Myanmar reasserts its authority over the BRI
Myanmar reasserts its authority over the BRI
WRITTEN BY SHAH SURAJ BHARAT
5 July 2020
Soon after the Myanmar government announced its COVID-19 Economic Relief Plan (CERP) on 27 April, analysts warned that the Chinese government would take advantage of these measures to push through infrastructure projects under the China-Myanmar Economic Corridor (CMEC), which falls under the Belt and Road Initiative (BRI).
The CERP details Myanmar’s medium-term recovery plan to deal with the economic impact of the pandemic and includes stipulations to expedite the solicitation of strategic infrastructure projects. The CERP is estimated to cost up to $3 billion or 2.9 per cent of Myanmar;s GDP, but this pales in comparison to neighbouring Thailand’s stimulus package of $76 billion or 12 per cent of GDP. The World Bank, meanwhile, has forecast that Myanmar looks set to see just 0.5 per cent growth in this financial year, compared to the 6.8 per cent last year.
Key projects and controversy
Myanmar is therefore in need of economic stimulus and hence accelerating the implementation of massive CMEC projects would appear initially enticing. Concerns, however, have been raised that under Chinese pressure such projects would be pushed through under the guise of the CERP and would therefore bypass proper environmental, social and financial scrutiny. The CMEC itself is a 1,700km, Y-shaped corridor featuring strategic infrastructure that will first connect Kunming (Yunnan Province) to Mandalay, and then branch out to Yangon and Kyaukphyu in Rakhine State. Myanmar signed a MoU with China to establish the China-Myanmar Economic Corridor in September 2018, while on 18 January this year State Counsellor Aung San Suu Kyi and President Xi Jinping oversaw the signing of 33 project MoUs during the latter’s two-day visit to Myanmar.
The Myanmar government added a key condition to CMEC projects in that financing be sought from international financial institutions, such as the World Bank and the Asian Development Bank, to avoid incurring unsustainable debt obligations to China.
The key projects being developed in the corridor are not without controversy. The $1.3 billion Kyaukphyu deep-sea port project has raised concerns of “debt trap” risk due to its hight costs. Analysts have warned the Mandalay-Muse $820 million highway and $8.9 billion railway projects would also result in the further militarization of northern Shan State as they could become military targets for insurgent groups operating in the conflict-stricken region. The involvement of China's Communications Construction Company in the $5 billion New Yangon City has also been criticised as it has previously been accused of fraudulent practices in 10 other developing countries.
Following the release of the CERP, fears that projects were being pushed through were heightened after high-level meetings between Chinese and Myanmar officials regarding CMEC projects.
On 20 May, Chinese President Xi Jinping and Myanmar President U Win Myint discussed the CMEC via telephone, in which Xi called for speeding up the implementation of key projects. The call came after Chinese Ambassador to Yangon Chen Hai’s meeting on 6 May with Deputy Minister for Planning, Finance and Industry U Set Aung which reportedly culminated in “in-depth discussions” on CMEC projects. Recent moves by the Myanmar government, however, have shown it is taking concrete steps to allay fears that projects will be pushed through. It has done this by emphasising that it will financially unbundle projects to avoid taking on excessive Chinese debt while systematising the proper scrutiny of such projects.
No longer compelled to take Chinese loans
On 8 June, Myanmar Auditor General U Maw Than cautioned government officials about the country's reliance on high-interest Chinese loans, citing that the 4.5% interest rates were the highest among countries that have lent to Myanmar. Myanmar’s current national debt stands at about $10 billion, of which $4bn is owed to China. Noting that Myanmar was set to take on more Chinese debt through CMEC projects, U Maw Than emphasised to officials that Myanmar was no longer in international isolation and therefore not compelled to take Chinese loans.
Following this, an unnamed senior government official said projects to benefit from the CERP do not currently include BRI projects. The official reiterated the stipulations of the CERP, such as that projects be implemented by a reputable company with international experience and that projects be commercially viable. The official further affirmed that despite China’s push to implement projects, the Myanmar government had firmly insisted that it will financially unbundle projects to ensure commercial viability.
Deputy Minister for Planning, Finance and Industry U Set Aung then said on 24 June that Myanmar and Chinese governments had signed an agreement under which Myanmar has the authority to choose the projects it wants to execute. He added the Myanmar government had also added a key condition to CMEC projects in that financing be sought from international financial institutions, such as the World Bank and the Asian Development Bank, to avoid incurring unsustainable debt obligations to China.
The commercial viability of strategic projects
In terms of screening projects for commercial viability, U Set Aung also said the Myanmar government was planning to add all BRI projects to the Myanmar Project Bank. The project bank comprises major projects that will be screened and appraised with the aim of boosting investment by highlighting investment priorities in a strategic and transparent manner. Furthermore, the Ministry of Planning, Finance and Industry signed on 27 May an agreement with Singapore’s state-owned consultancy, Infrastructure Asia, under which the latter will help identify suitable investors and assess the commercial viability of strategic projects listed in the project bank.
Despite the devastating economic impact of COVID-19, the Myanmar government has moved to reassert its authority over the CMEC. If properly implemented, the financial unbundling and systematised scrutiny of projects should put them on a more politically and economically viable footing – something in the interest of both the Myanmar and Chinese governments.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Shah Suraj Bharat is a Yangon-based transport infrastructure analyst for FMR Research and non-resident fellow for Policylab Indonesia. The views expressed are the writer's own. Image credit: McKay Savage/Flickr.