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Renewed conflict in Myanmar slows China’s belt and road projects

A recent decision by the Myanmar military, or Tatmadaw, not to extend a cease-fire aimed at ethnic armed organizations excluded from a nationwide peace agreement puts the country’s Belt and Road projects in further limbo.

Multiple projects have already been halted, including the key Myitsone dam hydropower project in in Myanmar’s northernmost state of Kachin. But ethnic strife is not to blame. Rather, the dam has run up against nationwide opposition and an International Finance Corp. report strongly advising against damming the upper reaches of Myanmar’s major rivers.

Meanwhile, work on a feasibility study for another project has been suspended as a result of the renewed hostilities. Tatmadaw forces in late September assaulted a Myanmar National Democratic Alliance Army base in Kutkai, squarely in the middle of the proposed route for the China-led Muse-Lashio-Mandalay rail project in northern Shan state.

One day after fighting recommenced, a Myanma Railways spokesman announced the suspension, blaming the instability.

The attacks signal the failure of Chinese attempts to broker peace between Myanmar’s vigorously independent military and a group of armed organizations known as The Northern Alliance.

Fighting has also broken out anew in Rakhine state, where the Arakan Army, part of the Northern Alliance, is engaged outside Sittwe, the state capital. The conflict erects yet another obstacle to bringing home Rohingya refugees from neighboring Bangladesh.

He Baogang, Alfred Deakin professor and chair in international relations at Australia’s Deakin University, suggests Beijing might have overestimated its capacity as a mediator in both conflicts.

“They thought they could solve the EAO issue behind closed doors in Kengtung, but they have failed to do so,” he said, using the acronym for ethnic armed organizations. “Beijing was also trying to get Aung San Suu Kyi and Bangladesh Prime Minister Sheikh Hasina together, but they did not succeed.”

Chinese envoys had been instrumental in convening members of the Northern Alliance and the military at the most recent round of peace talks in Kengtung, in north Shan state, on Sept. 17.

However, the Tatmadaw made clear it has no intention of acceding to the EAO’s demands for political recognition, territorial security and access to economic opportunities in the region, according to Dan Seng Lawn, director of the nonprofit research group Kachinland Research Center, who was present at the meeting.

“The Tatmadaw will carry on fighting, because their political agenda is to end the areas of armed independent resistance,” he said.

The ongoing conflict also threatens the China-Myanmar Economic Corridor, which aims to connect China’s southwestern Yunnan Province with Mandalay before branching south to Yangon and southwest to the deep-sea port special economic zone at Kyaukpyu.

This summer, the Northern Alliance highlighted the vulnerability of the economic corridor’s main artery by launching attacks along the Muse-Mandalay road, leading to significant damage to bridges and other infrastructure.

Annual trade volume at Muse, on the Chinese border, Myanmar’s busiest land port, declined 22.9% to $4.67 billion in the year to mid-September as a result of the EAO actions, according to Myanmar’s Ministry of Commerce.

Meanwhile, the Kyaukpyu development in southern Rakhine state, envisaged as an Indian Ocean trade and logistics hub that would galvanize growth in southwest China, has stalled.

“China has not had it all their own way at Kyaukpyu, as evidenced last October, when the scope of the deep-sea port was reduced from $7.2 billion to $1.3 billion on concerns over the scale of Myanmar’s national debt to China, environmental issues and land disputes,” said Jordan Zele, country director for Frontier Myanmar Research in Yangon.

Chinese banks have also balked at the commitment required to get business off the ground in an area without access to a stable power supply, a dearth of qualified workers and nonexistent logistics networks. The economic corridor is dotted with industrial parks and commercial developments that are dependent on Chinese investment, much of it to come from provincial governments, led by Yunnan.

The scope includes three proposed special economic zones along the border, a 10,000-acre Mandalay New Resort City integrated real estate project, the ambitious Yangon New City Project, spearheaded by China Communications Construction Company (CCCC), as well as a fledgling industrial zone in Myotha, outside Mandalay, and another in Myitkyina, in Kachin state.

But Chinese investment in Myanmar is tailing off, going from $1.4 billion in fiscal 2017, to $576 million in the 11 months through August, according to the Directorate of Investment and Company Administration, with the data reflecting a change to the timing of Myanmar’s fiscal year implemented this year.

China remains Myanmar’s second-largest investor, behind Singapore. But the mode of investment is fragmented, spread across 123 projects in the past 11 months, as opposed to the multibillion-dollar deals associated with the Belt and Road Initiative. Unofficial Chinese investment continues apace, morphing the social fabric of Mandalay, and the skylines of the towns on the road to the Chinese border.

As for the Myitsone dam, China is pressuring the National League for Democracy (NLD) government to press ahead, motivated by a need to export surplus construction capacity amid slowing economic growth, a debilitating trade war and the unrest in Hong Kong. The matter is also of face-saving importance at the highest level of the Chinese Communist Party, given Xi Jinping oversaw the signing of an agreement to build Myitsone during a visit here as vice president in 2009.

However, the NLD’s hands are tied by next year’s general election; protecting Myitsone has become an issue of national sovereignty. Experts say it is hard to imagine the dam coming to pass in its proposed 6,000 MW form, though a scaled down or relocated version may be tabled in the wake of next year’s polls.

Source: Asian Nikkei Review

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