China And Japan’s ‘New Great Game’ Intensifies In Myanmar

Throughout Asia the frontiers of investment are being pushed ever onward, gobbling up former backwaters in the hunt for cheap labor, natural resources, infrastructure deals, and the massive profits that can be made in the margins of a country transitioning from “emerging market” to “plain old market.” As the developed, investor countries of the world march through the Globalization 2.0 era, they continue leaving new roads, rail lines, bridges, power plants, airports, industrial zones, and completely transformed societies in their wake.

As China and Japan continue their race to match each other on securing infrastructure projects and other investment opportunities abroad, Myanmar has become another staging ground for their “new great game,” where position is gained via development deals rather than with armies on battlefields.

Myanmar opening up

After being a sanctioned, no-go zone for Western-affiliated investors for over two decades, Myanmar began opening up after a civilian government came to power in 2011. This transition instantly made the country the next frontier for countries and companies looking to capitalize on infrastructure, energy, transportation, telecommunications, and industrial development, and torrents of foreign investments and loans flowed into the country like a dam that had burst.

“Walking down the street in Yangon, the feeling of change is palpable. New buildings are being constructed and you cannot help but notice the influx of foreign tourists visiting the local sites. There is a lot to like about the opening of one of the world’s last frontiers, especially given its size, geography and vast raw materials,” Peter Birgbauer wrote for The Diplomat in 2013.

Myanmar offered foreign investors relatively cheap labor, abundant agricultural resources, ideal locations for new ports, and a strategic position right at the meeting point of Southeast and South Asia, while foreign investors could provide Myanmar with much needed infrastructure — like roads, rail lines, bridges, ports — and, especially, electricity, which the country still has a severe deficit of.

While FDI in Myanmar has been on a decline over the past year due to the refugee crisis and the signing of a key foreign investment law has been delayed, China and Japan are still very actively moving in, matching each other’s infrastructure projects blow for blow.

China in Myanmar

Under the auspices of its Belt and Road Initiative (BRI) — which promises trillions of dollars for foreign infrastructure development and energy projects — China has been an extremely active player in Myanmar, becoming the country’s biggest trading partner and source of foreign direct investment.Since 1988, China has dumped $14 billion of FDI into Myanmar, one-third of the country’s total, and over the first eight months of the current fiscal year, trade between China and Myanmar has risen to more than $7.42 billion, on track to at least match last year’s total of $10.8 billion.

That said, China has been scoring major infrastructure projects all over Myanmar. Last year, a Chinese consortium led by China’s CITIC Group and featuring China Harbor Engineering Company and China Merchants Holdings scored two contracts to build a deep sea port and a corresponding special economic zone in Myanmar. While the Sino-Myanmar pipeline — which stretches from the $10 billion Chinese-invested Kyauk Pyu Port and special economic zone on the bay of Bengal all the way to Kunming in China’s Yunnan province went into operation. This pipeline strategically bypassing Singapore and the Strait of Malacca and is one of a growing network of such pipelines which allow China to diversify its supply chains for incoming Middle Eastern energy resources — one of the core drivers of the Belt and Road.

Japan in Myanmar

Under the slogan “Partnership for Quality Infrastructure” — perhaps a direct jab at the type of infrastructure that China is building abroad — Japan has impressively been countering China’s Belt and Road Initiative throughout Asia. While Xi Jinping’s BRI gets more attention from the international community, Japan as been at the international infrastructure building game for decades, and views Southeast Asia as its backyard. Via financing engines such as the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), and the Japan Infrastructure Initiative, Abe and company have recently upped their game in the Asian investment sphere, promising an additional $200 billion for foreign infrastructure development. Some of Abe’s big deals have been a $8.76 billion natural gas purification plant and a $4.38 billion chemical plant in Turkmenistan, a big fertilizer plant in Uzbekistan, a deal with India to help build the Delhi-Mumbai Industrial Corridor, a large diesel plant on South Andaman Island, a high-speed rail line between Mumbai and Ahmedabad, along with two more metro systems in India.

In Myanmar, Japan has been a long-term player — even maintaining some degree of relations throughout the era of the junta — and when the country again opened up to outside investment they were all set and ready to jump in, instantly waving nearly $3 billion of debt and providing backing for a host of new development projects to rebuild the country’s ailing rail network, health facilities, and energy capacity.

Since 2012, Japan has directly invested over $717 billion in Myanmar ($220 million of which coming in fiscal year 2015-16), with some of the most notable going to the Thilawa Special Economic Zone, a 2,342 hectare industrial area just outside of Yangon that is 49% owed by the Japan International Cooperation Agency and a trio of Japanese banks. This is the first-ever Japan-Myanmar public-private initiative and upward of 21 Japanese companies are reportedly standing in the wings ready to make big investments.

 

Source: The Forbes

 

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