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Home»Finance»Myanmar’s Border Trade With China and Thailand Has Collapsed
Finance

Myanmar’s Border Trade With China and Thailand Has Collapsed

September 4, 2024No Comments6 Mins Read
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Myanmar’s Border Trade With China and Thailand Has Collapsed
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Earlier this week, the Institute for Strategy and Policy-Myanmar, a Yangon-based think-tank, published its regular report on the state of the country’s conflict. The report contained a comprehensive analysis of the overland trade between Myanmar and its neighbors, and the extent to which this has been affected by the country’s intensifying civil war.

For the military’s State Administration Council (SAC) the report would likely make for grim, though perhaps not surprising, reading. Among the various statistics continued in the ISP-Myanmar report was the remarkable conclusion that ethnic armed organizations (EAOs) opposed to the military are now in control of trade routes responsible for nearly all of the country’s overland trade with China.

As the report states, of the 17 official border trade stations between Myanmar and its five neighbors – India, China, Thailand, Bangladesh, and Laos – resistance groups now control five: three bordering China (Muse, Chinshwehaw, and Lwegel), one bordering Thailand (Mese), and one bordering India (Rihkhawdar).

Of the five border crossings with China, Muse and Chinshwehaw were taken by the Three Brotherhood Alliance of ethnic armed groups during the initial phase of its Operation 1027 offensive in northern Shan State late last year, and Lwegel was overrun by the Kachin Independence Army in April. By taking these stations, the ISP-Myanmar pointed out, these EAOs have come to control trade routes that accounted for a whopping 91 percent of the value of the border trade between China and Myanmar in the three years following the 2021 coup.

These losses are reflected in the SAC’s own latest data showing a  41 percent decline in the total overland trade with China between April 1 and July 19, compared to the same period in 2023. These figures also show that trade at the Muse border crossing fell by $371 million, or 46 percent. Even then, the $411 million in trade volume recorded at Muse from April 1 to July 19 was made up mostly of exports of natural gas via the pipelines running into China. Once this is taken out of the equation, it is likely that merchandise trade has mostly come to an end. SAC data also shows trade at Chinshwehaw and Lwegel dropping to nothing.

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The ISP-Myanmar report also notes that the SAC now has complete control “over only one of the six trade routes connecting these five border trade stations.” The most important of these, the Northern Shan trade route connecting Mandalay with the Chinese border, “seems to have come to a complete halt” since the launch of Operation 1027. The ISP-Myanmar report includes a map showing that the SAC only has complete control of a small portion of the highway between Pyin Oo Lwin and Nawnghkio; the rest is under the control of the members of the Three Brotherhood Alliance and their allies.

Even border crossings that are not yet under the resistance’s control have seen dramatic trade declines due to the security situation. Border trade with Bangladesh through the Sittwe and Maungdaw stations, still under military control, has come to a halt amid the ongoing conflict with the Arakan Army. The Tamu station on the Indian border in Sagaing Region likewise can “only operate minimal trade due to conflicts and hardships en route.”

Meanwhile, trade at the Myawaddy border crossing between Thailand and Myanmar has collapsed since late last year, when EAOs and People’s Defense Forces came close to seizing the town. While Myawaddy is now under the control of a Border Guard Force formerly allied to the junta, ISP-Myanmar stated that “the Myawaddy-Kawkareik Asian Highway is still not in use.”

According to SAC data, trade volume over the Myawaddy crossing plummeted by 87 percent from $556 million in April 1-July 19 last year to just $71 million in the same period in 2024, part of a 53 percent decline in the total overland trade between the two countries. At the Htee Khee border station in Tanintharyi Region, trade volumes fell by 55 percent; here, too, most of the $570 million in exports recorded for the latest quarter was made up of natural gas exports to Thailand.

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One of the results of this has been to exacerbate the illegal trade that has long flourished around Myanmar’s borders. ISP-Myanmar quoted estimates suggesting that “illegal trade now accounts for about 80 percent of border trade, with legal trade only around 20 percent.” (Previously, the proportion was reversed.)

According to ISP-Myanmar, the junta has attempted to offset the loss of nearly all overland trade with China by opening a new trade route through eastern Shan State, via the town of Kengtung, the home of the Myanmar military’s Triangle Region Command, to Thailand and Laos, and – via the Mekong River – to China. While this passage is part of a longstanding regional connectivity project, and has been viewed as an important future trade route, its realization “appears questionable if the ongoing conflict in the eastern and southern Shan States extends further.”

In any event, this route is lengthier and considerably more costly than those in northern Shan State. Likewise, on the Thai border, alternatives to the Myawaddy border trade route to the north and south require that “smaller trucks must be used to transport smaller consignments of goods instead of large trucks.” Furthermore, “various armed groups also impose taxes along the route.” To help offset the loss of overland trade, the junta has also attempted to increase cargo shipments by air from southern China, but this is also vastly more costly.

While overland trade only accounts for around a quarter of the trade that Myanmar’s junta has conducted since the 2021 coup, according to ISP-Myanmar, the collapse of this trade adds up to a bleak diagnosis for the SAC. Layered on top of the runaway inflation in the value of the kyat, this is likely to put further upward pressure on the price of basic goods, leading to greater privation and increased discontent with the generals.

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On the other side, it remains unclear whether and to what extent EAOs will benefit from the control of border trade with China. Angered at the launch of the second phase of Operation 1027 in June, which marked the final collapse of a China-brokered ceasefire agreement designed in part to allow the resumption of trade, Beijing has shut the border crossings controlled by the Three Brotherhood Alliance. Its official resumption is only likely to take place in the context of a new ceasefire arrangement between the Alliance and its allies and the Myanmar military, which, with the latter now poised to launch fresh attacks into central Myanmar, appears to be some way off.

If trade does at some stage resume, it could provide a source of income for EAOs, strengthening their positions in Shan and Kachin states and making it less likely for the military to be able to reverse its recent losses. Whether all of this consigns the military junta to a slow economic death, or whether it can come up with enough economic workarounds to sustain itself for the longer term – via smuggling or alternative trade routes through those few regions still under its stable control – will be put to the test in the coming months.

Border China Collapsed Myanmars Thailand trade
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