(Recasts to add comment from U.S. State Department)
By Amy Sawitta Lefevre
BANGKOK, July 19 (Reuters) - Thailand's navy denied on Friday a Reuters report that its personnel were involved in a lucrative smuggling and trafficking network that exploits minority Rohingya Muslims fleeing persecution in Myanmar.
The Reuters investigation, citing people smugglers and Rohingyas who made the journey, found that Thai naval security forces were involved in the smuggling of Rohingya Muslims. They have fled Myanmar, also known as Burma, in sharply growing numbers over the last year following outbreaks of religious violence at home.
The smuggling network, centred on the west coast of southern Thailand, transports thousands of Rohingya mainly into neighbouring Malaysia, a Muslim-majority country the Rohingya view as a haven from persecution.
"There is no truth to the allegations," Wipan Chamachote, a spokesman for the Royal Thai Navy, told Reuters. "We've found no indication of abuse by our staff in regards to Rohingya that enter the country, nor has there been any financial transaction for the purposes of human trafficking."
He added it was possible those interviewed mistakenly identified the navy, but said he was not implying that other Thai security forces were involved in the smuggling.
In addition to the Royal Thai Navy, the coastal seas are patrolled by the Thai Marine Police and by militias under the control of military commanders.
On Friday, the U.S. State Department called on Thailand to investigate the allegations surfaced by Reuters.
"We have seen the reports," said deputy spokeswoman Marie Harf. "We urge the Thai government to conduct a serious and transparent investigation into the matter. We remain deeply concerned about the safety of and humanitarian conditions for vulnerable communities in Burma, including refugees and asylum seekers on Burma's borders and elsewhere in the region."
Thailand has faced international pressure for failing to crack down on human trafficking. An annual U.S. State Department report, monitoring global efforts to combat modern slavery, has for the last four years kept Thailand on a so-called Tier 2 Watch List, a notch above the worst offenders, such as North Korea. A drop to Tier 3 can trigger sanctions, including the blocking of World Bank aid.
Earlier Friday, Thai Prime Minister Yingluck Shinawatra ordered the Labour Ministry to crack down on those involved in human trafficking, but made no reference to the allegations made against the navy.
"What Reuters found should prompt Prime Minister Yingluck to order a serious investigation into these allegations," said Phil Robertson, deputy Asia director at Human Rights Watch. "But to date, they have resulted in low-level investigations that seemed more oriented to covering things up than getting to the bottom of the situation."
FISHING INDUSTRY'S ROLE
Reuters interviews with refugees and smugglers found that Rohingya who can't pay for their passage are handed over to traffickers, who sometimes sell the men as indentured servants on farms or into slavery on Thai fishing boats.
There, they become part of the country's $8 billion seafood-export business, which supplies consumers in the United States, Japan and Europe.
The Thai government says it is serious about tackling human trafficking, but no minister has publicly acknowledged that slavery exists in the fishing industry.
"The Thai fishing industry remains resolutely irresponsible, and since they are influential in political circles, they have been able to stymie reformers who want to take on the industry's business practices," said Robertson of Human Rights Watch.
Democratic reforms in Myanmar have led, paradoxically, to an unleashing of ethnic and sectarian violence there. The number of Rohingyas fleeing by sea from Myanmar, and neighbouring Bangladesh, reached 34,626 people from June 2012 to May of this year - more than four times the previous year, says the Arakan Project, an advocacy group that has studied Rohingya migration.
Arakan says at least 800 people, mostly Rohingya, have died at sea after their boats broke down or capsized in the past year.
Myanmar - a majority Buddhist country - says the Rohingya are Muslim migrants from Bangladesh. A 1982 Citizenship Act excluded Rohingya Muslims from a list of 135 designated ethnic groups, effectively rendering them stateless. (Additional reporting by Pracha Hariraksapitak and Lesley Wroughton.; Editing by Stuart Grudgings and Robert Birsel)