BURMESE PRIME MINISTER KHIN NYUNT: CHINA FREQUENT

C O N F I D E N T I A L SECTION 01 OF 04 RANGOON 001014

SIPDIS

NOFORN

STATE FOR EAP/BCLTV, EAP/CM, EB
COMMERCE FOR ITA JEAN KELLY
USPACOM FOR FPA

E.O. 12958: DECL: 08/04/2014
TAGS: PREL ECON PGOV PHUM BM CH
SUBJECT: BURMESE PRIME MINISTER KHIN NYUNT: CHINA FREQUENT
FLYER

REF: A. BEIJING 12309

B. RANGOON 876

C. RANGOON 417

Classified By: Classified By: CDA a.i. RONALD MCMULLEN FOR REASONS 1.4
(B,D)


1. (C) Summary: Both the PRC Embassy and the Burmese
Ministry of Foreign Affairs (MOFA) described Burmese Prime
Minister Khin Nyunt's 11-18 July visit to China, his eighth
overall though the first as PM, as a huge success. The
visit, during which Khin Nyunt met senior Chinese leaders and
reportedly discussed Burma's "road map" to democracy, focused
heavily on economics and resulted in 12 signed agreements
(detailed below). Both the PRC CDA and a MOFA official
alluded to problems with Burma's capacity to move forward on
joint projects in a timely manner. In related events, the
COM offered to broker an informal exchange between Chinese
Embassy officials and NLD members at her residence. COM also
raised with the PRC CDA press reports claiming a purported
U.S.-based Chinese dissident had been arrested in Burma and
turned over to Chinese authorities. Separately, an NLD CEC
member told the PRC DCM that the PRC model of economic
development leading to political change was a good model for
Burma. End Summary.

Is the Carrot Too Big For the Stick?


3. (C) COM and Pol/Econoff met with Chinese Charge
d'Affaires (CDA) Yu Boren on July 23 for a readout of the
11-18 July visit to China of Burmese Prime Minister (PM)
General Khin Nyunt. Yu's comments were consistent with those
reported ref A. Yu described the visit, the eighth by Khin
Nyunt to China but his first as PM, as successful, resulting
in 11 (actually 12) signed agreements, and confirmed that at
seven days, it was somewhat longer than similar trips hosted
by China for foreign dignitaries. Yu said the focus of
discussions had been bilateral relations, noting that Khin
Nyunt's access to President Hu Jintao, Premier Wen JiaBao,
Chairman of the National People's Congress Wu Bangguo, and
Politburo Standing Committee Member Luo Gan illustrated the
importance China had attached to the visit. On the political
side, Yu said Khin Nyunt had raised Burma's National
Convention and stressed his commitment to the "road map" to
democracy in his meetings with Chinese leaders. In response,
Yu claimed China urged accelerated democratization and
political reconciliation, while reaffirming its policy of
non-interference in Burma's internal affairs.


4. (C) COM asked Yu how China reconciled what appeared to be
diverging messages to the GOB, encouraging accelerated
political reform while providing continued and extensive
economic assistance not tied to progress on the political
front. Yu said that the GOB attached great importance to
China's advice and that China had urged the GOB to respond
positively to international offers of assistance and to move
forward with political reconciliation. Yu pointed to Khin
Nyunt's comments to Chinese leaders that political stability
led to economic growth as evidence of Khin Nyunt's commitment
to move forward with democratization. (Comment: A rather
optimistic interpretation in our view. End Comment.)


5. (C) COM pressed Yu for details on several of the new
economic agreements, including the size of a debt
rescheduling agreement (ref C); what the "Master Plan for
Hydropower Projects" entailed; and whether the GOB was able
to use/spend the aid/loans being provided by China
effectively. Yu did not offer any statistics on debt
rescheduling. On hydroelectric power, he said that China's
objective was to help Burma harness its considerable water
resources to generate local electricity for domestic
consumption. Yu assessed that Chinese economic assistance
had been somewhat effective overall, but did not provide
details. He noted some Chinese-sponsored projects had not
been successful because insufficient attention had been paid
to issues such as the local availability of needed raw
materials and markets. Yu remarked that the GOB needed to
adopt a new style of economic management, which is why the
GOB delegation's visit to several of China's Special Economic
Zones (SEZ) had been so important.


6. (C) On the margins of the discussion, COM offered to host
a lunch to broker an informal exchange between Chinese
Embassy officials and NLD members at her residence; Yu said
he would raise the matter with his ambassador. COM also
asked about press reports claiming that in late May, a
purported U.S.-based Chinese dissident, Peng Ming, had been
arrested in Burma and turned over to Chinese authorities.
Yu, with apparent sincerity, said that he had no knowledge of
the incident; requested copies of the relevant press reports;
and commented in English that China and Burma have a "special
relationship" and that "if would be dangerous for such people
to come here." (Note: GOB sources separately affirmed that
Burmese authorities arrested and handed Peng Ming over to PRC
officials in late May. End Note.)

The Burmese Take...


7. (C) MOFA DG for Political Affairs, U Thaung Tun, in a
July 27 meeting with visiting EAP/BCLTV deputy director and
P/E chief, said Khin Nyunt's visit was a logical step "in a
history of long relations" and that the Chinese "went the
extra mile" to put on a productive and welcoming visit. The
DG said Khin Nyunt held a number of senior-level meetings to
discuss expanding bilateral cooperation (especially in the
energy and counternarcotics sectors) and to address regional
peace and security issues (including initiatives to increase
ASEAN integration with greater Asia). Pol/Econoff separately
met with MOFA Assistant Director (AD) of the East Asia and
Pacific Division Political Department U Aung Kyaw Zan on
August 2. The AD described Khin Nyunt,s visit as
"successful and very significant" and provided a detailed
overview of the 12 agreements that had been signed (see below
annex). The AD noted that Khin Nyunt and Luo Gan had
discussed expanding the scope of cooperation on border issues
beyond the parameters of an agreement signed in 1997. Areas
identified for broadened cooperation were narcotics,
transnational crime, and boundary issues. The AD suggested
that there were plans to open two or three additional border
points within the next few years.


8. (C) The AD said the most important of the 12 agreements
signed was the one related to hydropower, which includes
Chinese support for a 750 megawatt power plant. (Note: In
contrast to information received from the Chinese CDA, MOFA
DG and AD said 12 agreements had been signed; 11 in Beijing
and a 12th in Shenzhen. A list of the agreements is provided
below; all detail was provided by MOFA AD.) When asked if
there were any points of friction in the Sino-Burma
relationship, the AD remarked that the Chinese have been
disappointed with Burma's ability to implement projects in a
timely manner, although he characterized the issue as
"minor." The AD said that Khin Nyunt had extended an
invitation to Chinese Premier Wen Jiabao to visit Burma, but
that there had been no discussion of possible timing thus
far.


NLD CEC Member Meets Chinese DCM


9. (C) At a reception hosted by COM July 27, P/E Chief
facilitated the introduction of NLD CEC member and economic
policy advisor U Nyunt Wei and Chinese DCM Yu Boren. During
the ensuing conversation, Yu stated that Burma had made
progress on economic development but that more needed to be
done. Yu characterized Khin Nyunt as someone who had a true
understanding of the type of economic development strategy
Burma needed to employ in order to advance; but was
noncommittal on whether he believed Khin Nyunt had the
authority to move forward with his economic agenda. For his
part, Nyunt Wei indicated that the Chinese model, which he
defined as pursuing economic development and transition to a
market economy in order to achieve increased political
freedoms, was one that Burma should seek to emulate.

China: Friend or Foe?


10. (C) When asked whether Chinese economic assistance was
viewed by the majority of Burmese people as generally
positive or negative, an NLD MP-Elect said that many Burmese
viewed the Chinese with suspicion and considered Chinese
products available in the Burmese market to be of extremely
low quality. MOFA AD was somewhat less negative, expressing
his view that while there was suspicion and mistrust, there
also was recognition that China was bringing benefits to
Burma. The AD was unwilling to engage on the degree to which
senior SPDC leaders, some of whom had been involved in
suppressing the Burmese Communist insurgency, harbored
lingering mistrust of Chinese intentions.

Annex: List of Signed Agreements


11. (U) The following is a list of signed agreements between
the PRC and the GOB (all detail provided by GOB):

1) Agreement on Economic and Technical Cooperation between
the Government of the Union of Myanmar and the Government of
the People's Republic of China. China is to provide a mobile
x-ray container for use in border inspections on the
China/Burma border. (ref B)

2) Exchange of Notes on the Project of International
Convention Center. China is to send experts to Burma to
identify and survey a site for a new international convention
center, construction of which is to be completed prior to
Burma's assumption of the ASEAN Chairmanship in 2006.

3) Exchange of Notes on the Master Plan for Hydropower
Projects in Myanmar. China will provide a $5 million grant
to formulate a comprehensive hydropower plan for Burma; this
agreement was an outgrowth of the March 2004 visit by Vice
Premier Wu Yi.

4) Exchange of Notes on the Master Plan for Thanlyin-Kyauktan
Industrial Zone. Myanmar has invited unnamed/unspecified
Chinese companies, many of which are based in Shanghai, to
invest in the industrial zone, which will focus on
information technology and the information industry. While
Myanmar is using China's Special Economic Zones (SEZ) as a
model for this initiative, Myanmar is not seeking to emulate
a particular SEZ.

5) Exchange of Notes extending 50 Million RMB Yuan
interest-free loan for the provision and shipment of rails
for the Myanmar Government.

6) MoU between the Ministry of Communications, Posts and
Telegraphs of the Union of Myanmar and the Ministry of
Information Industry of the People's Republic of China in the
field of Information and Communications. China will assist
Myanmar in formulating communications policy and development
strategies and building communications infrastructure in
Myanmar. Chinese companies expected to be involved in this
initiative are ZTE (Zhongxing Telecommunications) and
Shanghai Bell.

7) Agreement on the Financing Plan for No 4 Urea Fertilizer
Factor at Taikkyi between the Export-Import Bank of China and
the Ministry of Finance & Revenue of the Union of Myanmar.
China will provide a $195 million concessional loan/export
buyer credit at 3% annual interest.

8) Debt Rescheduling Agreement between China Export & Credit
Insurance Corporation and the Ministry of Finance & Revenue
of the Union of Myanmar. The agreement rescheduled $94
million in debt that was due on November 1, 1999. China has
extended a two-year grace period, which started on July 1,

2004. (Note: This is less than the $120 million in debt
that an earlier draft of the agreement proposed to reschedule
(ref C)).

9) Supply Contract for Myanma National Telecommunication
Network Construction Project between Myanma Posts and
Telecommunications and ZTE Corporation. China will provide a
$150 million low interest loan.

10) Tagaung Taung Nickel Mineral Exploration and Feasibility
Study Agreement between No 3 Mining Enterprise and China
Non-ferrous Metal Mining & Construction Co Ltd. An area in
Mandalay Division has been designated for exploration. China
and Burma are to investigate and evaluate the economic
potential of this proposed endeavor within one year.

11) MoU between the Ministry of Industry-1 of the Union of
Myanmar and China Metallurgical Construction (Group)
Corporation for Extension of 200 TPD Pulp Plant (Thabung) and
Proposed 500 TPD Plant (Rakhine).

12) The Supply Contract between Myanma Post and
Telecommunications and ZTE Corporation for GSM Expansion
Project. This is a deferred payment agreement. China has
agreed to defer payment for 10 years as of 2004; there will
be a two-year grace period from 2004-2006, followed by an
eight-year repayment plan. The interest rate on the loan is
3%.
McMullen