Myanmar’s November 8 election is a de facto referendum on Suu Kyi and her NLD’s pro-China policies
by Rory Wallace –Asia Times
Myanmar’s State Counsellor Aung San Suu Kyi waits to meet Chinese Politburo member Yang Jiechi at the Presidential House in Naypyidaw on September 1, 2020. Photo: AFP/Thet Aung/Pool
YANGON – When Myanmar heads to the polls on November 8, voters will be indirectly choosing between more or less engagement with China.
A vote for de facto national leader Aung San Suu Kyi and her ruling National League for Democracy (NLD) promises a continuation of policies that have paved the way for China’s recent unprecedented expansion inside the country.
A vote for many ethnic-based parties, on the other hand, will be de facto support for resistance to China-backed infrastructure and other projects that have either been initiated or supported by Suu Kyi’s central government but strongly resisted at a grassroots level.
That electoral narrative flips the script on previous power relations, where for years Beijing propped military-aligned regimes ostracized and sanctioned by the West for their rights abuses and then-political prisoner Suu Kyi who was known to view dimly China’s supporting role.
Fast forward to the present, Suu Kyi is increasingly dependent on China’s largesse and investment to keep Myanmar’s laggard economy and her political fortunes afloat.
That, critics say, has been most glaring in her position on the China-backed, multi-billion dollar Myitsone dam. She opposed the unpopular mega-project, designed to export 90% of its power to China, on environmental grounds before entering government but has muted her objection and tarried on making a decision while in power.
Suu Kyi’s pro-China position is a reflection of limited choice as Western investors shy from the country largely due to reputational risks associated with the Rohingya refugee crisis the UN and others have tagged as possible “genocide.”
China has happily filled the investment vacuum, expanding into the many “last frontier” markets Suu Kyi had earlier hoped Western investors would enter with investments both to modernize the economy and rebalance the nation’s earlier dependence on China.
While Suu Kyi has couched her approach to certain Chinese infrastructure projects, including a deep seaport project at Kyaukphyu and a high-speed rail project, with caution and delay, business and investment ties with China in less strategically sensitive economic areas are steaming ahead.
So fast that some are now carping that Chinese interests are being given preferential treatment over other foreign investors. In one case, Chinese consortia recently won all but one of the solar projects tendered by Myanmar’s Ministry of Electricity and Energy.
Sungrow, China Machinery Engineering Corp, State Power Investment Corporation and other Chinese firms recently won bids to build 28 solar power plants based on price and not environmental and social criteria, according to bid results released by the ministry and reviewed by Asia Times.
Other winning bids were handed to China Gezhouba Group and Xian Longi Clean Energy Co. The winners were selected from 155 submitted bids, according to a list of bidders leaked last month seen by Asia Times. Eighty-five, representing more than half of the total bids, involved Chinese companies.
In May, Suu Kyi’s energy ministry gave one month for developers to submit bids to construct solar power plants in 30 sites across the country totaling 1GW of power on a 20-year build-operate-own basis.
A row with the business community and Western governments ensued, with foreign chambers in Yangon complaining directly to Energy Minister Win Khaing that the short timeline was “impossible to support.” The ministry extended the deadline by a month, to mid-July, which was still considered unreasonable by potential investors.
Those deals concluded the second and final power tender under the NLD-led administration. The first, entailing five emergency LNG and gas plants for 1GW of power, was equally controversial.
Over a year ago, Suu Kyi’s government awarded four of five projects to VPower Group, a Hong Kong-listed company with close links to China’s state-owned CITIC and train maker CRRC. A consortium led by state firm China Energy Engineering Corp won the fifth contract.
The emergency tender also enforced a one-month hasty application window and gave bidders only 180 days, until March and April this year, to go into commercial operations, among other conditions deemed as unreasonable by many bidders except the Chinese.
Jeremy Mullins, Myanmar director at regional advisory company Vriens and Partners, said Chinese firms have dominated these power initiatives partly because of their price competitiveness.
He pointed to the fact that Chinese companies often have extensive experience in power generation, the ability to mobilize quickly, a willingness to take big risks and strong local partners and presence.
“Myanmar has of late clearly felt comfortable in awarding the recent high-profile power projects to China, and does not seem to have prioritized a geopolitical balance in recent years,” Mullins added.
The rising dominance of corporations from Myanmar’s giant neighbor signals a clear shift from the earlier days of the country’s transition from military dictatorship to quasi-civilian rule under Suu Kyi.
Following then-President Thein Sein’s 2011 decision to suspend development of the Myitsone Dam, a controversial proposed USS$3.8 billion hydroelectric power project bankrolled by China, Naypyidaw actively sought to diversify away from big-ticket Chinese development projects.
But those days are over and the NLD’s China-favoring energy ministry is not alone in extending Beijing perceived as favorable treatment.
Yangon’s chief minister and NLD member Phyo Min Thein imported 2,000 buses from China without a tender and appointed state builder China Communications Construction Company (CCCC), the pre-ordained developer for a proposed megacity in western Yangon covering a landmass twice the size of Singapore.
The solar farm bid outcome was announced a week after Beijing’s top diplomat, Yang Jiechi, visited Naypyidaw to seek assurances from Suu Kyi and Myanmar’s figurehead president Win Myint on a raft of projects under the China-Myanmar Economic Corridor (CMEC), significantly amid the country’s Covid-19 outbreak.
Yang’s intervention followed a short but historic visit in January by President Xi Jinping, the first Chinese leader to visit the Southeast Asian neighbor in almost two decades. Xi’s visit marked the 70th anniversary of Sino-Myanmar diplomatic relations but failed to translate into actual contracts.
An International Crisis Group report in March anticipates no acceleration of the CMEC in this election year due to uneasiness and a lack of capacity within the government, as well as political sensitivities around Chinese investment.
Still, China remains the biggest cumulative source of approved foreign direct investment (FDI) in Myanmar over the past decade. China placed third in FDI contracts in the year ending September 30, trailing Hong Kong and Singapore, according to government statistics that disaggregate Hong Kong from the mainland.
Yet a big chunk of Chinese investment entered via Hong Kong, including VPower, which channeled up to $700 million of FDI approvals earlier this year.
The Bank of China, having secured a Myanmar license for wholesale activities this year, used its Hong Kong subsidiary to establish the Myanmar business. In 2019, PetroChina used its Singapore unit Singapore Petroleum Co to build Myanmar’s first foreign fuel station.
In a rare trip to Europe last June, Suu Kyi met Hungary’s autocrat ruler Viktor Orban, lamenting their “continuously growing Muslim populations” in a joint statement. Those words were met with disbelief among European executives wrapping up around the same time an annual Europe-Myanmar economic forum in Naypyidaw.
It is no coincidence that the two leaders were shunned by Western Europe and have endorsed – at least on paper –Beijing’s flagship Belt and Road Initiative foreign policy, commented Filip Lauwerysen, a Dutch trade official in China in the 2010s before setting up and heading the European Chamber of Commerce in Yangon in 2015 until last year.
“Thein Sein’s administration was clear in its desire to steer away from China’s orbit and stop relying on Chinese money. After a combination of political crises and slow pace of economic reform, ‘China Inc’ appears to have made a comeback – in Yangon you see Chinese-owned Volvo cars with big red stickers ‘China Aid’, public buses imported from China, construction sites of Chinese developers,” he told Asia Times.
Lauwerysen sees similarities between Suu Kyi and Orban, who was also repudiated by much of Europe for his government’s nationalist tendencies and cemented ties with Beijing to shore up the economy.
Beijing is a key player in Myanmar’s fractured peace talks and its staunch supporter in the United Nations, where the Tatmadaw has been accused of genocide against the Rohingya Muslims.
Shortly after the height of the August 2017 clearance operations against the Rohingya, Hong Kong leader Carrie Lam arrived in Myanmar to meet Suu Kyi and promote economic ties along the Belt and Road Initiative (BRI), the first-ever visit by a leader of the Chinese-ruled business hub.
Chinese money has always been present in modern Myanmar but the massive inflow of private investments into the formal economy is somewhat new.
At the start of the millennium, Chinese businesses were largely either informal trading outfits along the long porous border, investors in mining and real estate or government-to-government contracts. The mid-2000s were dominated by Myitsone and twin oil and gas pipelines linking the western Myanmar state of Rakhine to the southern Chinese province of Yunnan.
“Myanmar was dependent on Chinese investment ten years ago because Western investors avoided it. Now there is a diversity of choices, but China’s competitive offers – often state-subsidized – and willingness for geostrategic reasons to take risks that other investors would not take on still leaves it in top position,” said Vicky Bowman, who held a diplomatic post in the country from 1990-93 and was subsequently British ambassador to Myanmar from 2002-6.
The public backlash against Chinese megaprojects such as Myitsone and the Letpadaung copper mine, as well as the introduction since 2012 of new laws on environmental and social impacts, have led some firms to employ more experienced environmental consultants.
Hatch, of Canada, was hired as project manager for the Kyaukphyu special economic zone (SEZ) and SMEC of Australia for the Mongton dam in Shan State.
Bowman highlighted that SMEC’s advice to state-owned power company China Three Gorges that the project’s environmental and social impacts were too great to mitigate, which aligned with similar guidance from the World Bank affiliated International Finance Corporation (IFC) to Myanmar, contributed to the dam’s suspension.
“If the Myanmar authorities identify any social and environmental risks through effective planning and guidance to investors at an early stage, there will be fewer surprises and less backlash later,” said Bowman, who now heads the independent Myanmar Centre for Responsible Business.
She fears that, when faced with Chinese investors, some government officials “preemptively cringe” because they fear that there are higher-up geopolitical forces at play, and don’t want to push back against poor projects or wayward corporate behavior.
Chinese investors, most notoriously those behind the Shwe Kokko economic zone now under construction near the casino town of Myawaddy adjacent to the Thai border, have in the past adorned themselves with BRI or CMEC labels in the hope of being considered part of the Belt and Road bandwagon, say analysts and diplomats.
Its developer – overseas Chinese-run Yatai International Holding Group – pitched the project as a $15 billion, 180,000-acre SEZ that represents “a new chapter for the Belt and Road Initiative.” A slew of media and NGO investigations, accompanied by criticism in a US Senate Report this year, led Myanmar’s Chinese ambassador to state publicly that the project had nothing to do with the BRI.
“We’re all waiting to see whether the Chinese companies that swept up 28 out of 30 projects in the recent solar tender try the ‘Belt and Road’ gambit when they run into difficulties with the regulator,” Bowman said. “If they or the Chinese government do, it’s worth remembering that the Energy Ministry tender was not designed as part of CMEC, and was not intended to lead to a Chinese monopoly.”
The 2016 Investment Law gives the Pyidaungsu Hluttaw, the national legislature, a role in scrutinizing and approving megaprojects with significant environmental and national concerns. This clause should, in theory, cover Kyaukphyu, Myitsone and megaprojects in the CMEC, but it has not been used.
The NLD-led administration has instead tended to deal with individual projects on a government-to-government basis. It negotiated down the take ratio from 80% Chinese-20% local to 70-30% and cut the price tag of the Kyaukpyu port project to $1.3 billion from an original $7.5 billion.
Recently, Suu Kyi’s team also moved to split up the tender process of the Yangon new city proposal. Separating the projects makes it less difficult for companies to challenge CCCC because they can now bid for individual projects, such as the construction of an industrial park, instead of taking on an entire vast megaproject.
“By unbundling the ‘new city’ and hiring Roland Berger to oversee the tender, the government is keen to show that they are dealing with big Chinese projects with caution,” commented Khin Khin Kyaw Kyee, a lead researcher at Yangon-based Institute for Strategy and Policy.
The move is in part due to domestic politics, given that Yangon head Phyo Min Thein – the patron of the ambitious urban project – is not seeking reelection beyond his current term, she added.
Sebastian Strangio, an Australian expert on Southeast Asia and author of “In the Dragon’s Shadow”, expects Naypyidaw’s “pattern of caution and renegotiation” to continue post-election.
Despite the fallout between ex-Nobel Peace Prize laureate Suu Kyi and Western democratic governments, he said there remains deep suspicion within the military and the upper echelons of power regarding Chinese projects.
The desire of Chinese officials to connect Yunnan to the Bay of Bengal via Rakhine predates BRI, Strangio added. This geographical importance means that even if China’s economy experiences a hit because of the pandemic and Chinese investments abroad are scaled back, Beijing would still push for key CMEC components.
Prior experience with large-scale development projects in Myanmar suggests the CMEC could exacerbate the country’s decades-long conflicts by driving a wedge between the central authorities and minority groups unless issues such as revenue-sharing and lack of consultation or transparency are resolved.
Beyond infrastructure deals, Chinese money is pouring into Myanmar’s various fledgling markets. Alibaba’s Ant Financial Group this year took a stake in mobile financial services provider Wave Money, of which local tycoon Serge Pun’s Yoma Group is a major shareholder.
Shenzhen-listed logistics firm SF Holding last year pumped funds into Pun’s logistics joint venture with Kokubu Group of Japan. PetroChina and green power supplier GCL, meanwhile, have joined hands with Shwe Taung in power partnerships.
Both Shwe Taung and Pun’s corporate empire consistently rank at the top in the Pwint Thit Sa (Transparency in Myanmar Enterprises) index conducted by the Myanmar Centre for Responsible Business and Yangon-based consulting firm Yever.
They are, however, the exceptions. Big names associated with Chinese projects and enterprises, such as Steven Law’s controversial conglomerate Asia World and energy firm Supreme Group, score poorly in Pwint Thit Sa.
Opaque yet influential corporate titans also include Mandalay-based New Star Light Group, developer of a CMEC trade zone in Shan’s border city Muse, and conglomerate Capital Diamond Star Group, whose chief Ko Ko Gyi chairs the Upper Myanmar-Chinese Chamber of Commerce and Industries.
To improve their public image, Chinese businesses should regularly disclose company activities in both English and Burmese languages, and only work with transparent and responsible Myanmar partners, said Myanmar analyst Anthony Aung, who sits on the board of the top Burmese-Chinese business association.
“China and Chinese companies should work more closely with Burmese and English media outlets to communicate their activities,” he said.
“China has made an effort to reach out to the public through advertorials in local newspapers and sponsoring journalists to visit China, but there’s still room for improvements.”
If re-elected on November 8, Suu Kyi will need to carefully calibrate her next government’s relations with China.
While the political risks she has incurred in favoring Chinese investors in often controversial deals will not likely be enough to upend the popular leader at the polls, she is increasingly viewed as a willing conduit for Chinese penetration for her own political ends.