Myanmar Economic Corridors

In a world changing because of the COVID pandemic, China’s Belt and Road Initiative (BRI) has taken a back seat. Numerous challenges have emerged which need to be overcome, not just by China but also the host countries, for the initiative to move forward. Driven both by its ambition and compulsions, a sizeable portion of China’s vast foreign reserves have been invested in BRI projects across the globe. In the post COVID stage the future for the BRI appears very uncertain and China would need to be recalibrate its strategy.

The BRI was announced with much fanfare by President Xi Jinping in 2013 while visiting Kazakhstan and Indonesia. Spanning across Asia, Europe, Latin America, and Africa it involves an amount far exceeding US$ One trillion. COVID 19 has come at a time when negotiations for several projects were complete and it was only a matter of time before work on these was to commence. The China Myanmar Economic Corridor (CMEC) is one such venture that falls in this category.

The pandemic no doubt has made a big dent in the Chinese economy and unemployment has also taken its toll. Estimates put the unemployed in urban China to five million initially, which has risen to almost nine million. Xi’s priorities are now more on maintaining the image and status of the Chinese Communist Party, while taking care of the unemployment situation and keeping the country united. BRI for the time being appears to have been relegated to a lower priority.

COVID 19 has revealed a few Chinese weaknesses to the world – lack of transparency and accountability being the prime ones. The first case of COVID 19 from Hubei province in China was detected on 17 November 2019. While it took some time to home on to the actual cause and source of infection, China announced to the world only in end December 2019 the identification of a novel corona virus, the sequence of infection being confirmed as late as January 2020. Had timely travel restrictions been imposed by China, the spread to other countries could have been controlled. China’s weakness of ensuring adequate transparency and accountability revealed in the COVID pandemic has its similarities in BRI projects. The German Bild Newspaper has slapped “damage” charges for COVID pandemic against China to the tune of US$165 Billion. These have been refuted by China labelling it xenophobia, and as “pot calling the kettle black”.

The European Union has complained that lack of information on BRI deals and non-transparent procurement systems were the biggest hurdles in the BRI process. Similarly, members of the National Assembly in Pakistan claimed having no knowledge of the various deals signed by the government in connection with CPEC. A similar predicament exists in Myanmar regarding the CMEC.

China’s economic compulsion of its energy needs for remote Xingjian and landlocked Yunnan provinces has forced it to look for routes that bypass its “Malacca Dilemma”. While its flagship project the China Pakistan Economic Corridor (CPEC) is meant to take care of Xingjian, the CMEC is meant to look after Yunnan by a corridor passing through Myanmar with the outlet on the Andaman Sea at Kyaukpyu port.

Three summit level talks between Myanmar and China have already been held, the last one being in January 2020. Broadly the venture comprises of three main projects – three border economic zones along the Myanmar-China border, the highway from Myanmar’s Northern border to its southern tip with an additional stretch to Yangon, the New Yangon City project and the deep sea port at Kyaukpyu along with an economic zone.

Post COVID the Myanmar people will be more cautious and wary of Chinese moves and actions. China needs understand that it is dealing with a nation that has experienced partial democracy for five years after a long time. As full democracy sets in the people will be more vocal, forthcoming and will openly demand rights and entitlements. Doing business with Myanmar may get that much more difficult hereafter. That only nine of the thirty-eight projects proposed by China in the CMEC has been accepted by Myanmar is a testimony to this fact. On 27 April 2020 Myanmar released its COVID Economic Relief Plan (CERP). It talks of ways and means to revive the economy and does not make any specific mention of CMEC though it does highlight expediting the strategic projects.

An underlying fear of falling into a debt trap, with an outcome like Sri Lanka, exists in Myanmar. With Sri Lanka unable to repay its debts to China, the lease for the Hambantota port has now been extended to ninety years. To avoid such a situation with the deep seaport at Kyaukpyu, the number of piers has been reduced from ten to two, thus reducing the overall cost form US$ 7.3 billion to US$ 1.3 billion, billion, a reduction of $ 6 billion. Even the share of the Chinese CITIC consortium responsible for the construction has been reduced from 85 to 70 percent. The peoples’ involvement will become more evident now with this underlying fear getting more pronounced and soft power options being exercised by China as ‘COVID Diplomacy’, and its ‘Wolf Warrior Diplomacy’, may not work.

Construction of the Myitsone dam in Kachin state by China, which would have displaced more than ten thousand villagers besides damaging the environment, was suspended by the government based on representations received from the people. China is very keen that the stalled project takes off as it is crucial for the border economic zones that are a part of the CMEC. However, the situation is far from satisfactory. The apprehensions which surfaced pre COVID are likely to continue in the post pandemic scenario as well.

Similar apprehensions were projected by the people of Yangon and Rakhine state concerning the New Yangon City project and the Kyaukpyu deep seaport, respectively. Lack of adequate compensation and the resulting in a negative impact it would have on livelihoods, are the prime concerns, and post COVID these apprehensions will only get deepened.

The New Yangon City project has also been challenged by a large section of the society. A total of 168,000 acres of land has been promised to the China Communications and Construction Company (CCCC), to develop this project. This is a company that does not enjoy a very healthy reputation with respect to transparency and accountability. Myanmar stands to initially get only five percent of the profit while China would get 95 percent. This is likely to rise to 25 percent after the initial allocation of 20,000 acres of land is made to China. Opposing voices and concerns had already been raised which can be expected to grow louder now asking for transparency and accountability.

The CMEC is designed to give China access to the Indian Ocean. In the long term the advantages for China from this accessibility will far outweigh the debt trap Myanmar would be falling into. Yet negotiations have been done in a manner that benefits China in all pillars of the CMEC. Myanmar has come to realise that being the owner of the land it needs to get more than what is being offered now. Myanmar now needs to develop its negotiating capability, which it seems to have grasped fully.

BRI projects across the world come with the clause of finances, construction services, material and labour being provided by China. However, the recent disruptions in the supply chain caused by the pandemic has taught the world not to rely only on one source. Post COVID, Myanmar would most likely review the Chinese assistance, products, and collaboration, under CMEC / BRI. It is likely that Myanmar may prefer multilateralism over bilateralism, which will ease the hold China has over it.

At the same time, China is unlikely to accept its diplomatic and geo-economic efforts go waste. China has created some pressure points, which it can use to force / coerce Myanmar to take a decision in its favour. Prime among these is the tacit relationship it shares with Myanmar’s insurgent groups. Myanmar has twenty-one insurgent groups of which only ten have signed the National Ceasefire Agreement (NCA), eight in 2015 and two in 2018. Aung San Suu Kyi, the State Counsellor, has done her best to get rest of the groups to join the NCA but has been unable to do so. Located along the China-Myanmar border, almost all these groups are being funded and equipped by China. Using these groups as leverage to get its deals through with Myanmar, China has even suggested that it could play mediator in the peace talks with them.

The Rohingya issue is another pressure point. The mass exodus of Rohingyas into neighbouring Bangladesh, following the genocide unleashed by the Myanmar military in 2017, has been criticised by the world at large. Aung San Suu Kyi had to even appear before the International Court of Justice to defend her government. In such trying times China has stood firmly behind Myanmar supporting it on the Rohingya issue in every possible way. Myanmar cannot but be grateful enough for this.

Myanmar goes to the polls in December this year. The main parties in the fray are Suu Kyi’s National League for Democracy (NLD) and the military backed Union Solidarity Development Party (USDP). China is depending a lot on Suu Kyi for pushing through its projects. The Myanmar military on the other hand is going hell for leather to bring down the NLD government and will go to any lengths to malign it. With a growing awakening in the people of Myanmar would the people accept a return to a military supported party rule, after years of suffering under them. China, has till now played its cards well, supporting the military earlier and now seen as helping the NLD; however, with the growing roots of democracy, it needs to tread cautiously.

For India, Myanmar is vital for the Act East policy to fructify. Though India too would be recovering from the aftershocks of COVID 19, it needs to get its act together fast for progressing on this policy. An economic outreach for the North Eastern states will assist in timely economic and infrastructure connectivity of the region with South East and East Asia. Concurrent with re-energising the BIMSTEC, it would strengthen India’s relations in the region, for which Myanmar would be the anchor.

Lt Gen Shakti Gurung, PVSM, UYSM, AVSM, VSM (Retd), is the ex-Military Secretary of the Indian Army. During his 39 years of service he has extensive experience along the Western and Northern borders and counter terrorism / insurgency operations. He has also been the DA in Myanmar.

Disclaimer: The views expressed are those of the author and do not necessarily represent the views of the organisation that he belongs to or of the USI of India.