(October 11, 2011) Myanmar’s announced cancellation of the Myitsone dam has brought long-standing tensions with China into the open – including setting off conflicts with the Kachin Independence Organization in the north of the country. “It may be that the Myanmar government sees Chinese investment, in particular the Myitsone dam, as a destabilising force,” said Patricia Adams.

By Toh Han Shih
South China Morning Post

October 10, 2011

Despite being the biggest foreign  investor in Myanmar, China’s economic clout with its southern neighbour is being diluted as the Southeast Asian country improves ties with the United States, which is competing with Beijing for influence in the region.

The recent suspension by Myanmar of work on the Chinese-controlled Myitsone dam project shows the government could be preparing to reduce its financial reliance on Beijing, as it boosts economic ties with neighbouring Thailand and India.

The dam project has been the subject of bitter protests and violence by groups within Myanmar.

Myanmar’s President Thein Sein on September 30 suspended until 2015 the US$3.6 billion dam project, whose main investor is China Power Investment Corporation (CPIC), a state-owned power conglomerate. Located in northern Myanmar near the Chinese border, the dam was to become the world’s 15th largest hydropower project with an installed capacity of 6,000 megawatts.

“There have always been tensions between the Burmese and Chinese governments, and this latest issue brought these to the surface,” said Sean Turnell, an associate professor at Macquarie University in Australia.

The Myitsone is one of seven dams along the Irrawaddy River in Myanmar planned by CPIC, which will cost a total of US$20 billion.

The Burma Rivers Network, a Myanmar non-governmental organisation, has called on CPIC to scrap all seven projects, citing environmental concerns.

“The picture of China having influence over Myanmar is not the case,” said Pavin Chachavalpongpun, a researcher at the Institute of Southeast Asian Studies in Singapore. “China is reliant on Myanmar, rather than the other way round. Myanmar is free in managing its domestic and international relations.”

Pavin said any cooling of relations could leave a gaping hole in China’s relations with Southeast Asian states.

“I have heard many complaints within Myanmar about the extent to which China has exploited locals. The failure of the Chinese state in educating Chinese state-owned companies on responsible business could cost China the loss of enormous economic opportunities in Southeast Asia.”

In February, China overtook Thailand as the biggest investor in Myanmar, having poured US$9.6 billion into the country since 1988, compared with US$9.56 billion from Thailand, according to a Myanmese publication, Weekly Eleven.

At about the time Thein Sein announced the suspension of the Myitsone dam on September 30, Myanmar had been reaching out to the US, India and Thailand.

On September 30, in a rare visit to Washington, Myanmar Foreign Minister Wunna Maung Lwin held a “productive” meeting with Derek Mitchell, the new US policy co-ordinator for Myanmar, and other US officials, the US State Department said. This followed Mitchell’s visit to Myanmar earlier in September.

The US has maintained sanctions on Myanmar since 1988, when the military government cracked down on pro-democracy activists.

And according to a US diplomatic cable disclosed by WikiLeaks, its embassy funded groups within the country that persuaded the Myanmar government to suspend the  Myitsone dam.

The US has a hostile attitude towards Asia World Company, a controversial Myanmar company that is one of the shareholders of the Myitsone dam, along with CPIC and the Myanmar government. Asia World is controlled by the family of Steven Law, who is also known as Tun Myint Naing, and his father, Asia World chairman Lo Hsing Han, also known as Law Sit Han.

In February 2008, the US Treasury Department announced US economic sanctions against Law, his father Lo, Asia World, and other companies controlled by both the father and son, for providing support to the Myanmar government.

“Steven Law and Lo Hsing Han have a history of involvement in illicit activities. Lo Hsing Han, known as the ‘Godfather of Heroin’, has been one of the world’s key heroin traffickers. Steven Law joined his father’s drug empire in the 1990s and has become one of the wealthiest individuals in Burma,” the US Treasury Department said in 2008.

CPIC chairman Lu Qizhou insisted the Myitsone dam projects adhered strictly to Myanmar law.

On October 5, Thai Prime Minister Yingluck Shinawatra visited Myanmar to help improve ties. During the visit, contracts to build a road and a bridge were signed between both nations and Yingluck pushed for Thai investment in other port and road projects in Myanmar.

On September 27, Myanmar and India agreed to double their trade to US$3 billion by 2015, according to The Hindu newspaper.

In contrast to improving relations with the US, India and Thailand, tensions have been rising not just between the Myanmar and China and Beijing, but also within Myanmar with groups opposed to Chinese projects in their country, said Turnell.

Those tensions have spilled over into violence, with bombings at  Myitsone dam that killed at least three and injured at least 20, and several clashes between the Kachin Independence Organisation and government troops.

“It may be that the Myanmar government sees Chinese investment, in particular the Myitsone dam, as a destabilising force. Chinese investment in Burmese dams will threaten food supplies and that must worry the Myanmar government,” said Patricia Adams, executive director of Probe International, an international environmental advocacy group based in Canada.