at low prices. However, attitudes changed when the government paid for the rice with unusual haste, said Ye Min Aung.

“The government paid the exporters in three banking days; we have never experienced anything like it before in our lives,” he told Frontier.

By late June, the reserve had reached 80pc of its 50,000-tonne target, and the commerce ministry agreed to reduce its quota to 5pc from July 1 during a meeting with the MRF on June 26.

The MRF also suggested more dedicated warehouses be made available. This year the government needed to rely on privately-owned warehouses, because most state-owned warehouses are in residential areas and are unsuitable for receiving large amounts of rice.

Overall, Myanmar had maintained a smooth supply chain that avoided shortages and kept prices stable, said MRF executive member U Myo Thuya Aye, who added that overseas buyers are submitting offers again.

On June 13, Myanmar won a tender to supply the Philippines with 75,000 tonnes of rice this year, and the ministry said Malaysia and Indonesia have also expressed interest in export deals.

Out in the fields

While production might remain high, at the micro level many farming households are still feeling the strain.

Longstanding problems, such as inefficient growing techniques and lack of access to affordable credit, are combining with COVID-19 factors – including reduced income from work and remittances – to create hardship.

Many rely on microfinance institutions, which lend at a maximum of 28pc a year, so they have the cash to buy inputs like fertiliser and seeds, and to pay casual workers.

This year, though, microfinance institutions are facing their own liquidity crunch. In an effort to reduce pressure on borrowers, the regulator for the microfinance sector, the Financial Regulatory Department, announced the suspension of loan collections by microfinance companies from April 5 to May 15, and loan repayments had to be rescheduled. FRD also limited deposit and lending services to company premises, effectively curtailing new lending during this period.

Microfinance companies have resumed loan collections and new lending. But as Frontier reported in June, with less cash coming in they’ve had to “ration” their loans and offer fewer or in smaller amounts.

Read more: COVID-19 pushes rural Myanmar towards moneylenders

Even before COVID-19, microfinance institutions lacked the capital to meet demand for credit, says Mr Curtis Slover, the head of the financial inclusion and private sector programme at the Livelihoods and Food Security Fund (LIFT), which works with 75pc of the sector by asset size.

LIFT is anticipating a $180 million to $200 million liquidity shortfall among the microfinance companies it works with because of COVID-19 and plans to bring more than $50 million into the country for lenders, but Slover doesn’t expect cash flows in the sector to return to normal until September or October.

“Before COVID-19 we were hoping to be able to help microfinance companies issue larger loans this year,” he said. “But given what’s happened, this ‘top up’ is designed to try and make sure that borrowers are able to get a loan of the same size … there’s just not enough money in the sector to meet demand.”

Despite reduced incomes and difficulties getting credit, Slover said it seemed that many farmers were still planning to cultivate a similar amount of land this monsoon.

“Agriculture is considered a necessity for households so if they have a limited amount of money, they’re going to cut back on things that aren’t considered necessities,” he said.

However, this could mean reduced spending on things like health or education that may have other negative consequences. “That’s where the worry is – not necessarily that agriculture will be affected,” he said.

The state-owned Myanmar Agricultural Development Bank is another important source of credit for farmers and in a move they have widely welcomed has cut its interest rates from 8pc to 7pc this year.

However, it only lends K150,000 an acre – less than the typical cost of cultivation – on a maximum of 10 acres per person.

For a farmer like U Aye Htay, 63, who grows paddy on his 60-acre farm in Thida Myaing ward of Yangon Region’s southeastern Kyauktan Township, the loan will only be enough to cover about 7 acres.

He’ll have to find the rest of the investment from other sources, but that will be more difficult this year because he can’t rely on his two children: both work in a factory in the Thilawa Economic Zone and have had to take pay cuts due to COVID-19.

That means he’ll need to borrow anywhere from K5 million to K10 million from informal lenders. “When we borrow from other sources in the community, we have to pay interest of at least 8pc [a month],” he told Frontier.

Aye Htay said the government could help farmers by increasing the loan amounts that MADB distributes to at least K200,000 or K250,000 an acre.

U Kyaw Thein, 58, who farms 35 acres of paddy at Hle Seik village in Bago Region’s Bago Township, says farmers in the area were not greatly affected by COVID-19, but face the usual difficulties with inputs, production and logistics.

“Whether during a pandemic or in normal times, what farmers always need is more types of machinery, more capital, and advanced technology,” said Kyaw Thein, who has a small rice mill.

He said some farmers cling to traditional ways of farming and are unable to embrace modern technology.

“We try to encourage them to change, and some of them have done so, but we need to educate farmers throughout the country,” he said, adding that few paddy growers understand safe storage systems and modern production technology.

A farmer broadcasts seed onto a prepared field in Yangon's Twante Township on May 29. (Thuya Zaw | Frontier)
A farmer broadcasts seed onto a prepared field in Yangon’s Twante Township on May 29. (Thuya Zaw | Frontier)

A mooted future for farming

The government and the MRF have also embarked on separate plans to introduce contract farming on paddy land – mostly in the Ayeyarwady Delta – this monsoon season.

The Ministry of Agriculture, Livestock and Irrigation plans to contract farm 200,000 acres for seed production, while the MRF also plans to use 200,000 acres for grain as well as seed. No contracts have been signed yet and information about the schemes is sparse.

Contract farming usually involves a company specifying the quantity and quality of a particular product for the farmer to deliver at a certain date at an agreed price. Sometimes the company pays for the seedlings and agrochemicals or other input costs, which lessens the risk for farmers.

But the minority of paddy farmers who are familiar with the practice have often had negative experiences.

Farmers and organisations such as the Agriculture and Farmer Federation of Myanmar and the Myanmar branch of the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations, told Frontier they were concerned at the lack of information about the new schemes.

“Myanmar still needs to carry out agricultural reform and policy reform, and farmers also lack good production insurance schemes, and if we launch contract farming it will be risky for farmers,” said U Zarni Thway, chairperson from the AFFM.

He urged the government and the private sector not to rush into contract farming, which he has studied in other countries. He would like to explain how it could be made into a success in a meeting with the government, companies, and farmers’ representatives, he added. 

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His concerns were echoed by Ko Nyan Aung, from the IUF Myanmar, who said that without a strong policy, the contract farms would follow the way of big Thai agribusiness conglomerate Charoen Pokphand’s maize farms in Shan State.

Those yields were good at the start of the initiative in 2012-13, he said, but then insects began damaging the crops. According to the contracts, the farmers had to use the company’s pesticides and chemical fertiliser, which eventually depleted the soil of nutrients, he said, and prevented them from returning to paddy production.   

MRF chair Ye Min Aung said it was understandable that farmers and activists should oppose the schemes when little is known about them, and many remember the disastrous contract farming programmes introduced by the military government.

“Of course, they should be worried,” he said. “But the new model for contract farming is better because it is based on our past experience of failure and years of preparation.”

Contract farming would ensure that enough high-quality seed was available to farmers each season and at a fair price, said U Myo Tin Tun, the agriculture ministry’s deputy permanent secretary, on the government’s project. 

MRF executive committee member U Myo Thura Aye said concern about contract farming was misplaced and said it could be beneficial for both buyers and growers, particularly for seed production.

“We will fix the prices with a strong commitment before we start growing,” he said, adding that the programme would only be implemented on a fraction of the 14 million acres on which paddy is grown throughout the country.

The MRF has been pushing for contract farming for years. In 2017, it urged the government to draft standard operating procedures and guidelines for contract farming that were officially issued on January 30, 2020, under the 2013 Law of Protection of the Farmer Rights and Enhancement of their Benefits.

Ye Min Aung said this means farmers would now have legal protection.

“The contract farming schemes that failed in the past were signed by only two parties – the company and the farmers – but the new contracts will be issued through a tripartite mechanism that involves the government.”

“If the farmers feel they are being cheated by the companies or there is a bad environmental impact, in these more transparent times, the farmers can speak to CSOs and independent media.”

Additional reporting by Thomas Kean