* China long Myanmar’s top foreign investor, diplomatic ally
* Easing of Western sanctions will bring more competition to
Chinese firms
* Chinese companies well-established, have first-mover
advantage
* More stable government good for all firms, Chinese
included
By Ben Blanchard
BEIJING, April 26 (Reuters) – The lifting of decades of
broad Western sanctions on Myanmar will prove to be both a boon
and a test for China, for years the former Burma’s top investor
and trading partner, bringing both risk and opportunity for
long-established Chinese firms.
The United States, European Union, Japan, Canada and
Australia have all moved in recent weeks to ease or suspend
sanctions on Myanmar, as the once pariah nation embarks on
landmark democratic reforms and seeks engagement with the world.
While sanctions have blocked many Western investments, China
has become Myanmar’s biggest ally, investing in infrastructure,
hydropower dams and twin oil-and-gas pipelines to help feed
southern China’s growing energy needs.
But with European, U.S. and Japanese firms all chomping at
the bit to get in, Chinese firms long present in Myanmar with
little competition could be in for a shock.
“Being based in Yunnan, which shares a long border with
Myanmar, and not having to worry about sanctions, has been great
for Chinese companies in the past,” said Wei Jijian, a manager
at a Chinese mining company which operates in Myanmar.
“But now American and British companies are sniffing around,
and once they go in in a big way, it’s going to create
difficulties for Chinese companies,” he told Reuters by
telephone from the Yunnan provincial capital, Kunming.
“So Chinese firms should get in now and grab the first-mover
advantage.”
Moves to ease or suspend sanctions have been accompanied by
a degree of hand-wringing in Chinese media, especially in
publications from southwestern Yunnan province and those linked
to Chinese industry, the energy sector in particular.
China’s energy industry has more reason than others to be
nervous.
Last year, Myanmar’s new civilian President Thein Sein
suspended the $3.6 billion Myitsone dam being built and financed
by Chinese companies in northern Myanmar after weeks of public
criticism of the project.
But a more crucial project – twin oil and gas pipelines
being built at huge expense across Myanmar and into China –
appears safe despite unhappiness among some residents who live
along its route and conflict with ethnic minority rebels close
to the Chinese border.
CNPC, parent of PetroChina, is in charge of that
project. China’s top three oil firms – CNPC, Sinopec Group and
CNOOC Ltd – all operate in Myanmar.
Energy, a magazine published under the auspices of China’s
state-owned Assets Supervision and Administration Commission,
said in a recent blog on its website that Myanmar’s
democratisation would pose a big challenge to energy
cooperation, noting Myanmar was “drifting away” from China.
“In the eyes of some of Myanmar’s top leadership, the
country relies excessively on China, from daily necessities to
strategic resources, and that is bad for the country’s
international image and political and economic security,” the
magazine said.
“The appropriate way to deal with this then is to put some
distance between Myanmar and China and draw closer to other
large powers.”
MORE TRANSPARENT ENVIRONMENT
China has counted on Myanmar as a bulwark against what China
sees as U.S. attempts to surround it. That reliance could be
threatened now the United States has renewed contacts with
Myanmar as it embarks on political liberalisation.
China’s pledged investment in Myanmar was more than $14
billion in the 2010/11 (April-March) fiscal year, as total
foreign direct investment promises soared to $20 billion from
just $300 million a year earlier, official data show.
The Chinese government has called on all sanctions on
Myanmar to be lifted, after pro-democracy leader and Nobel Peace
Prize laureate Aung San Suu Kyi and more than 40 members of her
party won April 1 by-elections.
Still, China has expressed concern its influence in the
country could be affected, especially by U.S. moves to re-engage
with Myanmar. Vice Foreign Minister Cui Tiankai said on
Wednesday he hoped better U.S. ties with Myanmar were not aimed
at excluding China.
Chinese executives will also be hoping that Myanmar’s
reforms lead to less corruption and bureaucracy and a better,
fairer regulatory and governance environment.
“China has over the years monopolised the market, but that
actually was not necessarily a good thing. Some of the
investments there turned out to be bad bets,” one Chinese oil
executive told Reuters.
“If we now get a more transparent environment, Chinese
companies would be obliged to take a more objective look at
potential opportunities,” said the executive, who declined to be
identified as he is not authorised to speak to the media.
STILL MANY PROBLEMS
Not everyone in China is so sanguine about the prospects for
Southeast Asia’s poorest country, sanctions or not.
The state-run Yunnan Information Daily this month outlined
the case of a Yunnan firm which has invested millions in
Myanmar, yet had an unspecified new project called off by a city
mayor because of a dispute between the central and regional
governments.
“This kind of thing just adds to the risks for Chinese
companies. National reconciliation may be happening, but the old
problems are still there and are just as prominent,” the
newspaper said.
While some Chinese companies fret about competition from
Western firms, it may actually in the nearer term be Japanese or
South Korean companies that prove quicker on their toes.
Japanese companies have long conducted business in Myanmar,
but interest has grown since the reform-minded government took
office, particularly in planned industrial zones.
Japan will help draw up a blueprint for the Thilawa Special
Economic Zone, potentially giving Japanese firms a leg-up over
rivals in winning infrastructure projects for the area.
“Japan has started providing assistance again, including
loan resumption and debt forgiveness, and has been sending
numerous business delegations to look at deepening investment
ties,” said Stephanie Kleine-Ahlbrandt, Northeast Asia director
for the International Crisis Group.
“Competition at the regional level is likely to deepen, and
Japanese – and probably also Korean – investment will move much
faster than that from the West,” she said.
(Additional reporting by Chen Aizhu and Sabrina Mao; Editing by
Robert Birsel)
