Study Warns of Public Backlash to China's BRI Projects

By Nan Lwin 22 June 2018

YANGON — New research warns that China’s Belt and Road Initiative and the China-Myanmar Economic Corridor could face stiff public resistance in Myanmar if the projects fail to engage local communities, as other Chinese-backed projects have in the past.

“There is an explicit bias against Chinese investments in Myanmar,” the researchers says, going on to warn both governments of “the potential local resistance they may face if their investment strategies do not consider the local context carefully.”

The policy brief, “Public perception of Chinese investment in Myanmar and its political consequences,” released Monday, is the work of the International Growth Center, an academic policy research organization supported by UK Aid, Oxford University and the London School of Economics and Political Science.

It concludes that the public in Myanmar has a strong general bias against foreign investment in the natural resource sector, but calibrated to its perceived impressions of the investor’s country of origin.

Their survey found that respondents had a better opinion of firms from Japan than China, even when they failed to directly engage with local communities and collaborated with companies linked to Myanmar’s military.

Myanmar nationals in Malaysia protest against the Myitsone dam project outside the Myanmar Embassy in Kuala Lumpur on Sept. 22, 2011. / Reuters

“Chinese investors should be wary of existing negative attitudes,” they said, “but can improve their image by carefully selecting their local partners and engaging directly and actively with the affected communities.”

Launched in 2013, the Belt and Road initiative, also dubbed the 21st century Maritime Silk Road, is Chinese President Xi Jinping’s signature foreign policy project. Its aim is to build and improve trade and investment routes connecting China to Europe through central Asia, the Middle East and Russia.

Situated between Southeast Asia and the Indian subcontinent, and between the Indian Ocean and China’s landlocked southwest, Myanmar is often seen as a key piece in the Belt and Road Initiative puzzle. Many also see Myanmar as a safer route to the Indian Ocean for China than it’s other best option, Pakistan.

Earlier this year, Myanmar signed a memorandum of understanding with China to collaborate on the Economic Corridor project. The corridor would start out in China’s Yunnan Province and pass through Mandalay in central Myanmar, from where one branch would head south to Yangon and another west to the Kyaukphyu Special Economic Zone in Rakhine State.

Anti-China sentiment in Myanmar had hardened over six decades of rule by a military junta that counted Beijing among its few international allies and turned to China for much of the hardware it used to suppress dissent, grab people’s land and exploit the country’s natural resources.

Protesters march in Yangon in December 2012 against the government’s crackdown on a sit-in at a Chinese-run copper mine in Sagaing Region. / The Irrawaddy

That sentiment started to find a voice in 2011, when a new quasi-civilian government began a democratic reform process that freed up some space for a civil society. Myanmar soon became a more difficult place for Chinese firms — which regularly failed to engage with local communities — to do business.

Under pressure from widespread public opposition, Myanmar suspended the $3.6 billion Myitsone dam project in 2011. Located below the confluence of the May Kha and Mali Kha rivers, the main tributaries of Myanmar’s most important waterway, the Irrawaddy, the dam would submerge important historic and cultural sites and was projected to cause irreversible damage to the country’s river system and to downstream farming communities.

The Letpadaung copper mine has become another flashpoint of public resentment of China. Operated by China’s Wanbao Mining company, the site has been the scene of alleged forced evictions, land grabs and violently suppressed protests.

The conflict gained national prominence in 2012 when police attempted to disperse protesting villagers and monks with smoke bombs, burning several people in the process and sparking a wave of public outrage. The project remains controversial as displaced locals continue to demand their land back.

Another Chinese-backed project, under the Belt and Road Initiative, is the Sino-Myanmar oil and gas pipeline, which lets the world’s second-largest oil consumer bypass the busy Malacca Strait for its supplies.

Contracted during military rule and started in 2015, it can move 22 million tons of crude across the country, from the Rakhine coast to China. The pipeline also forced families off their land and sparked protests over safety and environmental concerns.

Local residents’ houses are seen in front of the buildings of a Chinese oil pipeline project (pink roof) on Madae Island, Kyaukpyu Township, Rakhine State, on Oct. 7, 2015. / Reuters

The Kyaukphyu Special Economic Zone, an important port project for China’s regional ambitions, has of late raised debt concerns as well.

Under the shareholder agreement struck in 2015 with the administration of then-President Thein Sein, China received an 85 percent stake in the project and Myanmar the rest. Since taking power in 2016, the National League for Democracy (NLD) has been in negotiations with China to raise its share. Public opinion in Myanmar is wary of the added debt the project will require the country to take on.

“The Belt and Road Initiative is not some kind of massive aid project to developing nations. Most of it consist of loans, which many of those countries cannot afford to pay back,” said Bertil Lintner, a longtime Myanmar observer.

“China would then offer a debt-for-equity swap whereby China assumes control of important infrastructural projects in other countries. The Hambantota port project in Sri Lanka is a typical example of this, and Kyaukphyu may be next,” he said.

The International Growth Center study said Chinese companies should consider a public engagement approach when investing in natural resource projects that might have strategic components and may trigger opposition. It singled out some parts of the country with large ethnic minority populations, such as Kachin and Rakhine states, that are abundant in natural resources but engaged in long-running conflicts with the central government.

“The China-Myanmar Economic Corridor project exists in the conflict areas, in Shan and Kachin state. China needs to consider that the project might provoke more conflict in the ethnic areas,” said Khin Khin Kyaw Kyee, a lead researcher at the Institute for Strategy and Policy-Myanmar.

“Usually the effects of development projects are more negative than positive in sensitive conflict areas,” she said.

Since the latest outbreak of violence in Rakhine State in August, some observers see Myanmar once again leaning toward China as Western governments and rights groups put pressure on the military over its alleged abuses. The International Growth Center’s policy brief warns that the shift could have economic consequences.

“Attracting FDI [foreign direct investment] remains a crucial strategy and urgent agenda for the NLD government to move the country towards a path of sustainable development and poverty alleviation,” it said.

It added that the memorandum the government signed with China over the economic corridor earlier this year suggests China will continue to play an important role in Myanmar in the near future.

Lintner said that could cause old resentments to return.

“I would not be surprised if China’s very aggressive foreign policy would cause anti-Chinese sentiment in Myanmar to rise again,” he said.