Chinese Methods Facing Pressure

Regime-cozy ways will not work in a more democratic environment, say experts

By WILLIAM BOOT

They are Myanmar’s biggest investors, but wherever their money goes, controversy and protests follow. Now the Chinese are facing growing competition for big contracts from the Japanese and South Koreans and, perhaps, soon the United States as well.

Chinese state or state-linked firms have focused on tapping into Myanmar’s natural resources—gas, hydroenergy, copper and timber—and hauling it off to China. But none of it has happened without allegations of land theft, displacement or environmental damage.

Observers say that China’s growing commercial influence in Myanmar was one of the factors which pushed the former junta generals to finally reform and open the country up to other investors. It is certainly true that one of the first major acts of the Thein Sein presidency was to stop Chinese construction of the controversial hydroelectric dam at Myitsone on the Ayeyarwady River.

Not only would most of the electricity generated by the project be pumped to China’s neighboring Yunnan Province, there would be massive relocation of communities and damage to fisheries and the downstream environment, numerous NGOs have said.

“Over the past two decades Burma’s leaders have become increasingly uncomfortable with their dependence on China for trade, aid and arms transfers,” said Ian Storey, a senior fellow at the Institute of Southeast Asian Studies.

“While their desire to reduce that dependence may not be one of the central drivers of the current reform process, it’s clear that their move to broaden the country’s foreign relations will ultimately erode China’s political influence and economic interests,” said Mr Storey in a commentary for the Singapore-based think-tank.

Myanmar anger at the cavalier attitude of many Chinese firms operating inside the country has even led to criticism from within China regarding their business practices.

“The reason why Chinese enterprises often become a target of criticism in [Myanmar] is that they lack a clear understanding of the national situation, especially the complicated interest pattern in the country,” com- mented Bi Shihong, a professor of the Institute of International Studies at Yunnan University.

“Chinese enterprises haven’t given enough attention to other interest groups besides the [Myanmar] government and its local partners. And they haven’t communicated well with the local NGOs and communities. [They] should pay more attention to these challenges when investing in Myanmar.

“They should take into consideration the interests of the central [Myanmar] government, local governments and local communities, so as to benefit all sides,” said Prof Bi in the Beijing Global Times, which is owned by the official Chinese news agency Xinhua

This is a severe scolding for Chinese firms in Myanmar, but it may be too late for Beijing to redeem itself. Japanese and South Korean invest - ment is pouring into Myanmar for vital projects to improve infrastructure— something China has never shown any interest in.

A consortium of major Japanese industrial conglomerates, led by Mitsubishi Corporation, is spending billions of dollars to develop Myanmar’s first special economic zone (SEZ) at Thilawa, adjoining the port just south of Yangon. And Korean companies are to build Myanmar’s first major new electricity generating station of which none of the power will be exported.

“It is interesting that Chinese business has shown no interest in investing in a [SEZ] at Dawei. I think that is a reflection of the fact that they see no benefit to China from it,” regional energy infrastructure analyst Vincent Lomax told The Irrawaddy from Hong Kong. “China has built its exclusive port on the central coast at Ramree Island to serve its purpose of transshipping crude oil through Burma.”

Dawei is a stalled project proposed by Thailand for an oil transshipment port with a refinery and petrochemicals plants.

“The Burmese are probably right to question China’s motives in their country because everything they have invested in concerns extraction of raw materials or the use of Burma as a conduit. They do this wherever they go in the world,” added Mr Lomax.

The contest for Myanmar’s resources has yet to begin in earnest, however.

“Small Chinese companies as well as big state enterprises are casting their eyes on neighboring [Myanmar] as it opens its economy to foreign investment,” said an assessment by the Financial Times.

One in particular, China Polymetallic Mining, is keen on exploiting

Myanmar’s lead, zinc, silver and copper resources.

China Polymetallic is privately owned and listed on the Hong Kong stock exchange but it is being backed by the Yunnan provincial government to venture across the border, said the London-based newspaper.

“Yunnan is close to [Myanmar] which has similar mining formations to Yunnan. Also our employees share their culture and living style with people in [Myanmar] so we think it’s relatively easy for us to take our operational model [there],” the firm’s chief financial officer Li Tao was quoted by the Financial Times as saying.

Myanmar workers and farmers have so far had little but a grim experience of Chinese mining business practices at a copper mine near Monywa, in northwest Myanmar’s Sagaing Division. The mine operator, state-owned Wan Bao Company, is accused of complicity in the theft of thousands of hectares of land to promote its commercial interests as well as devastating environmental pollution.

Wan Bao is partnered by the Union of Myanmar Economic Holding Limited, which is owned by the Myanmar military.

“It’s time for Chinese enterprises to alter their old habit of only catering to the government in [Myanmar]. Instead, they should pay more attention to the demands of local communities and their cultures and customs,” said Prof Bi in the Global Times.

Myanmar, however, will have to accept that their country’s geographical location will increasingly make it attractive as a conduit for business— China seeking a route to the sea, India seeking markets in Southeast Asia and Myanmar’s fellow members in the Association of Southeast Asian Nations pushing for land links to South Asia and the Bay of Bengal.

The challenge for Myanmar, say economists, will be to manage its new place in the 21st century regional economy without being exploited.

Myanmar gears Up for Tourism

Myanmar is likely to emerge as a major tourist destination within the Association of Southeast Asian Nations (Asean) by the end of this decade, says an industry publication.

Yangon will host the country’s first tourism conference, organized by the Myanmar Tourism Federation and Sphere Conferences of Singapore, over three days in February as part of the Naypyidaw’s “Tourism Master Plan.”

“The objective is to provide background and perspective for potential hotel investors while positioning the country as a player with a big future in Asean tourism,” said the Bangkok-based TTR Weekly.

“Most of the big inbound tour operators based in Bangkok maintained offices and joint ventures during the decades of military junta rule, giving them a substantial lead over tour operators in Singapore or Hong Kong who opted to wait for sanctions to lift,” said TTR. “However, it remains to be seen if they will now expand their influence after years of absorbing losses as sanctions held at bay lucrative travel contracts.” ocean-going vessels port in Kyaukphyu, which is also the starting point for the pipelines. China plans to acquire crude oil from the Middle East via the pipeline.

The multibillion dollar railway project is scheduled to take five years to complete. Tin Thit said proper compensation and respect for human rights must be guaranteed before any further work.

Singapore Sizes up Trade Expansion

Tiny Singapore is amongst the biggest sources of foreign investment interest in Myanmar, with teams from the Singapore Business Federation (SBF) making three exploratory visits in 2012.

In November a delegation made a five-day tour, examining business opportunities in financial services, oil and gas, agriculture, tourism and telecommunications.

The SBF said Myanmar’s new Foreign Direct Investment law would encourage more Singaporean firms to seek business opportunities.

Myanmar Investment Commission to build a $70 million wharf storage infrastructure at Thein Phyu in the Port of Yangon in anticipation of a big rise in container traffic.

In 2011, goods valued at US $1.2 billion were imported into the former capital from Singapore.

Myanmar Debts to be Settled by Early 2013

The World Bank has set the first quarter of 2013 as the deadline to help Myanmar clear its international debts and gain wider access to global aid and grants.

The institution is working with the Asian Development Bank (ADB) to resolve the debt issue. Previous military regimes stopped making repayments on loans up to two decades ago.

The ADB has opened an office in Yangon and is currently working with the Naypyitaw government, but still insists on full repayment of a US $500 million debt before providing any more funding.

China Urged to halt Railway

The state-owned China Railway Engineering Corporation is performing route assessment studies for a planned freight railway linking China’s southwest Yunnan Province to Myanmar’s west coast.

The 1,200 km railway will run between Kunming, capital of Yunnan, and Kyaukphyu on Ramree Island in Myanmar’s Rakhine State—alongside the controversial twin oil and gas pipelines currently being built.

Myanmar NGOs have recently called for pipeline construction to be suspended and persistent human rights abuses investigated. The military is accused of helping the builder, China National Petroleum Corporation, secure land and labor.

Now there is concern that more land could be seized and villagers forcibly relocated away from the railway route, said Tin Thit, of NGO Green Land Mandalay.

China has built an

Singapore is already a leading investor in Myanmar’s tourism industry, financing hotels and seaside resorts. It is also one of the nation’s biggest trading partners, providing a cargo sea link during Western trade sanctions.

Earlier this year, the Japanese government canceled Myanmar’s debts in a gesture to aid development. Japan has since become one of Myanmar’s biggest investors.

The World Bank is providing expert advice on restructuring Myanmar’s antiquated financial system and providing aid of up to $345 million to help reduce poverty and improve rural infrastructure over the next 18 months.

Meanwhile, a Myanmar cargo shipping company which operates container vessels to Singapore is moving into port wharf development in Yangon.

KMA Shipping Company won a contract from the

Denmark has also announced an increase in direct poverty alleviation aid to $23 million per year in 2013, regardless of EU financial assistance. Copenhagen already doubled annual aid to $18 million in 2012.

By WILLIAM BOOT