Companies warned over overseas project risks
Reported cancellations of solar power projects in Myanmar involve several mainland firms
Companies investing in potentially “vulnerable” overseas opportunities have been urged to be cautious after Myanmar’s military junta appeared to have cancelled 26 tenders related to solar power projects.
The tenders had been issued by the now-ousted National League for Democracy government in 2020. According to the bidding results from Myanmar’s Ministry of Electricity and Energy, Beijing-based China Machinery Engineering, Hefei-based solar photovoltaic inverter maker Sungrow and several ChineseMyanmar consortiums had won 28 of the 29 tenders originally offered.
“Pretty much all the solar projects which were granted after a tender in 2020 were cancelled due to the lack of progress by these companies,” said Edwin Vanderbruggen, senior partner at Yangon-based legal and tax advisory firm VDB Loi, which assisted the Myanmar government with the tender process.
“The basis for the cancellation is thus that the proposals of the companies no longer matched with their original bids.”
The Irrawaddy, a news website operated by exiles living in Thailand, had first reported on the cancellations.
The issue serves as a warning to mainland firms, analysts said.
“In recent years, especially under the Belt and Road Initiative, China has made huge investments in these types of countries. Chinese companies often face very high local political risks due to local ethnic conflicts, democratic transition, leadership turnover,” said Zhang Yifan, associate professor at the Chinese University of Hong Kong’s department of economics.
“In addition, Chinese investment is often concentrated in the raw materials, mining or infrastructure sectors. Projects in these sectors usually require large investment upfront, but generate stable revenue when completed. They naturally become vulnerable targets for the governments of the host country.”
Official information released on the Myanmar National Portal in January showed that China was the top source of foreign direct investment, followed by Singapore, India, South Korea, France, Hong Kong and Taiwan.
Yangon-based legal firm Charltons highlighted ongoing criticisms in Myanmar relating to Chinese investment in the solar projects. These included local firms being kept out of the bidding process and suggestions some of the Chinese companies lacked the experience to be independent power producers, it said.
Global conservation body the WWF said power from the solar projects was supposed to be available in 2021 and therefore “failure to deliver” could be one of the reasons for the reported cancellation of the tenders.