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A Glance of South Korean Investment in Myanmar and Its Implications for China

Yuelin Li

In July, 2017, I was shopping in a supermarket in Yangon. I found out that Korean and Japanese commodities each have a shelf yet Chinese goods do not. Along the street, I sometimes saw shops which only sell Korean and Japanese stuff. Burmese people stated that they thought Chinese products simply do not have attraction and usually are in low-quality while they trust Korean commodities more. I started to think about why Korea does a better job when Chinese projects often encounter challenges in Myanmar.

Indeed, anyone who first arrives in Myanmar would be able to observe that nearly 95% of the vehicles in public transportation system-buses, minibuses and intercity trains-are imported from China, Korea and Japan. These beat-up vehicles are apparently obsolescent in China and Korea but Burmese people did not remove out-of-date advertisements on the bus. For instance, some Korean buses are still covered with antiquated financial products from Woori Bank or publicity shots of has-been K-pop stars. “Those Chinese characters and Korean letters savor foreign parts and that seem to be nice-looking to us,” explained a taxi driver in Yangon.

Traffic lights, as well as public vehicles, were mostly donated by China, Korea and Japan, as a form of Official Development Assistance(ODA). The buses on road which look much newer were purchased from Yutong, a major producer in China’s bus industry. Korean and Japanese buses look well-worn, partly because these two countries got involved with bus sale or donation much earlier. “These countries want more investment opportunities in Myanmar. In order to get project license, they scramble to donate infrastructure like vehicles and traffic lights.”

Myanmar has experienced long periods of military rule since 1960s. The economic reform since 2011 featured with market-oriented approach started a new exploration and Foreign Direct Investment(FDI) poured in from many countries. After military rule was replaced by a new civilian government with military background in November 2010, policy reforms of politics, economics, foreign investment laws etc. have began rapidly developed. Because of the foreign aid and investment in infrastructure and the increase in foreign trade, Myanmar is experiencing a rapid speed of development with 6.9% annual GDP growth rate in 2017(the 9th fastest growth rate). After being closed to the outside world, Myanmar now refers to a country with great investment opportunities and unlimited potential.

China started its Official Development Assistance(ODA) in 1961 after signing an agreement for economic and technical cooperation with Myanmar. China provided 30 million-pound interest-free loan to aid the establish of industrial factory buildings, which were mostly completed in the 1960s. In the following decades, China’s aid has broadened to many sectors, such as communication center, agriculture, conference center, medical project and power station etc. Chinese government also encouraged FDI to Myanmar. According to The Directorate of Investment and Company Administration (DICA), up to June 2016, FDI in Myanmar came from investors from 41 countries with the total investment amount of 533.48 billion US dollars, and China ranked 1st by bringing 108 projects and total capital of 179.28 billion US dollars to Myanmar.

Though China invested huge amount of manpower, material and financial resources in Myanmar, somehow misunderstanding and misinterpretation exist among Burmese people. Most Burmese people associate China with mining, power station and deforestation. Myanmar is still in a peculiar period of social transformation, during which the media and network regulation has been abolished. Not only ordinary people develop distrust to the government via acquire information by themselves, but also news presses deliver the mood of distrust to citizens through newspaper and reports, which aggravate the distrust. The history background that Chinese involvement in Burmese Communist Party and ethnic conflicts in northern Myanmar, makes the situation worse. When people think that Chinese investment is “government-to-government” aid, plus the lack of access to detail information of Chinese projects and inaction of Myanmar government, Burmese people’s anti-Chinese feelings have come to the surface.

Though approaching into Myanmar market later than Japan and China, Korean companies have performed well. Korea started its FDI in 1990.

(Source: DICA)

Also, Korea’s ODA to Myanmar started much later than China (1987). Nowadays, Korea has become an important donor for development aid. In 2017, Dala industrial zone agreed by both Myanmar government and Korean developer. Now a bridge being built on Yangon River, which will connect Dala industrial zone to Yangon downtown, can be regarded as a fresh start of Korean capital and investment flowing to Myanmar.

(Source: Query Wizard for International Development Statistics)

But when we look at the experience of Korean projects, it seems that Korea does not have many conflicts as China. Why almost all the conflicts and controversial projects are Chinese? In history, both Japanese and Korean investment projects have encountered oppositions in Southeast Asia in the 60s and 70s. But through their effort, oppositions seldom occur now. Korea’s solution mainly can be divided into five parts, all of which are instructive to China.

Firstly, Republic of Korea has a governmental agency, the Korea International Cooperation Agency(KOICA), which serves as a semi-official governmental organization that provides ODA to developing countries and enhances international relations with them. KOICA did a great number of things in Myanmar. It engages in education, governance, climate change, food security, and many other sectors[1]. For instance, KOICA launched Myanmar Development Institute in 2016, which was designed to be a think tank that makes national socioeconomic policies. KOICA also handed school bus to schools as aid. It supports to develop public transport systems (urban railways) and residential infrastructure in cities. KOICA also participate in build private-public partnership to maintain a sustainable cooperation between the government, universities, NGOs and think tanks. In contrast, China does not have an independent agency in charge of aid issues. Thus, China should set up an aid agency which works independently and efficiently. Economic and Commerce Counselor under Chinese embassy is responsible for allocating aid, but they are also occupied with other economic affairs.

Secondly, apart from the endeavors from the investors and the government, chambers of commerce are also an indispensable cog in boosting local economy. Chambers of commerce can strengthen nongovernmental economic and technical cooperation between private partners from two countries. The Korean Chamber of Commerce and Industry(KICC) operates bilateral economic cooperation committees for non-government business cooperation in many countries, including Myanmar. The KICC serves as a channel of communication between Korean companies, the government and National Assembly actively. It helps enhance business environment, networking, international business cooperation and support business activities.

However, Chinese Enterprises Chamber in Myanmar, which formerly know as Chinese Companies’ Association in Myanmar, was founded in 2002, just lack the sense of presence. Chinese Enterprises Chamber in Myanmar is mostly under the direct lead by the Party Committee of the Embassy of China in Myanmar, and all the activities are under the supervision and management of the economic and commercial counsellor’s office of the Embassy. For now, Chinese Enterprises Chamber in Myanmar lacks of the function of coordinating relations between private and public sectors.

Thirdly, according to an employee in Thilawa Special Economic Zone, it is very hard for people to reach Chinese investors, which severe the conflicts when the channel of communication is inaccessible. When contradictions became acute in the Shwe project, an oil and gas pipeline cooperation project between four countries, Burmese people can easily reach crews from Daewoo International-a Korea’s leading export trading company. However, they never managed to contact directly with PetroChina. Generally speaking, Chinese investment projects institutes with multiple levels of government, so they only have contact with senior leaders in Myanmar. Daewoo international, in particular, has been incorporated into life among many social strata. This may attribute to two reasons: the lack of the Corporation Social Responsibility (CSR) department in Chinese corporations and the language and culture barrier between two countries. CSR department is more than a place to build up a channel of communication, but also would optimize the role of corporations in international relations. Besides, Chinese corporations prefer sending technical talents to the oversea branches in order to realize cost reduction and increase in efficiency. Nevertheless, these specialists are usually engineers whose social skills are disadvantages, which makes the communication between Burmese people and corporations even harder.

Furthermore, a multiple investment system would be beneficial to China. China should diversify its investment to different sectors. Though China’s aid already broadens to more sectors, Chinese investment projects still concentrates upon energy resources. Korea’s FDI in Myanmar focuses on diverse sectors.

Lotteria, a subsidiary of LOTTE Group, is a chain of typical fast-food restaurants and now opens 15 stores in Myanmar-13 in Yangon and 2 in Mandalay-all in flourishing region in downtown. Lotteria in Myanmar plays popular K-pop music as background, sets children’s space and is decorated in the same way with its stores in other parts of the world. The restaurants attract mostly the young generation and parents with little kids. “Lotteria is a successful business in Yangon because of fresh food materials and delicious products. Myanmar people really like it,” explained Zaw Min, a manager of Lotteria chain store. The food price in Lotteria is not that low, so only the middle class and upper class can afford it. The income gap between different regions is also why Lotteria mainly opens in Yangon. “The first store in Myanmar opened inside a supermarket in Yangon Chinatown. We plan to open 30 stores in total and of course, most of the store will open in Yangon.” The manager held positive attitude towards investment environment in Myanmar for foreign companies because the foreign investment law is improving, so more capital will come to Myanmar, and he thought that the government will change policies in order to provide a better living conditions for people and better development for companies. A Brand new LOTTE hotel opened on Sep. 1st, 2017.

Korea also get involved in automobile industry. “Our products do not need too many advertisements for the reason that people are familiar with Korean brands, influenced by Korean culture”, a young female sale in KIA 4S store claims. Though most of the cars on road are Toyota, Korean car brand KIA, which only approached in Myanmar for almost 5 years, is achieving better sale records and revenue each year. According to a sales manager in KIA auto store, “People get used to use Japanese cars because of their reasonable price, reliability and convenience to after-sale maintenance. But KIA automobile is also in good quality and lower price as new cars, which are attracting people significantly.” A sales manager introduced that in this store, all of the 21 employees are Burmese. And Toyota automobiles on road are mostly second-handed because Burmese people prefer to buy second-hand cars. KIA only sells new cars. So Korean cars actually have bright prospect here.

Lastly, Chinese NGOs should enter international market so they can do more in cooperation with developing countries and provide aid. Not only focus on investment area, but also on healthcare, education, food supply issues in improvised region. Such activities may help change Burmese people’s anti-China feelings. China is a laggard in NGO development, not only in international development but also many domestic issues can be alleviated by NGOs. China should speed up NGO development a little.

In conclusion, China should focus more on setting up independent aid agency, regularizing the development of Chinese Enterprises Chamber and NGO, diversifying the investment in different sectors, getting in touch with local people more frequently and enhancing the soft power of Chinese culture. On the way to establish a reputable image in Myanmar, Chinese policy-makers and enterprises could learn lessons from its Korean counterparts.

[1] KOICA website

This article is a sponsored post.

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