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Viewing cable 06RANGOON289, IN MANDALAY, TRADE UP AND TOURISM DOWN

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Reference ID Created Released Classification Origin
06RANGOON289 2006-03-03 06:42 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rangoon
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 RANGOON 000289 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/MLS; PACOM FOR FPA; TREASURY FOR OASIA:AJEWELL 
 
E.O. 12958: N/A 
TAGS: ECON PGOV BM
SUBJECT: IN MANDALAY, TRADE UP AND TOURISM DOWN 
 
REF: A. RANGOON 0287 
     B. RANGOON 0214 
     C. 05 RANGOON 1179 
 
1. (U) Summary: Enough people make money from trade with 
China to keep upscale retailers busy in Mandalay, Burma's 
second largest city.  However, due to rising prices and the 
poor state of the economy, residents are increasingly price 
sensitive, making it tougher to prosper there.  Europeans, 
the primary generators of tourism income, have dwindled, and 
the hoped-for Russians and Israelis have just begun to 
trickle in.  Some farmers around Mandalay use Chinese 
technology and advice to produce two or three crops a year, 
which traders can easily sell to the hungry China market. 
Mandalay has long been a trading crossroads between Upper and 
Lower Burma and between China and India.  It remains an 
active commercial center today.  End Summary. 
 
Keys To Success: Diversify and Import 
------------------------------------- 
2. (U) As part of an Embassy outreach week (ref A), we met 
with local business representatives to discuss the current 
commercial climate in Mandalay.  Ethnic Chinese own about 
half of the city's restaurants and almost all new businesses, 
according to one local businessman.  The influx of Chinese 
residents and businesses have caused real estate prices to 
rise, but both Burmese and Chinese residents profit from 
reselling the flow of imported Chinese goods.  One resident 
said, "Ninety-five percent of goods available here are of 
Chinese origin. That's all you can find here." 
 
3.  (SBU) As in Rangoon, the most successful Mandalay 
businesspeople have diversified businesses.  One businessman 
we met owns three hotels, has a money-changing license, and 
will open an umbrella factory.  His most profitable business, 
though, is importing Chinese goods for resale in India and 
Bangladesh.  Instead of taking a two-week trip from the 
Indian border through Burma to the Chinese border, Indian 
traders buy Chinese goods from him in Mandalay, to take back 
to the Indian border in three days. The businessman plans to 
open a facility on the Indian border to take advantage of the 
new demand.  He did not worry about Chinese competition in 
Mandalay: "The Chinese need to make money every year. If they 
don't, they close.  We Burmese know we will have good years 
and bad years and don't always expect to make money.  One of 
our businesses will do well when the others are down.  Then 
there's always a chance we'll do better next year." 
 
...and Export 
------------- 
4.  (SBU) Mandalay agricultural goods, especially fruits and 
vegetables, supply China's growing demand.  "China will buy 
anything Burma can produce," said one trader.  China, not 
Burma, buys many of the local crops, including watermelons, 
honey oranges, and tomatoes.  Using modern technology and 
information from Chinese agronomists, some farmers in the 
area boosted yields and recently moved from producing one 
crop per year to two or three. 
 
5.  (SBU) Agricultural traders have established networks of 
brokers to handle the transfer of the goods and payments at 
the border.  Much of this trade occurs outside the formal 
sector, despite government efforts to increase controls and 
tax it (ref C).  Traders can move three shipments a week into 
China unofficially, according to one businessman, while it 
can take up to a month to get an trade permit for one 
shipment using official channels.  Since the government 
ordered traders to stop using US dollars for border trade in 
February (ref B), business reps now use yuan for official 
transactions, and continue to use dollars for informal trade. 
 According to one trader, "Euros are useless here," despite 
GOB urging. 
 
Some Sectors Struggle 
--------------------- 
6.  (U) Western tourists, primarily Europeans on group tours, 
have long been the main revenue generator for the tourism 
industry, but their numbers have declined.  Travel reps say 
the repressive political situation, successful anti-tourism 
campaigns by exile groups, and a higher public profile of 
Burma's problems have led many Europeans to choose other 
vacation destinations.  Hotels have low occupancy, even 
offering rooms for only $5-$35 per night.  The few Americans 
that visit Mandalay are older, wealthier tourists who come on 
custom tours.  Tour operators now hope for growth from two 
new markets, Russia and Israel. 
 
7.  (SBU) Other businesses also struggle as increasing prices 
and the poor economic climate make consumers more 
price-conscious.  The premier computer store in Mandalay 
survives on slim profit margins from IT training classes and 
a busy internet cafe, but earns little from the average of 15 
personal computers it sells per month.  A consumer goods 
manufacturer and distributor said that sales steadily drop 
because his customers' purchasing power has declined.  "The 
prices have gone up," he said, "but their wages haven't." 
 
8.  (SBU) Comment: As the gateway to Upper Burma, and a major 
link between India and China, Mandalay will always be a busy 
trading city.  The regime's restrictive policies and the 
declining economy squeeze businesses that rely on foreign 
tourists or local citizens for profits, but those able to tap 
the growing Chinese and Indian markets do well.  End comment. 
VILLAROSA