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Myanmar: A New Pattern of China-Japan Interactions?

 
 

Myanmar Railways (MR) has been variously criticized for its low efficiency and increasing costs. Solutions are needed. Since the country’s independence, the British colonial era meter gauge rail system has not been modernized much. Antiquated semaphore signals and manual blocking systems are still broadly in service, suggesting both the limited capacity of lines, and the poor maintenance of tracks. Rolling stock operates at significantly reduced speed, only 40km/hr on average. It takes trains about 15 hours to complete the 620 km journey between Mandalay and Yangon, much slower than buses, which can make the trip in as little as 8 hours depending on the type of bus in question.

Unsurprisingly, then, MR’s share of land transport in Myanmar has been dropping in the last three decades and the company faces rising deficits. Naypyidaw is aware of the challenge, but it has the same dilemma other Southeast Asian countries face: whether to upgrade the existing meter gauge system for practicality’s sake, or to establish an entirely new standard gauge system for higher speed connection with China. Based on Myanmar’s financial capacity, upgrading the existing system is already a difficult ask, not to mention building an entirely new rail network.

However, thanks to Japanese and Chinese capital, upgrades to the existing system are ongoing, and a standard gauge system is likely to be built.

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Tokyo has financially and technologically modernized the MR network, mainly the Yangon circle line and the trunk line between Yangon and Mandalay, in addition to improving five MR maintenance sites. These projects are scheduled to be finished by 2024, after which MR passenger services will reach a top speed of 100 km/hr, and more than double of the amount of service. Furthermore, more efficient freight services will contribute to Myanmar’s blooming inland dry port projects, a considerable factor for import and export costs.

It must be noted that Japan is not the sole source of the ongoing MR modernization. China and India are major suppliers of locomotives and carriages. Beijing has also extended loans to Naypyidaw for building two factories for locally manufacturing rolling stocks.

Under the China-Myanmar Economic Corridor (CMEC), a part of the larger Belt and Road Initiative, the previously abandoned high-speed railway (HSR) plan was resumed last year with a feasibility study for a line between Muse and Mandalay. That would be followed by construction of a standard gauge rail line allowing a top speed of 160 km/hr, and eventually connecting to Kyaukpyu, a harbor town with Chinese investment. Due to its location beyond the MR network, the standard gauge rail to Kyaukpyu would not be redundant. China’s focus on crafting a rail link to the Indian Ocean is interpreted as creating an alternative route to the Malacca Strait. Rakhine state, where the rail line would end, also borders Bangladesh, allowing the potential extension of the line – and the BRI — to yet another country.

So far, Beijing and Tokyo are not competing in Myanmar in the way they did over railway contracts in Indonesia and Thailand. This is due to their separate focuses: the additional standard gauge line for China and the existing MR network for Japan. Since Japanese Prime Minister Shinzo Abe highlighted the desire for a beneficial relationship with China last year, including cooperation on overseas infrastructure projects, the situation in Myanmar may be a potential pattern for cooperation. (Another potential model fell through with Japanese companies’ withdrawal from a joint venture with their Chinese counterparts in bidding for the HSR project in Thailand’s Eastern Economic Corridor.) Japan’s upgrade of the MR network will improve land transportation and the overall economy, which may pave the foundation for more demand for the additional standard rail being built by China.

These two powers’ distinct approaches nevertheless mask a subtler competition over durability and adequacy. Building an additional standard gauge rail system, beside original narrow gauged ones, is China’s common offering, as evidenced in completed projects in Ethiopia and Kenya. In contrast, Japan usually takes a more gradual approach with relatively small-scale upgrades. Upgrading an established rail network is naturally much cheaper than building another whole system. The former requires less land, and various existing facilities can be retained or modified rather than built from scratch. In Myanmar, Tokyo’s approach is more practical than Beijing’s in terms of cost, burden sharing, and economic structure.

Due to the relatively lower cost, Japan is able to largely support Myanmar through soft loans and official development aid (ODA). In contrast, the Kunming-Kyaukpyu rail will be built from scratch, and the necessary construction of many tunnels and bridges to pass through the mountainous areas in Myanmar’s northern states would further increase the costs. As such, the financial toll from Beijing’s preferred project would be much heavier than Tokyo’s, and Naypyidaw would have to shoulder some of that burden. The HSR project in Laos, with the high portion of loan and investment from China, presents one possible way forward, but it brings the risk of a debt trap. Unlike Vientiane, which has only landlocked territory, Naypyidaw with its coastline and harbors may be less willing to accept large Chinese loans. The funding and loan issues may therefore become an obstacle in the Sino-Myanmar bilateral negotiations, just like in China’s delayed HSR project in Thailand.

Finally, as Myanmar’s economy mainly relies on sea transport for international trade, the railway section with the most potential will be between Myanmar’s inland and Kyaukpyu harbour, rather than the whole line linking back to China. A direct rail link to the relatively remote Yunnan province in China, with a higher cost than ships, may not signify much economic potential for Myanmar. The capacity of trains could be further limited by the slope; Kyaukpyu is close to the sea level and Kunming is at an altitude of 1,900 meters. However, Beijing’s strong geopolitical interest in the line may compensate for these disadvantages. As long as CMEC is strategically important enough, China may be willing to strike a deal acceptable to Myanmar by bearing a great deal of the costs, and even subsidizing the rail transport as it does to the freight services through Central Asia.

Despite the lack of direct competition, the roles of China and Japan in Myanmar’s rail transportation could be summarized as revolution vis-à-vis evolution. Time will reveal their respective pros and cons.

Shang-su Wu is a research fellow of the Regional Security Architecture Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University in Singapore.

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