US embassy cable - 04RANGOON1014

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