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HomeAnalysisBurma's new assertiveness is not an economic game-changer

Burma’s new assertiveness is not an economic game-changer

The suspension of the Myitsone dam project could signal a shift in how business is done in Burma in the future. The greater awareness of development projects of national importance by both the parliament and the public calls into question whether the backroom deals between foreign investors and military cronies will continue to be tolerated.

President Thein Sein announced that construction on the Myitsone hydropower dam would be suspended for the term of his presidency on 30 September. The announcement came as a shock to the state-owned China Power Investment Corporation (CPI), which soon after threatened a series of legal issues. Beijing followed up by calling for respect for the rights of Chinese companies and “friendly talks” to discuss the issue.

The $US3.6 billion project had been agreed to in 2005 during the previous military junta of Senior General Than Shwe. Following the 2010 elections a growing grassroots campaign in Kachin state to stop the project out of environmental and social concerns gathered speed. It began to be discussed on a national level by intellectuals, artists, parliamentarians and opposition figures including Aung San Suu Kyi. The dam became a symbol of China’s growing economic and financial influence in Burma. The project was described as having little benefit for Burma, but 90 percent of the electricity was earmarked for China. Many were aware that the deal was done with hardliners in the military junta, some of whom are members of the current government.

Numerous hypotheses have been extended to explain Thein Sein’s actions. They range from a newfound responsiveness to the “will of the people”, to a power struggle between reformers and hardliners in the government. Others see it as a move to appease the US and Europe, while some claim it is an attempt to stave off a destabilising split in the military leadership over growing Chinese economic and financial influence.

Thein Sein may or may not have had the concerns of the people at heart when he made his decision, and it may have been part of a power struggle between reformers and hardliners, but he certainly could not ignore the scrutiny being placed on a project of national importance by members of both the public and military. It was apparent that certain generals and businessmen – and certainly China– were going to make a healthy profit on the deal at the expense of the country.

The new democratic system in Burma and calls for reform by Thein Sein and others in the government have played into feelings of nationalism on the part of the public and certain members of the parliament – and most importantly – elements of the military. At least on this point some senior officers, former members of the military junta and the average Burmese citizen found common ground.

What this may mean for future foreign investment in Burma is that projects will be under much more scrutiny. Investors may no longer be able to secure a deal by meeting with a well-connected businessman, gaining an audience with a general, and providing a few ‘presents’. In the future they will have to take into account the mood of the public, and certainly more importantly, the nationalist frame of reference of the military. Already some members of parliament have called for parliamentary oversight of projects that potentially affect national interests.

Chinese companies, in particular, may have to take on a much lower profile to avoid fueling popular anger over Chinese commercial dominance and ownership of local land. Chinese companies are involved in some of the highest profile investment projects, including the Kyaukphyu deep-sea port project and a 790-kilometre dual oil and gas pipeline that will run the length of the country to China’s southwestern Yunnan province.

Documentation from human rights and civil society groups alleges widespread confiscation of land and forced relocation of villages. Additionally, the projects are being built with substantial Chinese labour with most of the direct benefit going to China. Payments received for the projects go directly to the government with little apparent benefit for the local populations near the projects.

It remains to be seen, however, whether the intersection of public and military interests and nationalist sentiment will result in a public debate on these projects as well. There is unlikely to be a large-scale review of Chinese investment projects in the country, nor a pullout by Chinese companies.

China remains Burma’s preeminent patron in terms of foreign direct investment and aid. Beijing also continues to act as a buffer from foreign criticism in international forums, particularly at the UN Security Council. China, likewise, needs Burma for its strategic geographical location as a link to the Indian Ocean, as a provider of natural resources, and a source of energy in terms of electricity and oil and gas. Most analysts agree that neither side can make moves that would truly jeopardise their close, if wary, relationship.

In the immediate aftermath of the suspension, Thein Sein made it clear that talks would continue between Naypyidaw and Beijing to bolster their strong bilateral relations. Burmese Foreign Minster U Wunna Maung Lwin was dispatched to Beijing on 10 October where he held talks with Chinese Vice-President Xi Jinping and Foreign Minister Yang Jiechi. It is presumed that the dam project was the main topic of discussion.

China became Burma’s largest foreign investor last this year. Burmese-language magazine, Weekly Eleven, wrote in September that over $US3 billion in investments was made by China between November 2010 and January 2011. Chinese official statistics indicate China’s investment reached $US12.3 billion in 2010 with bilateral trade amounting to $US5.3 billion during the fiscal year 2010-2011.

Chinese state-owned and private companies are heavily invested in hydropower, natural resources extraction, commercial agriculture and infrastructure development. During a visit by Thein Sein to Beijing in May, 36 agreements and Memorandums of Understanding (MoUs) were signed, including $US4.2 billion worth of interest-free loans to help fund hydropower projects, road and railway development, and information technology development over a 30-year period.

For once the public and elements of the military found themselves in agreement on an issue. This, however, is unlikely to be the norm. Large-scale development projects may come in for more scrutiny and less scrupulous generals, their cronies and Chinese business partners may have to be more circumspect about how they do business, but, at least for the time being, Naypyidaw has few other options than to rely on China.

 

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