TAIPEI ( TheStreet) -- The irony is irrepressible. We have two authoritarian Asian neighbors with a historically cozy anti-Western relationship. One is investing all over the world, from acquisitions in the United States to resource exploration in Africa. The other has cracked open its fertile economy to foreign investors over the past year.But China is not emerging as the most favored investor in Myanmar, according to an unusually critical report in the venerable Caijing.com.cn online newspaper. Its July 30 commentary says Chinese investors are offering excessively "traditional industries" such as mining, infrastructure construction and telecom projects. Those missions would give China access to the Indian Ocean while locking in natural resources for its still fast-growing economy. But the Burmese are less interested in horse-trading for ports and minerals than in helping bottle American soft drinks, eating American fried chicken and buying Japanese electronics. Myanmar's market today lacks the scale to lift the shares of those foreign investors, but early arrivals in the once-closed nation of about 55 million people should see eventual rewards. China won't be competing unless it gives up the traditional client-provider investment approach. "In contrast to the enthusiasm of the United States, Japan and many other countries, Chinese enterprises, which used to enjoy great advantages in Myanmar, seem to have become onlookers in Myanmar's new investment boom," Caijing.com.cn laments. China should know it can't keep taking the default view that because the countries to its south are smaller or poorer than China that they're just waiting to be spoon-fed. Vietnam still beats its chest today about routing China in their war of 1979. Resentment against the Chinese merchant class lingers in Indonesia even 15 years after sometimes brutal forced assimilation under ex-president Suharto. Continental Southeast Asia has pushed back against China for building dams on the upper Mekong River, diverting flows to the delta. "Bottom line: Were Chinese companies to become more involved in services outside the extractive industries, perceptions would likely shift. In the present environment, any attention paid to a project's environmental and social impacts -- in any industry -- would also help," says Ryker Labbee, Myanmar country director with the research firm Cascade Asia Advisors.
Myanmar's investment authorities may fear now that China's traditional industries would mold their country into something it doesn't want to be -- a scrappily overbuilt and polluted land ignominiously dependent on economic relations with the country that sculpted it that way. "As Myanmar proceeds through the industrialization process, the country is starting to worry that massive imports of manufactured goods from China will jeopardize its weak national industry," Caijing adds. "Moreover, it has also become discontent with simply exporting its resources." At a deeper and more vexing level, Myanmar "seeks to adjust its relations with China," according to an October 2012 report by the Institute of Developing Economies under the Japan External Trade Organization (Jetro), a government-linked body that promotes Japanese trade and investment in other parts of the world. The Southeast Asian nation formerly known as Burma hatched a foreign investment gold rush after its first transition from military rule to civilian government in 23 years in March 2011. Before then Myanmar stuck by China as Western nations imposed sanctions on the strict authoritarian government. The new government wanted out of China's shadow. "In order to eventually detach itself from its excessive dependence on China, Myanmar's government began to seek out ways to improve its relations with Western countries," the Jetro report says. "Under these circumstances, Japan reinitiated its full-fledged assistance to Myanmar, and a large number of Japanese private companies began to visit the country. "The United States also began to develop its business relationship with Myanmar, for example, by easing restrictions on American companies investing in Myanmar," the (obviously pro-Tokyo) report adds. "Thus, entering the age of democratization, the presence of China in Myanmar is becoming relatively weaker." As of last year, Myanmar's Directorate of Investment & Company Registration said 88% of overseas projects went to power, mining and oil and gas. About 34% of the $40.4 billion in foreign investment then came from China -- too much, apparently. China's lost traction would help American companies that are contributing to services and tourism. For example, KFC, a unit of YUM! Brands ( YUM), serves fried chicken served in the capital Yangon. In June, Coca-Cola ( KO) announced the opening of its first Myanmar bottling plant, part of the drink giant's five-year investment plans worth $200 million and 22,000 local jobs.
U.S. hotel band Hilton Worldwide, owned by Blackstone Group ( BX), said in March that from 2014 it would co-manage its first Myanmar hotel, a 300-room property in Yangon, to soak in part of the country's 45% growth in visitor arrivals since last year. "Yangon, in particular, is positioned to grow much faster than many other emerging markets in Asia," Hilton said in a statement in March. Tourism would grow partly on Myanmar's mystique. Getting a visa is no longer like a coin toss that sometimes ended with being stuck in nearby Bangkok a few extra days before flying home. From Japan, where officials have historically vied with China for strategic control of Southeast Asia, Panasonic ( PCRFY) Asia Pacific opened a branch office in Yangon in June to help sell consumer electronics. Fast Retailing ( FRCOY), the Japanese operator of Uniglo brand stores, is also considering the launch of a garment plant in Myanmar, according to industry news Web site textilebasics.com. What's next for China? Chinese automakers may an open road to giving Myanmar what it wants, says UBS equity strategist Chen Li. They already repack Japanese parts in China and export them onward to neighboring countries. My vote goes to internationally branded Chinese electronics firms, which sell solid stuff at Third World-friendly prices. Beijing-based PC developer Lenovo's ( LNVGY) Myanmar Facebook fan page boasted 4,110 likes as of Wednesday, while the " Huawei Device Myanmar" page dedicated to the U.S.-maligned Chinese brand's smartphones had garnered 4,857 clicks of approval. "I don't sense as much animosity among the people as might be expected or assumed," Labbee says. "Myanmar will continue to do business with China but is looking to engage other partners with greater frequency and depth." At the time of publication the author had no position in any of the stocks mentioned. Ralph Jennings is on LinkedIn. This article was written by an independent contributor, separate from TheStreet's regular news coverage.