Annan has been asked by the leader of Myanmar's new government, Aung San Suu Kyi, to head a commission tasked with trying to heal divisions between Buddhists and Muslims and alleviate poverty in Rakhine.
Annan's two-day visit to the western state, which is home to the minority Muslim Rohingya, got off to a shaky start yesterday when angry Buddhist nationalists protested against his "international interference".
But the Ghanaian diplomat's arrival today at several decrepit camps outside the state capital Sittwe, where tens of thousands of people, mostly Muslims, languish after being displaced by religious violence, was largely met with curiosity.
Rakhine has been effectively split on religious grounds since bouts of communal violence tore through the state in 2012, killing scores and forcing tens of thousands to flee.
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"Our lives here are worse than those of prisoners," Aung Nyein, a 63-year-old Rohingya leader, told AFP after meeting Annan in Aung Mingalar, an impoverished Muslim neighbourhood which residents cannot leave without permission.
"We asked him to find the best solution for the future of Muslims here... We welcome anyone who comes to work for stability of Rakhine state," he said.
But at home she must contend with hardline Buddhist nationalists who revile the Muslim minority, describing them as illegal immigrants from neighbouring Bangladesh.
The hardliners protest at any move to grant them citizenship or even to utter the name "Rohingya".
The protracted conflict has cast a shadow over new freedoms in recent years as Myanmar emerges from decades of brutal army rule.