Categorized | Asia, Economics

China’s Foreign Investments: the Dilemmas of Myanmar’s Myitsone Project

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Here in Britain, the ongoing sagas of the EU referendum result and the planned Hinkley Point nuclear development have cast some light on a typically opaque area of public policy; the negotiation of international economic cooperation and investment. Over five thousand miles away, Myanmar is grappling with similar issues. How does a country balance the need for foreign trade with a commitment to the welfare of its people? The Myitsone Dam project has drawn these tensions to the fore. It poses a challenge for the fledgling National League for Democracy (NLD) government.

The project dates back to 2005, when the China Power Investment Corporation (CPIC) and Asia World Company of Burma began to consider constructing a series of large-scale hydroelectric dams along the Irrawaddy river and its tributaries. The target completion date was set for 2018. However, criticism of the plan was widespread: it would flood a biodiverse and ecologically distinct area, vast amounts of the energy generated would be exported to China, the construction would take place in a region destabilised by armed Kachin fighters, and the Irrawaddy river holds a specific spiritual importance as the supposed birthplace of the nation. Then, despite his government’s reputation for crony capitalism and suppressing dissent, Thein Sein acquiesced and suspended the project in 2011.

So the NLD have inherited a tricky situation. China, heavily invested in Myitsone and other industrial developments, is on a charm offensive. Journalists, politicians and students have been invited to visit China in the hundreds to promote the countries’ relationship. And although Wang Yi, the Chinese Foreign Minister, recently claimed that the future of the Myitsone project will not damage state relations, it is hard not to be sceptical. If the protestors are right that as much as 90% of the energy to be produced by Myitsone was destined for China, then surely the Chinese have a strong incentive for recommencing work on the dams. The current ongoing hiatus amounts to a de facto cancellation.

At this stage though, the cost to the NLD of the project’s resumption would be even greater than the social and environmental degradation of Kachin State. Most commentators assume that any steps to restart or renegotiate the dams construction would be political suicide, such is the public anger at the project. Indeed, The Mirror, a state-run newspaper, has recently argued in favour of officially cancelling the Myitsone development. Their analysis that the continuing suspension of work is likely to frustrate CPIC seems persuasive. Whether or not the NLD should therefore look to considering CPIC-backed hydroelectric projects in other, less sensitive regions is harder to tell. China has played an outsized role in the Myanmar economy, partly because of the restrictive effects of western sanctions. Now that those sanctions are beginning to be lifted, the case can be made for other states to invest and collaborate in Myanmar’s economic future.

There is no doubt that the people of Myanmar need access to energy. The Myitsone dams, which may not have even been intended for the Myanmar market, were never going to adequately address that issue. Cancellation is the best option. Going forward, the NLD stands to benefit from offering construction contracts for hydroelectric stations, and other power sources, to a variety of international bidders. Their ventures should be assessed ecologically as well as financially, perhaps along the guidelines for sustainability assessments provided by the World Bank or the OECD.

All of this comes in light of the government’s announcement of its economic policy on July 29th. The announcement was more of a statement of intent than a set of policy proposals; one way of signalling commitment to the stated ideals of supporting competition, improving infrastructure, and welcoming foreign investment would be to act quickly and decisively on the Myitsone case. There is reason to hope that the NLD may do so. They have demonstrated verve in their decision to reform the licensing of the jade trade, winning praise from NGOs and civil society groups. In freezing the renewal of mining permits until the relevant regulations have been properly reviewed, the government has begun to challenge the major stakeholders in this extractive industry.

Myanmar is one of the poorer countries in the world and decades of authoritarian rule and international isolation have not helped. However, as gargantuan as the task of economic reform may be, there are signs that the governing NLD party and the international community are taking the right first steps. For instance, Kanbawza Bank has become the first Myanmar bank to expand abroad, in order to serve those living in Thailand. British law firm Allen & Overy have been training the government on privatisation, in light of the NLD’s desire to reform state-owned enterprise. If these examples reveal anything, it is that the appetite for a dynamic, outward-looking economy exists. Cancelling the Myitsone project would be another break with the country’s unfortunate economic past, and would enable a clear-sighted and competitive approach to Myanmar’s energy needs.

Image: Flickr

Arnot Birss

About Arnot Birss

Arnot Birss is a third year English Literature student at the University of St Andrews, focusing on 20th century writing. He has contributed to several current affairs publications. His interests lie in the promotion of institutional transparency and the South East Asia region.

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