Coup leader and Commander-in-Chief Min Aung Hlaing’s attempt to reassert full military control over the country is astounding for the extent of the damage it has caused. But according to Myanmar expert Richard Horsey, the coup has greatly benefited transnational crime organisations and illicit actors.

‘What is striking about this coup,’ states Richard Horsey, Myanmar consultant to the International Crisis Group, ‘is that nearly everyone has come out of this coup a loser... except the transnational crime organisations and illicit actors in these economies.’

Horsey spoke recently at a webinar hosted by the Foreign Correspondents Club of Thailand (FCCT) titled “Myanmar coup fallout: Illicit economies, trafficking, and transnational crime”. Moderated by FCCT past president Gwen Robinson, the panel also included independent advisor on human trafficking, Marika McAdam and regional representative of the United Nations Office on Drugs and Crime (UNODC), Jeremy Douglas.

Formal Informal and Illicit Economy Dynamics

The structure of Myanmar’s economy after the 1 February coup, says Horsey, will be very different from that going into it, and will have fundamentally changed the dynamics between Myanmar’s formal, informal, and illicit economies and the region.

An influx of foreign capital into Myanmar rapidly opened the formal economy in 2015-16 but now the opposite is taking place.

The military-led coup reversed that growth and brought the national economy to breaking point. Foreign investor trust has diminished, drying up payments, withdrawing investment and evaporating future deals. Existing and reignited ethno-political armed conflict around the country has deepened and insecurity widened.

The Word Bank’s April East Asia and Pacific Economic Update forecasts at least a 10% contraction of the formal economy. The knock-on effects for informal economies that flourishes around and support formal economy and in which most people make a living are devastating. The UN Special Rapporteur on Myanmar, Tom Andrews, has estimated 250,000 people have been displaced. The UNDP now expects 48.2% of Myanmar’s population to subsist below the poverty line by next year.

As law-and-order policing and the routines structuring normal social, political and economic activities around the country are disrupted by the coup chaos, uncertainty and insecurity presently characterise the economy, Horsey explained.

In this way, the coup has created the conditions in which Myanmar’s illicit economies thrive.

‘So that free fall the UNDP and WB have described is about to be a boon for the illicit economies and they are very likely to scale up,’ said Douglas.

This is dangerous Horsey says, because as the illicit economies’ share of the total economy rise, a power shift will occur between the formal and illicit economies.

‘If a sector has dominance in that economy, it has influence in that economy. It is where the money is being made. It is where power accumulates. Its where politics is influenced. So, by being a larger share of the Myanmar economy, these illicit actors will have a greater influence not just economically, but politically in terms of the conflict and other things as well.’

Human migration and trafficking

Unlike drugs and other forms of crime, responses to trafficking of humans requires very sensitive and nuanced approaches.

Myanmar made some progress particularly on trafficking over recent years and McAdams laments that loss.

‘We had a central body that was looking at addressing this, we had some strong laws we had some bi-lateral agreements in place that were to make these traditional routes not one of exploitation but one of safe and fair migration into actual labour markets. So, what happens to all of those?’

In current circumstances, outward migration from Myanmar will increase above already high levels. As borders further ‘harden’ while the push factors remain, illicit actors will take advantage of people’s vulnerability to move across borders. Forced to use these routes, individuals fleeing torture and persecution can be misbranded as migrants and returned into the hands of the regime.

Children and adults may be trafficked into a variety of situations including forced marriages, labouring in mines, fishing, agriculture and affiliated jobs, into armed conflict as porters, soldiers, human shields or into criminal activities as drivers or couriers.

A collapse in Myanmar's data collection capacity following the coup, notes McAdams and one can only speculate on the scale of trafficking and people smuggling. But two things are sure, she states - capacity and political will to confront these crimes has ‘drastically reduced’.

Armed Groups and Militia

With the escalation of conflict and breakdowns of ceasefire agreements and peace processes, ethnic armed organisations (EAO) and militias also face increasingly unpredictable futures. Many now need more cash to prepare for the conflicts that are to come and conflict, which Horsey notes, is expensive.

For some others, the political turmoil provides an opportunity to increase their power in relation to the military. In the past 5-10 years, the military acted as one of the constraints on the growth of illicit economies. This is not because they cared, said Horsey, but because they were concerned these groups would become too powerful

from these revenue means and form self-governing territories. With the pressure off, some of these groups have started to resume illicit activities.

EAOs are able to scale up their illicit activities by mining more jade, cutting more trees or planning more opium while those in borderlands tax and engage in trade. For some others revenue has traditionally been raised through drug production and trafficking, mining, timber and casinos.

Transnational Organised Crime (TOC)

Myanmar’s illicit economy has for a long time been dominated by transnational crime syndicates particularly in the last few years, and predominantly in illicit drug production and trafficking.

Douglas expects as people lose employment in towns, cities and agriculture, particularly in poor areas, and the legal economy shrinks, some will move back to opium growing areas to make money.

Experts consider that the expansion of the opium economy will be slow as the crop takes at least 12 months to grow. The heroin economy is then likely to follow the crop harvest with the rebooting of production and trafficking networks. At this stage, the money goes into the groups that control the trafficking. Large quantities of heroin are likely to hit regional and global markets within 12 to 18 months.

Methamphetamine

The big story, emphasises Douglas, is methamphetamine (MA) production in Myanmar by TOC. Unlike opium, it employs very few individuals and has the capacity to scale up within a matter of weeks, said Douglas.

Production and trafficking of synthetic drugs from Myanmar, especially methamphetamine, is proving highly resilient in the face of closed borders and disrupted transport networks, with record seizures of drugs and precursor chemicals over the past year.

From that base, as Myanmar’s formal economy dives and Southeast Asian and Pacific regional economies begin to bounce back as the COVID-19 pandemic eases there will be a predictable surge in illicit drug demand which groups in Myanmar and TCO will be ready to meet.

Generating tens of billions of dollars for TOC groups, and only a small proportion landing in Myanmar, MA is trafficked worldwide with 100% market share in Thailand, 80-90% regionally and in China and being the dominant supply for Australian, Japan and Taiwan markets.

Douglas concludes there will be a ‘significant impact on the region’.

Arms

In addition to EAOs and militia, Robinson noted, there are now an estimated 40 new resistance groups looking to arm themselves.

There has long existed lively arms black market in the region and an illicit trafficking route across the north of Myanmar for arms going to Northeast Indian insurgents, explained Horsey. Traditionally these markets and routes are available to certain groups with long standing connections. However, this can change with money and determination, noted Horsey, as it is evident through recent clashes that some of these links are being made.

Panellists noted early indications of renewed arms trafficking activity with the seizure in April of an arms haul in Tachileik perpetrated by a drug trafficking network in the deep south of Thailand.

Where to from here?

Regional cooperation on transnational organised crime is not going to change dramatically, said Douglas. But there is still a lot that can and must be done.

Regional players are not sharing information and need to do this to get ‘ahead of the game’.

The current situation provides impetus for monitoring bodies to find new ways to tackle Myanmar - and the regions’ - illicit economies and transnational organised crime - by refocussing on the root causes and the drivers of conflict.

Adams likewise sees an opportunity to introduce more effective approaches to human trafficking and smuggling. She sees an opportunity to shift the narrative, so that forced migrants are not criminalised, and efforts are realigned to respond more squarely to transnational organised crime.

These issues have no quick fix; they are all stages in a ‘long game,’ concluded Adams. The story is not ‘how do we get back on track’ but ‘how do we get back on (a) better track’.