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weighs infrastructure, strategic ties to China
weighs infrastructure, strategic ties to China
Financial Times, May 31, 2017
Two big decisions will sway Yangon’s strategic posture with
neighbour to the north
Jinping, China’s president, staged an impressive show for Asean
leaders attending his summit in Beijing this month. The assembled
politicians received the intended message loud and clear — that
their countries stand to benefit from the One Belt One Road
initiative every bit as much as China.
Surprisingly, the state within the 10member Association of Southeast
Asian Nations that until recently had an ill-defined role in the One
Belt script is Myanmar. Yet this is the country that could make some
of the greatest gains from the infrastructure connectivity promised
by the latterday Silk Road. With its return to democracy, Myanmar is
no longer isolated by politics and economic sanctions. But it
remains semidetached in a critical respect: decades of
underinvestment in infrastructure has ensured that it is has not
properly benefited from its location between the trading
opportunities of India and China.
Might One Road join those vital dots?
Two key decisions in the coming weeks and months will probably
determine how China and Myanmar cooperate. The first decision
concerns the ownership of the $7.3bn deep water port of Kyaukphyu on
Myanmar’s seaboard. It is the port from which gas and oil are pumped
from the Bay of Bengal in parallel pipelines for 770km across
Myanmar to China. These pipelines make China far less dependent on
tankers sailing the long voyage from the Middle East and Africa
through the Strait of Malacca. The resulting savings come in time,
money and added security.
China’s interest in Kyaukphyu is thus strategic, and a consortium
led by Citic Group, the state owned conglomerate, is reportedly
considering whether to press for a controlling stake in the port.
For the Myanmar government, permitting such a foreign investment
will be contentious but also very tempting — especially if it
entices wider Chinese investment to connect the country with its
Paradoxically, this advance might come at a cost. For the second big
decision facing Aung San Suu Kyi, de facto leader of Myanmar, is
what to do about a series of Chinesebacked
hydropower projects in her country that vocal protest campaigns want
The largest of these is the Mong Ton dam, on the Salween River,
where Three Gorges and Sinohydro (alongside Egat International
Thailand) are the lead investors. Sinohydro and Egat are again
involved in the smaller Hatgyi dam. Meanwhile, State Power
Investment Corporation is the main investor in the Myitsone dam in
the north of Myanmar, which has been suspended by presidential
decree since 2011.
Speculation has it that Myanmar will concede Chinese control of the
Kyaukphyu port in return for cancelling some of the contentious
hydropower projects. Doubtless this quid pro quo would suit Citic,
but not the affected Chinese energy corporations that took out
commercial loans to pay for hydro projects predicated on an eventual
return on investment. The compensation bill exceeds Myanmar’s will
or capacity to pay.
Hard to find is the Myanmar man or woman who lies awake at night
worrying about the hit Chinese energy companies might take if these
projects are cancelled. But with 70 per cent of Myanmar’s population
still not connected to grid electricity and even big cities such as
Yangon (Rangoon) continuing to suffer almost daily outages, is
spurning such massive investment in the country’s abundant
hydropower potential really in Myanmar’s interests?
The country necessarily exports much of its oil and gas so that it
can earn foreign currency. Without these fuel exports, Myanmar’s
trade deficit would become serious. It is a trade balance that would
also be worsened by importing coal — to say nothing of the
What Myanmar does have in plentiful supply is an effectively
limitless natural supply of hydropower. Only 3 per cent of the
country’s hydroelectric potential has thus far been tapped).
When the contentious dams were first proposed, it was in the
expectation that most of the electricity generated would go to
satiate the energy thirsty Yunnan province which borders Myanmar.
Myanmar would get what was left over.
But the energy shortages anticipated for Yunnan have not
materialised. By contrast, Myanmar suffers an acute energy shortage.
As to the future, current projects under way do not look geared
towards meeting the 15 per cent a year increase in Myanmar’s energy
requirement needed to meet its economic growth projections. Either
this problem is solved or Myanmar’s prospects will ultimately
Rather than cancel the big dams in return for agreeing to Chinese
majority control of the port of Kyaukphyu, Myanmar could insist upon
a reassessment of existing agreements to put Myanmar’s energy
This will require setting rigorous environmental standards. Local
communities that are most inconvenienced by construction must be
sent to the front of the queue for the benefits that come with it.
With supporting development of the grid, the dams should prioritise
powering Myanmar, with the surplus going to its neighbours rather
than the other way around.
A decision on Kyaukphyu need not be at the cost of Myanmar’s ability
to keep its lights on. Far from being antagonistic, the
electrification of Myanmar and its integration in a wider One Belt
network of trade and development should be complementary objectives.
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