Myanmar walks a fine line between the US and China
posted by Xi Sun on October 3, 2016 - 9:10pm
YAP KWONG WENG AND SUN XI
Last month, American President Barack Obama pledged to lift all sanctions against Myanmar during its leader Aung San Suu Kyi’s visit to the United States. Such an apparent thawing of ties between the two nations must be of some concern for Myanmar’s long-time ally, China.
Since the 1990s, China has stood firmly with Myanmar, even when its former military-run regime was isolated by the international community.
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China helped Myanmar build hydropower plants, oil pipelines and key bridges. Their relationship was known to be so close that it is often described as “baobo” (brothers and relatives).
Today, China remains Myanmar’s largest foreign investor, far ahead of countries in the Association of South-east Asian Nations (Asean).
Bilateral ties, however, have weakened in recent years — starting from 2011, when then-President Thein Sein suspended the controversial Myitsone dam project. The halting of a joint Myanmar-China project to develop the Letpadaung copper mine dealt another blow to ties.
Today, border skirmishes and disagreements over the ethnic Chinese border peoples in Kokang, a small region beside China’s Yunnan province, continue to cast a shadow over the two countries’ relationship.
Just last month, Ms Suu Kyi deliberately picked China for her first official visit outside South-east Asia since taking office as State Counsellor. The visit was believed to be aimed at repairing ties, and appeared to work quite well.
China’s show of support for the recent peace talks between the Myanmar government and its ethnic groups was also an encouraging move, even though the talks ended without any breakthrough.
It takes two to rebuild a relationship. China understands that Myanmar (then Burma) was the first non-Communist country to recognise the People’s Republic of China’s founding in 1949. Now, China needs Myanmar to support its strategic development, especially the Bangladesh–China–India–Myanmar Economic Corridor and the ambitious “One Belt, One Road” initiative.
SPLITTING THE PIE
Both China and the US have expressed a desire to work more closely with Myanmar, given its great market potential and rising role in this region.
It is an interesting situation to be courted, and Myanmar seems to be playing a balancing game between the two superpowers. China, though, is in a better position than the US.
First, Chinese companies, along with others in the region, have already made significant investments in Myanmar, committing billions of dollars into developing the Special Economic Zones (SEZs) of Thilawa, Dawei and Kyauk Phyu. Supported by foreign investment, these SEZs are land areas strategically located in Myanmar to develop key infrastructure such as ports, factories, and power and petrochemical plants, among others.
According to Myanmar’s Directorate of Investment and Company Administration, from November 2014 to July 2016, Japan invested US$258 million (S$351 million) in 25 enterprises in the Thilawa SEZ, second only to Singapore’s US$372 million in 18 enterprises.
Likewise, Thailand — Myanmar’s second-largest trading partner, after China — recently reaffirmed its commitment to develop the mega-logistics project in Dawei despite several delays.
The multibillion-dollar Kyauk Phyu residential and deep sea port project was awarded mainly to Chinese conglomerates by Myanmar’s former government after a tender process, but it is unclear if the project will go ahead under the new regime.
Up till now, American investment in Myanmar has been limited because of sanctions, although there are growing US business interests.
For example, US conglomerate General Electric entered in 2012 and has forged commercial relationships in the healthcare, aviation and power sectors through the provision of equipment, partnership and training.
In the near future, Myanmar businesses expect other US investors to come with strings attached on human rights and transparency because this is perceived to be a standard American commercial practice.
The sectors where US companies may have an edge over the Chinese are the development of small and medium enterprises (SMEs), and international aid programmes contributing to democratic reform. China, on the other hand, focuses on large infrastructure projects in Myanmar and already has an investment headstart over the US.
One possible way to stay ahead is to extend loans from China’s Asian Infrastructure Investment Bank to Myanmar for infrastructure projects.
Banks in Myanmar are still not able to provide full trade-financing, making it difficult for SMEs to scale up and for local firms to expand their portfolio.
For Myanmar, it is good to see two giants competing for its attention. However, playing the balancing game is a double-edged sword. It will be interesting to see if Myanmar’s new leadership can quickly master the skill of maximising its own benefits without alienating either suitor.