Promoting Development: The Political Economy of East Asian Foreign Aid (Development Cooperation and Non-Traditional Security in the Asia-Pacific) by Barbara Stallings & Eun Mee Kim

Author:Barbara Stallings & Eun Mee Kim [Stallings, Barbara]
Language: eng
Format: azw3
Publisher: Springer Singapore
Published: 2017-06-23T04:00:00+00:00

Myanmar

A fourth case in East Asia where China has been very active is Myanmar (Steinberg and Fan 2012). Myanmar is both larger and potentially richer than Laos or Cambodia. With a population of 53 million, it has abundant natural resources. Myanmar was effectively isolated from the United States, Europe, and the international financial institutions from the time of a military coup in 1988 and the repression that followed. Japan, which had been Myanmar’s largest donor, tapered its assistance and investment. Asian neighbors continued diplomatic relations with the country over the intervening decades, but little economic interchange took place. Although Myanmar became a member of ASEAN in 1997 and continued as a member of the ADB, the latter did not approve any loans for the country after 1986. In this context, China stepped in with large amounts of financial assistance.

China was the first country to recognize the new military government in 1988. Recognition was followed by an increase in trade, much of which was border trade on Myanmar’s northern frontier with China. Beginning in 1991, finance was provided for many projects, involving ODA-like flows, sellers’ credits, commercial loans, and FDI. Most of these resources were for infrastructure. Especially important have been road and rail projects to link China’s Yunnan province with ports on Myanmar’s west coast. These would enable China to avoid the Straits of Malacca in its trade routes, where it fears US interference (Kudo 2012).

Other important projects involved energy. Some were for hydropower plants, mainly on the lower Mekong River and tributaries, involving both sellers’ credits to purchase machinery and loans to construct the plants themselves. Most of the electricity generated would go to China’s Yunnan province. Other important energy projects were twin pipelines to send oil and natural gas from the main port on Myanmar’s west coast to Yunnan. Mining projects were also included, with nickel and copper as prime attractions In addition, China financed the construction of factories on a build-operate-and-transfer (BOT) basis, including tire plants, sugar mills, and textile mills.

Quantitative estimates of these activities are hard to come by. Kudo (2012) and Reilly (2013) agree that Chinese investment as of 2010 amounted to nearly US$ 2 billion. Kudo (see also Wall Street Journal 6/4/2013) then says that approved investment by China in the following two years was over US$ 12 billion. In addition, there have been large quantities of loans of various kinds. One estimate (Aung Myoe 2007, 20) cites loans and grants of over US$ 500 million through 2006, but more recent projects seem to have been much larger.

Since 2010, however, China’s position in Myanmar has been shaken to the core. As Myanmar’s government began a political liberalization, popular opposition to Chinese activities in the country began to surface. The concerns, which had been present—but suppressed—for many years, were that Myanmar’s resources were being drained off to China and that the country itself was being left with serious problems, both social and environmental. In response, Myanmar’s new leader shocked China by suspending for the remaining five years of his term the largest of the hydropower projects, the US$ 3.

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