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Myanmar’s changing ties with China
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Beijing has maintained a relationship with Naypyidaw after last year’s coup, highlighted by Foreign Minister Wang Yi meeting counterpart U Wunna Maung Lwin in April. Photo: Ministry of Foreign Affairs

Chinese firms warned over ‘vulnerable’ overseas projects after Myanmar military junta cancels tenders, blacklists

  • Myanmar’s military regime is reported to have cancelled tenders relating to 26 solar power projects, the majority of which involved Chinese investment
  • Firms have been blacklisted for ‘breaching tender regulations’ after 29 tenders were invited under the now-ousted National League for Democracy government in 2020

Chinese firms investing in potentially “vulnerable” overseas opportunities have been urged to proceed with caution after reports Myanmar’s military junta cancelled tenders and blacklisted companies related to over 25 solar power projects.

Beijing has maintained a relationship with Naypyidaw after last year’s coup, highlighted by Foreign Minister Wang Yi meeting counterpart U Wunna Maung Lwin in April.

But The Irrawaddy, an independent news website operated by exiles living in Thailand, reported last week that Myanmar’s military regime had cancelled tenders relating to 26 solar power projects which were invited under the now-ousted National League for Democracy government in 2020 and blacklisted the companies for “breaching tender regulations”.

The move also came after the electricity and energy minister U Aung Than Oo was ousted last week.

Pretty much all the solar projects which were granted after a tender in 2020 were cancelled due to the lack of progress of these companies
Edwin Vanderbruggen

“Interestingly, Myanmar’s government said only a week earlier that it wanted to accelerate hydrocarbon and renewable energy projects in the country, as power shortages have worsened due to LNG price rises in addition to the impact of sanctions,” said Melissa Cyrill, deputy associate editor at consulting firm Dezan Shira & Associates.

According to the bidding results from Myanmar’s Ministry of Electricity and Energy, the Beijing-based China Machinery Engineering, Hefei-based solar photovoltaic inverters manufacturer Sungrow and several Chinese-Myanmar consortium had won 28 of the 29 tenders.

“Pretty much all the solar projects which were granted after a tender in 2020 were cancelled due to the lack of progress of these companies,” said Edwin Vanderbruggen, senior partner at Yangon-based legal and tax advisory firm VDB Loi, who assisted the Myanmar government with the tender process.

“The basis for the cancellation is thus that the proposal of the companies no longer matched with their original bids.

“To maximise transparency, the Myanmar government decided to redo the tenders instead of renegotiate terms because that would unfairly treat other bidders in the original tender.”

04:43

What has changed after 1 year of military rule in Myanmar?

What has changed after 1 year of military rule in Myanmar?

Global conservation body, the WWF, said the power from the solar projects was supposed to be delivered in 2021 and therefore the group speculated that “failure to deliver” could be one of the reasons that led to the cancellation of the tenders.

But Yangon-based legal firm Charltons, who specialise in Myanmar’s economic and business environment, highlighted ongoing criticisms in Myanmar relating to the Chinese investment in solar projects.

The criticisms include local firms being kept out of the bidding process due to high thresholds and suggestions some of the Chinese companies lacked the experience needed to be independent power producers.

Chinese mining companies faced calls to take a more responsible approach and withdraw their investment from Myanmar in January, amid reports of an increase in human rights abuses and civilian deaths since the military took power in February last year.
Projects in these sectors usually require large investment upfront, but generate stable revenue when completed. They naturally become vulnerable targets for the governments of the host country
Zhang Yifan

A report by Publish What You Pay Australia, a campaigning organisation which calls for transparency and accountability in the oil, gas and mining sectors, showed the military junta earned an estimated US$725 million in revenues from Chinese-run mines during the 2020-21 financial year.

“In recent years, especially under the Belt and Road Initiative, China has made huge investments in these types of countries. Chinese companies often face very high local political risks due to local ethnic conflicts, democratic transition, leadership turnover,” said Zhang Yifan, associate professor at The Chinese University of Hong Kong’s department of economics.

“In addition, Chinese investment is often concentrated in the raw materials, mining or infrastructure sectors. Projects in these sectors usually require large investment upfront, but generate stable revenue when completed. They naturally become vulnerable targets for the governments of the host country.”

Zhang suggested that Chinese companies should conduct careful evaluation of political risks before they invest and partner with local companies or make better use of insurance.

01:32

Myanmar junta has reportedly torched 100 villages since last year’s coup

Myanmar junta has reportedly torched 100 villages since last year’s coup

He also highlighted the utilisation of China’s International Commercial Court, which has been a very useful dispute settlement platform for belt and road projects.

In an analysis posted on the website of the New Delhi-based Observer Research Foundation in November, junior fellow Sreeparna Banerjee said that there were “growing Chinese investments” in Myanmar’s post-coup era, as Singapore intended to remove military affiliated firms from its portfolio and Japanese firms terminated operations due to the difficult business situation.

China has pushed on with its development in Myanmar with the China-Myanmar Economic Corridor under its Belt and Road Initiative, which aims to connect the southwestern Yunnan province and its neighbouring country in Southeast Asia by road and rail links.

Official information released on the Myanmar National Portal in January showed that China was the top source of foreign direct investment, primarily in the manufacturing sector, followed by Singapore, India, South Korea, France, Hong Kong and Taiwan.

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