Construction going on at the Myitsone Dam in 2010 before President Thein Sein ordered a suspension on the project. (Photo: The Irrawaddy)
RANGOON—Chinese investment in Burma has sharply declined since President Thein Sein’s reformist government took over from the military junta in 2011, says a US-based think tank. It warns that this fall in investment could hurt Burma’s economic development and the success of its nascent democratic reforms.
Burmese public opposition against China’s Myitsone Dam and the Letpadaung copper mine, and the government’s decision to suspend the projects, have seriously affected economic relations between the two countries, according to a report by Yun Sun, a researcher with the Stimson Center, a foreign policy research institute in Washington.
“[P]olitical reforms since 2011 have substantially impacted Chinese projects, causing the rapid decline in Chinese investment,” Sun wrote. “China perceives that Myanmar is now a more unfriendly and risky place to invest and is displeased that the Myanmar government is not doing more to protect Chinese interests.”
Chinese investment in Burma fell from about US$12 billion in 2008-2011 to just $407 million in 2012-2013. Non-Chinese investment failed to make up for the shortfall and overall foreign direct investment (FDI) plummeted from $20 billion in 2010-2011, to $4.6 billion in 2011-2012, and only $1.4 billion in the last fiscal year.
The report warned that this trend not only threatened Burma’s economic development, but also its democratic transition. It added that attracting foreign investment in infrastructure was pivotal to Burma’s development.
“The economic success of the new democratic system in Myanmar is critical to the sustainability of the nation’s political transition,” Sun wrote. “[T]here is a need for both Chinese investors and Myanmar to recalibrate their positions to reduce distrust and hostility, and assume mutually beneficial cooperation.”
Chinese Embassy spokesman Gao Mingbo confirmed in a reaction that Chinese FDI had fallen sharply since 2011, adding “The [FDI] situation was bad last year, but it might improve a little bit this year.”
Gao Mingbo echoed some of the report’s findings, saying there was a strong need for both Burma and China to address the concerns surrounding Chinese investments, so that the suspended projects can resume.
“It’s important that the two sides step up their efforts,” he said. “Obviously, we are trying very hard… We have to increase the risk awareness among the [Chinese] operators. We also need more outreach efforts to local communities and the media” about investment projects.
During the past two decades, Burma’s former military regime relied heavily on China for political and economic support.
Around 2008, Beijing began to step up large-scale investment in Burma and it reached agreements with the generals in Naypyidaw for the implementation of three mega projects—the $3.6-billion Myitsone hydropower dam, the $1-billion Letpadaung copper mine and the $2.5-billion Shwe oil and gas pipeline.
Sun said China had “consciously pushed to ink these deals before the 2010 elections to maximize its holding of Myanmar natural resources.” Most of these investment funds, she added, had since been disbursed in Burma by the Chinese state-owned companies involved.
However, after Thein Sein’s nominally-civilian government took office in 2011, it suspended the Myitsone Dam until 2015. The Letpadaung mine was suspended in November 2012.
Both decisions were taken following a popular backlash among the Burmese public against the projects, which were perceived as having heavy social and environmental impacts on local communities, while mostly benefiting China and Burma Army-affiliated companies.
The oil and gas pipeline, which runs from western Burma’s Arakan coast to Kunming, the capital of southern China’s Yunnan Province, has encountered fewer problems, according to Sun, because it is a joint enterprise involving six firms from four countries, China, Burma, India and South Korea.
In recent months, Burma’s Parliament launched an investigation into the Letpadaung mine, which concluded that it should resume if Burma’s government gains greater benefits from the project and if concerns about its local impact are addressed.
Since then, a new project agreement has been reached that provides far greater income benefits to the Burmese government, while the Chinese project investor and Burmese Army-affiliated Union of Myanmar Economic Holdings took a large cut in project incomes.
The Stimson Center report said this new agreement was potentially a significant development as “it creates the legal, political and bilateral precedent for renegotiation on profit-sharing and for how Chinese investors should address the inadequacies of their projects” in Burma.
Ref;irrwaddyburmese
Ref;irrwaddyburmese
Foreign investment in Myanmar surges, office rents sizzle
YANGON, Sept 20 |
(Reuters) - Myanmar has approved more foreign direct investment in the past five months than all of last year, but companies setting up operations in the hot frontier market face a growing problem: Southeast Asia's highest office rental rates.
Myanmar has approved FDI projects worth more than $1.8 billion from the start of the fiscal year on April 1 to the end of August, compared with $1.4 billion in the whole previous fiscal year, Aung Naing Oo, a director general at the Ministry of National Planning and Economic Development, told Reuters.
But he said he fears potential foreign investors will be turned away by a severe shortage of office rental space.
The wave of investment comes as Myanmar's quasi-civilian government implements political and economic reforms, initiated two years ago by President Thein Sein, a former general who led the country out 49 years of military rule and global isolation.
The European Union agreed in April to lift all sanctions on Myanmar, while the United States suspended sanctions in May last year and allowed U.S. companies to invest through a general license. Some American executives have urged Washington to go further and lift sanctions entirely.
Most of the approved FDI came from other Asian nations, said Aung Naing Oo.
"Malaysia, which brought about $500 million for manufacturing Nissan cars, is the biggest investor during this fiscal (year) in terms of size followed by Hong Kong and South Korea, who injected funds in the garment industry," he said.
Nissan Motor Co plans to start a complete knock down production of its cars in Myanmar with a Malaysian partner Tan Chong Motor Holdings Bhd, the Japanese automaker said on Friday, becoming the first major global carmaker to be assembling cars in the Southeast Asian country.
The rising tide of foreign investment is fuelling a property boom in the commercial capital Yangon with the increasing demand for rental space feeding the highest office rental rates of any Southeast Asian city, according to real-estate firm Colliers International, which opened a branch in Yangon in July.
Colliers put the average rental rate in Yangon at nearly $80 per square metre, compared to about $25 in Bangkok and $30 in Hanoi. At about $70 per square meter, even the affluent city-state of Singapore doesn't match Yangon, it said.
Scipio Services, a Yangon-based firm that helps foreign companies establish themselves in Myanmar, puts prime office rental rates even higher. According to their survey, commercial spaces in the fewbusiness towers available jumped from $50 per square metre in mid-2011 to as much as $90 by May this year.
SKELETAL STAFF
Some companies choose to rent houses and villas in lieu of office space, said Brett Miller, Scipio Services' managing director. But residential rates have also shot up, with villas ranging in price from $4,000 per month to $25,000, he said.
As a result, some companies "are coming in with a small footprint," stationing only skeleton staff in the country, he said.
Other companies base executives in neighbouring Thailand and fly them to Yangon where they stay at hotels, said Tony Picon, Colliers' managing director in Myanmar. "I call them the 'half-pats', spending around half their time in Yangon," he said.
Aung Naing Oo said the government is taking measures to increase the supply of rental space.
"To solve the problem of the shortage of hotel and office apartments, we are now encouraging investors in these sectors by approving their proposals very speedily," he said.
Drastic rises in property prices are being driven partly by land speculators. Miller at Scipio Services said the government could implement a "holding tax" that would encourage landowners to either build on a property or sell it to a developer.
Picon, however, was sceptical the government could enforce compliance.
"For tax on unused land, the owner could build something small and say the land is being used," he said. "Overall I find using tax often counterproductive especially when you have limited capacity within government to enforce laws." (Editing by Jason Szep/Simon Cameron-Moore)
Ref:reuters
Ref:reuters
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