Saturday, August 30, 2014

Problems and Promises in Burma Go Far Beyond Freight and Logistics Interests

New South East Asian Market Comes with Both History and Contemporary Difficulties - the Role of Geopolitics in Transport and Infrastructure Development
Shipping News Feature

BURMA – MYANMAR – Much is made currently about how Burma, otherwise known as Myanmar, is 'the last great investment frontier'. Emerging after decades of brutal military rule (though the situation is far from stable according to local NGO's) Burma is experiencing a flood in foreign finance as companies rush to get a piece of the pie and be in at the start of what is expected to be a highly profitable boom in a blossoming economy, and freight forwarding and other logistics related groups have been amongst the first to join the rush. However as investors fight for position in the new market more powerful forces are shifting behind the scenes to attempt to make Burma fit into their own power plays and counter one another's influence.

Since the end of British rule in 1948 Burma has largely – thanks to an almost continuous and hideously brutal civil war waged against its own ethnic minorities – been reliant on its own resources due to its status as an international pariah. This has left its infrastructure in an increasingly ramshackle state and as a result redevelopment of the country's road, rail and sea links is seen as the first in a number of potentially very lucrative steps by capital investors.

China had looked to be well positioned to exploit this market. Burma is a neighbour and during the long years of sanctions the Peoples Republic was often the only supplier of support to the military junta. Currently China is by far and away Myanmar's biggest investor, a world leader in massive transportation projects and would look like the ideal partner for Myanmar to work with to revitalise its moribund logistic and power supply capabilities.

However the world is rarely so simple. During the post WWII years China not only supplied the military junta but also actively armed the Communist Party of Burma and the ethnic armies that have been fighting the central government. The destabilisation of Burma has, it seems, been a useful tool for the Chinese government whose state companies were, until 2011, pretty much the only “game in town” when it came to investment.

This is likely one factor in recent actions by the Myanmar government which have seen the cancellation of several major rail and power generation projects and some very mixed signals from both the Chinese and Burmese. In July there were raised eyebrows when the Burmese government announced the cancellation of a US$20 billion, 1,215 km long rail project that would link Kunming to the Indian Ocean. The reason given for the cancellation was that it was due to domestic public opinion being against the scheme.

Surprise reigned when the Chinese ambassador to Myanmar stated shortly after the announcement that this was a mistake and that the project, which was largely to be paid for by the China Railway Engineering Corporation, was still on course to happen. Subsequent silence from the Myanmar government has watchers and analysts concluding that some sort of spat has happened behind the scenes.

Another factor could be the wish of the current Burmese administration to reduce ties made in an epoch that the government is still firmly connected with, but is going to great lengths to disassociate itself from. China's Power Construction Corporation has recently announced that they are renegotiating terms on several hydro-electric dam projects that it agreed with the junta. Under the original agreements the vast majority of the power generated was to be supplied to China. Widespread discontent at the perception of Chinese exploitation of Burmese resources has led to the Myanmar government clamping down and insisting that new terms be agreed on more power being supplied to the domestic market.

There is also the fact that China's growing economic strength is proving highly alarming to not only the United States but also to many countries in the region. It is often forgotten in the West that though European colonial history played a major part in shaping the current world, China's own colonial era casts a very long shadow in South-East Asia. As Ho Chi Minh, former leader of Vietnam once commented: "The last time the Chinese were here it took us a thousand years to get them out".

China's recent actions and claims to territory in the South China Seas has got its neighbours (and in the cases of Indonesia, the Philippines and Malaysia pretty distant ones at that) increasingly concerned about the future as they face the reality of a burgeoning and apparently more aggressive China. The same fears hold true in Myanmar.

What is also apparent is the willingness of other interests to step in and compete against China in securing support in Burma. To the person in the street in Burma there is both a hope for a better future as the country develops, tinged with fear that Myanmar and its people will simply be abused, stripped of natural resources and rights. China, with its heavy current investments in industries such as logging and mineral exploitation – and the bad press that attends the consequent environmental and human damage from occurrences of mismanagement – is a particular concern.

America is seen in some quarters as being the alternative. Last week saw a dual announcement of an initiative by the US government to work to improve labour rights in Burma alongside a US$470 million deal between an American investment company and the Myanmar Ministry of Power to develop two solar power plants near Mandalay, Burma's second city. When completed in 2016 the plants will supply between 10 and 12% of the country's electricity.

That other rising behemoth, India, is also looking towards Burma to further its own geopolitical means, and transportation projects are seen as a key part of its courting strategy. The Indian government and the World Bank has just announced a joint US$107 million investment in Indian developed roads in the east of the country to encourage trade between the subcontinent and Myanmar – estimates by the World Bank believe that the improvements could double trade between the countries and reduce the costs of such trade by 20%.

This investment is part of a wide sweeping plan to revolutionise transport links between India and South East Asia; both the Kaladan Multi-Modal Transit Transport Project, to be completed next year, and the India-Myanmar-Thailand trilateral highway corridor (scheduled for 2016) will see India firmly moving to establish its own stake in the region to counter China's influence. What is noticeable about the Indian projects is that though they have faced similar criticisms from local communities as the Chinese development projects the Burmese government has not hindered them or voiced concerns though a recent comment from a Burmese minister rebuked India for ‘window-shopping’ rather than committing to greater investments.

Regardless of where Burma ends up in the political wrangling between actors in the region what can be sure is that the canny locals are going to do their best to wrestle the best deal they can from this latest round of Kipling's ‘Great Game’.

This piece was submitted by our resident South East Asian correspondent Dan Shingleton.

Photo: Supplies of food being delivered to a local NGO (Wunpawng Ninghtoi (WPN) – Light for the People in Kachin State, a humanitarian organisation to aid those displaced by war and oppression.