Maximizing Benefit and Reducing Risk in the China-Myanmar Economic Corridor

Myat Myat Mon discusses some priority preparations Myanmar should undertake before the launch of the China-Myanmar Economic Corridor.

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International media outlets tended to ignore the September 9, 2018 signing of the China-Myanmar Economic Corridor (CMEC) agreement. This element of China’s Belt and Road Initiative (BRI) was covered mostly by Chinese and Myanmar media outlets. Apart from Chinese government mouthpieces that extended welcome hands over the signing, several news reports and articles by Myanmar media organizations, in both Myanmar and English languages, have pointed out the debt trap likely to result from BRI projects, and even before the CMEC was officially signed, have advised the government not to rush to reach an agreement.

The CMEC was first proposed by China’s Foreign Minister, Wang Yi, during his visit to Myanmar in November 2017. The estimated 1,700-kilometer long Y-shaped corridor will connect Kunming, the capital of land-locked Yunnan Province, to Yangon and Mandalay, Myanmar’s two major commercial cities, and a Special Economic Zone (SEZ) in Kyaukphyu, Rakhine State. The corridor includes 24 projects worth an estimated US$2 billion in total which is exclusive of other major infrastructure projects that will operate in the later stage.

The debt trap warning is exemplified by Sri Lanka’s Hambantota Port, which the government handed over to a Chinese state-owned company on a 99-year lease after Sri Lanka failed to make loan repayments. With this in mind, in the Kyaukphyu SEZ, the Myanmar government has moved to reduce China’s stake of China from the 85% agreed upon by the previous administration, down to 70%, raising Myanmar’s shares to 30%. But the new share proportion has not been officially agreed, and is not reflected in the CMEC agreement.

Adding up the plan to reduce China’s stake in the Kyaukphyu SEZ, Myanmar’s Minister of Commerce has noted that international companies will also be invited to take part in Myanmar’s Belt and Road projects, and that the tender process will be transparent. In addition to that, the Vice President of the National League for Democracy Party, Dr. Zaw Myint Maung, during his nine-day visit to China in early September, has pushed China to respect local laws and concerns in implementing Chinese financed projects in Myanmar. Regardless of the likelihood of the debt trap and other warnings from local media, it is a hard truth that the ripple effects from the CMEC are unavoidable. Despite this, however, several preparations should be carried out in order for Myanmar to maximize CMEC benefits and reduce risks.

Transparency is the one of the first priorities that the government and project implementing companies should guarantee. As of now, there are no publicly available official documents on China-financed projects in Myanmar. Residents of Kyaukphyu also criticized the lack of transparency and accurate information available about the Kyaukphyu SEZ project. An article in The Irrawaddy’s Burmese language edition noted that security checkpoints on Maday Island, where China’s pipeline project originates, was so tight that even photography was banned without prior permission from the Ministry of Home Affairs. Unless transparency is guaranteed, it is hard to say that such projects will be beneficial to local people. Once the CMEC is guaranteed to continue in the near future, the Myanmar government, in collaboration with civil society organizations and non-governmental organizations, should develop an alliance to oversee project implementation, or build an online portal that releases regular and accurate information on CMEC, in order to inform the public and media organizations.

Questions surrounding ‘standardization’ should also be addressed. Peter Cai from the Lowy Institute and other analysts have pointed out that China is intending to use the BRI to establish Chinese technical and engineering standards, not only in railway transport, but also in energy, telecommunications, finance and data management. On 22 October 2015, the Action Plan for Harmonisation of Standards Along the Belt and Road (2015-2017) was issued by the National Development and Reform Commission of the People’s Republic of China in order to “vigorously promote the Chinese standards to ‘go out,’ accelerate the internationalisation of Chinese standards so as to provide comprehensive support for the construction of the One Belt One Road Initiative”. The plan aims to sign agreements on standardization cooperation with key BRI countries in Southeast Asia and Central Asia to promote Chinese standards in the fields such as iron and steel, nonferrous metals, railway, highway and waterway engineering, and oil and gas.

Some have analysed that, for China, the adoption of Chinese standards matter more than the return on investment, and that China seems to be happy that standardization is currently not a hot topic in Belt and Road literature. Once Chinese standards are adopted, this will ensure China’s position as the sole exporter of infrastructural goods in Belt and Road countries, wiping out regional and global competitors. Competition over standardization is quite obvious in the high-speed railway sector in which Japan and China compete, especially in Asia. So far, China has sought railway supremacy in Thailand, Laos, Indonesia and Vietnam.

The China-Myanmar Economic Corridor, in fact, covers a widely range of activities, including infrastructure, manufacturing, agriculture, transport, finance, telecommunications, human resource development and ICT. Bringing Chinese standards to all of those areas will make Myanmar fall into the standardization trap which could potentially minimize the options for import markets in Myanmar. More importantly, this will give China superior bargaining power in price negotiations over Chinese-standard products in the future. The role of Myanmar National Standardization bodies, established under the law on Standardization in July 2014, will be significant in keeping CEMC projects with Myanmar national standards and with international standards, as well as ensuring the quality of the infrastructure used in the projects. Citing the Commerce Minister’s welcome note for international partners in BRI projects, standardization will also be a critical epicentre for the Myanmar government to conduct conformity assessments of all domestic and international participating partners in CMEC projects.

The creation of employment opportunities for Myanmar’s people through CMEC projects is also ambiguous. Several news outlets have noted that Myanmar locals are frustrated that China-backed projects employ Chinese citizens for management positions, and that Myanmar locals are only used for labour intensive work. Questions over employment are not just the case in Myanmar. A report by Nikkei Asia Review mentioned that at the Port of Gwadar, one of the key strategic BRI projects, about half of the workers are Chinese. Similarly, in Laos, there are complaints by the Laotians regarding the fact that majority of the labour on the railway line are Chinese. More importantly, Myanmar youth should also have their capacity built in order to work in management and technical positions in CMEC projects. Labour proportions by citizenship should therefore be reflected formally in agreements in details. More importantly, questions surrounding local capacity should be addressed by both the Myanmar and China governments by establishing training programs for young Myanmar engineers in order for them to be able to work in these dignified positions, and earn the same wages as Chinese citizens.

The China-Myanmar Economic Corridor is a decades-long project for which details have not yet been agreed. And Myanmar’s National League for Democracy-led administration has nearly two years left to govern; new civilian governments will be elected in 2020, 2025 and so on. With this in mind, a Public Private Partnership Body should be established at the project negotiation stage, and continue its work through the project implementation and monitoring stage, to ensure homogeneity across successive governments.

Recent news show how Chinese projects are negatively effecting the health and livelihoods of local populations in Kyaukphyu, due to tankers pumping oil from vessels to storage tanks on Maday island. This 771 km-long crude oil pipeline, launched in 2017, carries 440,000 barrels of crude oil per day, coupled with a 2013 gas pipeline that carries 12 billion cubic meters of gas annually from Maday island to China’s Yunnan Province. Even before CMEC projects are launched, it is quite obvious that this dual pipeline project alone has negatively impacted locals. A clear-cut calculation of the benefits and the costs of such developments should therefore be made and weighed carefully by the Myanmar government. Several preparations should be carried out before the launch of the project – the ones recommended here are just a few. Unless planned and prepared wisely over the long-term, the ultimate aim of achieving development through the China-Myanmar Economic Corridor as declared by the Myanmar government would go into an opposite direction.

Image Credit: Liu Yun, AFP via Getty Images. Original image featured on Mizzima.

Myat Myat Mon is currently a UNESCO-China Great Wall Programme fellow in International Economics and Trade at Zhejiang University of Science and Technology. Previously, she worked in the field of constitution building, federalism and democratic governance in Yangon. She thanks Tea Circle editors, Bobby Anderson and Ko Htet Thiha Zaw, for their insightful edits and comments in the first draft.