Mekong Utility Watch

China anxious to protect energy, resource interests in Myanmar

XFN-Asia Newswire
September 28, 2007

Chinese power companies are investing in large-scale hydropower projects in Burma, without adequate transparency or democratic oversight.

BEIJING – China’s request that the Myanmar government “shows restraint” in handling the protests that have swept across the country reflects at least some concern in Beijing about China’s growing economic involvement in Myanmar, particularly in energy and resources, analysts said. Extensive cooperation through both ASEAN and the Greater Mekong Sub-region organization means that many of China’s state-owned enterprises have an interest in maintaining stability in Myanmar.

“I don’t think that (the interests of Chinese energy companies) will be threatened by a change in government,” said Professor Zha Daojiang, of the People’s University of China, who studies the diplomacy behind energy deals. “But if it were to happen, we might see various contracts being renegotiated.”

Zha said there are no concrete plans in place in China to import Myanmar’s resources or to use its hydroelectricity, mainly due to logistical difficulties and uncertainties about how much Myanmar can actually deliver. However, there are now dozens of state-owned Chinese companies involved in projects to develop the country’s gas fields, mines and hydropower resources.

Environmental activists are concerned that China’s big state-owned firms are drawn to Myanmar’s hydropower sector because of the lack of accountability and public scrutiny in the country.

“Chinese companies have been moving into countries that lack transparency and democracy, including Laos, Cambodia and Burma,” said Pianporn Deetes of the Thailand-based pressure group, the Salween Watch Coalition.

A key element in the shared economy of the two countries is the Nu River, which sweeps through a remote gorge in southwest China’s Yunnan province and meanders across the border into Myanmar, where it is better known as the Salween.

On both sides of the frontier, the river has attracted the attention of NGO and human rights campaigners concerned about government management and plans by state-owned firms to generate electricity to industrialize and “integrate” the region.

The Salween remains one of only two “virgin” rivers in China, and the plans to build as many as 13 hydroelectric plants on its upper reaches were blocked by Premier Wen Jiabao in 2005. However, construction across the border — where China’s major hydropower  corporations face less scrutiny — has continued.

There has been “a pretty noticeable stepping-up” in the activities of Chinese firms in Myanmar since the middle of last year, said Chana Maung, Southeast Asia Director of EarthRights International, a group focusing on resource development in the region.

At least five Chinese investors — Sinohydro, the Gezhouba Group, the Farsighted Investment Group, the Gold Water Resources Group, and the China Power Investment Corp (CPI) — have launched projects in Myanmar within the last two years, she said.
“We are concerned that corporations from China are increasingly investing in large-scale hydropower projects in Burma, where such projects often result in environmental and social abuses,” she added.

With the companies forced to comply with more stringent environmental regulations at home, they have found it somewhat easier to launch projects in Myanmar, where relations with the government are the determining factor and where no vigorous social or  environmental impact assessments are required, Deetes of Salween Watch said.

“The people (affected by the dams) feel hopeless about influencing the Chinese companies, particularly in a country where there are no international standards in force,” she said.
A number of proposed hydropower plants on the Salween, including the first on the river to begin construction — the Hat Gyi dam in which Sinohydro Corp and the state power company of Thailand have invested — have stirred considerable local and international opposition.

Recent efforts to integrate the economy of China’s southwest with surrounding southeast Asian countries have led to a surge of investment in Myanmar, with as many as 26 big Chinese corporations involved in more than 62 hydropower, oil, gas and mining projects in the country, according to research by EarthRights International.

According to EarthRights, there are at least 14 Chinese corporations working on about 40 hydropower plants in Myanmar, including large state-owned concerns like Gezhouba,  Sinohydro, CPI and the Yunnan Power Grid Corp.

Earlier this week, official Chinese news agency Xinhua announced that the Gezhouba Group had signed a deal to supply equipment to a plant in Myanmar.

Gezhouba, owned by the Yangtze Power Group and which operates the Gezhou Dam hydroelectric plant just downstream of the Three Gorges, has increased its presence in Myanmar in recent years.

In 2005, it signed a contract to construct the dam and supply the turbines for the 125 mln usd Yeywa hydropower project in Mandalay, which is being built and financed by — among others — China’s CITIC, Sinohydro and the China Export-Import Bank.

Meanwhile, CPI, one of the country’s “big five” state-owned power producers, signed a deal with Myanmar’s electricity bureau at the end of last year to develop hydropower resources on the rivers Irrawaday, N’Mai Hka and Mali Hka in the north of the country, about 100
kilometers from the Chinese border.

Significant progress has also been made on China’s first ever overseas hydropower plant in northern Myanmar in which China Southern Power Grid Corp has invested.

Officials from the Chinese side are talking about increasing cooperation in the Mekong Delta and about “optimizing” and “coordinating” the various resources in the region.
The projects in Myanmar will be connected to a regional power grid supported by the Asian Development Bank, with much of the power being supplied to neighboring Thailand.
However, many of the projects are believed to be destructive and unnecessary.

“Thailand doesn’t actually need the electricity,” insisted Deetes of the Salween Watch Coalition. “It is already producing more than it needs and has a 40 pct surplus.”
Myanmar’s largely untapped nickel reserves have also attracted the attention of the China Nonferrous Metal Mining Corp, which signed an initial agreement with the Myanmar government in 2004.

Meanwhile, amid tightened domestic logging restrictions, particularly in Yunnan, China has sought increasing amounts of timber from its southwest neighbor, the bulk of which actually comes from Myanmar’s rebel-controlled border areas.
China has also been anxious to secure the lion’s share of the Myanmar’s fossil fuel resources before India, its major regional rival, gets there first.

The country’s promising hydrocarbon reserve has already raised the interest of China’s three big state-owned oil companies. Both PetroChina and the China National Offshore Oil Corp (CNOOC) have signed agreements on the development of offshore oil and gas along the coast of Arakan state. PetroChina is also buying natural gas from the region.

Sinopec has also conducted exploration, and this year signed a contract worth 1 bln usd on the construction of a cross-border oil pipeline, according to EarthRights.
A source told XFN-Asia last week that the China-Myanmar oil pipeline project had already won Chinese government approval, and construction was originally expected to start some time this year.

The pipeline route will not only give China a much needed supply boost, but could also enable it to bypass the geopolitically sensitive Strait of Malacca, the narrow shipping route between Malaysia and Sumatra, through which the bulk of China’s oil imports are  transported.

However, Zha of the People’s University is very skeptical about the possibility of China  building a pipeline from Myanmar.

“The pipeline plans are fictitious, and have come from academics in Yunnan,” he said. “It is a terrible misrepresentation to think that China’s oil companies are currently hoping to build a pipeline.”

“The pipeline talk doesn’t make sense because we still don’t know the potential of  resources in Myanmar,” Zha added.

“It would actually be more feasible for Burma to export its natural gas to India,” he said.  None of the Chinese companies involved were willing to discuss their operations in Myanmar, an especially “sensitive” part of their efforts to fulfil their government’s call for them to “go overseas” in search of new revenues and resources.
The Chinese Foreign Ministry’s spokesperson, Jiang Yu, told reporters this week that Beijing is maintaining its stance of “non-interference”, but expressed hope that Myanmar could maintain stability and economic growth.

China is also believed to be resisting proposals to introduce tougher sanctions on Myanmar’s military government, and — along with Russia — tried to halt a special meeting of the United Nations Security Council on Wednesday evening.

The activists are urging China’s state-owned enterprises to think twice about developing resources in the country.

“Given the current situation, it is very important for corporations that invest (in Myanmar) to use their influence to promote stability,” said Maung from EarthRights.
“Corporations should think very carefully about partnering with such an unstable and internationally-criticized military junta,” she said.

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