China tops Myanmar FDI table but pace slows

China tops Myanmar FDI table but pace slows

As China's economy slows down and its stock market continues to decline, Chinese investments into Myanmar appear to be abating, yet Asia's largest economy remains the top investor in the country.

Chinese investment rose marginally in June from the previous month, with projects valued at US$8.9 million accounting for 26% of total foreign direct investment (FDI) in the country.

The June figure was down slightly from April and from the same time last year, when China accounted for 38% of total FDI.

Thailand accounted 18% of total FDI into Myanmar in June, second to China.

Official figures from the Myanmar Investment Commission (MIC) showed total FDI of $2.3 billion in the first three months of the 2015-16 financial year, but real investment amounts were likely to be higher.

Out of the $2.3 billion, the oil and gas sector alone accounted for $2 billion.

The figures so far this year are in line with the trend in fiscal 2014-15 when the country attracted $8 billion in investments, with about 40% of the total in oil and gas.

Politics has played a part in the slowing pace of Chinese FDI into Myanmar, exacerbated by the recent stock market plunge in China, said Sean Turnell, a professor of economics at Macquarie University in Sydney and longtime Myanmar-watcher.

"The stance of the government in Myanmar was cooler of course, and I think the Chinese also finally realised that they had overplayed their hand when they were the only real investor in the closing year of the old [military] regime," Prof Turnell told Asia Focus.

He added that too many exploitative deals agreed to by the former junta had caused hostility in Myanmar as a consequence, both sides saw the need for "something of a reset".

Local anger has stalled a number of large-scale hydroelectric projects, among them the China-backed Myitsone dam in Kachin State, which President Thein Sein suspended in 2011.

The $3.6-billion dam at the headwaters of the Irrawaddy River originally was to have been completed in 2017 but now the project's future is uncertain. It would have a generating capacity of 6,000 megawatts of electricity, primarily for Yunnan province in southern China.

Despite such high-profile setbacks, Prof Turnell said he expected China to come back strongly.

"FDI levels are usually very 'lumpy' in the sense they are often big projects, spaced apart," he said. "I do expect Chinese FDI to bounce back."

His conclusion appears to be supported by news of a memorandum of understanding signed last week between China, Thailand and Myanmar to develop the Mong Ton dam in northern Shan State.

Valued at $2 billion, at full capacity the dam would be able to produce more than 7,000 MW. It is expected that 90% of the electricity would be exported to China and Thailand.

Rumours that President Thein Sein might not seek a second term in the Nov 8 election also might encourage Chinese investors to return.

The president's office last week announced that Thein Sein would not contest the poll, but spokesmen reversed themselves a day later and said he had not ruled out seeking a second term.

Local media have been reporting that preparations are under way to develop the Myitsone dam once Thein Sein's term comes to an end. Reports surface periodically of site preparation work continuing despite the government's suspension of the project.

Prof Turnell said that if Thein Sein decided not to run again, the Chinese would be thankful that they had reached out to opposition leader Aung San Suu Kyi when she visited China last month, even though the constitution bars her from being the president.

"But I don't really see his decision as having much impact on Chinese FDI," he said.

"In the end, this will always be determined by the numbers, I think."

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