Francisco A. Laguna & Jennie Linder Cunningham
In the last of the series, this week, we explore China’s economic activities in mainland Southeast Asia. Over the past weeks, we have determined that Chinese foreign direct investments and trade patterns in the developing world indicate a significant (if not coordinated) effort to secure natural resources, new markets, and short to long-term energy security. This post examines Burma (Myanmar) and Cambodia, finding similar patterns and goals.
The geopolitical situation of China and Southeast Asia, particularly in the South China Sea, adds a wrinkle to foreign direct investment / trade in the region, a factor not present in Africa or Latin America.
China has significant interaction with the Association of Southeast Asian Nations (ASEAN), which encompasses the historical Indochina region, including Cambodia, Laos, Burma (Myanmar), Vietnam, Thailand, Malaysia and Singapore, along with Indonesia, the Philippines, and Brunei. As a bloc, ASEAN ranks in the top ten world economies. It had a nominal GDP of $2 trillion in 2012, expected to increase by 21% by 2020, to $4.7 trillion. Much of this projected growth stems from a free trade agreement with China, signed in 2010, which created the most populated and the third largest trade zone, trailing only the euro zone/EU and NAFTA.
China’s interests in Burma, with which it shares a historically unstable border, tend to lie in natural resources such as wood and stones like jade, as well as energy security, transportation and oil and gas. China accounts for almost 39% of Burma’s imports, and natural resource investments alone are estimated at over $20 billion. Unfortunately, Chinese activity is often described as “plunder” (of natural resources), exacerbated by an economic vacuum resulting from Western sanctions imposed in the mid-1990s – now being eased. Terms of trade tend to be unequal and favorable to China. Chinese State-owned enterprises (SOEs) have recently tried to counter domestic resentment in Burma with infrastructure projects as well as the construction of schools in towns close to a controversial oil pipeline through Burma, another pattern seen in Africa and Latin America.
In Cambodia, another poor member of ASEAN, we also see intriguing Chinese economic activity. Although exports to China are not particularly high, China is Cambodia’s largest investor and aid source, and the origin of approximately 20% of Cambodia’s imports. Beyond the interest in Cambodian natural resources, China has expressed a desire to acquire land – but for use in tourism projects, including gambling resorts and replicas of the legendary Angkor Wat. Chinese tourism has been increasing rapidly, reportedly a 35% increase from 2011 to 2012.
The pattern of natural resource extraction and energy security continues to be the focus of China’s influence among its near neighbors in the Southeast Asian mainland; however, we also see the added (and not unexpected) factor of Chinese tourism goals, along with controversial infrastructure and aid, especially in the poorer and less powerful ASEAN states.
TransLegal works with clients interested in entering the ASEAN market. Contact us with your questions concerning Burma, Cambodia and the other Southeast Asian countries.