VZCZCXRO7792
RR RUEHCHI RUEHDT RUEHHM RUEHNH RUEHTRO
DE RUEHGO #0809/01 2910609
ZNR UUUUU ZZH
R 170609Z OCT 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 8289
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2069
RUEHBY/AMEMBASSY CANBERRA 1581
RUEHKA/AMEMBASSY DHAKA 5014
RUEHNE/AMEMBASSY NEW DELHI 5065
RUEHUL/AMEMBASSY SEOUL 8663
RUEHKO/AMEMBASSY TOKYO 6232
RUEHCN/AMCONSUL CHENGDU 1607
RUEHCHI/AMCONSUL CHIANG MAI 1881
RUEHCI/AMCONSUL KOLKATA 0455
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 4082
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 2047
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000809 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EEB/IFD/ODF 
PACOM FOR FPA 
TREASURY FOR OASIA:SCHUN 
 
E.O. 12958:N/A 
TAGS: ECON ETRD EFIN PREL BM
SUBJECT: ECONOMY OF MANDALAY, BURMA'S SECOND LARGEST CITY 
 
RANGOON 00000809  001.2 OF 003 
 
 
Summary 
------- 
 
¶1.  (SBU)  Mandalay, Burma's second largest city, is home to 
approximately one million people and more than 20,000 registered 
businesses.  It is a vibrant, bustling city, and Chinese influence 
is readily apparent at every turn.  Mandalay is a trading center and 
transshipment point for jade, gems, and agricultural products, which 
are sold to Rangoon, Thailand, and China.  Seventy-five percent of 
Mandalay's businesses are dependent on agriculture.  Despite the 
hustle and bustle, poverty remains rampant throughout the city, and 
businesses complain that it is becoming more difficult to work in 
Burma.  While the GOB does not produce economic growth figures by 
city, local business people estimate that that the local economy has 
shrunk by more than 15 percent, with prices increasing and 
disposable incomes falling.  End Summary. 
 
Snapshot of Mandalay 
-------------------- 
 
¶2.  (SBU)  Like Rangoon, Mandalay is a trading center, with more 
than 20,000 registered businesses.  Merchants import, often 
illegally through border trade, Chinese and Indian products that 
they resell to Rangoon and other places throughout the country. 
Mandalay is also a transshipment point for goods produced in 
Northern Burma, such as agricultural products, jade, and gems, which 
are often sold to Rangoon and neighboring countries, particularly 
Thailand, or China.  There are more than 200 jade and gems stores in 
Mandalay, selling products from the Mogok and Phakant mines, and 
several streets in the downtown area are dedicated to the sale of 
jade, gems, and gold.  Nevertheless, the majority of Mandalay 
businesses remain dependent on agriculture; farmers in Mandalay and 
Sagaing Divisions produce rice, beans, and pulses that Mandalay 
trading companies buy and resell to exporters in Rangoon.  Tourism 
also plays an important role in Mandalay's economy, accounting for 
about 15 percent of the city's GDP. 
 
¶3.  (SBU)  Mandalay is also an industrial city, boasting an 
industrial zone with more than 1,100 factories.  According to Ye 
Naing Naing Tun, Manager of the Mandalay branch of Myanmar Tractors, 
the majority of businesses in the industrial zone produce heavy 
machinery, such as cars, turbines, and mining and drilling 
equipment. 
 
¶4.  (SBU)  All 14 of Burma's private banks have branches in 
Mandalay, an indication that there is wealth in the city.  U Tin 
Tun, Deputy General Manager of Kanbawza Bank (Burma's largest 
private bank), told us that while the bank's main business continues 
to be the remittance of money to other parts of Burma, the number of 
customers with savings accounts has quadrupled from 500 to 2000 in 
the past three years - the largest growth in Kanbawza history. 
While most of Kanbawza Bank's customers are Burmese, the number of 
Chinese customers has increased, accounting for almost 35 percent of 
saving accounts, he noted. 
 
¶5.  (SBU)  Mandalay has more than 150 internet cafes, most of which 
are registered,  Khun Oo, Vice President of the Myanmar Computer 
Professionals Association, told us.  Internet connections tend to be 
slower than in Rangoon; most cafes use dial-up services while only a 
few subscribe to broadband.  Unlike in Rangoon, wifi service is not 
readily available in Mandalay.  Internet usage costs are higher in 
Mandalay than in Rangoon, at approximately 1,000 kyat (USD 0.83) an 
hour compared to between 500-800 kyat (USD 0.42-0.67) an hour. 
There are no movie theaters in Mandalay and most bars and 
restaurants close by midnight, unless they have special permission 
from the Mandalay Regional Commander. 
 
Stagnating Economic Growth 
 
RANGOON 00000809  002.2 OF 003 
 
 
-------------------------- 
 
¶6.  (SBU)  Despite the hustle and bustle of the city, the city's 
economic growth has stagnated since 2007, Min Htin, YMCA Mandalay 
Board member and small business owner, told us.  The GOB does not 
publish data on economic growth by city, but Min Htin and his 
business colleagues estimated that Mandalay's growth had shrunk by 
15 percent over the past 18 months.  He noted that more than 600 
Mandalay-based businesses closed in 2007 and 2008, including 20 
factories. Ye Naing Naing Tun pointed out that Mandalay's 
electricity problems - the city and surrounding areas have received 
an average of six hours of electricity a day in 2008 - and the 
increasing cost of diesel fuel, at USD 6.50 a gallon, have caused 
Mandalay businesses to experience substantial losses.  Consequently, 
an increasing number of people are turning to service-based 
industries, such as restaurants, hair salons, and gift shops, to 
earn a living in Mandalay, he noted. 
 
¶7.  (SBU)  Food prices in Mandalay continue to rise at a faster rate 
than in Rangoon.  Coupled with stagnant salaries, many Mandalay 
residents have less disposable income, Ye Naing Naing Tun said.  The 
decline of tourism, estimated to be down by as much as 60 percent in 
Mandalay, also hurts economic growth.  Koichi Tanaka, Manager of the 
Sedona Hotel Mandalay, emphasized that the downturn in tourism 
affected more than just hotels; taxi drivers, tour guides, 
restaurants, and others were also feeling the pinch (septel).  While 
Mandalay is on face a prosperous city, 27 percent of city residents 
live in poverty, according to UNDP. 
 
Chinese Influx 
-------------- 
 
¶8.  (SBU)  Chinese influence in Mandalay is strong and immediately 
apparent.  Mandalay is located approximately 150 miles from the 
China border and Eastern China Air runs a direct flight from 
Kunming, Yunan Province, to Mandalay three times a week.  The 
majority of businesses in downtown Mandalay are owned by either 
ethnic Chinese or Chinese-Burmese people.  Store signs are in both 
Chinese and Burmese languages.  Local grocery stories, such as City 
Mart and Orange, have specific sections devoted to Chinese food 
products.  Zaw Ye Htun, Manager of City Mart Mandalay, told us that 
demand for Chinese food products increases annually and that the 
store often imports food directly from Kunming to meet the Mandalay 
residents' needs.  Of the five international schools located in 
Mandalay, two offer classes taught in Chinese.  Chinese language 
schools abound, with five new ones opening a year, Min Htin, YMCA 
Mandalay Board member, explained. 
 
¶9.  (SBU)  Despite the abundance of Chinese people and products in 
Mandalay, the general sentiment among Burmese appears decidedly 
anti-Chinese.  During a discussion on small business development in 
Mandalay, local participants complained bitterly that Chinese 
businesses were expanding their influence throughout the city, 
buying up smaller Burmese businesses and paying their Burmese 
workers low wages.  One participant noted that in most instances, 
Chinese companies brought in their own workers rather than training 
and providing jobs to the locals.  Another participant commented 
that Chinese businesses were only in Burma for their own good, 
noting that Chinese companies were building the Yei Ywa dam outside 
of Mandalay in exchange for free electricity (septel). 
 
Comment 
------- 
 
¶10.  (SBU) Mandalay is one of the most vibrant cities in Burma - the 
energy is palpable.  However, it is increasingly taking on the 
appearance of a foreign city, as Chinese continue to move in and 
dominate the economy.  Resentment is growing and some Mandalay 
 
RANGOON 00000809  003.2 OF 003 
 
 
residents feel that the government is selling out by giving economic 
benefits -- extractive industry concessions, low prices for oil and 
gas, minerals, and other natural resources -- to Chinese companies. 
 The opinion among Burmese living in Mandalay is that Chinese 
investment does little to promote the overall economic development 
of the city.  Instead, they view the investment as a way for the 
Chinese to procure Burmese products and resources at low prices 
without creating jobs and training opportunities for local Burmese. 
 
VAJDA