Cross-border Smuggling in Sulu’s Deadly Waters: How Economic Agenda Co-exist with Violence Starjoan D. Villanueva

Research Question

• How do key actors benefit from smuggling? How much income is derived from these unofficial transactions?

• How does smuggling contribute to conflict? Do small traders of consumer goods and commodities operate independently as part of a ‘coping economy,’ or are they linked to a large network of traders that may have direct or indirect connection(s) to a regional ‘shadow economy’ and violence?

• What are the political forces and dynamics that drive and sustain illegal trade and the existence of local ‘war economies?’

• Are small traders the victims or are they exploiters as well of this ‘underground economy?’

“Why cross-border smuggling co-exists, but does not necessarily trigger violence, in a region that has a long history of conflict?”

Review of Literature (1)

• Janet MacGaffey, in studying the extent of smuggling in Zaire, described the existence of unmeasured and unrecorded “second economies” that intersect with the country’s recorded and official economy;

• She noted how economic factors had driven these second economies to expand far beyond official economic figures;

• She further underscored the role of colonial powers and state controls in reviving ancient trade routes for smuggling, thereby resulting to strong personal ties among actors upon which second economies largely depend on.

Review of Literature (2)

• In analyzing the links between informal economies and conflict, Paul Collier postulates that economic agenda or greed (rather than grievance) as a main driver of conflict, can motivate certain groups to exploit economic opportunities and cause them to initiate and sustain conflict;

• Eric Tagliacozzo further argues that violence and illicit commerce always cross in specific historical or geographic contexts. However, violence, he asserts, is often the last alternative that smugglers would resort to in protecting their economic interests at the risk of challenging the political status quo.

Review of Literature (3)

• Another relevant study on the political economy of conflict further highlights the role of globalization and economic restructuring in facilitating permissive conditions for conflict trade and the regionalization of ‘war economies;’

• Neoliberal policies’ inherent function weakens state capacity to generate, distribute, and regulate wealth equitably. These policies further exacerbate regulatory differentiation between states in a regional economic setting, thereby adding incentives for cross-border illicit trade to flourish.

Thesis or Argument (1)

• Smuggling, like any other economic enterprise, is mainly driven by profit and opportunities for other benefits that a particular geographic setting can offer;

• Small traders’ decisions to engage in cross-maritime illicit transactions are further influenced by socio-cultural and political considerations which include familiarity with trade routes, trust and confidence with existing social networks and personal ties, and serious assessment of legal implications and human security threats associated with external and internal political dynamics that can trigger violence.

Thesis or Argument (2)

• Cross-border trading and smuggling has existed long before the concept of a nation-state started and the birth of the Philippine republic;

• This puts to question the illegality label attached to all unofficial and unrecorded cross-border transactions on consumer goods and commodities, plus the fact that the state has neglected its duty to provide access to economic opportunities, infrastructure support, and protection that would allow local economies to formally develop and flourish;

• This further underscores the negative impact of neoliberal policies on the local economies of the Sulu archipelago, resulting to the marginalization of small traders who are now forced to resort to smuggling in order to cope with the situation.

Evidence (1)

• Cross-border trade, smuggling and piracy particularly in Southeast Asia are an ancient phenomenon. Steam navigation and colonial expansion in the latter half of the 1800s caused illicit trading activities to decline;

• After the Philippines gained independence in 1946, smuggling and piracy became a viable occupation for Sulu outlaws, with the proliferation of modern firearms and motorized boats due to available inexpensive military surplus engines brought in by the war.

Evidence (2)• Initial valuation of cross-border smuggling off the

shores of Tawi-tawi reveals that this practice is both widely recognized and highly accepted; the practice is so rampant that a very thin line (if at all) exists between formal and informal economies;

• Both traders and state actors benefit from smuggling; the traders enjoy exemptions from paying import taxes that can reach as high as 50 per cent of the price for rice, and 60 per cent of the price for sugar;

• Customs personnel profit from illicit trading through imposition of predatory taxes or kotong to allow illegal shipment of consumer goods from Malaysia through motorized wooden boats or kumpits (PhP60 per sack of smuggled rice or flour). A very conservative estimate of 1,500 sacks per kumpit would fetch an unrecorded income of P90,000 per transaction.

Evidence (3)

• Economic factors that drive the flow of illegal trade from Sabah, Malaysia: a) access to cheaper consumer goods and commodities that are not readily available from mainland Zamboanga, thus, increased opportunities to maximize profits; b) improved infrastructure support; and c) enabling economic environment on the part of the Malaysian government that allows cross-border trading of basic commodities like rice, flour, sugar and other food items like noodles and chocolates;

• Long established social networks and personal ties among traders and kumpit operators, and strong familiarity with these traditional sea lanes further encourage key actors to engage in smuggling.

Evidence (4)

• At the other end of this informal trading relationship, the development and expansion of rubber and oil palm plantations in Malaysia has created a diaspora and demand for labor to work on these commercial farms;

• This opened doors for Tawi-tawi traders to ‘export’ locally produced commodities to Sabah. These include RDL and Belo beauty products, and ‘hot’ illegal items like fighting cocks (from Negros), liquor (Tanduay and San Miguel beer) and cigarettes. (NOTE: Mapping of trading patterns, prices and volume of these goods is underway)

Evidence (5)• Despite rampant smuggling activities

that largely intersect with and dominate formal local economies, cross-border trading has not been observed to have direct links with regional ‘shadow economies’ and violence;

• Highly illegal smuggling activities involving drugs, guns and human trafficking co-exist, thus, run parallel with illicit trading of consumer goods;

• The traders are aware of the existence of drug and human traffickers in the area, but they avoid crossing the paths of these shady characters.

Evidence (6)• Presence of external threats associated

with piracy, human trafficking, maritime accidents and drowning due to lack of access to safe transportation system in getting to Sabah has resulted to a significant decrease in the number of women traders actively involved in cross-border smuggling;

• Most women traders are now confined to manage the family’s dry goods shops in Bongao, while their male counterparts continue to ride the kumpits and take the risks of getting drowned or killed by pirates that continue to prey on these traders.

Evidence (7)• In contrast to Tawi-tawi, initial findings on

cross-border smuggling in Sulu reveals the existence of a more sophisticated and complex system that has direct links to a larger ‘shadow economy’ and violence;

• Based on key informants’ accounts, almost everyone (i.e. business, military and police, armed groups, politicians and influential clans) is involved in highly illegal activities like human trafficking, gun running and narcotics trading that intersect with smuggling of goods and commodities;

Evidence (8)• There are around 20 medium-sized kumpit

boats plying the sea lanes that connect Jolo to Sabah. These boats are chartered by private individuals through a broker who has direct contacts with the owner of these boats. A chartered trip to Sabah from Jolo would cost around P150,000-P200,000. The total value of goods shipped by one chartered boat in going back to Jolo from Sabah is estimated at P100M to PHP150M;

• Given the high stakes involved in various forms of intersecting illegal activities and actors in the area, conflicting interests always play out in these cross-border illicit transactions, thereby triggering a proliferation of violence, particularly clan feuds or rido.

Concluding Remarks• The case study illustrates how economic agenda and profit-

seeking interests associated with cross-border smuggling, in a region prone to conflict, may run parallel or co-exist with other illegal transactions, but would not necessarily lead to or trigger violence;

• This unveils a highly predatory nature of informal economies, with key actors feeding on the weaknesses of the state by exploiting opportunities for economic survival (as in the case of small traders in Tawi-tawi), or for personal gains (as illustrated by customs personnel engaged in kotong);

• These profit-seeking interests eventually intersect with other far more lucrative illegal activities that would necessitate access to and manipulation of political powers and resources to secure the economic interests of a few powerful elites who seek control of these emerging informal economies (as in the case of cross-border smuggling in Sulu);

• This situation eventually creates incentives for violence to take form and unleash its powers, thus, poses a major challenge to state-building efforts that can transform conflict and build enduring peace.