China to remain influential in Myanmar even as Western firms arrive

Market share of Chinese companies to decline but cash resources will help maintain influence

PUBLISHED : Monday, 13 May, 2013, 12:00am
UPDATED : Monday, 13 May, 2013, 3:34am

China, the biggest investor in Myanmar, will lose market share to other countries as they rush to invest there, but Asia's largest economy will remain a major investor in the Southeast Asian nation owing to its huge cash resources, observers say.

"In the past, Chinese companies played a big role inYangon. In the future, all countries will play a big role, because we want all countries to share in the investment," said Toe Aung, deputy head of city planning and land administration at the Yangon city development committee.

"Yes, China used to be the dominant investor, but its relative importance will shrink," said Thurane Aung, director of Dagon International, a Myanmese conglomerate.

At present, China is the No1 investor in the country, followed by Thailand, said Thurane Aung, a speaker at the recent Myanmar Urban Development Conference in Yangon, the former capital.

"With the lifting of sanctions, more foreign investors will come to Myanmar," he said, mentioning Pepsi Cola and Unilever.

"They are moving in fast," he said. "Every week I read news of US investment in Myanmar. I've been seeing German, French and Dutch coming to look for business opportunities in Myanmar."

In April, the European Union removed most sanctions on imports from Myanmar, in recognition of the country's political liberalisation, which began in 2011.

In November last year, the US government lifted restrictions on imports of most products from Myanmar.

One motivation for the Myanmese government's reforms is that it does not want to rely too much on China, said Salil Tripathi, policy director at the Institute for Human Rights and Business in Britain.

Myanmar's dependence on China had caused discomfort among its leaders, given the two nations' complex relationship. Beijing has been a supporter of the government while also backing Kachin rebels along the Sino-Myanmese border, said Hugo Williamson, managing director of the Risk Resolution Group, a British risk consultancy.

A major Japanese project in Myanmar is the Thilawa special economic zone on the southeastern outskirts of Yangon.

In April last year, the governments of Japan and Myanmar signed an agreement to create a master plan for the zone, said Thurane Aung.

Myanmese companies and the government own 51 per cent of the project, while Japanese companies and Tokyo own 49 per cent.

He said it was a "massive project" but could not give figures for the investment involved.

The project will comprise of a port and a 2,400 hectare industrial zone. The Japanese project is "definitely" a result of the political opening of Myanmar, he said. "Japan sees that our government is transparent and democratic, so it wants to help us out."

Kenneth Stevens, managing partner of Leopard Capital, an Asian investment firm, said: "Thilawa will take a very long time to develop, because the Japanese are cautious investors."

The quality of Chinese infrastructure projects was "acceptable" but there are sometimes problems with after-sales service, said Wunna Htun, director of National Steel & Construction, a Myanmese construction firm.

"The quality of European, US and Japanese infrastructure is better than China's. Now Myanmar wants to attract infrastructure investment and technology from the US, Europe and Japan," Wunna Htun added.

However, Nicholas You, chairman of the steering committee of the World Urban Campaign, a United Nations initiative to improve the quality of the world's cities, said: "US and European firms are not investing in US and Europe. You don't expect them to invest in Myanmar."

In contrast to listed US companies, Chinese companies investing in Myanmar think long term, You added.

"China is the only country willing to invest massive amounts of money in infrastructure in Myanmar," he said. "Chinese companies will continue to make long-term investments in Myanmese infrastructure. They have the money."

China will remain a major investor in Myanmar, Tripathi said. "There is the competitive advantage of geographical proximity and familiarity with the market. But over time, China's share will drop," he said.

Sany, a Chinese construction machinery maker, will benefit even if China loses market share in Myanmar, Sany sales director Cai Hui said.

"We are happy to see the Myanmar gate open to more investors," Cai said. "To absorb investment from the US, Europe or China, Myanmar needs infrastructure, and we hope to sell more construction machinery."