West ‘Cannot Afford’ Major Economic Aid to Burma, says China Commentary

By William Boot 17 December 2013

A Chinese government-run newspaper has argued that Western nations cannot afford the cost of reviving the Burmese economy.

A hard-hitting commentary in the Chinese Communist Party-controlled Global Times suggested that Washington “will try to foment discord between China and [Burma]” to damage Chinese business relations with Naypyidaw.

“However, [Burma] is unlikely to totally throw itself into the arms of the US. Mired in financial crisis, Western countries cannot afford to provide considerable economic assistance to [Burma],” said the commentary. “US and European enterprises are reluctant to invest in a land where the investment environment is not good and the political situation is not stable.”

But in criticizing Washington’s engagement in the new sanction-free Burma, the commentary appears to ignore Japan—a country that is making much bigger investments in Burma than Western countries.

And while China bids to invest in extractive industries such as gas and copper, as well as hydropower, for its own benefit, Japan is helping to rebuild Burma’s crumbling industrial infrastructure.

In recent days, Tokyo has pledged additional loans of US$580 million to Burma for that purpose.

“The fresh pledge will push total economic aid promised under [Prime Minister Shinzo Abe’s] administration above 150 billion yen (US$1.45 billion),” Japan’s Kyodo news agency said.

Japan’s objectives are not entirely philanthropic though. Major Japanese conglomerates such as Mitsubishi and Sumitomo have said they cannot make large business commitments in Burma until its basic infrastructure, most importantly electricity supply, is improved.

“Abe is also expected to pledge assistance in public health, agriculture and other areas to boost the living standards of ethnic minorities living near Burma’s border with China and other regions,” Kyodo said.

The agency quoted unnamed Tokyo government officials saying Japan’s aid is “an attempt to counterbalance China’s influence in Burma, as well as to support Japanese companies as they move into the country.”

China’s influence in northern Burma bordering the Chinese province of Yunnan is already very strong, said the East Asia Forum, an analysis group based at the Australian National University.

“Much of China’s growing trade with [Burma] and Laos occurs through cooperation across international boundaries. The role of Yunnan and its capital city of Kunming in China-GMS [Greater Mekong Sub-region] trade cannot be understated,” said a Forum study.

“Yunnan’s GDP skyrocketed from US$33 billion in 2000 to US$160 billion in 2012, and the province aims to double that to US$320 billion by 2017 through even stronger cross-border economic and trade ties. Kunming acts as the origin and core of economic activities that reach into the bordering countries of Laos, Myanmar, Vietnam, and beyond.”

The inroads China has already made in Burma’s border region will be a challenge for Japan or any other country to counter.

The Chinese not only dominate trade in this region, they have begun to migrate into it too, said the Forum report.

“The border towns of Muse and Namhkam have done well by importing Chinese goods such as garments and consumer electronics, which occupy as much as 80-90% of the local markets in northern [Burma],” Forum said.

“In Lashio, a remote but important market town 195 kilometres from Mandalay in northern Shan State, many trucks loaded with Chinese consumer goods rolled through the town and onto the booming city of Mandalay. The population of Lashio is about 50% Chinese, while Mandalay, the seat of Myanmar’s culture, is one-fifth Yunnanese Chinese. This Chinese ‘on the ground’ influence helps pave the way for China’s new ambitious outlook for accessing the Indian Ocean over the Lashio–Mandalay land route,” it said.

And despite China’s apparent worry that the US seeks to contain Beijing’s economic influence, the Naypyidaw government has appealed to the Chinese to press ahead with proposals for a commercial railway route from Yunnan to the Burmese coast at the new Chinese-run oil transhipment terminal at Kyaukphyu.

“I would like to urge Chinese business people to take investing in Kyaukphyu SEZ [special economic zone] into serious account,” the director-general of the government’s Directorate of Investment and Company Administration, Aung Naing Oo, reportedly told a trade conference in the border town of Ruili last week.

The key to creating an SEZ around Kyaukphyu is a new railway running from Yunnan to the port, which is already the terminal for the controversial Chinese oil and gas pipelines just completed through Burma and connecting to Yunnan.

The 800-kilometer railway would cost $20 billion and take five years to build, said the Forum.

“Once completed, the railroad will allow electric trains to travel at speeds of up to 200 kilometers per hour and carry 4,000 tons of goods,” the Forum study said. “Strategically, this railroad will carry China’s imports and exports to and from the port of Kyaukphyu on the Indian Ocean via Ruili and Kunming, obviating the need for ships to sail through the narrow Malacca Strait [via Singapore].”

There seems little competition to China from potential foreign investors—least of all American—to develop a Kyaukphyu SEZ. The Japanese are focusing on the Thilawa SEZ in the outskirts of Rangoon.

As the Global Times report says, Burma is now dependent on China to a certain degree: “The region north of Mandalay has forged close trade links with China, so it is necessary for [Burma] to involve China in its modernization drive.”