Navigating Myanmar’s Border Trade In The Post-Military Coup Era – Analysis

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By Windia Soe

From the impacts of post-coup policies and border trade disruptions to the rising influence of ethnic armed organizations and shifting power structures, Myanmar’s economic and political fabric is undergoing profound changes.

3 Key Takeaways:

  1. Border trade remains a critical pillar of Myanmar’s economy, accounting for $7.7 billion of its $30 billion international trade in 2023-2024. However, post-coup policies, such as foreign exchange controls, increased import restrictions, and ongoing armed conflicts, have disrupted traditional trade routes and exacerbated economic challenges.
  2. EAOs have gained significant influence over Myanmar’s border trade, controlling major trade hubs like Muse and Chinshwehaw. This shift challenges the military junta’s authority. It has forced foreign stakeholders, including China and India, to engage directly with EAOs to safeguard their investments.
  3. Myanmar’s reliance on low-complexity exports, such as natural gas and jade, contrasts with its trading partners’ focus on value-added goods. Addressing this imbalance through industrial development, technological advancement, and export diversification is crucial for achieving equitable and sustainable trade growth in Myanmar.

Geopolitical Strategic Position

Myanmar spans 676,578 square kilometers with diverse landscapes, including the Arakan Mountains in the west and the Shan Plateau in the east. It borders Thailand and Laos to the southeast, China to the north and northeast, and India and Bangladesh to the west. Its location near the Andaman Sea, Bay of Bengal, and Indian Ocean shipping lanes makes it a vital regional link and trade hub into China from the Bay of Bengal.

The Historical Evolution of Border Trade Under Military Rule

Myanmar’s economy, rich in natural resources like oil, gas, and minerals, suffered under decades of military rule and economic mismanagement. During the socialist period, key trading partners included Japan, the UK, and the US, supported by official development assistance (ODA). After the 1988 military coup, Western sanctions redirected Myanmar’s trade towards neighbors such as China and Thailand.

The 1962 coup saw industries nationalized, eliminating competition and stifling economic growth. These policies pushed many businesses into the informal economy, spurring illegal border trade. A market-oriented economy reintroducedin 1988 attracted private investment, boosting imports and exports. Border trade agreements with China, Thailand, India, and Bangladesh in the 1990s further solidified cross-border commerce, establishing 17 official border trade stations.

Trade Policy Reforms Under Semi-Democratic Transition Period

Since 2011, Myanmar has pursued trade liberalization to integrate into global markets. Key reforms include reducing export taxes on Cut-Make-Pack (CMP) goods, exempting agricultural products from commercial taxes, and eliminating state monopolies. Customs duties have been progressively reduced, and most exports were duty-free, barring a few exceptions like rice and bamboo. Export taxes include an 8% commercial tax and a 2% income tax on private-sector exports, while state-owned enterprises pay only an 8% commercial tax.

Foreign trade was overseen by institutions like the Myanmar Foreign Trade Bank (MFTB) and Myanmar Economic Bank (MEB), while trade policies are aligned with World Trade Organization (WTO) standards. Despite capacity-building challenges, these measures have enhanced trade flows and encouraged foreign investments.

Border Trade’s Economic Significance

Border trade accounts for a substantial portion of Myanmar’s economic activity, crucially supplementing maritime trade restricted by Western sanctions. The agricultural sector, contributing 22% of GDP and 29% of exports, relies heavily on border trade to access regional markets. In 2023-2024, border trade generated $7.7 billion of Myanmar’s $30 billion international trade. In the 2023-2024 fiscal year, Myanmar’s international trade exceeded $30 billion, with $7.7 billion from border trade.

Despite challenges like a $734.2 million trade deficit in 2022-2023, key exports include garments, gas, and pulses, while imports comprise refined oil, machinery, and raw materials. Land routes dominate trade with China and Thailand, while sea routes prevail with India.

Myanmar-China Border Trade

China is Myanmar’s largest border trading partner, with bilateral trade surpassing$3.279 billion in FY 2023-2024. Major border hubs include Muse, Lweje, and Chinshwehaw, with Muse accounting for the highest trade value. Myanmar exports low-complexity goods like natural gas and precious stones to China while importing industrial materials like fabrics and iron pipes.

In 2022, Myanmar exported $9.62 billion worth of goods to China, with key exports including precious stones ($4.05 billion), petroleum gas ($1.31 billion), and rare-earth compounds ($604 million). These exports have grown at an average annual rate of 14.4% since 2017. Imports from China, valued at $13.5 billion, were dominated by industrial materials like fabrics ($1.25B) and iron pipes ($625M), with a 3.36% annual growth rate since 2017.

Myanmar’s reliance on low-complexity goods like natural gas, jade, and agricultural products, with minimal value addition, contrasts starkly with China’s focus on value-added goods, highlighting a disparity in economic complexity. In 2022, Myanmar ranked 118th on the Economic Complexity Index, compared to China’s 18th. The disparity in economic complexity between the two nations highlights Myanmar’s need for industrial development, technological advancement, and export diversification. Strengthening these areas could reduce reliance on low-value goods and foster more equitable trade relations.

Myanmar-Thailand Border Trade

Thailand ranks as Myanmar’s second-largest export partner and third-largest import partner. Trade occurs through six checkpoints: Hteekhee, Tachilek, Myawady, Kawthoung, Myeik, and Mawtaung. In the first quarter of FY 2024-2025, Hteekhee led with $472.66 million in trade, followed by Tachilek ($80.48M) and Myawady ($63.23M). By June 2024, total border trade reached $737 million, down significantly from $1.7 billion the previous year.

Border crossings, particularly Myawaddy-Mae Sot, account for about 80% of Myanmar-Thailand trade, including legal and illegal activities in 2022-2023. However, ongoing armed conflicts have disrupted traditional routes like Myawaddy-Mae Sot, forcing traders to adopt alternative shipping methods.

The Yangon-Kawthoung-Ranong maritime route, launched in 2024, demonstrates the growing importance of container shipping, which offers more excellent reliability compared to uncertain land transport. By October 2024, this maritime route facilitated $60 million in trade, complementing traditional land routes such as Myawaddy-Mae Sot. For instance, in March 2024, Myanmar exported 1,767 tonnes of freshwater fish using 17 container ships from Aungmingala Port. These shifts underscore the adaptability of Myanmar’s trade networks amidst logistical challenges.

Myanmar-India Border Trade

Myanmar is the only ASEAN country sharing land and maritime borders with India, a crucial link between India’s northeastern states and Southeast Asia. The 1,643 km shared border with Arunachal Pradesh, Nagaland, Manipur, and Mizoram integrates isolated India’s northeastern region with ASEAN markets. Myanmar’s Sagaing Region and Chin State are key trade hubs.

Bilateral trade facilitated through Moreh-Tamu and Zowkhathar-Rhi volume remains modest, reaching $2.175 billion in 2016-17. Myanmar exports beans and pulses ($809 million) and timber ($156 million) while importing sugar ($424 million) and pharmaceuticals ($184 million), highlighting untapped potential in the trade relationship.

The introduction of the Special Rupee Vostro Account (SRVA) mechanism in 2024 has streamlined transactions by allowing settlements in Indian Rupees alongside Chinese Yuan and Thai Baht. This transaction reduces costs and promotes efficiency in cross-border commerce. However, challenges persist, particularly in the timber trade. Sanctions and smuggling have complicated this sector, with illegal activities often financing conflict with the military junta and Ethnic Armed Organizations (EAOs), which rely on these proceeds to support their operations. Political stability, law enforcement, and transparency are essential to address these issues.

Impact of Post-Coup Policies on Myanmar’s Trade

Political instability following the military coup in 2021 has disrupted border trade and reshaped the economic landscape. The military junta has reversed economic liberalization, opting for restrictive policies emphasizing state control and self-sufficiency. Central Bank of Myanmar (CBM) mandated the repatriation and conversion of foreign currency income into Myanmar Kyat (MMK) within one day. While aimed at curbing USD outflows and rebuilding reserves, these measures have limited importers’ access to foreign currency, stifling trade. Policies like the car import ban and increased licensing requirements (35% to 74% of import lines) reflect the SAC’s efforts to regulate economic activity.

The combination of these restrictive policies has led to several impactful changes in Myanmar’s trade dynamics: Export values fell by $4 billion by 2023, while garment exports hit a five-year low due to the withdrawal of foreign brands. Economic restrictions have also fueled informal trade, particularly in timber, with an estimated 80% trafficked illegally to China and India. Rising prices for essential goods and transport disruptions have worsened inflation and food shortages, especially in conflict-affected areas.

Rising Influence of Ethnic Armed Organizations (EAOs)

EAOs have gained significant control over Myanmar’s border trade, undermining the junta’s authority. Key trade stations like Muse and Chinshwehaw with China are under EAO control, facilitating millions in daily trade. These groups’ strategic acumen and resilience have reshaped power dynamics, challenging the junta’s dominance.

Notably, the Muse trade station, controlled by the Three Brotherhood Alliance (3BHA), handles $6 million daily trade, while the Chinshwehaw station, under MNDAA control, handles over $1 million daily. As a result, Myanmar-China trade volumes have dropped from $640 million to $416 million in just one year, exposing the junta’s failure to maintain stability.

Strategic Importance of EAOs in Border Trade

Rakhine State is pivotal in China’s Belt and Road Initiative (BRI), hosting critical infrastructure like the Kyaukphyu deep-sea port and oil and gas pipelines. China’s Kyaukphyu deep-sea port and Special Economic Zone (SEZ), a crucial endpoint for the China-Myanmar Economic Corridor, connect Yunnan Province to the Indian Ocean, offering an alternative route to bypass the Malacca Strait. As of August 2024, EAOs and PDFs fully control 10 of 19 Chinese projects in northern Shan State and central lowlands, worth over $2.4 billion, and partially control key infrastructure, including the China-Myanmar oil and gas pipelines, cross-border power lines, Muse-Mandalay railway, and significant trade routes.

As Myanmar’s internal conflicts escalate, China and India have adopted strategies to safeguard their interests. India’s engagement with ethnic groups aims to ensure the success of strategic projects like the Kaladan Multi-Modal Transit Transport Project. China employs a dual-track approach, balancing relations with the SAC and EAOs to protect investments and secure supply chains. However, disruptions caused by the KIA’s seizure of key border towns and rising rare earth prices underscore challenges to China’s influence.

Growing EAO control over these projects highlights the Myanmar Military’s inefficient role in stabilizing Chinese investment. As EAOs consolidate power, foreign stakeholders must engage directly with local actors (EAOs) to protect their interests and contribute to regional stability. Rakhine’s potential as a trade hub hinges on political stability and international cooperation.

Conclusion

Myanmar’s evolving trade landscape reflects broader political and economic upheavals. While border trade remains a vital lifeline, internal conflicts and restrictive policies have created significant obstacles. The rising influence of EAOs and strategic shifts by foreign powers underscores the need for innovative diplomacy and inclusive economic strategies. 


Shwetaungthagathu Reform Initiative Centre

The Shwetaungthagathu Reform Initiative Centre (SRIc) is a hybrid think tank and consultancy firm committed to advancing sustainable development and promoting sustainability literacy in Myanmar. Through its Sustainability Lab, SRIc conducts public policy research and analysis to promote Sustainable Development in Myanmar and guide the country toward a sustainable future. SRIc also offers consultation, CSR strategy development, and Sustainability roadmaps focused on Environmental, Social, and Governance (ESG). SRIc equips individuals and organizations with actionable strategies for sustainable growth through capacity-building programs, customized training, publications like Sabai Times, and outreach initiatives such as webinars and podcasts. By merging research insights with practical consultancy, SRIc fosters responsible business practices, develops CSR strategies, and creates sustainability roadmaps, contributing to local and global sustainability efforts.

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