In the wake of the coup in Myanmar, China’s strategic investments there could suffer significant losses. Analysis suggests that China’s Belt and Road initiatives, which often have clear political intentions and highly corrupt projects, are more vulnerable to political unrest.
The Myanmar military seized control of the country earlier this month and detained de facto top leader Aung San Suu Kyi and hundreds of other top government officials, some of whom were involved in negotiations about Chinese investments, adding to the uncertainty surrounding Chinese investment projects.
The military has also said the state of emergency will last for a year, when new elections will be held, meaning some deals may need to be renegotiated and that new major investment deals are unlikely to be struck anytime soon.
The unrest in Myanmar has once again revealed the political risks facing Belt and Road projects. Experts say Chinese government-led investments are more likely to collude with the local government, making them more vulnerable to negative impacts in the country’s change of power.
Many of the projects are government-to-government (G2G) partnerships between the two countries, so they feel nothing can go wrong or that the host government will help solve the problem,” Dane Chamorro, a partner at risk consulting firm Control Risks Group, told the Voice of America. “
Chinese investment in Myanmar dealt a blow
Aung San Suu Kyi has been in power in Myanmar for five years and her party won the election. But in reality, the Burmese military remains very powerful and the country’s geopolitical risks remain high.
Chamorro said, “Many Chinese overseas investors rarely conduct risk assessments, due diligence, etc., before investing, as multinational companies in the U.S., EU and Japan do.”
China’s major investment in Myanmar dates back to 2004, when the two countries agreed to build an oil and gas pipeline between China’s Yunnan Province and the port of Kyaukpyu in Myanmar’s Rakhine State. The multibillion-dollar project, invested by China National Petroleum Corporation, was hailed as a model of strategic Belt and Road investment.
Since then, China has expanded its investments in Myanmar’s core sectors of mining and energy, gradually becoming one of the country’s largest trading partners and strengthening its influence.
Christopher Ankersen, an associate professor at the Center for Global Affairs at New York University’s School of Professional Studies, told VOA that China is looking for more than just financial rewards in Myanmar, but more importantly, a “bias toward Beijing.
Not all of China’s investments in Belt and Road projects are likely to pay off if you look at the risks from an economic perspective alone,” Ankersen said. But if we take a more holistic view that incorporates the strategic and symbolic significance of the Belt and Road, then the calculation of risk for these investments takes on a completely different dimension.”
However, precisely because China chooses to invest in projects that often have significant geopolitical implications in the expectation of achieving Beijing’s goal of expanding its regional influence, these investments are also often affected by local political unrest.
The loss of power of Myanmar’s NLD government has been a setback for Chinese investments. China’s largest project in Myanmar, the China-Myanmar Economic Corridor, was signed during Aung San Suu Kyi’s tenure. Previously, the Chinese investment in the Myitsone hydropower project was halted in 2011 by the military-backed Thein Sein government.
In addition, U.S. President Joe Biden‘s response to the coup in Myanmar was to impose sanctions. This could spell trouble for Chinese companies if Washington bans companies dealing with Myanmar from cooperating with the US.
High levels of Chinese-funded corruption
Indeed, many of the countries through which Belt and Road projects pass are high political risk areas. In many cases, China has colluded with corrupt local governments to secure contracts for the Chinese side, sparking discontent among the local population and sowing hazards for the sustainability of the projects.
These contracts are often ‘no-bid’ contracts, meaning that they are awarded to Chinese contractors or sponsors without competition,” Chamorro said. This leaves Chinese companies open to charges of collusion.”
The data points to significant corruption in many of the countries receiving Chinese investment, and the TRACE Global Commercial Bribery Risk Index report shows that most Belt and Road countries have a fairly high risk of commercial bribery, ranking at the end of the spectrum.
For these politicians, Chinese investment projects contribute to their corruption. The dazzling mega-infrastructure projects and cozy relationship with the second largest economy can be used to appease the public as long as the projects get built, but privately they disguise a plethora of opaque money transactions.
In 2018, Malaysian Prime Minister Mahathir Mohamad threatened to cancel a Chinese-backed rail project signed by his predecessor, Najib Razak, who was later found guilty of corruption. Although the deal was renegotiated, the case is seen as a major setback for the Belt and Road project.
Another example is the Maldives. Abdullah Yameen, the pro-China president of the Maldives, was unexpectedly defeated in 2018 and was immediately exposed for corruption. The new government found that the Maldives owed huge amounts of money to China for Belt and Road projects, many of which had inflated construction project costs.
If the Maldives defaults, the country could face the same fate as neighboring Sri Lanka. Sri Lanka owes China billions of dollars in Belt and Road projects, with reports that large sums went to former President Mahinda Rajapaksa, who lost an election in 2015 but was forced to lease the strategically important port of Hambantota to China after the new government struggled to repay the debts he took on.
Recent Comments