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    Southeast Asia
     Nov 1, 2006
China paves way to Myanmar riches
By David Fullbrook

RUILI, China, and BANGKOK, Thailand - If you've ever had a seafood dinner in Kunming or a number of other inland southern Chinese cities, the catch may have taken a tortuous trip across the mountains from the Myanmar coast along a route that Chinese investment aims to make a thriving trade artery if Beijing's touch-and-go relations with Yangon stay on track.

Often caught at night in nets made in China, fish are brought ashore at harbors along Myanmar's Andaman Sea coast. There

they are packed into boxes filled with ice and wrapped in thick blankets to ward off the tropical heat and stacked on to heavy-duty three-axle Korean or Chinese trucks, driving up to the central Myanmar city of Mandalay, then the remote Shan state, and finally across the China-Myanmar border.

At the goods yards of the Chinese border town of Ruili, sweating workers quickly unload the boxes to smaller trucks taking the fish to markets and restaurants around Yunnan province and beyond. Myanmar-owned trucks returning to the Andaman coast often carry equipment such as nets sourced by Myanmar-national fishing-company agents in the southern Chinese city of Xiamen. Merchants running the trade expect at least 20% of fish to spoil before reaching Kunming, capital of Yunnan province, which borders Myanmar. If trucks are held up at any of the numerous checkpoints along the Mandalay-Ruili road, even more are lost.

Fisheries are a typical example of an investment-starved industry in Myanmar presenting significant opportunities for Chinese investors. For an idea of what Myanmar's fishing industry could look like were money and know-how available, look no further than Thailand, one of the world's largest seafood exporters. Apart from the occasional anti-dumping complaint and concerns over unhealthy additives, Thai seafood faces few hurdles reaching its markets, whereas Western trade sanctions often block Myanmar-produced goods from competing in European and North American markets.

Unlike Western countries, China is not ruffled by the ruling Myanmar junta's utter disdain for democracy and human rights. There are no embargoes preventing exports such as seafood, minerals and staple crops from entering China from Myanmar. Unshackled by sanctions, Chinese investors and traders are increasingly making a beeline for Myanmar's underdeveloped industries and unexploited markets.

Despite the sorry state of transport between China and Myanmar, trade is rising fast. In 1989, Myanmar-China trade was worth US$313.7 million, with a Chinese surplus of $61.6 million. In 2004 it nearly reached $1.2 billion, with China enjoying a surplus of $731.5 million, according to Chinese government statistics. Offsetting the Chinese surplus are Myanmar's illicit exports of narcotics, timber, gems and gambling.

Paving the trade way
Trade would be easier were transport fast and reliable, something the Chinese are planning to fix with roads, railways and pipelines linking Myanmar's deepwater ports of Sittwe or Kyaukphyu via Shan state to Ruili. Myanmar's military has eliminated the threat once posed by insurgents to transport along the route through Shan state, buying off some groups with truce deals and battling others back toward the Thai border. Beijing and Yangon are still, however, arguing over who pays for what infrastructure inside Myanmar and transit fees for Chinese trade.

Chinese Vice Premier Wu Yi, who oversees economic affairs, visited Myanmar in March 2004 offering more aid and loans, and discussed laying a railway from the Myanmar town of Lashio in Shan state to connect with the railway being built from Kunming to Ruili. "We are also interested in building infrastructure and industrial parks in Myanmar," Gao Yan, vice chair of the China Council for the Promotion of International Trade, told the state-controlled Myanmar Times newspaper while accompanying Vice Premier Wu.

Early this year, the partly state-owned Shanghai Jinqiao Export Processing Zone Development Co proposed a special economic zone next to Yangon's Thilawa port, according to media reports. In July 2004, General Khin Nyunt, then prime minister and now in jail on economic-crime charges, visited the company's Shanghai project. Chinese funds routed via Hong Kong helped finance the deepwater port at Tilowa, says Australian National University's Helen James, who authored a study about Myanmar's security strategy. China is also helping out with a large port at Rakhain, according to a May report in Bangladesh's The Independent.

Meanwhile, Chinese engineers are preparing to begin a $2 billion gas pipeline from Sittwe, which supports oil and gas platforms in the Andaman Sea, to Kunming this year for completion in 2009, according to an April China Daily report. Industry analysts speculate that those Myanmar-situated pipelines will be designed to transport oil and gas arriving by tanker from the Middle East and Africa to inland China, potentially saving Beijing time and money now spent sailing through the choked, pirate-infested and vulnerable Malacca Strait to China's east-coast ports.

Geologists and drillers from China's big three oil-and-gas firms are busy tapping into 11 Myanmar exploration blocks. Myanmar's reserves are believed to be some of Asia's largest; the US Central Intelligence Agency estimates gas reserves second only to Indonesia's. China National Petrochemical Corp and China National Offshore Oil Corp both have onshore production-sharing deals with Myanma Oil and Gas Enterprise. PetroChina reached an understanding with the Myanmar government in December 2005 to pipe gas from block A1 to Kunming for 30 years.

Despite sitting on all this untapped energy, power cuts and brownouts are common in Myanmar, underscoring the years of military-led poor governance. Until now, that has badly hobbled the country's ability to industrialize and kick the economy into a higher gear. But the lights may soon stay on more regularly, as Chinese loans and engineers aim to bring more hydropower dams into service across Myanmar.

In 2003, China lent $200 million for the 700-megawatt Yeywa hydropower plant near Mandalay, and agreed to the $150 million Shweli scheme. Beijing usually demands that borrowers use the money to buy services and equipment from Chinese firms, and Yunnan Machinery and Equipment Import and Export Co is the supplier for the Paunglaung hydropower plant. An undisclosed Chinese firm has signed up for the Electricity Generating Authority of Thailand's 1,000MW Hutgyi hydro-dam in Myanmar, one of five planned for the Salween River, where construction is scheduled to begin in November 2007.

With so many big-ticket projects being drawn up, Chinese traders have spread throughout upper Myanmar, opening stores and even small factories and farms around Mandalay, a popular place for enterprising Chinese. That marks the continuation of a strong migratory trend. Mya Maung, a finance professor at Boston College, suggested in a paper as long ago as 1994 that about a quarter of Mandalay's estimated million or so residents could be accounted for by recent Chinese migrants who bought bogus national registration cards on the black market.

Still, hard figures are difficult to come by today. Chinese direct investment in Myanmar was less than $1 million annually between 1999 and 2003, apart from the $4.84 million committed in 2002, according to data from the Association of Southeast Asian Nations Secretariat. Yet Chinese official figures record 800 projects worth a total of $2.1 billion as of late 2002. Meanwhile, Myanmar's government officially counted 22 Chinese projects valued at $130.92 million by February 2005.

Myanmar's official statistics in particular should be taken with a pinch of salt. Civil servants spend much of their official time, when they might be collecting data, doing other jobs to make ends meet because official salaries are paltry. Their job is made even harder by basic equipment shortages. Moreover the junta is obsessed with secrecy, especially regarding investment, money and business deals made by the military. Investment figures from China's better-paid and -funded statisticians are probably closer to reality. Whatever the number, it is clearly rising, and fast.

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