Myanmar recorded more than US$8 billion in new foreign direct investment from China in May 2010, official figures showed, boosting total contracted FDI since 1988 by more than 50 percent.
The $8.173 billion was spread across four projects in the oil and gas, electric power and mining sectors. Mainland China inked two power investments, while Hong Kong signed contracts for mining as well as oil and gas, figures from Myanmar’s central statistical organisation show.
The projects are believed to include two hydropower dams in Kachin State, valued collectively at $5.03 billion, China National Petroleum Corporation’s oil and gas pipeline connecting Rakhine State in western Myanmar to China’s Yunnan province ($2.146 billion) and Norinco’s planned development of the Letpadaung copper deposit near Monywa ($997 million).
All are essentially mainland Chinese companies.
The new investments reflect China’s increasing influence in Myanmar, particularly in major projects in the energy sector.
You need energy to drive an economy. This has made China move pre-emptively and acquire energy resources before other countries.
Dr Maung Aung, a senior researcher at the Union of Myanmar Federation of Chambers of Commerce and Industry, said he expected China to overtake Thailand as the largest foreign investor in Myanmar “in the near future”.
Though Thailand still tops investors, with $7.447 billion spread across 60 projects, mainland China ($6.364 billion, 31 projects) and Hong Kong ($3.653 billion, 34 projects) have a larger combined total – in excess of $10 billion. Little more than four years ago, China had officially invested just $194.22 million in Myanmar.
The UK (mainly through the British Virgin Islands) and Singapore lag well behind at $1.81 billion and $1.6 billion respectively.
U Min Win Myint Aung, former director general at the ministry of electric power, said China’s booming economy had forced Beijing in recent years to secure energy resources outside of its borders.
“You need energy to drive an economy. This has made China move pre-emptively and acquire energy resources before other countries,” he said.
“As Myanmar is rich in energy resources and close to China, Chinese companies are investing in energy projects to import power to China”, particularly in Kachin and Shan states.
The new investment increased total FDI by more than 50 percent to more than $24.1 billion. Prior to May 2010, foreign companies had signed contracts worth $16 billion with the Myanmar investment commission since the current foreign direct investment law was introduced in 1988.
However, a significant proportion of those investments have yet to be completed, or in some cases started. Both the Tasang and Hutgyi hydro-
power projects, which will see Thai and Chinese companies dam the Than Lwin River, have only recently gotten under way despite the contracts being signed in the 2005-2006 fiscal year.
However, most of China’s major investments in Myanmar are made by state-run companies, and immediate profits are not necessarily a high priority.
Derek Tonkin, chairman of NetworkMyanmar, said he expected the investment to be realised.
“I have no reason to doubt that the bulk of the investment contracted by Chinese state companies will be realised.
“The record of Asian private companies is less encouraging – it is suspected that some investment permits are acquired by promoters whose sole intention is to sell the investment on at a profit, such as by investing through an offshore company whose shares can be sold to anyone anywhere while the corporate entity ... remains the same,” he said.