Myanmar shouldn’t write off China without understanding her neighbour

An old Chinese proverb goes like this: “Three men make a tiger.” It means that if an unfounded premise is repeated many times, the premise will be accepted as the truth. Once this “tiger” is invented, it would be extremely difficult to dispel it from people’s minds, especially when we are living in a post-truth age when verifiable news is scarce and wishful thinking rampant.

The recent debate on the Kyaukphyu Special Economic Zone illustrates “Facts matter not at all. Perception is everything.” The Myanmar Times on June 13 recently published an article on the Kyaukphyu SEZ and compared contrasting claims about the SEZ debt issue, quoting two prominent figures in Myanmar’s economic policy circle – Sean Turnell, State Counsellor Daw Aung San Suu Kyi’s economic adviser, and U Soe Win, co-chair of Kyaukphyu SEZ Management Committee.

The “debt trap” concept was first floated by Bloomberg as a “debt bomb” and was subsequently resonated in Dr Turnell’s interview in Singapore, as well as in a Financial Times report. According to Dr Turnell, to raise sufficient capital for the Kyaukpyu port, the Myanmar government “will have to borrow from the Export-Import [EXIM] Bank of China about US$2 billion to $3 billion.” Following this line, the Global Times, China’s state media, tried to dismiss this claim by saying that the SEZ deal has not yet been finalised and that the Myanmar government does not need to borrow money and can use land as capital. Meanwhile, EXIM Bank of China has not yet confirmed any loan for the Kyaukphyu project.

Unfortunately for China, the “debt trap tiger”, though seemingly baseless in this case, has become widespread in Myanmar’s policy circle. This could have a potential impact on the Myanmar government’s decision-making process on whether to further postpone the Kyaukphyu project.

Misperceptions in an asymmetrical relationship Simply put, the recent concerns over heavy debt from the Kyaukphyu SEZ is only a reflection of Myanmar’s deep fear for China’s dominance in Myanmar’s economy. Admittedly, it is unfair to accuse CITIC (the leading Kyaukphyu project developer) of the wrongdoings it has not committed. But this reflects one of Myanmar’s many structural (mis)perceptions of China. International relations academic Robert Jervis once said: “decision-makers tend to fit incoming information into their existing theories and images.”

Despite the clarification by the Global Times, perceptions of a possible “debt trap” may have already impeded the negotiation process. The asymmetrical bilateral relations between China and Myanmar have put the two in a dilemma of unbalanced interdependence.

Understandably, Myanmar does not want to miss the big inflow of Chinese investment under the Belt and Road Initiative (BRI), an economic cooperation scheme initiated by President Xi Jinping in 2013. Nevertheless, it also does not want to be viewed as shifting towards China again – a lesson learned from decades of overdependence under military rule. The existing views on China’s investment – based on previous impressions – are relatively sticky and can only be changed bit by bit.

It is usually argued that Chinese investment is viewed negatively by the Myanmar public. Yet, there lacks systematic empirical data on public attitudes towards different types of Chinese investment to support the argument. To obtain a more granular understanding, my colleague Youyi Zhang and I conducted a survey experiment on Myanmar people’s perceptions of Chinese investment.

Experimenting on perceptions in Myanmar Though Myanmar has started to diversify its sources of foreign investment since the warming of its relations with the West in 2011, China remains the largest source of Myanmar’s foreign direct investment (FDI) in stock, amounting to more than 20pc of total FDI, according to the Directorate of Investment and Company Administration (DICA). China’s investment mostly concentrates on natural resources sector. The top four sectors that attract most Chinese investment are power, oil & gas, manufacturing, and mining, each comprising 67.4pc, 13.9pc, 6.4pc, 4.6pc respectively, according to DICA data as of April 30, 2018.

This survey experiment is to understand what determinants can shape Myanmar people’s perceptions of Chinese investment projects in natural resources. We find public perceptions of Chinese projects are contingent on the firm’s local partner and social engagement strategy. In other words, respondents are likely to change their perceptions if they see the firm choose its Myanmar local partner and engage with the communities differently.

Overall, there is an implicit bias against Chinese investments, which is likely based on experience of previous Chinese investments in Myanmar. But the findings suggest Chinese companies can improve their image by engaging more actively with local communities and selecting local partners more carefully. In the experiment, respondents are more favourable to investment projects from Japanese firms than Chinese firms when both partner with military-affiliated companies and engage with local communities indirectly. However, respondents show similar support rates for projects conducted by firms from China and Japan when they partner with local private companies and engage with local communities directly. These findings resonate with the local civil society’s call for transparency and responsible investment in doing business in Myanmar.

The results suggest that public perceptions of FDI inflows are partly correlated with the perceived image of the investors’ country of origin (e.g. Japan vs China). Therefore, Chinese investors should be wary of existing negative attitudes but they can improve their image by carefully selecting their local partners and engaging directly and actively with the affected communities. Furthermore, this research offers a warning for project proponents involved in the BRI and the China-Myanmar Economic Corridor about the potential local resistance they may face if their investment strategies do not take the local context seriously.

Ying Yao co-authored with Youyi Zhang the report “Perceptions of Chinese investment in Myanmar”, which is supported by the International Growth Centre (IGC). She is a PhD candidate from the international relations department at Tsinghua University, while Youyi Zhang is a PhD candidate from the government department of Cornell University. The research was conducted in collaboration with the University of Yangon and Yangon School of Political Science.

Source: Myanmar Times

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