Engage to overcome Myanmar bias against Chinese investments
There is an “implicit bias against Chinese investments” in Myanmar, a report from the International Growth Centre argued, attributing the prejudice to the legacy of earlier Chinese projects in the country, including Myitsone Dam and Letpadaung Copper Mine. The way for Chinese firms to repair the tainted brand is to directly engage the affected communities and reach out to the domestic media.
The IGC published the report “Public perception of Chinese investment in Myanmar and its political consequences”, co-authored by Ying Yao from Tsinghua University and Youyi Zhang from Cornell University, on June 20, which examines the general public’s perception of Chinese investment in Myanmar.
The briefs highlighted that China remains a powerful actor in Myanmar’s economy amid the country’s reforms and opening up.
Despite the diversification of investment sources, Myanmar remains one of the largest destinations for Chinese infrastructure investment over the past decade, particularly in the hydropower sector.
30pc of Chinese-funded dams built since 2000 are in Myanmar, while another 10pc are located in the rest of ASEAN. China was the single dominant investor in Myanmar before 2011, partly owing to western sanctions, and accounted for more than 60pc of Myanmar’s approved FDI in 2012, most of which went to the infrastructure sector, including power, transport and energy.
Beijing’s Belt and Road Initiative, combined with recent shifts in Myanmar’s political standing on the international stage, the report observed, means that Chinese firms will continue to play a major role in Myanmar’s economy. For example, the government in February signed a Memorandum of Understanding (MoU) with China on the China-Myanmar Economic Corridor, which Nay Pyi Taw approved last month.
“Following the recent Rakhine crisis in western Myanmar, it seems that Myanmar is once again leaning towards China as Western governments … increasingly place heavy criticism on the Myanmar government for its human rights record.” – Ying Yao and Youyi Zhang, International Growth Centre
The report revealed that public perceptions of Chinese projects are contingent on the firm’s local partner and social engagement but there is an implicit bias against Chinese investments, which is “likely based” on experience of previous Chinese investments in Myanmar, including to the Myitsone Dam and Letpadaung Copper Mine projects before the latter was investigated by a commission chaired by Daw Aung San Suu Kyi. “Those projects caused widespread criticism and concerns in Myanmar,” Mr Zhang commented.
In addition, Japanese firms were found to be regarded much more positively than their Chinese counterparts, even when companies from either country collaborate with military-affiliated companies and do not directly engage with local communities. Based on the survey, Singapore, Thailand, and Japan all enjoy a higher percentage of being seen as responsible investors than China.
The survey experiment differentiated FDI project from private companies and state-owned enterprises (SOEs), but the difference is not significant. When both types of companies choose military-affiliated partners and engage with affected communities indirectly – only through local government – there is not a big difference in support rate among the respondents. In contrast, when both types of firms choose non-military local partners and engage with communities directly, the respondents favour private companies over the SOEs.
Similarly, the results suggested that public support for BRI is contingent on the domestic partner and social engagement of the Chinese investor. For instance, Chinese SOEs which work with private partners and engage with communities directly would lead to improved public support for infrastructure projects under the Belt and Road Initiative. The report argued that this finding has broader implications for economic cooperation schemes under the BRI.
Community and media engagement
Working with local communities directly is the key to repairing the tarnished reputation. Chinese investors can improve their image by “carefully selecting their local partners and engaging directly and actively with the affected communities”.
“Furthermore, this research offers a warning for the Belt and Road Initiative and the China-Myanmar Economic Corridor about the potential local resistance they may face if their investment strategies do not consider the local context carefully,” the publication cautioned.
Apart from communities, Chinese investors should also work with domestic media, especially the private media.
“We suggest that they [Chinese firms] should engage more openly with the privately-owned media by providing accurate and reliable information before the unfounded rumours spread around. In the meantime, we also suggest private media conduct comprehensive and verifiable investigation about Chinese investment projects,” Mr Zhang explained.
When it comes to investing in natural resources-related projects, foreign investors, including Chinese businesses, are well-advised to be more cautious and undertake due diligence.
“This is especially the case for Myanmar’s designated ethnic states such as Kachin State and Rakhine State, which are abundant in natural resources but are affected by long-running conflicts with the central state,” the report concluded.
The report’s conclusion resonates with what academics and domestic business leaders said earlier.
Simon Tay, chair of the Singapore Institute of International Affairs, said last year that the success of the BRI depends on whether Beijing can learn from the mistakes of Myitsone Dam and take into account concerns from communities. He said the issue is that China wanted a dam built in Myanmar with most of the power generated going to China. But most of the environmental and social problems would have remained in Myanmar. “But we need to minimise the problems [for affected communities],” the academic stressed.
In the same month last year, U Khin Maung Win, CEO of Myanmar Shwe Pyi Tractors, also highlighted that early public engagement is critical for BRI projects because past experience suggests that commercial gains from such cooperation, albeit smaller scale, were “rarely transparent”.