China's President Xi Jinping (R) shakes hands with Myanmar's State Counselor Aung San Suu Kyi as they attend the welcome ceremony at Yanqi Lake during the Belt and Road Forum in Beijing on May 15, 2017.  Photo: AFP/Pool
China's President Xi Jinping (R) shakes hands with Myanmar's State Counselor Aung San Suu Kyi as they attend the welcome ceremony at Yanqi Lake during the Belt and Road Forum in Beijing on May 15, 2017. Photo: AFP/Pool

Myanmar’s ethnic turmoil and political uncertainties are keeping Western investors and tourists away, as the Rohingya refugee crisis has once again made the country a pariah byword for grave human rights abuses.

At the same time, China has emerged as the largest investor in Myanmar’s commercial center Yangon, accounting for 65 of 113 approved foreign invested projects in fiscal 2018-19.

Chinese tourist arrivals, guided in part by Beijing’s control of tour groups and Myanmar’s new relaxed visa rules for Chinese visitors, have also skyrocketed, making them far and away the largest national group to visit the country in 2018.

According to a July 26 report in The Irrawaddy, the surge in new Chinese investment has been concentrated in Yangon but is also growing fast in other parts of the country.

The report said: ”China is planning to implement multi-billion dollar projects, including a deep seaport, new cities, industrial parks, border economic cooperation zones and high-speed railroad lines under its ambitious Belt and Road Initiative.”

In November, Myanmar signed a Memorandum of Understanding with China which officially established the China-Myanmar Economic Corridor (CMEC), a transport artery that will connect China’s southwestern Yunnan province with the Bay of Bengal, thus giving China an alternative trade route to the congested Malacca Strait.

Source: Twitter

Despite earlier hopes of a democracy-rewarding economic boom, overall foreign investment in Myanmar has actually declined since the National League for Democracy (NLD) was elected and formed a government in March 2016.

In 2015-2016, the year before the NLD government was installed, foreign commitments totaled $9.5 billion but fell to $5.6 billion in fiscal 2017-2018, an accounting period which ended at the end of March.

A new system was introduced last year by which the fiscal year runs until September 30, which explains some discrepancies in recent official statistics. But the trend is clear: China is surging into Myanmar while the West retreats.

Due to its strategic location between China and the Indian Ocean, Myanmar is emerging as perhaps the most important link in Beijing’s $1 trillion BRI.

At the same time, spurned by the West over its abysmal human rights record, Myanmar is increasingly turning to China to fill its foreign investment shortfall. State Counselor Aung San Suu Kyi chairs Myanmar’s steering committee for BRI investment, giving it top-level clout to close deals.

Foreign Economic Relations Minister Thaung Tun stated during an international investment seminar in the capital Naypyitaw in late January that “if you look at the BRI you will find that Myanmar is in the middle of all of it, because the Maritime Silk Road must pass through Myanmar.”

He also stated that the rise of China should be seen as an opportunity and not an obstacle.

Chinese investment, which was scaled back during the previous government led by Thein Sein, a former army general, has increased markedly since the NLD took power.

Local residents' houses in front of buildings of a Chinese oil pipeline project (pink roof) on Madae island, Kyaukpyu township, Rakhine state, Myanmar. The wider project, part of China's One Belt, One Road initiative, envisions twin oil and gas pipelines, a deep sea port and special economic zone. Photo: Reuters/Soe Zeya Tun
Local residents’ houses in front of buildings of a Chinese oil pipeline project on Myanmar’s Madae island in Kyaukphyu, Rakhine State. Photo: Facebook

Big ticket projects include a planned high-speed railroad from the Chinese border to the central Myanmar city of Mandalay, a deep sea port with an adjacent free trade zone in Rakhine state and an entirely new modern city opposite the river from the old capital Yangon.

Chinese investors are also plowing money into building a string of hydroelectric power stations while also attempting to revive the stalled $3.6 billion Myitsone dam project in the north, which was suspended by the previous government on environmental grounds.

The new surge in Chinese investment comes after a brief 2011-2017 dalliance with Western engagement, a gambit which aimed to lessen the country’s dependence on China. That reliance grew ever stronger when Myanmar was subjected to Western sanctions and boycotts first imposed in the 1990s.

China-Myanmar relations have now come full circle, and there is little the West can or seems willing to do about it. But all that glitters is not gold, as Myanmar is beginning to see.

Most notably, there are concerns that the terms of Chinese lending could result in a sovereignty-eroding debt trap. Myanmar’s foreign exchange reserves totaled $6.35 billion in 2018, while the total national debt was estimated at around $10 billion. Of that, $4 billion is reportedly owed to China.

More BRI projects would mean more loans and even heavier financial dependence on Beijing. Meanwhile, a fragile, illiquid and largely backward banking sector, controlled by a small number of so-called military “cronies”, make Myanmar especially vulnerable to unregulated foreign capital flows.

Authorities are having enough trouble just managing the surge in Chinese tourism.

Chinese tourists at a temple in the central city of Mandalay. Photo: Twitter

In June, Business License Department Director Myo Win Nyun found it necessary to publicly state that action had to be taken against so-called “zero-dollar tourism.”

The practice, seen in neighboring Thailand, involves Chinese tourists booking package tours that only patronize hotels, restaurants and retail shops connected to China-based tour operators and therefore offer little trickle down to Myanmar operators and vendors.

In January, nearly 42,000 Chinese tourists arrived in Myanmar, more than double the 20,717 in 2018. Last year, Chinese travelers accounted for 297,400 of the 3.55 million who visited Myanmar, making them the largest national group among foreign tourists.

By comparison, the number of North American and West European visitors were down 12.66% and 23.35% respectively in 2018, the year after the Rohingya crisis and United Nations accusations of ”ethnic cleansing” came to dominate global headlines.

Certain Myanmar tycoons are leveraging directly into the Chinese tourism boom. Serge Pun, a wealthy Sino-Myanmar businessman, recently established a new company known as the Memories Group to manage his expanding portfolio of tourism-related investments.

Pun is also involved in the China-backed New Yangon City project, underscoring his close business connections in China. He has acknowledged that while Western tourists are giving the country a miss, his target is mainly Chinese tourism.

“The West sees Myanmar in a simplistic way, saying that Rakhine is Myanmar, Rohingya is Myanmar, and there is nothing else,” Pun told Frontier magazine in a recent interview.

“The East sees us differently. The East sees that Rakhine is a problem, but that it is one small part of the country tucked up in a remote northwestern region, and then there is the rest of Myanmar, and we have to engage.”

Pun, for one, is punting on the sustainability of that China-led trend.

Myanmar businessman Serge Pun in a 2018 file photo. Image: Twitter

His company has opened new high-end hotels in the old capital Yangon as well as in Kayah and Mon states near the Thai border and, more significantly from the point of view of high-end tourism, resorts in the southern Myeik Archipelago in Tanintharyi Region.

Largely unexploited and located to the north of the world-famous and arguably over-developed Thai beach resort of Phuket, the Myeik Archipelago consists of more than 800 islands which until 1997 were off limits to foreign visitors.

The archipelago, replete with idyllic islands, now appears ripe for massive tourism development, though the area is already suffering from the effects of overfishing, climate change and plastic waste. But those concerns may have to take a back seat as Myanmar bids to lure more Chinese tourists and their needed spending.

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