By Tridivesh Singh Maini and Sandeep Sachdeva
Yangon, Myanmar, September 27, 2017
The most obvious sign of this is the sudden jump in foreign direct investment (FDI), from US$4 billion (K5.46 trillion) in 2013-14 to $9.4 billion in 2015-16. China is not only its largest trading partner, but also has made a huge investment in Myanmar. In fiscal year 2016, China invested $2.8 billion in Myanmar, while Singapore invested $3 billion, and even Vietnam’s investment was fractionally ahead of China’s, but over the past nearly three decades (1988-January 2017) China has invested $19 billion in Myanmar, far more than any other country.
China and Myanmar have maintained good relations for some time, and Beijing has enjoyed especially robust relations with the military junta, as evidenced by China’s FDI in Myanmar even during military rule. It is pertinent to note that China fervently backs Myanmar in the current Rohingya crisis.
While the transition to democracy, and the thumping electoral victory of the National League for Democracy (NLD) led by Daw Aung San Suu Kyi in 2015, made many analysts sceptical about the direction of China-Myanmar relations, in view of her strong personal ties with India, Daw Aung San Suu Kyi has dexterously navigated relations with both Asian powers. She said in one interview that “Myanmar should not be seen as a battleground. Rather it can emerge as a bridge between India and China,”
Daw Aung San Suu Kyi has developed a strong rapport with China’s leadership in recent years. She met with President Xi Jinping in her capacity as opposition leader in June 2015, and, after becoming State Counsellor, she chose China for her first overseas visit outside ASEAN and since then has met with Chinese leaders many times.
However, the relationship faces many obstacles. In 2007, a joint venture of the China Power Investment Corporation (CPI), Myanmar’s Ministry of Electric Power and the Asia World Company began construction of the Myitsone Dam on the Ayeyarwady River to supply power to China’s Yunnan province. The project was vehemently opposed by local people, because the river is considered the birthplace of Burmese civilisation and because of its environmental, social and economic effects. In 2011, then-President Thein Sein suspended the project due to nationwide protests. Daw Aung San Suu Kyi has yet to decide the fate of the project.
The problems don’t end there. Despite China’s huge investment in the country, Myanmar people perceive it as an exploiter rather than a benefactor. The Chinese face similar sentiments in other countries, such as Vietnam and Sri Lanka.
Another problem is the slow pace of reforms in Myanmar. Political and economic reforms have been mired in controversy because of inconsistent formulation and drafting. The process was begun in 2011, with the creation of a commission to privatise state-owned companies, which handed over these companies to family members of politicians and highly placed officials. In 2012, the government passed a foreign investment law to allow formation of joint ventures with local partners and the leasing of land from the state and authorised companies, but critics argue that the law is being misused by cronies to grab land in anticipation of a deal with a foreign investor.
Apart from this, the country’s infrastructure is in a very bad shape, with millions of people living without access to power and proper roads. Huge investments are needed in housing, connectivity, electricity and water supplies, health care, education and tourism. As per the Global Infrastructure Outlook report recently, of the 50 nations surveyed, Myanmar fared the worst in terms of infrastructure, for which, the report estimates, it requires the investment of $112 billion by 2040.
Now the key question is which country or investor, other than China, would invest in such a volatile political and economic situation? In China, decisions are not taken by investment banks and private institutions but by the leadership, which attaches immense importance to the strategic and political implications of investments, apart from their economic benefits. In other countries, where the private sector plays an important role, things are different – efficiency and transparency are important prerequisites for FDI, as are political and economic stability. It is very difficult for investors to consider projects like the Myitsone Dam. Inept bureaucracy, lack of transparency, deep-rooted corruption and a lack of cooperation among ministries are red flags for investors. Myanmar’s new government should pay careful attention to the fact that foreign investment plunged roughly 30 percent between March 2016 and March 2017.
Myanmar seriously needs to look at big investors beyond China, but genuine political and economic reforms are needed. Even after the successful transition from military rule to democracy, the military still holds the levers of power. By turning a blind eye to the atrocities against the Rohingya, and making a few perfunctory statements, Daw Aung San Suu Kyi has done no favours to her position vis-à-vis the Myanmar army and the country’s image internationally. It remains to be seen whether there will be a course correction and the delivery of reforms that were expected after the NLD took over. If this does not happen, China’s economic stranglehold on Myanmar is likely to continue, which is likely to create popular discontent, as has been seen in other countries like Sri Lanka and Vietnam.
Tridivesh Singh Maini is a policy analyst associated with the Jindal School of International Affairs at OP Jindal Global University in Sonipat, India. Sandeep Sachdeva is an independent policy analyst.