In Myanmar, China’s BRI Projects Are Old Wine in a New Bottle

By Nan Lwin 8 November 2019

YANGON—China is rebranding and repackaging dormant or delayed projects in Myanmar under the banner of its Belt and Road Initiative, many of whose projects lack transparency and consultation with affected communities, according to the latest policy brief by a Netherlands-based research and advocacy institute.

Stephanie Olinga-Shannon, a planning and evaluation coordinator for the Transitional Institute (TNI) who also researches Chinese foreign policy for the organization, said, “Rather than a ‘grand strategy’, the BRI is a broad and loosely governed framework of activities seeking to address a crisis in Chinese capitalism.”

“Almost any activities, implemented by any actor in any place can be included under the BRI framework and branded as a BRI project in Myanmar,” Olinga-Shannon said.

The BRI allows Chinese state-owned enterprises (SOEs) and provincial governments to promote their own projects to pursue profit and economic growth, she added.

Myanmar occupies a unique geographical position in the global BRI plan, lying at the junction of South Asia and Southeast Asia, and between the Indian Ocean and southwestern China’s landlocked Yunnan province.

Myanmar became an official member of Chinese President Xi Jinping’s ambitious infrastructure plan across the region in September last year after signing a memorandum of understanding (MOU) establishing the China-Myanmar Economic Corridor (CMEC)—which is set to be part of the BRI.

A TNI policy briefing said, “CMEC has helped Chinese state-owned enterprises and the Yunnan provincial government revive dormant or delayed projects in Myanmar.”

Those projects have faced the same challenges and criticism as previous Chinese investments in Myanmar, and progress has been slow, TNI said.

On Thursday, TNI launched a briefing paper in Yangon, “Selling the Silk Road Spirit: China’s Belt and Road Initiative in Myanmar.”

The research institute examined four case studies of BRI activities in Myanmar: the China-Myanmar High Speed Railway; the interconnection of the Myanmar and Chinese national electricity grids; special economic zones and industrial zones; and the Sino-Myanmar Land and Water Transportation Passage are long-standing activities that predate the BRI with support from the Myanmar side varying over time.

Myanmar State Counselor Daw Aung San Suu Kyi and Chinese Premier Li Keqiang witness an MOU signing ceremony in Beijing on April 25, 2019. / Ministry of Foreign Affairs of Myanmar / Facebook

The BRI is Xi’s signature foreign policy project. Unveiled in 2013, it is also known as the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. The project aims to build a network of roads, railroads and shipping lanes linking at least 70 countries from China to Europe passing through Central Asia, the Middle East and Russia, fostering trade and investment.

The proposal to build the CMEC was announced by Chinese Foreign Minister Wang Yi following a meeting with State Counselor Daw Aung San Suu Kyi in November 2017. Wang said the economic corridor would enhance investment in development and trade as part of the BRI.

The estimated 1,700-kilometer-long corridor will connect Kunming, the capital of China’s Yunnan province, to Myanmar’s major economic checkpoints—first to Mandalay in central Myanmar, and then east to Yangon and west to the Kyaukphyu Special Economic Zone (SEZ) in Rakhine State.

Under the MOU for CMEC, the governments agree to collaborate on projects in a number of sectors including basic infrastructure, construction, manufacturing, agriculture, transport, finance, human resources development, telecommunications and research and technology.

China has been pushing the Myanmar government to work out an implementation plan for CMEC. Since Myanmar signed the MOU, statements from the Chinese Embassy in Myanmar have shown that all the activities of Chinese officials have been directed towards promoting the BRI in Myanmar.

In June, China’s new ambassador to Myanmar told President U Win Myint that he would push for deeper “practical cooperation” on the CMEC in the country during his credentials-presentation ceremony in Naypyitaw.

Myanmar signed a cooperation plan on the CMEC for 2019-2030 with China at the 2nd Belt and Road forum in Beijing, which was attended by Daw Aung San Suu Kyi.

According to the Myanmar government, China has proposed a total of 38 projects under the CMEC. However, Myanmar only approved nine early harvest projects at the second BRI forum in Beijing in April. So far Myanmar has only publicized three projects; the construction of three economic cooperation zones in Kachin and Shan states; the Kyaukphyu SEZ; and the Muse-Mandalay railway project.

Nothing new

However, the key projects are nothing new; rather, they are projects that were delayed or suspended in the past due to unfair agreements or public opposition.

TNI said the Kyaukphyu SEZ and railway and other SEZs that have been branded as BRI activities in Myanmar are driven by Chinese SOEs and the Yunnan government with support from the Chinese Embassy and other central Chinese government institutions.

One month after signing the CMEC MOU, Myanmar and China signed another to begin studying a proposed railway line from Shan State’s Muse to Mandalay, both of which are envisioned as key hubs in a plan to improve connectivity in Southeast Asia as part of the China-Myanmar High Speed Railway.

However, the proposed railway link is not a new plan under the CMEC. In 2011, Beijing and Naypyitaw signed an MOU to build a railway between Muse and Kyaukphyu—also known as the China-Myanmar High Speed Railway. According to Chinese media reports, China Railway Group was to be in charge of building the rail line from Ruili in southwestern Yunnan Province to Kyaukphyu via Muse.

The entire rail line was to run 810 kilometers. Under the terms of the MOU, the project was to have been completed at a total estimated cost of US$20 billion (30.49 trillion kyats) in less than three years. However, the government of then-President U Thein Sein suspended the project following strong local objections. In 2014, the agreement expired and the railway project remains in limbo.

Later, China approached the government of Daw Aung San Suu Kyi, asking it to consider building a railway from Muse to Mandalay as the initial part of China’s strategic railway link from Ruili to Kyaukphyu. China Railway Group proposed a feasibility study for the line from Muse to Mandalay in May 2017, according to the Myanmar Transport Ministry.

According to TNI, throughout 2018, as the content of the CMEC was being negotiated, China Railway Group continued to lobby for the project to resume under the CMEC.

Additionally, two months after the MOU for the CMEC was signed, a framework agreement on the development of China’s ambitious Kyaukphyu Special Economic Zone (SEZ) was inked. This key strategic project under the BRI 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.

The Kyaukphyu SEZ will comprise an industrial park and deep seaport project. With 1,000 hectares, the industrial park will be built in three phases. It is expected to include facilities for textiles and garments, construction materials processing, food processing, marine supply and services, pharmaceuticals, electrical and electronic industry, and research.

China’s cooperation on the Kyaukphyu SEZ was in the works years before the initiative was officially announced in Myanmar.

In 2009, Myanmar signed an MOU with China National Petroleum Corp (CNPC) to build a twin oil and gas pipeline linking Maday Island in Kyaukphyu with southern Yunnan province in China. Xi, who was then Chinese vice president, witnessed the signing ceremony.

According to Myanmar state-owned newspapers, the two sides officially agreed to build the Kyaukphyu SEZ during the signing ceremony.

In December 2015, China International Trust and Investment Corporation (CITIC) Group won a tender. However, CITIC struck a shareholder agreement with the previous government just before the 2015 election.

It gave the Chinese developer an 85-percent stake in the project and Myanmar the rest. Critics of the project raised concerns that the deal could land Myanmar in a debt trap with China. After negotiations under the NLD government, China agreed that Myanmar would hold 30 percent of the shares.

TNI warned that the commercial viability of the railway is linked to the commercial viability of the Kyaukphyu port. Key concerns are the viability of the railway, the high debt burden, the process of consultation with affected communities, and the project’s potential to increase militarization in a volatile region.

The railway route passes through conflict areas in northern Shan State.

“BRI activities should not lead to increased militarization to protect foreign investment. Moreover, it should not exacerbate existing conflicts or trigger new ones in those areas, either,” Olinga-Shannon said.

Given these doubts, an independent assessment of the financial viability of the project is necessary, according to TNI, which said an assessment of the impact of the railway on the conflicts and peace process is needed before the project resumes.

TNI pointed out that the China-Kunming-Myanmar Yangon Ayeyarwady River Portage Passage is now being revived under the BRI. Previously known as the Sino-Myanmar Land and Water Transportation Passage, it was abandoned by Myanmar’s military government.

The plan was proposed by the Yunnan provincial government in 1989. The original idea envisioned a land and water transportation passage linking Yunnan to the India Ocean via the Irrawaddy River. The route is expected to involve the transportation of cargo from the Sino-Myanmar border to the northern trade hub of Bhamo, in Kachin State, by road. From there, cargo and passengers could sail down Myanmar’s major waterway to reach Mandalay, Yangon and the Indian Ocean.

The project has not been officially announced by the current Myanmar government. However, The Irrawaddy has learned that a group of China academics visited Bhamo in August to look at possible ways to upgrade the port and land transportation route.

In one of the very first agreements the National League for Democracy (NLD)-led government signed with China, it committed to constructing three border economic cooperation zones in Shan and Kachin as a part of the BRI. The plan to build the zones was agreed by the two countries’ respective commerce ministries during a visit by Daw Aung San Suu Kyi to Beijing to attend the forum on the BRI in 2017.

Before signing the MOU on the CMEC in July 2018, the Ministry of Commerce made a move to expedite construction of the economic cooperation zones.

The zones are in Kanpiketi Town in Kachin State’s Special Region 1 (currently under the control of the New Democratic Army-Kachin militia, a Border Guard Force allied with the Myanmar military; Chinshwehaw in Shan State’s Laukkai Township (part of the Kokang Self-Administered Zone); and Shan State’s Muse Township. Chinshwehaw and Muse are already major trading hubs along Myanmar’s border with China’s Yunnan Province. Kanpiketi currently does regular trade with China as well.

Backed by local Chinese govts

TNI said the governments of China’s Yunnan and two municipalities within the province, Baoshan and Tengchong, have been investing in Myanmar’s SEZs and industrial parks.

Last year, the Baoshan municipal government announced it would invest $390 million in the Myotha Industrial Zone in Mandalay. Moreover, a firm affiliated with the Tengchong government, Tengchong Heng Young Investment Company, announced it would jointly develop the Myitkyina Economic Development Zone.

TNI said those industrial zones are currently promoted as projects under the CMEC, as part of the BRI.

TNI revealed its concern over labor rights violations in Chinese factories associated with those SEZs, as well as land grabbing for industrial zones in Myanmar.

Chinese investment is already a controversial issue with local communities across the country, as it is associated with labor rights violations, land grabbing—in particular a lack of transparency in the process of providing compensation for land—and its harmful impact on both the environment and local livelihoods.

TNI stressed that existing land laws, for instance, do not recognize ethnic customary tenure systems, while many of the natural resource-extraction projects attracting foreign investment are located within ethnic areas.

TNI also said the interlinked industrial zones in the economic corridor would leave Myanmar at the low-value end of the production line.

China is trying to take advantage of Myanmar’s lower labor costs, while the higher-value aspects of the production line and consumption are likely to occur in China, TNI warned.

Under the BRI framework, it said, Chinese energy and construction SOE China Southern Power Grid (CSG) began lobbying the Myanmar and Chinese governments in 2014 to connect the two countries’ electricity girds, to enable the sale of more Chinese electricity to Myanmar.

In May, the Ministry of Electricity and Energy (MOEE) announced it has a plan to buy 1,000 MW of electricity from CSG to meet an expected electricity shortage over the next two years.

Olinga-Shannon said increased purchasing of Chinese electricity could leave Myanmar reliant on China as a source of electricity.

The chances of success for the four projects on which TNI based its case studies are interlinked, the group said, adding that because the transportation projects appear to lack financial viability, all four may result in a high debt burden for the Myanmar government.

China already holds 40 percent of Myanmar’s foreign debt (nearly $4.1 billion), and charges the highest interest rates among all of Myanmar’s international creditors.

Given the very high cost of key infrastructure projects, it is important to assess the debt burden that any BRI project would create, Olinga-Shannon said.

Despite the fact that the Myanmar government signed the CMEC MOU with China last year, the government has not publicized any documents related to the MOU, including a list of the early harvest CMEC projects that were approved during the 2nd Belt and Road Forum.

Olinga-Shannon said the government needs to show greater transparency concerning the planned projects. Until it reveals the details of the planned projects, the initiative will continue to be recognized as lacking in transparency, she said.

TNI pointed out that the current legal and policy framework for regulating FDI in Myanmar is weak, and mostly benefits companies, rather than local communities.

Last year, a policy brief from International Growth Center warned that BRI and CMEC projects could face stiff public resistance in Myanmar if they fail to engage local communities, as other Chinese-backed projects have in the past.

The public consultation process needs to be developed, and it is important that projects deliver genuine benefits to local communities, TNI said.

It urged the government to evaluate BRI projects based on their benefit to the Myanmar people, and not just the Chinese companies and provincial governments driving them. Otherwise, Myanmar people, especially in ethnic areas, will bear the brunt of the negative impacts from the BRI activities, the group said.