The closure of dozens of illegal trade gates along the border with Thailand to prevent the spread of COVID-19 is causing shortages of everything from beer and energy drinks to detergent and cosmetics, highlighting the vast scale of informal trade with Thailand.
By NAW BETTY HAN and THOMAS KEAN | FRONTIER
For decades, billions of dollars of goods have crossed the Thai-Myanmar border through dozens of illegal trade gates in Kayin State’s Myawaddy Township that are run by armed groups.
Each day, hundreds of trucks drive to the Thai side of the Thaung Yin (or Moei) River in Mae Sot, where their cargo is processed by Thai Customs, unloaded by hand onto small boats, ferried across the narrow stretch of water to Myawaddy and stored in warehouses for distribution throughout Myanmar. Most of this happens in broad daylight, and is legal on the Thai side and tacitly approved in Myanmar.
Through conflict, natural disaster and political instability, these “boat gates” have nearly always remained open, providing a steady stream of imported goods to markets around the country.
Not only do the gates provide a financial lifeline to the armed groups that control them, they enable businesses to skirt trade regulations – and Customs duties – on everything from fabric and liquor to cars and used refrigerators, costing the country hundreds of millions of dollars a year in lost tax revenue. Government officials acknowledge the gates are illegal, but insist they are powerless to close them.
But then came COVID-19. For the past two months the illegal gates have been closed, and cross-border trade has been limited to a single official crossing, the No 2 Thai-Myanmar Friendship Bridge. Although some traders have tried to switch to legal channels, many of the goods, such as liquor, that cross through the illegal gates cannot be imported legally. Trade has fallen from about US$10 million a day in February to as little as $3 million a day in April, according to the Myawaddy Chamber of Commerce. Stocks of imported goods have run out, while exports to Thailand have also been hit hard.
The border slams shut
The border began to close in the second half of March. The coronavirus was spreading rapidly in many countries and the World Health Organization had declared a global pandemic. Although Myanmar was yet to record a confirmed case of COVID-19, the number in Thailand was rising sharply. On March 20, the Thai government announced that it would shut the No 1 Thai-Myanmar Friendship Bridge between Mae Sot and Myawaddy the following day.
Then, on March 29, the Kayin State Border Guard Force, which originated in a breakaway faction of the Karen National Union called the Democratic Karen Buddhist Army, suddenly closed its 27 illegal trade gates and said it would take action against anyone that it found trying to cross the river. The KNU and Democratic Karen Benevolent Army – the latter formed by remnants of the Democratic Karen Buddhist Army who had refused to join the Border Guard Force – followed suit the next day, closing the seven gates under their control.
BGF spokesperson Major Naing Maung Zaw said the group took the decision because it had a responsibility to ensure the virus did not spread to Myanmar.
“The decision to shut down the boat gates has affected our income but we can’t take any risk that could destroy the reputation of the BGF,” he said. “If someone with coronavirus used our boat gate and it then spread, our force could be blamed.”
But he also revealed the Tatmadaw had pressured the BGF on March 28 to close its trade gates. “The next day, our leader, Colonel Saw Chit Thu, ordered the gates to close. He said he received a suggestion from the Tatmadaw to be careful of COVID-19 in our area,” Naing Maung Zaw said. “The BGF is a branch of the Tatmadaw and, just like the Tatmadaw, we are ready to coordinate with the government and local people to protect the country from COVID-19.”
The closure is not entirely unprecedented, according to traders in Myawaddy. In 2002 the border closed from May to October due to clashes between the Tatmadaw and Thai military, and again in July 2010 when the Tatmadaw was pressuring the DKBA to become a Border Guard Force. Although the bulk of the DKBA soon agreed to become the Kayin State BGF, some rebel DKBA brigades rejected the proposal and formed the Democratic Karen Benevolent Amy.
In November 2010 the new DKBA launched attacks on Myawaddy. “I remember the clashes between the DKBA and Tatmadaw very well, because they were very close to the town,” said U Soe Nyunt, the administrator of No 4 ward in Myawaddy. “We had to leave our homes and stay in monasteries. All the illegal gates were shut for months because of the fighting.”
The border was officially shut for more than a year, forcing traders to reroute most goods through other crossings. The difference now though is that bilateral trade through Myawaddy-Mae Sot is significantly higher than in 2010, when the Mae Sot Customs House estimated that the closure was costing US$3.2 million a day, or a little over $1 billion a year. As Myanmar has opened up its economy over the past decade, trade at that crossing has risen steadily and is now estimated at around $2.5 billion a year.
Trade is expected to grow strongly in the coming years, according to KResearch, an arm of Thailand’s Kasikorn Bank, thanks to the opening of the No 2 Thai-Myanmar Friendship Bridge late last year and new trade facilitation agreements that enable authorised trucks to cross the border and deliver directly to locations in either country. Although its November 2019 forecast that Thai exports through Mae Sot would increase to 80 billion this year is unlikely to be reached because of the border shutdown, trade is expected to bounce back quickly once the threat of COVID-19 passes.
‘Prices are already getting high’
Since the illegal gates shut at the end of March, trader U Aung Soe has watched his inventory – mostly energy drinks, like Shark and Red Bull, which he distributes to Mawlamyine in Mon State and Hpa-An and Kawkareik in Kayin State – slowly dwindle.
Speaking on May 25, he said he had only three days of stock left. “Since COVID-19 happened and the boat gates were closed, it has been difficult for me and the other traders to continue our business,” said Aung Soe. “Prices are already getting high as the products are becoming difficult to find in the market.”
Daw Thin Thin Myat, chair of the Myawaddy Border Trade Association, said traders had been stocking up on goods since the first COVID-19 cases were reported in Thailand in January. As a result, when trade was restricted in late March, they had about two months’ supply in their warehouses. Now most of that has gone.
“At the moment the boat gates are closed and trading through official channels is also down because of COVID-19,” she said. “Unless traders can get more stock soon there could be problems – the prices for some commodities will be unstable and might rise suddenly.”
Many of the imported goods, particularly consumer items, are distributed in the border areas of Kayin and Mon states and Tanintharyi Region, where Thai products are popular.
Ma Zin Mar Thet, who runs a shop in Yadanar Myaing Market in the Mon State capital Mawlamyine, said that she has been unable to restock anything imported from Thailand since the first week of May.
“It’s now hard to get things like cosmetics, soft drinks and household goods such as detergent and soap,” she said. “Other shops in the market are facing the same problem. Because we’re out of stock of so many things our sales are down.”
She said the government should allow the illegal gates to reopen to ensure consumers had access to essential products. “If they are worried about COVID-19, they can just allow trading – not let people go through the gates – and screen any workers for symptoms,” she said. “Just completely closing the gates is not the right way – it creates trouble for people who rely on these goods.”
The border closure has also badly affected businesses on the Thai side of the border. In early May, the head of the Tak Chamber of Commerce urged the Thai government to reopen both official and unofficial crossings in order to “save the local economy”.
The effects are being felt in Yangon, too. “I’ve had to close my shop because trade has stopped in Myawaddy,” said one shop owner who sells used refrigerators and air conditioners, as well as mobile phone accessories, all of which are brought through informal crossings. “I’ll have to find another way to get them … I hope I can open my shop once the [border] lockdown ends.”
U Htin Kyaw Aye, who owns a beverage shop in Yangon’s Dawbon Township, said that since April he has been unable to order shipments of Thai-made energy drinks and beer, including Chang, Leo, Singha and M150, from Myawaddy.
“Thai-made products have a different taste to Myanmar-made products and they are also cheaper, which means we can make more profit,” he said. “The traders I normally buy from said they hope they’ll get more stock in June, but they’re not sure when the gates will reopen.”
A billion-dollar racket
Not all border trade has stopped, however. The closure has only affected the informal trade, known as the “low road”; official imports – the “high road” – continue to cross the No 2 Thai-Myanmar Friendship Bridge.
But trade data shows that the vast majority of trade at Myawaddy-Mae Sot goes through informal channels – that is, the 34 gates in Myawaddy Township controlled by ethnic armed groups.
Although Myanmar does not record trade through these illegal gates, Thailand counts imports and exports regardless of how they cross the border. In 2018 it reported bilateral trade of 80 billion baht ($2.5 billion) through Mae Sot, while Myanmar’s Ministry of Commerce counted only $970 million through Myawaddy in 2018-19.
These figures suggest that around 60 percent of trade at Myawaddy-Mae Sot goes through the illegal gates that have now slammed shut.
Nearly all of it flows one way: into Myanmar. The exception is labour. Myanmar migrant workers, many of whom are undocumented, are an important feature of the Thai economy, and send back billions each year in remittances.