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Chinese power, Burmese politics

China’s state-owned energy firms have entwined themselves in Myanmar’s internal struggles. Yang Meng finds out more on a visit to the stalled Myitsone dam.

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We approached the Myitsone construction site along a new concrete road, laid over the local government’s old, rough track by China Power Investment Corporation (CPI). This Chinese state-owned power company is the investor behind this multibillion-dollar hydropower scheme in northern Myanmar, also known as Burma, and its Yunnan-based staff told me I was the first reporter to be granted permission to visit.

A cascade of seven dams is planned for the Irrawaddy River, of which the Myitsone scheme – located 30 kilometres north of the Kachin state capital Myitkyina – is just one. At a total cost of 160 billion yuan (US$25 billion) and with power-generating capacity of 20 gigawatts, this string of dams is set to be China’s largest overseas hydropower investment to date. Once the dams are complete, experts say, Myanmar’s government will receive tax revenues, free electricity and shares and dividends worth US$54 billion (340 billion yuan). That’s more than Myanmar’s entire GDP for 2010, which was US$42.9 billion (270 billion yuan).

At least that was the plan. On September 30 last year, events took an unexpected turn. Myanmar’s new, nominally civilian president, Thein Sein, believed to be responding to increasingly widespread opposition to the dam across Burmese society, suddenly announced the suspension of the project for at least the term of the current parliament.

Myanmar stands on the brink of great change. The military government that has ruled for half a century is in decline. Aung San Suu Kyi’s National League for Democracy is again a political player [editor's note: on Sunday, April 2, the party claimed a landslide victory in by-elections, setting Aung San Suu Kyi on course for a seat in parliament for the first time] while ethnic militias control swaths of the north. Nobody has the upper hand. China is Myanmar’s biggest investor, and the big state-owned enterprises that have charged into the country now find themselves caught up in its power struggles.

The situation is comparable to that in Africa, where many Chinese companies have struggled to adapt to changing conditions in the swell of democracy movements. Strategy consulting firm Roland Berger has warned that existing practices and guidance from the Chinese government are unable to keep up with the constantly shifting circumstances, or to track and evaluate both international and tribal disputes.

As of the end of July last year, 31 different nations had investments in Myanmar totalling US$36 billion (227 billion yuan) across 12 different sectors, according to the country’s Directorate of Investment and Company Administration. China is the largest single investor, accounting for almost US$16 billion (101 billion yuan). China is also Myanmar’s largest trading partner – annual trade between the two countries is now worth around US$3.6 billion (23 billion yuan). China’s Myanmar-bound exports are largely destined for its investment projects, comprising raw materials and equipment worth over US$2 billion (13 billion yuan). Myanmar meanwhile sends minerals and agricultural products worth US$1.6 billion to China.

These figures are strikingly higher than just 18 months earlier. In January 2010, official statistics put China’s investments in Myanmar at no more than US$1.8 billion. The leap is mostly thanks to the arrival of huge state-owned enterprises such as the China National Petroleum Corporation (CNPC) and CPI. Previously, investments came from small and medium-sized firms (SMEs) based over the border in Yunnan. Deals already inked by Chinese firms and the Burmese government will see investment continue to boom in the near future, mostly in hydropower, oil and gas. But those who arrive first will also be the first to hit problems.

Myanmar is rich in water. Three major river systems – including the Irrawaddy – run down the country, from north to south. But the country has never had the infrastructure to exploit these resources. Before travelling to Myanmar, I visited CPI’s offices in Kunming, where I watched as CPI Yunnan’s president, Li Guanghua, unfolded a map of Myanmar with the course of the Irrawaddy closely annotated. “There are over a dozen Chinese firms, including CPI, working on hydropower in Myanmar,” he explained. “We may be based in China, but we compete in Myanmar – almost always with other Chinese firms, and fiercely.”

Li Guanghua is a veteran of the power industry and its government regulators. He moved to CPI Yunnan in 2008, by which time the company’s Burmese projects had already been under way for two years. In 2006, with the military government in need of relief from international sanctions, Myanmar Power visited CPI in search of investment, and CPI became the first Chinese firm to work on hydropower in Myanmar. But the honeymoon period was brief. Soon, other Chinese firms were flocking to compete for the same projects. The Burmese government realised it could impose harsher conditions and still have a range of partners to choose from.

CPI operates a build-operate-transfer (BOT) model in Myanmar, meaning it will build a hydropower plant, operate it for 50 years and then transfer the whole project to the Burmese. Its cascade of seven dams is tabled to generate a similar amount of power to the Three Gorges Dam.

Under the contract, Myanmar will receive a tenth of the electricity generated for free, while the remainder will be sold to China. There is no need for CPI to obtain the land rights – Myanmar will provide those at no cost. Myanmar will also hold a 15% stake in the project. Li estimates that the project will provide an 8% return on investment, which is normal for hydropower schemes. And, as the project is near the border with Yunnan and the Burmese are waiving export taxes on the electricity, he said it is pretty much the same as building a hydropower dam in Yunnan.

The sudden arrival of 2,000 CPI employees in Myitkyina caused temporary shortages of supplies and price spikes. The situation only calmed down when goods were shipped in from Tengchong, over the Chinese border. The Chinese workers have laid telephone and optical fibre lines running back home, and you can now call the dam site with a Tengchong area code.

An unknown party countered the Chinese advance with a terrorist attack. At 4am on April 17, 2010, a series of bombs exploded at four points within the Chinese camp. In the panic, a Chinese worker was injured as he fell from a building. Chen Kerui, a CPI project officer, pointed to a spot less than five metres from our meeting room. “Part of the roof was blown off. It looked like it was homemade bombs, about the size of a tin of paint,” he said. The Burmese military has not solved the case, but soldiers are now stationed around the camp. As we drove towards the dam, we saw soldiers armed with grenades and rocket launchers changing shift.

CPI’s Irrawaddy projects are in Kachin state (where the majority of inhabitants belong to the Kachin ethnic group), considered the territory of the anti-government Kachin Independence Army (KIA). A ceasefire signed between the two sides 17 years ago forbade either from entering the other’s territory. But, in May 2011, the Burmese army moved to protect a dam being built by China’s Datang Corporation on the Tarpein River. Fighting with the KIA broke out, and continues today.

Fifty-six-year-old Nuoleidan is a former KIA platoon leader who now manages the army base. He opened his belt and showed us three gunshot scars, acquired during battle with the Burmese army: “The Burmese government and the Kachin have been at loggerheads for 60 years. Their army wants to wipe out the Kachin, and we’re fighting for complete independence. So the war has to go on.”

In January this year, at a hotel in Ruili just over the Chinese border, the Burmese government and the KIA held their second round of talks, to no avail. This was not good news for Chinese companies.

The clock has stopped on the Myitsone dam. Nationalist sentiment is on the rise in this traumatised country and has become more important than the struggle between the government and the ethnic militias. On September 10 and 11 last year, Li Guanghua attended two press conferences held by the Burmese parliament and answered questions from members on the dam. Seven government ministers were present, and were firm that the dam would go ahead. But a public backlash followed and, on September 17, anti-dam protestors gathered in front of the Chinese embassy. Sensing that this could lead to larger protests, the Burmese government had no choice but to call a halt to the dam, catching the CPI by surprise.

“They’re all saying we’ve taken Myanmar’s resources, but that’s not the case,” complained Li Guanghua. “The 10% of electricity we’re giving to Myanmar is equivalent to two gigawatts, and the entire country only has three gigawatts of generating capacity. And if that isn’t enough, we’ll give priority to meeting Myanmar’s needs. China’s installing massive amounts of capacity every year, this is small change for us. It’s not a major resource, we’re just doing business and it’s nothing but good news for Myanmar. Over a century, there’ll be one trillion yuan of profit for Myanmar.”

Not everyone in Myanmar agrees. Nairg and Maiparn, two young members of the Ta’ang ethnic group (who number 60,000 according to official statistics) on the Burmese border with Yunnan, both strongly oppose the dam. They are members of the Ta’ang Youth and Students Organization (TYSO). Founded in 1998 and based in Thailand, the TYSO is active on Myanmar’s borders with China and Thailand. 

“The Chinese companies should listen to what we, the people of Myanmar, say. When their bosses go to Naypyidaw, everyone I know is sure they are carrying suitcases of cash for bribes,” said Maiparn.

Nairg concurs. The Irrawaddy basin is heavily populated and much of the country’s agricultural land lies on the river’s banks, and so many like Nairg worry that the dam will affect harvests. “It’s true that Myanmar lacks electricity, but the arrival of the Chinese changes our lives, while most of the benefits go to the government and the Chinese companies,” he said. “The army takes the land and fields, and then drives away the people. The people get all the pain.”

There are people in China who disagree with Li Guanghua too. Yu Xiaogang, founder of environmental NGO Green Watershed, said that China’s six large state-owned power companies have already fully exploited their own country’s rivers – and that’s why they are looking to Myanmar.

Myanmar is rich in resources – and provides an excellent example of what economists call the “resource curse”: countries that rely on the export of resources, in particular oil, diamonds and metals, are likely to suffer low growth, high levels of corruption, a lack of political freedom and frequent conflict.

In September last year, Yu and representatives of two other NGOs went on an investigative trip to Myitsone. In the report  they wrote on their return, they said: “China’s large state-owned firms have significant resources and huge amounts of capital, and restrict the development of private enterprise. They set policy, control the market and do not need to worry about environmental and social impacts. Profits are not made public, while public resources are often transferred to the companies.”

But Li Guanghua has no time for environmental NGOs. “The environmentalists are all well-fed and clothed; they’re not the ones who need to improve their circumstances. There’s no need to talk to them.”

Yang Meng is a reporter at
Bloomberg Businessweek’s Chinese edition, where this article was first published.

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匿名 | Anonymous

中电投的筷子困境

根据缅甸媒体的报道,在密松大坝遭受缅甸总统单方面宣布搁置后,中国电力投资集团公司于近日向克钦邦当地政府申请,在原密松项目地区建立两家筷子工厂,以协助解决当地由于密松工程的停建而带来的经济发展落后以及失业问题。
中电投的实际意图是显而易见的。即希望在密松地区驻留公司人员与相关机械设备等待“转机”,并以提供就业机会、协助当地发展等理由和行动改善公司的形象。但是,不得不说,该计划存在着严重的战略性错误,先不论当地政府是否批准,即便批准建厂,不仅无助于密松大坝的重启,更会为反坝组织提供更有力的支持。
当地民众反对密松大坝项目的主要理由就是担忧其对地区生态环境的破坏。而实际上,由于长期的无节制地大量砍伐森林、淘金,是密松地区的生态环境破坏主要原因之一,然而在反坝活动中,这些结果全都归到了密松大坝项目的头上。
而中电投近日的建厂计划,本意虽好,但在具体的实施项目上却明显未经过深思熟虑。建立筷子工厂,势必大量砍伐竹林,这意味着中电投从此就真的“实际参与”到当地的生态环境破坏行动中了。此外,报道显示,工厂生产的筷子将销售到中国去。这也使反坝人士更加相信“中国在掠夺和利用别国的资源,使其本国受益”的说法了。可以这样说,中电投的做法,只会将密松大坝项目推至更窘困的境地,却对该项目的重启百害而无一利。
事实上,中电投与其以协助当地发展的理由在密松地区建立筷子厂,不如实际投入到伊洛瓦底江的“护江工程”当中去。不论,密松大坝是否建设,伊洛瓦底江确实正遭受着污染与破坏。密松风波后,已有缅甸公司表示,正在研究对伊洛瓦底江进行保护。中电投如能在“护江工程”中有所作为,不仅有助于改善公司的形象,并且也将间接地为密松项目的重启提供了有利的环境条件。总而言之,“护江”的成绩才是大坝“重建”的有力保障。

The dilema of China Power Investment Corporation (CPI)

According to media reports, after the Myanmar president unilaterally announced the delay of the Myitsone Dam project, CPI applied to the local government of Kachin State for permission to build two chopsticks factories in the would-be Myitsone project area, and help to solve the problems of economic decline and unemployment brought by the cessation of the construction of the Myitsone project. The intent of CPI is obvious and that is to let the staff and relevant equipment wait for a 'chance', and hope to improve the company's image through helping the development of the Myitsone area. However, something that should be mentioned is that the plan has serious strategic errors. Even if the plan is approved, it seems helpless as far as restarting the Myitsone dam project goes, and also, would gain more support for anti-dam organisations.

The main reason for local opposition to the Myitsone project is concern over the environment. But in fact, it is large-scale, long-term, uncontrolled tree logging and gold panning that should be blamed. But the Myitsone project has become the leading reason due to anti-dam activity.

The new CPI project has a decent aim, but actual implementation of the project seems to lack consideration. Building chopsticks factories, literally, bamboo logging, would definitely lead CPI to the edge of destruction of the local environment. In addition, according to reports, the chopsticks would be sold in China, which may strengthen the dam opposers' belief that 'China is exploiting resources from other countries.' In this case, CPI would only worsen the situation of the Myitsone dam project, rather than helping to restart it.

Why doesn't CPI just assist the Irrawaddy river protection project? No matter whether the dam gets built or not, the Irrawaddy river is in fact seriously contaminated. There have been some Myanmar companies trying to help with the prevention. If CPI can also make a contribution, not only it will improve the company's image, but also indirectly help restart the Myitsone dam project. In a word, the gain from the river protection can promote the dam project.

Default avatar
匿名 | Anonymous

中国海外投资的形象危机:需要环保组织的正向参与

由于国际环境认知、投资软因素控制能力、企业自身水平、投资地的复杂利益博弈等原因,中国在许多新兴市场的一些投资经常被冠以“中国新殖民主义”的恶名。熟悉中国的朋友知道,这种说法背后,不仅是中国人和中国式投资的问题,更多还有文化模式和西方构建的全球市场模式的因素。

中国的“走出去”国家战略实施了多年之后,中国确实需要找到一个新的投资和国际交往模式。由于企业“船小好掉头”,企业如果能从海外“疯投”转变为海外“智投”,或许在解决企业自身处境的同时,也给疲于应付的中国式外交提供一些新思维。

要做到一种投资和海外交往的新模式转型,关键是两个因素:第一,从新角度认知海外环境和投资行为;第二,投资主体的知识构型和思维模式的转型。中国的海外投资或者政府外交,毫无疑问都具有既定的模式,这些模式也并非全然一无是处,而是中国在1949年以来苦心经营的结果,只不过世事变迁,主体革变,中国在思维、策略、战略层面的适应速度发生了问题。

很多企业投资,一般都使用的是跨国公司、咨询公司、资本市场、投资财金分析的策略模式,首先是企业老总见国外的政要和部长级别政府要员,获得政府重视和“政府批文”,再接着一轮的并购、融资、投资金融分析,海外的咨询公司、会计公司和风投公司将各种投资文案整理齐备。这些当然是必要且高效率的投资准备和市场进入模式,但是在我看来,这是“火箭发射模式”,项目介入人往往在乎的是把企业“送上天”,但是没有解决后期的飞行轨道、弹道学轨迹、“落地姿势”的问题。很多企业进入海外投资之后,留在当地的一般多为技术、管理背景的高管,对当地的文化、宗教、政治、传媒、社会细节了解程度和学习能力相当有限,而这些“软因素”往往最终影响企业在海外的持续繁荣和发展。

李光华的那番话,相信有他的原因,但是仅仅因为某些环保组织的研究给自己的投资造成了反作用,便说出这种不屑、不合作的话,是非常愚蠢的。不过,给这种愚蠢买单的,不光是他所在的机构。是整体的中国人。

The crsis of China's overseas investment:environmental organisation's positive participation is needed

Due to the reasons such as the international environmental awareness, the ability to control the soft factors of investment, enterprise's own level and the complex interests in the investing area, China is regarded as the "neo-colonialism" in many emerging market. People who are familiar with China may know that this is related to Chinese people and the way they invest, and also, the differences in culture and the construction of the global market between Chinese and the western world.

Years after the launch of China’s ‘going out’ national strategy, China indeed needs a new way for its investment and global communication. Due to the flexibility of small enterprises, if the companies change their way of ‘crazy investment’ to ‘wise investment’, it may solve their own problems, as well as give fresh ideas to the struggling Chinese diplomacy.

It seems there are two key factors to the transformation for investment and overseas exchanges: firstly, learn the overseas environment and investment behaviour from a new angle; secondly, the knowledge configuration of the investment’s main body and the transformation of the thinking mode. The already-existent mode of China’s overseas investment, as well as the government’s diplomacy, is not all bad. After all, it is the result of China’s painstaking efforts since 1949. However, China’s thinking mode and strategies can’t adapt to the global changes.

Most of the corporate investment would adopt the strategy which is usually used by multinational companies, consulting firms, capital markets , investment and financial analysis, and that is, corporate CEOs firstly meet the minister-level officials of foreign government and gain their supports and official approvals, then followed by another round of mergers and acquisitions, financing, investment, financial analysis, as well as a variety of investment copywriting finished by overseas consulting firms, accounting firms and venture capital companies. These are certainly the necessary and high efficient preparation and market entry mode. But in my opinion, that seems more like ‘rocket launcher mode’ projects. What the launchers really care about is to get the enterprise "into space", but not to address the following problems such as flight path, ballistics trajectory and the landing position. Executives who stay overseas after corporate investment are mostly of technology and management background, and hence their understanding to the local culture, religions, politics, media and society is rather limited. These ‘soft factors’ may ultimately affect the continuous prosperity and development of enterprises in overseas.

Li Guanghua may have his own reason for his words, however, it is very foolish to say something disdain or uncooperative just simply because the research of some environmental organisation had caused counterproductive effect. But sadly, it is Chinese people as a whole that need to pay for his foolishness, not only his company.