WASHINGTON - Myanmar President Thein Sein's decision to suspend construction of
the China-backed Myitsone dam project has surprised many observers and raised
questions about the state of the two countries' bilateral ties. Civil society
groups and other observers have celebrated the decision as a people power
success under a new democratic regime and perhaps Myanmar's first overt rebuff
of China's economic dominance.
Different analyses have emerged as to why Myanmar has turned its back on its
powerful and wealthier northern neighbor. Many believe that Thein Sein's
government responded to public opposition to the US$3.6 billion project, which
threatened environmental degradation and the livelihoods of local communities
in the area. Some think Naypyidaw is catering to the West to show it is
genuinely different from the outgoing military
junta and deserves a more positive and welcoming treatment.
Others have argued that the decision was the result of an internal power
struggle among different factions inside the government. However, none seems to
be asking the critical question: What happens next?
The suspension of the dam will not change immediately a basic hard fact. That
is, China is currently Myanmar's biggest economic patron in regard to foreign
direct investment and aid. As the new government of Myanmar eagerly seeks to
reform and develop its national economy, China is and most likely will remain
an indispensable player in that process.
Although China also needs Myanmar for a variety of reasons, namely border
stability, natural resources, energy transportation and an outlet to the Indian
Ocean, such mutual dependence is hardly symmetrical. China has a lot to lose if
the bilateral relationship turns sour. However, Myanmar has even more at stake
considering China's overwhelming economic importance to the country.
The real value of China for Myanmar is heightened by existing Western
sanctions. Under the current investment, trade and financial restrictions
imposed by the West, including the United States and the European Union,
Myanmar is yet to find a realistic alternative to China to meet its economic
Neither the 10-member Association of Southeast Asian Nations (ASEAN) nor India
generate as large or steady a cash flow into Myanmar as China. Although pleased
by the changes inside Myanmar and disturbed by China's dominance and
problematic projects, the West seems to be in no hurry to remove these punitive
measures. Even if the Myanmar government may not relish its over-dependence on
China, at the moment it does not really have other feasible options.
Therefore, the decision to suspend the Myitsone dam has raised some serious
questions. Most immediately, the two countries need to resolve next steps
regarding the dam project. The differences in perceptions are striking and
threaten future diplomatic complications. Most in Myanmar seem to have taken
Thein Sein's decision as the cancellation of the project, while many in China
have noted that the decision was only to suspend the project during this
government's term rather than abandon it altogether.
It remains to be seen whether this disconnect reflects Thein Sein's strategic
planning to leave the door open for further negotiations or instead a
step-by-step approach to mitigate harsh feelings. Either way, Beijing seems
hopeful that there is still room for maneuver.
According to China's Ministry of Foreign Affairs, the legitimacy and validity
of the dam is not at issue since the project has "gone through scientific
verification and strict examination of both sides". The ministry added that any
issues about the project at this point are merely "relevant matters arising
from the implementation of the project" and "should be handled appropriately
through bilateral friendly consultation".
For China, the issue is not whether the project should or will be implemented,
but how to resolve the differences on the specifics of its implementation. The
more hardline response from China Power Investment Corporation (CPI), the
Myitsone dam's lead investor, adds one more layer of complication to the future
of the project. CPI's general manager has publicly threatened that Myanmar's
decision will lead to "a series of legal issues" and "immeasurable" financial
CPI has invested heavily in the Myitsone dam, including $18 million alone on
the relocation of local populations. If the project is abandoned and the
Chinese government does not intervene, CPI will almost certainly press Myanmar
to compensate it for losses and collateral damage.
The abandonment of the dam will also completely change the original seven dam
mega-project of which Myitsone is the central link. CPI has also invested in
spin-off infrastructure projects such as factories, bridges and roads. The
total compensation amount demanded could be astronomical.
Beyond dam diplomacy
In the longer term, the Myitsone dam controversy raises other serious
challenges to Myanmar's relationship with China. Some China analysts have
argued that broad bilateral relations will not be determined by one single
project. However, Thein Sein's surprise decision has been interpreted by many
Chinese as a serious betrayal which should not be brooked without some sort of
More profoundly, Thein Sein's apparent disregard of Chinese interests, the
public embarrassment created by his announcement, combined with Naypyidaw's
parallel efforts to improve relations with the US, all feed into growing
Chinese suspicion about Myanmar's strategic intentions and its dependability as
a bridge into Southeast Asia, South Asia and the Indian Ocean.
The suspension decision will thus influence how Myanmar's government and its
people manage their future relations with China. To minimize the damage, Thein
Sein will need to convince Beijing of the necessity of the suspension (or even
abandonment) and help China understand the changes underway inside Myanmar and
their implications for China-Myanmar relations.
To be sure, playing on domestic public opinion could provide Myanmar's
government useful new leverage. Some civil society groups in Myanmar have
already expressed their wish to collect one million signatures and send the
petition to Beijing for the complete abandonment of the project, as well as a
waiver on compensation for work completed.
Nevertheless, both the government and civil society groups should be cautious
when playing the public opinion card. China has viewed anti-China sentiment
bubbling in Myanmar as a conspiracy stirred up by the West and pro-Western
nongovernmental organizations to undercut China's national interests. Thus any
over-emphasis placed on public sentiment by Thein Sein will be viewed by
Beijing with suspicion and might result in bigger economic losses.
Clearly, China does not want the dam controversy to stir wider anti-China
sentiment and cause a domino effect on other Chinese-invested projects,
including several other hydropower projects, mining ventures and, most
importantly, major new oil and gas pipelines. The pipelines, similarly beset
with controversy, are one of China's four national strategic energy
transportation routes and its most important project in Myanmar.
It's unclear what, if any, broad lessons China's government and companies have
drawn from the Myitsone dam experience. Public opposition to the dam had never
been acknowledged by Beijing or CPI. Widespread resentment of the dam, however,
was learned the hard way in April 2010 when the construction site was bombed by
locals. An ethnic Kachin insurgency in the dam's area has also reignited in
For almost 18 months, Beijing and CPI stood aside and watched the hostility
fester rather than engaging the different groups and stakeholders that could
have worked towards a solution, or at least a less embarrassing public result
caused by the abrupt suspension. The failure, it appears, is the result of a
strategic miscalculation that CPI could bribe its way out of the predicament
and reflects a fundamental misjudgment about Myanmar's new political reality.
Myanmar's new government is not the old military dictatorship and China cannot
hope its previous business model of working through cronies and corrupted
government officials will continue to guarantee commercial success and new
investment opportunities. A lot needs to be done to mend China's image and
improve its relationship with the people and civil society groups in Myanmar
who rallied against the Myitsone dam.
Most importantly, Beijing might want to consider that the strong anti-China
sentiment in Myanmar has deeper causes beyond Western instigation.
Single-minded, profit-driven Chinese companies will need to be reined in before
they undermine the many good things China has recently done for Myanmar.
However, without a change in official thinking, China can expect more surprises
like the Myitsone dam suspension and new tests to the bilateral relationship.
Yun Sun is a visiting fellow at the Center for Northeast Asia Policy
Studies at the Brookings Institution in Washington DC. She was until recently
the Beijing-based China analyst for the International Crisis Group.
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