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MAYANMAR: Scrutiny needed to ensure Belt and Road projects are viable, says think-tank

JOHN LIU 15 NOV 2019

A file image of the Hambantota port in southern Sri Lanka. Sri Lanka couldn’t repay the loans, and gave China a 99-year lease for debt relief. Photo - Bloomberg

China’s Belt and Road Initiative (BRI), seen most visibly in Myanmar through a proposed “economic corridor” between the two countries, requires government and media scrutiny and regulations to ensure projects are done in a socially and environmentally responsible way, an international think-tank says.

Transnational Institute, an Amsterdam-based think-tank focused on building a just, democratic and sustainable planet, released a briefing paper this month on the Belt and Road Initiative (BRI) in the Myanmar context.

The paper examines four major infrastructure projects in Myanmar: the interconnection of Myanmar and Chinese electricity grids; a proposed railway from Kunming to Kyaukphyu; a land and waterway passage between the two countries, and industrial hubs.

“These cases highlight a lack of transparency and meaningful consultation, as well as the questionable financial viability and potentially harmful social, economic and environmental impacts of such projects,” the research paper stated.

Stephanie Olinga-Shannon, the paper’s author, said the BRI is a “branding exercise” for activities to address the crisis in Chinese capitalism. In contrast to the pervasive perception of the initiative as a predetermined grand strategy led by Beijing, the scheme in practise consists of a wide range of business- and provincial government-driven projects.

Individual Chinese companies, state-owned and private, are left to decide whether to brand their investment activities as part of the BRI, Ms Olinga-Shannon added. The host government has the choice to greenlight project proposed.

State Counsellor Daw Aung San Suu Kyi stressed that BRI projects should complement national priorities and take into account the welfare of local communities when speaking at the official 2017 BRI Summit in Beijing.

Daw Aung San Suu Kyi also highlighted the need to ensure responsible business practices.

The current legal and policy framework for regulating foreign investment in Myanmar is weak and mostly benefits companies rather than local communities, the research paper argues. 

Apart from a stronger regulatory framework, Ms Olinga-Shannon said Myanmar needs to allow the government, civil society organisations and media outlets to scrutinise investment plans and business operations. 

This does not only apply to Chinese investors. Observers warn that Myanmar will not have a good investment climate without a strong, independent, professional media outlets because business, journalists and civil society share the same civic space.

Myanmar’s strategic position

Myanmar holds a strategic geographical position between China and India, and also linking Southeast Asia with Southern Asia. Most importantly, the location provides opportunities for Southwest China to gain access to the Indian Ocean, bypassing the Strait of Malacca, especially for China’s landlocked Yunnan province.

Central to China’s BRI in Myanmar is the approximately 1700-kilometre-long China-Myanmar Economic Corridor (CMEC). It will stretch from Yunnan’s Kunming to Myanmar’s second-biggest city Mandalay, then west to Kyaukphyu in Rakhine State, and east to the country’s commercial capital Yangon.

The proposal was first announced in November 2017 in a meeting between China’s Foreign Minister Wang Yi met and Daw Aung San Suu Kyi, though many activities began before the idea of CMEC was conceived. 

Sceptics of the project have warned Myanmar of a potential debt trap, as demonstrated by Sri Lanka having to lease the deepsea Hambantota Port to China for 99 years after struggling to repay loans from China totalling US$1.3 billion to build the port. 

The Transnational Institute paper cautions of potential “debt burdens” arising from BRI projects, especially when China is already Myanmar’s largest lender, having provided loans totalling US$3.8 billion.

Among the most closely watched developments is the US$1.3 billion port in Rakhine, backed by China’s state-owned CITIC Group. In July, the port developer started a legally required environmental and social impact assessment, or ESIA, and preliminary geological survey.

Four case studies

In 2014, state firm China Southern Power Grid began lobbying the Myanmar government to purchase electricity because of its over-supply in China. The Ministry of Electricity and Energy announced in May its intention to buy 1000 megawatts of electricity from the company.

The Chinese national grid has already been linked to Kachin State’s Bahmo, a high-voltage transmission line between Bahmo and Sagaing’s Ohntaw awaits to complete the interconnection. The report warns the transmission lines are “likely to be high-profile targets open to sabotage” because of the high cost.

The research paper also pointed out the surplus of electricity is due to its higher price. To which, the Transnational Institute calling for an “open and transparent assessment of cost” to analyse whether the deal is economically efficient.

The China-Myanmar railway, connecting Yunnan’s Kunming to Kyaukphyu through Muse and Mandalay, is one of the key CMEC projects now led by China Railway Group. Proposed and suspended multiple times over the past decades and revived again in 2017 after intense lobbying from the Chinese side, the railway project has advanced to a feasibility study by a China Railway subsidiary that was completed early this year. 

The Myanmar government is insisting on an international tender for the project after the railway route is finalised. State-owned Myanma Railways, however, announced in September the suspension of the Muse-Mandalay part of the project, citing security reasons as the Brotherhood Alliance launched extensive attacks across northern Shan State and Mandalay Region in mid-August. 

As the Muse-Mandalay railway alone is projected to cost US$7 billion, a huge amount of money is required to protect the cargo and passengers if the conflict remains unresolved, which the research argued could lead to increased militarisation and tension in the area. 

The less-known Sino-Myanmar Land and Water Transportation Passage is a Yunnan provincial government-led initiative utilising the potential of the Ayeyarwady River to link Yunnan to the Indian Ocean. Discussions regarding the passage between the two countries have continued but the progress appears stalled. 

The research paper states that while project details and related information have been made available through the Chinese government and media, access to information in Myanmar remains limited, making it less known to the Myanmar public. 

The fourth example examined five Chinese proposed SEZs, including Kyaukphyu, proposed during the Thein Sein administration, Myitkyina and Kampaiti in Kachin State, and Muse and Chinshwehaw in Shan State, as well as other Chinese proposed industrial zones.

According to the report, the high cost and the lack of transparency and consultation are not new to constructions of SEZs and industrial zones in the country. These projects are also often associated with land grabs, labour abuses, illegal practices and damage to livelihoods, the report said.

For example, a US$470 million contract was awarded to China Railway International Group, China Railway’s subsidiary, to provide basic infrastructure to New Mandalay Resort City development, another Chinese BRI-branded industrial zone, in April this year, but the developers of the project made no announcement to the public.

As transparency is highlighted as a prominent issue among the examined cases, “it comes down to the responsibility of corporations, the government, journalists and civil society organisations,” said Ms Olinga-Shannon.

Overall, the government has to take into consideration the benefits for both the country as a whole and local communities as well, she added. And “that comes through regulations and oversight of all foreign investments,” she said.


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