Suu Kyi's man in Yangon under fire over transit deal with China

YANGON (Reuters) - Aung San Suu Kyi's first major infrastructure project could hardly be more visible - hundreds of new yellow buses now plying the streets of Yangon in what her ruling party hopes will be a potent symbol of how it is transforming peoples' lives.

But two deals to import 2,000 buses from China estimated at more than $100 million have caused an unusual rift within her National League for Democracy (NLD), with regional lawmakers questioning its cost and accusing Yangon's chief minister Phyo Min Thein, a Suu Kyi protégé, of cronyism and a lack of accountability.

"Phyo Min Thein's government lacks transparency," said Kyaw Zay Ya, a Yangon NLD lawmaker. "The image of the government will be damaged if he doesn't change."

Yangon Chief Minister Phyo Min Thein (L) and Myanmar State Counselor Aung San Suu Kyi attend an event marking the 70th anniversary of Martyrs' Day at the Martyrs' Mausoleum in Yangon, Myanmar July 19, 2017. Picture taken on July 19, 2017.Soe Zeya Tun

The deal, struck with Chinese companies and a businessman with ties to the junta that ruled Myanmar for decades, has also soured relations with the West, according to diplomats.

While there is no evidence that any laws were broken in the awarding of the contracts, Roland Kobia, the EU ambassador to Myanmar, complained in a private letter to Commerce Minister Than Myint of a lack of transparency in public procurements.

"Currently, the domestic economy remains dominated by a small number of domestic and regional actors whose long-standing practices prevent fair competition," Kobia wrote in the June dated letter, seen by Reuters. The letter did not specifically refer to the bus deal.

Although the Chinese buses were about half the price of international rivals, engineers who inspected them for Myanmar predict that they will wear out and need to be replaced far sooner than the international standard.

Phyo Min Thein declined several interview requests from Reuters. He and other ministers have previously defended the deal, saying the government-to-government agreement with China offered a discount price and express delivery.

EU ambassador Kobia said in a statement in response to Reuters' questions that "many European actors stand ready to work in Myanmar, but more needs to be done to give them a fair chance to compete for contracts".

He was referring to the broader issue of transparency in public procurements, the EU said.

Myanmar's commerce ministry spokesman Khin Maung Lwin declined to comment.

When Suu Kyi swept to power in an electoral landslide in 2015, analysts predicted Western companies, whose government's had cheered on the transition to democracy in the Southeast Asian nation that began in 2011, would flock to the country.

But the Yangon bus deal underscores that Suu Kyi's backers in the West have grown disillusioned as Myanmar increasingly prefers to do business with China.

IN A HURRY

Phyo Min Thein, a charismatic 48-year-old who spent about 15 years behind bars for opposing the junta, likes to tell people he has no more time to waste.

His bid to overhaul Yangon's antiquated transit system offers Suu Kyi's party one of its first opportunities to tangibly improve the lives of more than 2 million commuters in a city that overwhelmingly voted for the NLD at the last election.

Yangon officials last year rejected a proposal to improve the transit network from the World Bank's investment arm, the International Finance Corporation, due to differences over the details of the plan, which required detailed traffic monitoring and an open tender process.

Initial talks with potential French and Dutch suppliers also came to nothing, because they could not deliver the number of buses with the speed the chief minister was demanding, diplomats and lobbyists involved said.

Instead Yangon Bus Public Company (YBPC), a public-private joint venture majority-owned by the city government, bought 1,000 buses from two Chinese suppliers picked by Beijing's ambassador to Myanmar, Hong Liang.

Another 1,000 buses were bought from a third Chinese company in a private deal by businessman Kyaw Ne Win, a grandson of former junta leader Ne Win.

There was no public tender or debate in the regional legislature before the deals were agreed.

"Yes, people can say that there's no transparency," said YBPC chairman Maung Aung. "But calling a tender is not necessarily better. The deal was struck to maintain good relations between the two countries."