In Person

Suu Kyi Economic Adviser: National Interest Must Come First When Deciding Large Chinese Investments in Myanmar

By Nan Lwin 20 January 2020

YANGON—Chinese President Xi Jinping made a two-day visit to Naypyitaw, the capital of Myanmar, last week. During his visit, Myanmar and China signed a total of 33 memorandums of understanding (MOUs), agreements, exchange letters and protocols, including two agreements for the Kyaukphyu Special Economic Zone (SEZ) deep seaport project, which will boost China’s presence in the Indian Ocean.

The majority of the agreements relate to China’s ambitious Belt and Road Initiative (BRI), calling for cooperation in sectors including infrastructure mega-project development, railways, industrial and power projects, trade, investment and human resources, among others.

The Irrawaddy spoke to Dr. Sean Turnell, Special Economic Consultant to the Myanmar State Counselor and director of research at the Myanmar Development Institute (MDI), about his views on Xi’s trip, especially how the agreements will shape the two countries’ future relations, the Myanmar government’s cautious approach to Chinese investment, Naypyitaw’s strategic vision regarding Chinese projects, and whether Myanmar and China have agreed on a new resolution regarding the controversial Myitsone Dam project.

Nan Lwin: Myanmar and China signed a total of 33 agreements during Chinese President Xi’s visit to Myanmar. How will these agreements shape future China-Myanmar relations?

Turnell: These agreements are all in critical areas, and some involve potentially very large infrastructure investments. How they shape future relations will depend upon how they are actually implemented. Executed badly, and they could damage Myanmar’s political economy in all sorts of ways, predictable—such as high debt loads—and otherwise. As usual, both the angel and devil will be in the detail of how they are implemented, and what happens on the ground.

Nan Lwin: What did China gain from Xi’s trip? And Myanmar?

Turnell: For China it would seem to be a reaffirmation of what it perceives as a healthy relationship between itself and a country with a lot to offer it—as a market, a source of critical resources, and as a strategically important territory.

For Myanmar, the gain is probably mostly the demonstration effect that it has a powerful partner in trade and investment—that Myanmar has options. Of course, given the outcome of the talks, and the way in which Myanmar stood firm in its conviction that all infrastructure projects must meet its own financial, environmental and social criteria, collectively applied under the government’s “Project Bank” mechanism, the trip was another useful reminder that Myanmar is not a country that can be taken for granted.

Nan Lwin: Looking carefully at the MOUs and agreements, the two concerning the Kyaukphyu SEZ were the only ones related to a major BRI project that were signed during Xi’s trip. The rest of the backbone projects like New Yangon City, Muse-Mandalay railway, Ruili-Muse Border Economic Cooperation zones, power projects, local cooperation, and other projects are still at the nonbinding stage. Does this mean the Myanmar government is taking a cautious approach toward Chinese investment?

Turnell: Yes—and as it should for any large-scale infrastructure projects with large financial, environmental, social, human rights, and other complexities. As noted earlier, strict procedures have been constructed for such projects and it is not just appropriate, but highly prudent, that such “backbone” schemes of the type you mentioned are properly assessed before they are approved. As we know, past Myanmar governments signed off on a great many agreements without such considerations, to great and lingering costs to the country. Myitsone, which I know we will discuss in more detail shortly, is just one example of this. It’s long past time for the national interest to be the prime consideration in deciding on large-scale investments in Myanmar.

Nan Lwin: Talking about Kyaukphyu, the Myanmar government has already successfully avoided a “debt trap” and renegotiated the shareholding ratio. The major concerns have been resolved. But there is concern that the project could eventually be used for Chinese military access. Do you think Myanmar needs to worry about that?

Turnell: Myanmar could scarcely be more importantly located in terms of geopolitics, and clearly Kyaukphyu allows access to sea lanes that are strategically vital to many countries, including China. Accordingly, Myanmar should indeed take into account the security and military dimensions of projects as strategically critical as this one. Moreover, I am sure that it does.

Myanmar State Counselor Daw Aung San Suu Kyi shakes hands with Chinese President Xi Jinping at a signing ceremony in Naypyitaw on Jan. 18, 2020. / Nyein Chan Nyein / EPA / POOL

Nan Lwin: China has planned strategically for its projects in Myanmar. Myanmar also fits into China’s strategic vision to achieve a presence in the Indian Ocean. Does the Myanmar government have a clear strategic vision when it comes to Chinese projects?

Turnell: I am an economist and so I should leave my prognostications to the economic front perhaps. That caveat noted, Chinese projects are approached, via the Project Bank and other procedures, in the context of the broadest consideration of Myanmar’s national interest, including the strategic.

Nan Lwin: Experts say China has a clear vision of what it wants from Myanmar. Does Myanmar have a clear vision of what we want from China?

Turnell: Myanmar’s economic team has a very clear vision, I think, of the country’s economic interests, and how these are reflected in the relationship with China. China will surely always be Myanmar’s most significant economic partner. The largest source of investment, the largest market for Myanmar’s exports, the biggest supplier of Myanmar’s imports. The world’s most populous country and second-largest economy cannot but dominate the economies around it.

So, how to avoid being overwhelmed, how to make sure that Myanmar has other options—other sources of investments, other markets, other suppliers?

The answer to these questions—as it is to so much in the realm of economics and finance—is diversification.

Myanmar should seek the best outcomes it can get, in the broadest sense—that is, cognisant of human rights, environmental concerns, social and cultural impact—as well as economic and social returns, from China, as it should from all its other economic partners. Enlightened self-interest—the universal and time-honored objective of all effective sovereign governments—should always be front and center.

Nan Lwin: Why did Xi Jinping choose to visit Myanmar as his first foreign trip for 2020? Anything more than celebrating the 70th anniversary of diplomatic relations?

Turnell: Sometimes a cigar is just a cigar. It would seem on the face of things that the broad relationship, as viewed through the lens of this anniversary, may indeed have been the main focus of Beijing.

Nan Lwin: What message does his trip send to the other powerful players in the region—Korea, Japan and others—and beyond, especially the West?

Turnell: Hopefully nothing except that Myanmar is open for mutually beneficial economic relations with all countries. Of course, one mustn’t be naive, and so I am sure that some will interpret the trip as a signal that Myanmar has a powerful friend and backer, and a possible backstop against punitive economic measures of other nations.

All being well, however, it will not be interpreted this way. Myanmar cannot achieve transformational economic growth of the sort that would advantage ALL its people via its relationship with China alone.

Myanmar needs good relations with all countries, especially those in which human capabilities have achieved their highest potential thus far. China is a communist, one-party state without a free press, the rule of law, or critical freedoms. Men and women do not live by bread alone.

Nan Lwin:  Experts have said that China-Myanmar relations will be closer than ever if even half the China-Myanmar Economic Corridor (CMEC) projects actually get off the ground, and that these will bring the two countries closer together economically and socially. They say it is unavoidable that we will have to lean toward China. What is your opinion on this?

Turnell: As noted earlier, geography, wealth, and power disparities will surely always place China in the box seat with respect to influence in Myanmar. The CMEC projects, if mutually beneficial, will draw the countries closer together. Of course, badly conceived, exploitatively financed, or favoring one side only, and they would damage the relationship. This is why, in the interests of all parties, it is critical to get these projects right—and that means that justice is served in the selection and implementation of such projects in all dimensions.

Nan Lwin: Myanmar State Counselor Daw Aung San Suu Kyi told the Chinese president that it is very important that the CMEC projects are in line with the prioritized strategic national development plans of the two countries, and that measures are taken to prevent environmental degradation, and that they contribute to the development of the social life of the people. I think that it sends a strong message. But the question is whether the Myanmar Sustainable Development Plan (MSDP) is comprehensive enough. What is your view? 

Turnell: I think the MSDP is comprehensive enough—the key thing is to ensure that it is properly applied. Once again, this will require Myanmar’s government to be clear-eyed and to act in the best interests of all of its peoples. So far, it seems to me, Myanmar’s current government has been among the most successful in the world in meeting the challenge that constructing a mutually beneficial relationship with China entails. Looking around the region, around the world, it’s difficult to find a developing country that has better avoided the traps that the less adroit have been prone to.

Nan Lwin: Many speculated that a final decision on the Myitsone Dam would be made during Xi’s trip. So far, the Myanmar government has not revealed any details about this. Do you think Myanmar and China agreed on a new resolution for Myitsone during the trip?

Turnell: Myitsone I think is a project of another time and place. It’s hard to see how it makes any sense for anyone in 2020. Proposed and accepted at a time when Myanmar’s governments were desperate, short of cash, friends and imagination, and facing a China with severe energy shortages—now the context is dramatically changed. China now has surplus energy, and a different interlocutor in the form of a Myanmar government with democratic legitimacy in large part, and many other options. For Myanmar, the costs of Myitsone, the environmental damage, the displacement of people, the sheer affront of the project to what the country now seeks to stand for, must surely render it redundant.

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