Why China may run into roadblocks in its New Silk Road in South Asia - II
by Ramtanu Maitra on 04 Aug 2019 2 Comments

Myanmar: Too Much Chinese Muscling 


In Myanmar, China’s BRI faces a different set of problems. The Myanmar government is under pressure from the international community for its poor handling of the Rohingya crisis. What particularly hurts Naypyitaw is repeated attacks from the United Nations on the issue. Yanghee Lee, the U.N. independent expert on human rights in Myanmar, said in late June that the Myanmar army may be committing gross human rights violations under cover of a mobile phone blackout in Rakhine and Chin States: “The conflict with the Arakan Army (a violent outfit set up by the Rohingyas with help from Saudi Arabian money and Pakistani training) in northern Rakhine State and parts of southern Chin State has continued over the past few months, and the impact on civilians is devastating. Many acts of the Tatmadaw (army) and the Arakan Army violate international humanitarian law and may amount to war crimes, as well as violating human rights.” (U.N. investigator reports possible fresh war crimes in Myanmar: The Daily Star of Bangladesh: July 03, 2019)


Perhaps because of this virtual isolation and China’s decision not to join the voices pushing Myanmar to attend to the Rohingya crisis, Naypyitaw has become more dependent on Beijing for its economic well-being. But, that too, has run into problems. In 2015, Myanmar chose a Chinese consortium led by state-run CITIC Group to develop a $10 billion port, Kyaukphyu, on the Bay of Bengal and an industrial park that could turn into the country’s largest foreign investment. With Beijing pledging to create 100,000 jobs and transform a poor region, the Kyaukphyu port plan potentially represented a huge win for Myanmar, it was argued.


At the time, it was estimated that the deep-sea port component itself would run up a bill of $7.3 billion. CITIC settled for a 70 percent stake in the port, leaving a $2.2 billion contribution from Myanmar for its 30 percent share. Assuming that Myanmar and China are pursuing a 50/50 joint venture in the $2.7 billion industrial park at the site, the total amount of investment Myanmar needs for its stakes in the port and the park would be around $3.5 billion, or 5 percent of Myanmar’s GDP. (China’s latest megaproject courts controversy in Myanmar: Yun Sen: Nikkei Asian Review: Nov. 16 2017)


However, critics challenged the deal within Myanmar, citing the debt burden that China would impose on the population and voicing reluctance to be over-dependent on China. As a result, the deal was reworked, and the initial $7.3 billion was revised in July 2018. The revised cost would be “around $1.3bn, something that’s much more plausible for Myanmar’s use,” said Sean Turnell, economic adviser to Myanmar’s civilian leader, Aung San Suu Kyi. The original plan was to develop about 10 berths at the 25-meter deep-sea port to accommodate bigger oil tankers, but the size will now be revised to only two berths, Myanmar’s Deputy Finance Minister Set Aung said in an interview. (Myanmar scales back Chinese-backed port project over debt fears: Reuters: Aug 2 2018)


It is likely that even the revised deal had to be muscled in by Beijing. It succeeded because Myanmar is facing criticism from the United Nations, Western nations and many Muslim-majority nations for its treatment of the Rohingyas and has remained heavily dependent on China for shoring up its diplomatic efforts to withstand the pressure.


It should be noted, however, that even the strong muscle of China was not successful in the case of the Myitsone Dam near the Myanmar-China border. Construction of Myitsone Dam, the first dam to cross the Irrawaddy River, began in 2009, and the finished crossing was scheduled to open in 2017. Facing huge protests from the local population, it was abandoned in 2011 after the Chinese had spent about $1 billion. The dam was to be built by the Upstream Ayeyawady Confluence Basin Hydropower Company, a joint venture between the China Power Investment Corporation, the Myanmar Government’s Ministry of Electric Power and Asia World Company. The dam was planned to have a generating capacity of 6,000 megawatts and to produce electricity primarily for export to Yunnan, China. Though it has not been completed, the last word on Myitsone has not yet been said. China is still pressuring Myanmar to revisit the contract.


Elsewhere in South Asia


China has met serious resistance in Myanmar, but because of the strong cards it holds in light of Naypyitaw’s inability, or unwillingness, to counter the hardline anti-Muslim Buddhists, has given Beijing a leg up in pushing through the BRI, even the curbed version. In some other South Asian countries such as Sri Lanka, Bangladesh, Maldives and Nepal, China does not hold as many cards.


For instance, in Maldives, Beijing made large investments in infrastructure projects during former President Abdulla Yameen’s tenure in office. Projects included a $830 million upgrade of the Maldives airport and a 2-km bridge to link the airport island with Male, according to the Centre for Global Development. China is also building a 25-storey apartment complex and hospital in the Maldives. While these developments do not indicate BRI activity, the arrival of three Chinese naval ships in Male in August 2017 cast a different light on the purpose of those investments.


Subsequently, following Yameen’s defeat in the presidential election and the emergence of opposition leader Ibrahim Mohamed Solih as the new president, rumblings were heard from this nation of less than a half million people about accruing an estimated $1.3 billion in debt to China - more than a quarter of its GDP - mostly for large-scale infrastructure projects, according to Reuters. In the run-up to the elections, an opposition Maldivian Democratic Party spokesperson called the Beijing-funded projects “debt traps” and signs of corruption under Yameen. Notwithstanding this turnabout by Maldivian authorities, no anti-China activity in the Maldives has been noted yet.


A similar situation exists in Sri Lanka, as well. In the mid-2000s, Colombo signed with Beijing to build a new port from scratch in the town of Hambantota, in the south of the island. “Chinese funds and engineers are mobilized to build infrastructure outside China, as part of a partnership that was meant to be win-win: this is the very definition of the rationale of the Silk Road,” said Jean-François Dufour, economist and director of DCA China-Analysis. The Chinese president integrated the Sri Lankan project into the BRI in 2013. (In Sri Lanka, the new Chinese Silk Road is a disappointment: France 24:  March 24 2019)


However, the project turned out to be a dud. In 2015, when it was realized that the future of Hambantota Port is bleak and Sri Lanka was staggering under debt, and was unable to repay the more than $8 billion in loans it had taken from China for several infrastructure projects in the country, it agreed to turn over the port to Beijing for 99 years in exchange for cancellation of its debt.


The first phase of another project, the construction of Colombo Port City, a $1 billion mega project funded by China, was completed earlier this year with the reclamation of 269 hectares of land from the ocean. Two-thirds of the new 269-hectare reclamation project, which is envisaged as the site of a new financial district and has worried environmentalists, also goes to China on the 99-year lease.


In Bangladesh and Nepal, where Chinese investments are growing steadily, BRI is the focus. China has emerged over the years as Bangladesh’s largest trading partner. In fiscal 2017-2018, bilateral trade between the two was $12.40 billion. During the fiscal year, Bangladesh imported $11,706 million while exporting about $694.97 million of goods to China. Chinese investments totaled $1.03 billion in 2018, the bulk of it - $834 million - coming in the power sector. Both countries have identified electrical and electronics, agriculture, tourism, flower, medicine, connectivity and maritime as some of the potential sectors for joint ventures.


However, the presence of the Chinese has not been as well received in Bangladesh as it was in Sri Lanka. Recently, hundreds of Chinese and Bangladeshi laborers clashed at the site of Payra power plant being built south of Dhaka, leaving one Chinese worker dead and more than a dozen others injured. Following the incident, Bangladeshi officials pointed out to the media that similar clashes occurred a year ago.


In May 2017 in Kathmandu, according to the Chinese state-run agency Xinhua, Nepal and China signed a memorandum of understanding on bilateral cooperation under the framework of China’s BRI. Nepal received foreign direct investment pledges from China to the tune of $57 million in 2015-2016, $76 million in fiscal 2016-2017, and $427 million in fiscal 2017-2018.


Further, in May 2019 these two countries also signed a protocol to allow Nepal access to seaports at Tianjin, Shenzhen, Lianyungang and Zhanjiang and road and rail facilities at Lanzhou, Lhasa and Shigatse for third-country import, according to Nepal’s Kathmandu Post. Long Xingchun, director of the Centre of India Studies at China West Normal University, said the protocol was “largely symbolic since most of Nepal’s external trade will still rely on passing through India, but it does help Nepal’s bargaining power when dealing with India.”


Nepal, a nation of nearly 30 million people, is the focus of rivalry between the two Asian powers, with a surge of Chinese investment and infrastructure development reshaping a region long considered to be India’s backyard. India is Nepal’s biggest trading partner, accounting for about two-thirds of Nepal’s exports and most of its consumer goods imports. “China knows that it cannot replace India’s role in Nepal,” Long said. “China also does not demand Nepal side with it, which is different from India’s attitude which actually pushes Nepal even further away. For China, it’s fine as long as Nepal remains neutral.” (China and Nepal sign off on ports deal to ease Kathmandu’s dependence on India for trade:  Catherine Wong: SCMP: May 2 2019)




The resentment against Chinese workers who have been employed by the Chinese construction companies and other enterprises engaged in BRI work stems from several factors. In South Asia, incidents exhibiting resentment have occurred in both Pakistan and Bangladesh.


With easy access to a large market and relatively cheap labor, more Chinese companies are heading to wherever BRI has created an opening for them to function. Suddenly Chinese workers, many of whom are skilled and are experienced with the technology they are handling, have appeared. It is not surprising that the locals do not like the presence of these foreign workers, who they consider not only intruding in their land but also taking away jobs that they might be expected to perform.


What causes further anguish among the locals is that China is a huge country compared to theirs, and an economic powerhouse. That provides China an unequal advantage and allows it to disregard their concerns, some believe. Even normal interaction between the two could get testy because of this perception.


In addition, particularly in Pakistan, as Pakistan’s debt to China increased, anger has developed among some, particularly the small and medium-size business community, because of the preferential treatment Chinese companies have been enjoying, thanks to the Pakistani authorities. Their fear is that things are going to go further downhill, endangering their means of livelihood. Such perceptions, bordering on suspicion, often drive people to challenge other positive aspects of the project.


As a June 2018 report from the International Crisis Group on the CPEC in Pakistan put it: “The project risks inflaming longstanding tensions between the center and smaller federal units and within provinces over inequitable economic development and resource distribution. Less-developed federal units such as Balochistan and Sindh contend that the corridor’s route, infrastructure and industrial projects will mostly benefit Punjab, already the country’s wealthiest and politically powerful province. Yet, even in Punjab, locals could forcibly resist the state’s acquisition of land for CPEC’s agricultural projects.”


In Pakistan, China needs to watch over its shoulder carefully to make the CPEC a smooth operation. Disgruntlement among the locals about what they may construe as “Chinese intrusion” in the country, since the large power projects or transport projects do not directly help the poorer Pakistanis as they help those with means, could result in public expression of anger. In a country where the Islamist Jihadis are looking for opportunities to assert themselves, such disgruntlement could lead to serious disruptions.


Even though in Bangladesh or Nepal the Islamist Jihadi factor does not exist as a threat to the Chinese projects, many of the resentments expressed by the Pakistanis can be expected to show up. One of the added problems in South Asian countries, barring Pakistan, is the fact that pre-Deng Xiaoping China during the halcyon days of Mao had actively funded, armed and supported Maoist communist groups trying to find their feet. Although the main beneficiaries of Chinese bounty in those days were the anti-India secessionist groups in India’s northeast, Chinese support did show up in Nepal, Bangladesh and other South Asian countries, as well.


Despite its turnaround from the earlier policy of exporting communism to create regime change in South Asia and elsewhere, China’s recent behaviour has not earned the trust that is critical to making the Belt and Road Initiative a success in South Asia. China’s money power may achieve some success, but without trust it may not be enough.



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