Beijing’s New Toys in Myanmar

A year after Chinese President Xi Jinping’s first state visit to Myanmar, Foreign Minister Wang Yi is scheduled to arrive in the capital Naypyidaw today for a two-day official visit. The trip to Myanmar follows an African tour that has taken Wang to Nigeria, the Democratic Republic of Congo, Botswana, Tanzania, and the Seychelles. The agenda of his Myanmar trip is yet to be confirmed, but the ongoing progress of the China-Myanmar Economic Corridor (CMEC), along with COVID-19 diplomacy, is very likely to be high on the list.

First signed between China and Myanmar in 2018, the CMEC envisions the construction of a network of railways, roads, ports, and new cities running overland from China’s Yunnan province to the sea. Although numerous memorandum of agreements related to CMEC and Xi’s Belt and Road Initiative (BRI) have been in place for years, progress has lagged considerably. Indeed, progress on the CMEC seems to have been slowed further by Beijing’s pandemic-induced belt-tightening and the unprofitable nature of many of the infrastructure projects that fell under its aegis. This had prompted Beijing to adopt an alternative model of engagement in Myanmar: one that is more economically feasible, and that leverages its strategic assets, innovation, and technology to expand its sphere of influence, rather than focusing on infrastructure alone.

This is consistent with China’s recently announced Five-Year Plan (2021-2025), which signaled a significant shift in China’s economic and development strategy toward increased domestic consumption. This shift has been prompted by its trade tensions with the United States and the opportunities and challenges offered by a post-COVID-19-world. This re-calibration may impact Beijing’s ability to realize the CMEC as it is currently envisioned.

While trade and infrastructure will continue to remain at the top of the diplomatic agenda, there are three other important sectors that represent growth areas for China’s influence in Myanmar.

The first is Myanmar’s energy sector. Having won almost all of the country’s solar power plant projects, China continues to dominate the sector. By offering a production rate of an average of 0.4 cents per kilowatt-hour, China is far and away the most competitive player in solar production in the country, working in partnership with local companies. The general model for these projects is that China provides the technology, while local joint venture partners secure the land on which to construct the solar plants.

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These projects require an initial capital outlay to build and operate the planned plants, in which the local companies usually seek financing from Chinese state banks. Indeed, winning the bid and securing the Power Purchase Agreement are just the beginning; local firms still need to secure access to land for the development of projects. Most local partners have purchased land areas with very low initial deposits in order to submit tenders for solar projects, but then frequently face problems with the communities occupying the land once the projects have been approved. As with financing for hydropower projects, Beijing will likely back the banks to secure the companies financing under the BRI, but managing possible land disputes needs to be addressed politically with Naypyidaw.

The second sector is retail and mobile payments. In May, China’s Ant Financial announced a $73.5 million investment in Wave Money, Myanmar’s leading mobile payment and remittance system, which has more than 22 million users. Alibaba group has also acquired the largest e-commerce website, shop.com.mm, and is expanding in the retail and payment markets. The largest retail bank in Myanmar, KBZ, is also working closely with the Chinese telecoms giant Huawei to expand its mobile payment system, KBZPay, now one of the most used mobile wallet platforms in Myanmar. Facing little significant competition, Huawei is also expanding its cloud services as a fast pace.

With the lack of legal compliance regulations, data privacy remains unclear, but Beijing continues to forge ahead with market expansions. With the signing of a strategic cooperation agreement on financial services for small and medium-sized enterprises (SMEs) between China’s Ministry of Industry and Information Technology and the China Construction Bank, Beijing is planning to extend its “dual circulation” policy to support local SMEs. Soon SMEs in China may be able to link up with payment and platforms that have already been developed in Myanmar. This will likely result in the expansion of China’s domination of the retail market in Myanmar, where there are few viable competitors

Third is “safe cities.” Although the early bird in 5G technology, China is not gaining much ground in the Myanmar market. Given the competition from Ericsson, Huawei may not be the one and only player once the country rolls out its 5G network. But in other domains Huawei remains predominant; it has already agreed to provide a security system in two major “safe city” projects, in Mandalay and Naypyidaw. Hundreds of Huawei CCTV cameras with facial recognition technology will be installed in each of these cities. Huawei’s successful bid for these two major projects, without any competitors, suggests that it will have no trouble securing future projects at the regional and national levels.

Balancing China with India and other Indo-Pacific partners is always Naypyidaw’s preferred option for attempting to limit Beijing’s influence in Myanmar. But it is not smooth sailing, especially in the tech-related industries. Given the strong support from the government in Beijing, the tech-related sectors in China are far ahead in the region, and as of yet, there are no other actors who can compete with China in the Myanmar market. China’s five-year plan also encourages support for its domestic industry, which will fuel and accelerate Beijing’s dominance in Myanmar – even without the completion of the major CMEC infrastructure projects.

Amara Thiha is the Senior Research Manager at Myanmar Institute for Peace and Security (MIPS) and a nonresident fellow at the Stimson Center. The views and opinions expressed here do not necessarily reflect the policies or positions of MIPS and Stimson Center.

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Source : The Diplomat

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