Myanmar COVID-19 Recovery Plan Won't Favor China's BRI Projects, Official Says

By Nan Lwin 11 June 2020

YANGON—When Myanmar announced its seven-point economic relief plan to mitigate the economic impact of COVID-19 in late April, one item immediately raised eyebrows among China analysts in the country. The initiative’s third main objective is stated as “Easing the Impacts on Laborers and Workers”, and one of the ways the government intends to achieve this is putting laid-off laborers and returning migrants to work on “Implementation of Labor-Intensive Community Infrastructure Projects” before the end of this year.

At first glance, it seems a worthy goal, as it aims to benefit workers affected by the coronavirus pandemic.

However, with several megaprojects in the planning stages as part of China’s Belt and Road Initiative (BRI), experts are concerned that the COVID-19 Economic Relief Plan (CERP)’s emphasis on reviving the economy will see Myanmar push ahead with the implementation of BRI projects without properly assessing their risks in terms of conflict sensibility, potential for incurring unsustainable debt and commercial viability, among other criteria.

Adding to their worries, shortly after the plan was unveiled, Chinese Ambassador to Myanmar Chen Hai and Myanmar’s Deputy Minister for Planning, Finance and Industry U Set Aung met to discuss how to move forward on the development of China’s ambitious projects in Myanmar in the context of the CERP. The New Yangon City; Kyaukphyu Deep-Sea Port and Industrial Zone; and China-Myanmar Cross-Border Economic Cooperation Zone projects—all of which were agreed during Chinese President Xi Jinping’s visit to Myanmar in January—were among those discussed at the meeting.

Furthermore, Xi expressed hope that Myanmar would speed up its cooperation with China on implementation of the infrastructure projects during a telephone conversation with Myanmar President U Win Myint in late May.

Since then, speculation has grown that the CERP’s third goal is tantamount to a green light for the projects.

However, The Irrawaddy learned this week from a senior official familiar with the matter that, so far, the infrastructure projects to be promoted under the CERP do not include any Chinese megaprojects.

The official confirmed to The Irrawaddy that BRI megaprojects are not among those listed in connection with the CERP, adding that there is no danger of the China-backed projects being rushed through or avoiding proper scrutiny.

“When it comes to choosing strategic infrastructure projects, they must already have been proposed but facing delays; they must be implemented by a reputable company with international experience; and the projects have to be commercially viable—not a burden on the country,” the official said.

The official added: “According to the criteria, BRI projects are not among those slated to be chosen.”

Based on the official’s comments, the three projects agreed during Xi’s visit—New Yangon City, the Kyaukphyu Deep-Sea Port and Industrial Zone, and the China-Myanmar Border Economic Cooperation Zones—seem far from meeting the criteria.

The Kyaukphyu Special Economic Zone (SEZ) in western Myanmar is expected to boost development in China’s landlocked Yunnan Province and provide China with direct access to the Indian Ocean, allowing its oil imports to bypass the Strait of Malacca.

A crude oil tanker docks at Maday Island in Rakhine State’s Kyaukphyu Township in 2019. / Zaw Zaw / The Irrawaddy

Daw Khin Khin Kyaw Kyee, head of the China desk at the Institute of Strategy and Policy (ISP)-Myanmar, told The Irrawaddy that the key BRI projects, including the Kyaukphyu SEZ, are not commercially viable.

“It would take at least 10 to 15 years to become commercially viable. But it is still not certain. Because the result will also depend on geopolitical factors, as the project’s implementation is being planned from a strategic perspective [of giving China access to the Indian Ocean],” Daw Khin Khin Kyaw Kyee said.

The China-Myanmar Border Economic Cooperation Zones are planned as industrial hubs spanning the Shan State-China border. They will form part of the China-Myanmar Economic Corridor (CMEC). The CMEC is envisioned as a corridor for transporting goods to and from Yunnan’s Kunming via Myanmar’s Muse along trade routes in Shan State through Mandalay to the Kyaukphyu SEZ in Rakhine State.

However, the corridor traverses highly volatile areas in northern Shan State that are currently plagued by frequent clashes between ethnic armed groups and government troops. Of the six major ethnic armed groups active along the China-Myanmar trade route in northern Shan State, five have not signed the Nationwide Ceasefire Agreement. Last year, a series of attacks launched by armed groups shut down border trade for several days. Experts have urged the government not to implement the projects without first securing a political settlement with the ethnic groups. They also warn that if the plan goes ahead without taking the armed conflict into consideration, it would aggravate the situation and provoke new grievances among local people.

U Khine Win, director of the Sandhi Governance Institute, agreed that the Kyaukphyu SEZ is not commercially viable.

Myanmar State Counselor Daw Aung San Suu Kyi attends the Invest Myanmar Summit 2019 in Naypyitaw. / Invest Myanmar Summit

He told The Irrawaddy that Kyaukphyu would be commercially viable only after interlinked projects are finished, such as the Muse-Mandalay railway project and Shan State’s cross-border cooperation zones—both of which are components of the CMEC. But he said the armed conflicts pose risks to the successful implementation of both those projects.

“It will take time,” U Khine Win said.

In late May, the CEO of New Yangon Development Company (NYDC), which is slated to develop the controversial New Yangon City project on the west bank of the Yangon River, said he was hopeful the project would commence this year and did not expect any change to the project plans. After reviewing the CERP, he was confident the project would move forward.

And in contrast to the views of the official quoted above, U Khine Win believed it was indeed possible that the BRI projects could be accelerated as the government takes steps to support mega-infrastructure projects under the CERP in a bid to mitigate the effects of COVID-19.

New Yangon City has been a source of controversy due to its flood-prone location as well as the involvement of China Communications Construction Company. The Hong Kong-listed, Chinese state-owned company has been accused of engaging in corruption and bribery relating to development deals in at least 10 countries in Africa and Asia, from the Philippines to Bangladesh to Tanzania, according to international media reports.

And even as China pushes Myanmar to implement the megaprojects, serious questions are being asked about whether Myanmar can still finance them given that its economy has slowed significantly due to COVID-19 and the government has committed to increasing spending on economic stimulus and improving social security and health care in the wake of the outbreak.

The Irrawaddy has learned that Myanmar has added a key condition to the CMEC Cooperation Plan stipulating that China must allow Myanmar to seek financing for the projects from multiple international financial institutions, especially the World Bank and the Asian Development Bank, to avoid incurring unsustainable debt obligations to China.

The official said that despite China’s push, the Myanmar government has firmly insisted that it will unbundle the projects to avoid implementing white elephant projects that are not commercially viable.

Recently, the Ministry of Planning, Finance and Industry signed an agreement with Singapore’s Infrastructure Asia (IA) under which the latter will help Myanmar identify suitable investors and assess commercial viability—including by inviting international-standard tenders—for strategic infrastructure projects listed in the country’s Project Bank, an online database of priority projects aligned with the country’s sustainable development plan.

The Irrawaddy has learned that the government is also planning to add all the BRI projects to the project bank to ensure they are screened for commercial viability and adherence to the sustainable development plan. Moreover, it plans to seek more agreements with firms such as IA to consult on the implementation of strategic projects.

Daw Khin Khin Kyaw Kyee said, “The government is cautious when it comes to BRI projects. The preliminary agreement for the CMEC was reached in 2017. It has been more than two years, but implementation of the backbone projects is still being negotiated.”

She added, “I don’t see any projects that have gotten off the ground. That means the government is handling the Chinese projects carefully to avoid the potential risks.”