As Myanmar exerts all-out efforts to attract foreign investors to boost economy, the current government and ruling party should pay more attention to honor the spirit of contract if Myanmar really wants foreign investors to come and stay in the country that currently has a comparatively complicated business environment.
The significance of honoring spirit of contract has already been expressed by Myanmar State Counselor Aung San Suu Kyi, who said in late January that no investor would trust in Myanmar if a new government abolishes projects approved by its predecessor.
“Suppose a foreign investor established a business and the government that approved that business then left office. If its successor terminates the project saying it did not approve it, then no businessperson would want to invest in this country,” said Aung San Suu Kyi, Myanmar news outlet The Irrawaddy reported.
If the successor breaks a promise made by its predecessor, the country will lose its credibility, she said, adding that every government is responsible to protect the interests of the country.
Aung San Suu Kyi’s remarks came after heated debate of the future of the Myitsone dam project, a joint infrastructure project that was halted in 2011. Opposers suggest the projects should be suspended permanently while others say the Myanmar government should find a proper solution to protect the interest of foreign investors.
The projects are designed to provide 6,000 megawatts of clean electricity. The hydropower dam projects are estimated to create over 50,000 jobs and offer stable, green and safe energy for the industrial modernization of Myanmar.
For Myanmar government, it has to find a proper solution to the suspended Myitsone projects. It’s not only about a demonstration of honoring contract spirit, but also a test of whether it has the capability and political wisdom to protect interests of foreign investors it needed.
More importantly, the project was agreed at a time when Myanmar was under Western sanction and China is offering a hand for help. If the project could not be handled properly, or if it was suspended for ever, how could other countries have faith in Myanmar’s capability to honor spirit of contract?
China understands the complicated political situation in Myanmar and the huge pressure its ruling Party facing. However, honoring the spirit of contract is the most fundamental thing for a government to earn the respect from foreign investors, and there’s no excuse for that no matter how hard it would be.
It’s not a new thing that China’s infrastructure projects in foreign countries faces challenges and concerns, but facts have proved that those countries are benefiting from China’s investment, especially in less-developed regions.
For instance, China’s investment has contributed largely to the economic development of Djibouti, an African country that witnessed its ranking in the latest Doing Business 2019 Report, released by the World Bank, jumping from154th in 2018 to 99th in 2019 among 190 countries and regions.
However, Myanmar only ranked 171 in the list.
The World Bank in October 2018 also revised its forecast for Myanmar’s economic growth by 0.5 percentage points to 6.2 percent in the fiscal year 2018-19. The outlook for 2019-20 and 2020-21 was also cut by 0.4 percentage points to 6.5 percent and 0.3 percentage points to 6.8 percent, respectively.
Facing the economic downturn, hydroelectric could be a powerful engine to boost Myanmar’s economic growth and improve people’s life. However, Myanmar has limited talent, financial and technical condition for large-scale projects in this sector.
Meanwhile, poor infrastructure is preventing foreign investors from coming to Myanmar. British Chamber of Commerce in Singapore once warned that those operating on the ground in Myanmar frequently experience power outages, unstable telecoms services and limited transport coverage.
Foreign businesses may find that they have to make their own capital and technological investments, just in order to ensure smooth daily operations, said the chamber.
Infrastructure is the most fundamental area for Myanmar government to develop if the country wants to bring tangible benefits to its people and to lay a sound business environment for foreign and domestic investors.
In this regard, Chinese companies are the best choices. Firstly, unlike some Western countries, China has repeatedly stressed that it attaches no political strings on its foreign investment. Secondly, China has the latest and leading experience in building large-scale infrastructures, which Myanmar could borrow easily concerning their geological similarity. Last but not least, China is a country that keeps its promise no matter what challenges it face.
There’s a Chinese proverb that goes as this: “without credibility, a man cannot live, a business cannot thrive and a country cannot prosper.” Such philosophies could also be found in other cultures, such as the idea of “trust is the coin of the realm.”
Myanmar government’s solution to the Myitsone project is also a chance to earn credibility from its people and foreign investors. It will not come in an easy way, but it will yield in good outcome.
Myanmar government should also realize that honoring the spirit of contract is the most basic principle for business activities. This is the foundation for foreign investors to have trust in spending their money in a country that does not have a widely acknowledged sound business environment.
The current and potential benefits from China’s Belt and Road initiative have also boosted investor’s confidence in Myanmar.
The position as an “important crossroads” in the initiative was listed as an advantage of investing in Myanmar in a report released by consulting firm KPMG in Myanmar in July 2018.
Myanmar is gunning for more foreign direct investments (FDI) from East Asia in the next 20 years, and the FDI is expected to total $200 billion during the period, Myanmar Times reported in October 2018.
Chinese companies investment could be a great chance for the current Myanmar government to prove that the country has the strong will, as well as capability, to attract and effectively use foreign investment for win-win outcomes.
China is the largest investor, trading partner and FDI contributor to Myanmar.
It ranked first among sources of Myanmar's FDI as of February 2018, and invested 344 projects totaling $24.85 billion in Myanmar, accounting for 40.14 percent of Myanmar’s FDI.
Another noteworthy warning is that Myanmar’s ruling party should never make unwise decisions from the pressure of opposition politician parties.
Politicians, or those who have political ambitions in Myanmar, often use the narrative that a overwhelming number of people in Myanmar oppose the Myitsone project, saying the future of the dame should be decided by the Myanmar public.
However, for those politicians, do they care more about the life of the people to be affected by the project, or they just want to take advantage of those people and the issue to win more political assets?
For instance, many of the arguments from opposition parties have been proved invalid.
The Myitsone project, after completion, can effectively adjust most of floods of the Ayeyawady River upstream Myitkyina City. The flood control storage of the reservoir reserved is 850 million cubic meters, which can increase the flood control capacity of Myitkyina City to a 20-year re-occurrence.
More importantly, Myanmar needs such projects. Less than 40 percent of Myanmar's population has access to electricity, while international scholars have repeatedly said that hydropower is the best choice for Myanmar.
The Chinese and Myanmar side, including government and companies involved, have rolled out numerous measures to make sure that the immigrants’ life are secured, or getting better after relocation. If the project resumed, or finished, it will create hundreds of thousands of jobs and provide stable, safe and clean electronic supply for the country.
Since 2010, the China-Myanmar joint venture that is responsible for implementing the project has been offering rice and electricity freely for those relocated for the project. By the end of 2017, the scholarship launched by the company has benefited over 400 Myanmar students,
The company also built houses, hospitals, schools, churches and other facilities for those who are relocated for the project.
The company is also actively fulfilling its social responsibilities. It has helped build and renovate dorms, donate rice and stationaries to Love Orphan Center and Grace Happy Land Orphanage in Myanmar to offer a better living environment for those who were orphaned for military conflicts, diseases and other reasons.
The list of long-term benefits for Myanmar government, people and companies could go on and on. However, the other side of the story is that, not only Chinese government is suffering hugely from the suspension of the project, but also Myanmar government and its people.
The views expressed here do not necessarily reflect the views of Mizzima