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Economy

China's growing image problem in Myanmar

YANGON -- When protesters against a copper mine in central Myanmar recently took two Chinese contractors hostage, the incident sparked reports about growing anti-China sentiment in a country long reliant on investment from its giant neighbor.

     Some commentators were quick to link the kidnapping with violent protests in the Philippines and Vietnam against China's economic encroachment and territorial claims. But anger over the Letpadaung mine at Monywa, about 135km west of Mandalay, predates the recent flare-up in tempers over territory. There is a swelling backlash, from the government level on down, against China's pervasive role in Myanmar and its unrivaled dominance during the Southeast Asian country's long economic isolation from the West.

     A number of Chinese businesses -- including Wanbao, the company leading the Letpadaung mine project -- are finally recognizing the need for proactive community engagement. Some observers suggest such efforts have come too late. "Anti-China sentiment is definitely on the rise in Myanmar," said Sean Turnell, a Myanmar expert and economist at Macquarie University in Australia. "This is across all strata of society, from business, government, to the ordinary people of Myanmar's major cities."

     He continued: "Much of this sentiment is not without reason, to the extent it is not so much anti-Chinese people as anti-Chinese state and some especially rapacious Chinese state-owned enterprises."

     Turnell said "terrible" deals drawn up between Chinese state companies and Myanmar's past military regime are now bitterly resented. "The idea that China treats Burma as a quarry, mine and plantation will not quickly go away."

     A symbol of China's growing public relations disaster in Myanmar is the $3.6 billion Myitsone Dam project, which sits abandoned in the northern state of Kachin. The massive development provoked so much public ire in 2010 that the government of President Thein Sein suspended it just six months after taking power in March 2011.

     Infrastructure around the site gathers dust while the project remains inactive -- at a massive loss to the developers, state-run China Power Investment and local private partner Asia World.

     Acrimony over this and other China-led projects, ranging from the extractive industries to infrastructure construction, continues to be felt throughout the country. And a sharp decline in Chinese investment in Myanmar suggests the protests and the government's response are having a knock-on effect on Myanmar's economy.

     "What (the latest incident at) Letpadaung shows is how difficult it is to put the genie back in the bottle once it's unleashed," said Vicky Bowman, a former British ambassador to Myanmar and director of the Myanmar Center for Responsible Business. "Outrage, once you make a mistake, is quite difficult to (assuage)."

Community motives

The two Chinese workers taken hostage were grabbed May 18 while surveying near the Letpadaung mine, along with one of their local colleagues. The local contractor was released later that day, but the Chinese men were held until the following evening. A group calling itself the Yangon Public Service Network demanded China's mining activities cease, according to Wanbao.

     The company's statement at the time said the captives' lives had been threatened, though upon their release a spokesman confirmed that they were "in good shape."

     The kidnapping is just one in a series of protests at the copper mine -- a joint venture between Wanbao, a unit of Chinese arms manufacturer Norinco, and Union of Myanmar Economic Holdings, or UMEHL, a conglomerate owned by Myanmar's military.

     An expansion of the site in 2010 brought accusations that vast tracts of land had been confiscated from locals without adequate compensation. In November 2012, security forces led a crackdown on protesters, using incendiary white phosphorous and injuring at least 100 people, including dozens of monks. Work on the site was halted, but it restarted last year after the deal was renegotiated based on the recommendation of an investigation commission headed by opposition leader Aung San Suu Kyi.

     Under the new contract, the state, rather than Wanbao, now receives the majority of profits, at 51%. The Chinese company's share has fallen to 30% and UMEHL's to 19%. In addition, Wanbao has vowed to channel 2% of its profits toward corporate social-responsibility initiatives.

Lingering distrust

Yet locals apparently remain suspicious that the mine is still a China-dominated project. While Wanbao's website insists the organization "cares about the future of your community," that message does not resonate with everyone.

     At the time of the kidnapping, a resident from the village of Hse Te told local media: "We are only keeping them to draw the attention of authorities from the mining company, so they come to see us and talk about our future.

     "We have asked the mining authorities several times to negotiate with us, but every time we meet they fail to give a clear statement about our future. Now the authorities tried to face us brutally. Since we lost our land, we have no life."

     Community-level issues, rather than wider political concerns, distinguish the anti-China protests in Myanmar from those elsewhere in Southeast Asia, Bowman suggested.

     "These (complaints) in Myanmar are highly specific to the locality of the project and people thinking the project is not beneficial to them," she said, noting this applies to the controversial Taguang Taung nickel mine, the Myitsone Dam and Letpadaung. "The Vietnamese situation has a different background. It is political."

     Some observers see the Myanmar government's push to diversify its sources of investment away from China and toward the U.S. and Europe as a clear political statement against China. Bowman sees it as more of an economic decision.

     In her view, Myanmar has "passed the peak" of anti-China sentiment, noting "some Chinese companies are now trying to conform ... and work closely with communities." She acknowledged, however, that public hostility toward projects such as Myitsone or Letpadaung may deter future Chinese investors.

     "Chinese companies looking at Myitsone or Letpadaung might say, 'what happened there could happen to us' -- whether that's because they're Chinese companies or because of the current investment climate," Bowman said.

     One thing is clear: Whether it is because of anti-Chinese sentiment, a general move toward diversification or growing anxiety among companies that their projects will be targets for protests or attacks, investment flows from China into Myanmar have slumped dramatically.

     Figures from Myanmar's Central Statistical Organization show Chinese investment between April 2013 and January this year was just $46 million, compared with $407 million in the previous fiscal year and $4.3 billion in the year through March 2012.

Scared off

According to some analysts, negative reporting about Chinese investment and commerce in Myanmar could be contributing to the decline. Tang Xiaoyang, resident scholar at the Carnegie-Tsinghua Center for Global Policy, observed that the media's focus on anti-Chinese sentiment in Myanmar risked driving away Chinese investors, which could deal a "significant blow" to the Southeast Asian nation's economy.

     "Western economic activity in Myanmar cannot replace China's comprehensive engagement, as Western companies have only shown interest in limited sectors, like oil and gas," he said.

     The impact of Chinese uncertainty on Myanmar's development was evident in June, when it emerged that concerns over attitudes toward Chinese companies had led international investors to pull out of plans for a proposed special economic zone (SEZ) on the outskirts of Sittwe, capital of the western state of Rakhine.

     However, Turnell said the withdrawal of Chinese investment was unlikely to be long-term, given China's huge demand for resources and Myanmar's proximity. "They will be back," he said.

Sectarian violence

The rise of extremist Buddhist nationalism is another cause for concern.

     Draft legislation on "the protection of national race and religion" now before parliament has been condemned by rights organizations for exacerbating racism. It has also fueled concerns that extremism aimed primarily at Muslims could expand into other sectors of society. Outrage over Chinese business activity, some fear, could turn into wider, more dangerous prejudice.

     Aid workers say they have noticed an increase in reports of broader anti-China sentiment in some local papers. On the other hand, Nay Phone Latt, a blogger and founder of anti-hate-speech campaign group Flower Speech, downplayed the potential impact. He said threats to individual Chinese living in Myanmar are nowhere near the level of those faced by other groups, such as Muslims or foreigners working in Rakhine -- the scene of violent ethno-religious conflict between Buddhist and Muslim communities.

     "I've read some (anti-China rhetoric), but it is mostly to do with mining and other related activities and directed at the Chinese government (rather than individuals)," Nay Phone Latt said.

     And while he said there are some groups calling for violence, the incitement is mostly focused on religion, not China. "The Myanmar government has a good relationship with the Chinese government," he said. "They wouldn't allow it."

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