Myitsone Dam Hangs In The Balance

WITH LESS THAN a fortnight left before the commission set up to assess the trade-offs between the economic benefits and the social and environmental damage of planned hydropower dams on the Irrawaddy (seen above) is due to submit its report to Myanmar’s president, word is emerging that the commission may recommend that the controversial Myitsone dam project is scrapped. If so, that would kick a potentially politically prickly decision to President Htin Kyaw (nominally) and (in practice) de facto leader Aung San Suu Kyi’s new NLD-led government.

The $3.6-billion-dollar dam is heavily China-backed. China Power Investment Corp. (CPI) is financing the 4,600MW project and Sinohydro doing the construction — such as it is to date; then Myanmar President Thein Sein suspended work on the dam in 2011 in the face of local protests over village displacement, traditional livelihoods being at risk and dissatisfaction that China will get 90% of the electricity generated.

Beijing has since been pushing hard for a resumption of work, and at times it has seemed set to restart. In March, Vice foreign minister Liu Zhenmin called the project crucial for China.

While China has six other hydroelectric projects in Myanmar, not to go ahead now with Myitsone would rupture relations between Beijing and the new democratically elected government in Naypyidaw. Aung San Suu Kyi has been carefully rebuilding the relationship with Beijing, coloured by its support for the former military dictatorship and her desire to open Myanmar to a broader range of foreign investors.

However, when she visited Beijing in August, the Myitsone dam was conspicuously absent from a range of projects on which she and her hosts agreed to enhance their cooperation. The two sides agreed to no more than “to work together find a solution to the issue of the stalled Myitsone Dam project”. Termination of Myitsone would set precedents for other unbuilt or in-construction Chinese-backed infrastructure projects in the region that would be unwelcome to China’s ‘One Belt One Road’ aspirations.

However, cancellation of Myitsone would be popular within Myanmar. Myitsone is in Kachin state. Many ethnic Kachin reportedly said they voted for the NLD in the recent historic elections because they saw the party as their best hope of getting Myitsone stopped.

Alienating those voters risks making the NLD government’s hoped-for settlement with Myanmar’s ethnic armed groups more complicated. The armed wing of the Kachin Independence Organisation, the Kachin Independence Army (KIA), is one of those still fighting the government.

Beijing will not want an even more unstable border than it has now. Since the breakdown of a ceasefire between the KIA and the Myanmar military in 2011, It has already had to take thousands of Kachin refugees fleeing the conflict into camps on the Yunnan side of the border. It has brokered talks between the KIA and Naypyidaw in the hope of bringing some stability to the area.

There is a thriving but illicit trade in gems, timber, drugs and increasingly people across the border. China is also the biggest (legitimate) purchaser of Myanmar’s jade, has two oil and gas pipelines that pass through Kachin state and six other dam projects apart from Myitsone, the most notable of which is the Dapein Dam 1, which started generating power in 2011.

There is more than a single dam project in play. Myitsone will be being weighed in the balance of that greater calculation in both capitals while frantic efforts are made to see whether there is any face-saving deal that can be struck. Stakes are high on both sides. As a result, we may well not see the details of the commission’s report when it is handed over on November 11.

Myanmar And China Reset Rocky But Key Relationship

 

LITTLE UNDERLINES CHINA’S importance to Myanmar as much as Myanmar’s de facto leader Aung San Suu Kyi choosing to make a meeting with China’s foreign minister Wang Yi , seen above, her first with a foreign leader since her party historically took office on March 30.

China is Myanmar’s largest trading and investment partner, but the two countries have had a rocky relationship over the past few years. Points of dispute have been the fighting in the northeast of the country between Myanmar’s military and ethnic insurgent groups seeking greater autonomy, including ethnic Chinese Kokang, which periodically spills over into China, and controversial Chinese-backed infrastructure projects, notably the Myitsone dam near the headwaters of the Irrawaddy river and an oil and gas pipeline from Yunnan to the Indian Ocean that would let Chinese energy imports from the Gulf bypass the chokepoint of the Malacca Strait.

When Myanmar was still under military rule, China was able to take advantage of crony deals with Myanmar’s generals and some ethnic elites to exploit the country’s natural wealth; huge volumes of illicit timber and jade as well as drugs flow across the border into China.

Former President Thein Sein sent the relationship into a spin in 201o when he unexpectedly and unilaterally suspended the Myitsone project, which was being built by state-owned China Power Investment Corp. and its sub-contractor SinoHydro.

Wang and Suu Kyi at their meeting this week chose to emphasize resetting the relationship on a more positive footing, not discussing what her spokesman described as ‘controversial’ Chinese projects. Wang subsequently said that China would ‘guide’ Chinese companies operating in Myanmar to ‘respect’ Myanmar’s regulations, society, and environment.

That probably means paying a bit more than lip service to local concerns about environmental protection, land-grabs and lack of compensation for displaced communities, and bringing in Chinese labour to build Chinese-financed projects. A deal is likely to be struck to restart Myitsone in some form, probably addressing some of the social responsibility concerns and earmarking more of the electricity the dam will generate for consumption in Myanmar and less to be transmitted back to China.

Nothing is likely to happen until after the end of the rainy season in October at the earliest. However, Beijing has a diplomatic card it can play to support its infrastructure ambitions — helping to broker peace with some of Myanmar’s ethnic insurgent groups. Suu Kyi’s government will need Chinese cooperation if it is to generate the national peace settlement it has said is a priority.

However, while China will remain a key economic and political neighbour, Suu Kyi will want to be careful to avoid over-reliance on Beijing. She will also court U.S. trade, aid and investment and that from other regional powers, notably Japan and India, both of which have reasons of their own or wanting to counterbalance Beijing’s influence in a critical corridor between East and South Asia.

Sinohydro Looks To Restart Work On More Myanmar Dams

Sinohydro, the Chinese state-owned contractor for Myanmar’s suspended (for now) Myitsone dam project near the headwaters of the Irrawaddy river and China’s leading dam builder, faces a new environmental and reputational challenge now the government in Naypyidaw has approved construction of the controversial Hatgyi dam on the Salween river.

The isolated Salween is one of the world’s longest free-flowing rivers. It rises on the Tibetan plateau and courses through the canyons and gorges formed when the plates of the Indian subcontinent and Asian mainland met. For much of its 2,800 kilometers, the river flows through Yunnan, where it is called the Nu Jiang. Then it cuts through the eastern edge of Myanmar and marks 120 kilometers of the border with northwestern Thailand, a portion of which is shown in the photo above, before turning back into Myanmar to reach the Andaman Sea at the old teak trading port of Mawlamyaing.

En route, it flows through the watershed known as the Three Parallel Rivers of Yunnan, a UNESCO world heritage site. The river is so environmentally sensitive and biodiverse that local protests forced Beijing in 2004 to cut plans to build 13 hydroelectric dams along its own stretch of the river to four, and then in 2009 to suspended even those pending a still uncompleted environmental review. One of the proposed dams would have been bigger than the Three Gorges dam.

The $1 billion 1,200 MW Hatgyi dam is one of at least five hydropower plants planned for the Myanmar leg of the Salween by a partnership of the Myanmar and Thailand state electric utilities (see map, right, from the environmental group, Salween Watch). Hatgyi’s go-ahead follows the signing of a peace deal between Naypyidaw and ethnic Karen rebels. Sinohydro, which was given the contract to build the dam in 2006 before fighting stopped construction starting, has reportedly been stockpiling equipment and material at the site since mid-April in preparation for a resumption.

Environmental groups are gearing up again to block construction, saying it will destroy traditional village life along the ecologically fragile river, forcibly uprooting local populations and flooding farmland. Periodic local protests against the project have been staged since 2004, the most recent in March.

Sinohydro is also the contractor for another proposed dam on the river that could now go ahead following a peace agreement between Naypyidaw and a different group of ethnic rebels, in this case the Shan. The $6 billion 7,100 MW Tasang dam is planned to be the one of the highest in southeast Asia, taller than the Three Gorges. China’s state-owned Three Gorges Corp., which built and runs the Three Gorges dam, is a sub-contractor to the Tasang dam project. Some 60,000 villagers will have to be relocated to build it. Sinohydro has reportedly started surveying work there. As with Hatgyi, most of the power generated will be sold to Thailand and China.

The Tasang, Hatgyi and Myitsone dams are just three of 56 hydrodam projects in Myanmar proposed, under construction or completed that Chinese companies are involved in, according to a count by International Rivers, a riverine NGO. Sinohydro is involved in at least 17 of them, equivalent to one in eight of all its 132 current dam projects outside China. The international expansion of its business is leading the company to be more environmentally and socially responsive than it was in the past. The extent to which it will need to be in Myanmar may most depend on how rapidly the government in Naypyidaw wants to push ahead with opening the country to rapid development, and how well the economic rationale for projects originally intended to provide export earnings to fund a military dictatorship that has now stepped back from power hold up.

Pressure To Restart Work On Myitsone Dam Intensifies

Beijing continues to press Myanmar to allow a restart to work on the Myitsone Dam. Myanmar’s President Thein Sein unexpectedly and unilaterally pulled the plug last September on state-owned China Power Investment Corp.’s controversial hydropower project in Kachin state near the headwaters of the Irrawaddy river. The issue was again raised by foreign minister Yang Jiechi during his Myanmar counterpart’s visit to Beijing this week.

Meanwhile, CPI is pressing ahead with a new feasibility study addressing the environmental and social impact of the dam, this Bystander understands. It is recruiting a group of international dam-building experts for the task. Contrary to some reports, this is not being done by the Paris-based International Commission on Large Dams (ICOLD), an influential industry standards group, according to a statement the organization issued at the end of last month. It did confirm that CPI had “directly asked experts coming from countries with long term experience in building and operating large dams to assess its work”. It also said that Myanmar had applied for membership of ICOLD, whose current president happens to be from the China Institute of Water Resources and Hydropower Research.

CPI and its sub-contractor Sinohydro have kept about 200 workers on site regardless of the suspension. As we noted before, any resumption of work would have to wait until the end of the rainy season in October. But the increasing pressure form Beijing is making hitting that deadline look increasingly likely.

Work To Resume On Myitsone Dam?

This Bystander is getting reports that suggest Myanmar may be gearing up for the resumption of work on the Myitsone Dam, if not immediately then at least once the summer rains are done. Myanmar’s President Thein Sein unexpectedly and unilaterally pulled the plug last September on state-owned China Power Investment Corp.’s hydropower project in Kachin state near the headwaters of the Irrawaddy river. We now are told that in the past two weeks Myanmar government soldiers have been re-evicting 100 local villagers who were originally relocated from the area but since the project’s suspension have returned to reclaim their old homes. Soldiers have also been leveling the remains of the village, according to Kachin activists.

Ethnic Kachins, who have been fighting the Nawpyidaw government for greater autonomy for their state, particularly since a 17-year old truce broke down last June, have been at the forefront of the opposition to the dam. Environmental groups say it will damage the ecology of the Irrawaddy, the country’s main waterway. Some 2,000 villagers were moved out of five villages in 2009 and 2010 so construction could start. Apart from being removed from ancestral homes that will be submerged by the reservoir created to feed the turbines, they complain that they have been resettled on land too barren to farm.

The latest round of clearances followed by a week a call by China Power Investment’s president, Lu Qizhou, to restart work on the dam. President Thein had said it would remain suspended for the duration of his term of office, which runs until 2016. But we here the sounds of backtracking. Reports say a compensation deal has been hacked out and discussions continue to get work restarted. Yet it remains a thorn in the side of relations  between Beijing and its old ally in Naypyidaw, which is now as less steadfast one as it opens more to the outside world. The fighting in Kachin, refugees spilling over the border into Yunnan and drugs- and gun-running are making China’s western reaches more unsettled than Beijing cares for.

Plus it wants the power. The Myitsone dam was to be the first in a series of seven on the upper Irrawaddy that would eventually supply hydropower to western China. Planning work on the other six has continued and China Power Investment employees have remained on site at Myistone, where, we are told, they have been mining for gold with CPI’s Myanmar partner in the dam project, Asia World, Myanmar’s Mining Enterprise No. 2 and Hka Ka Bo Mining.

Large-scale panning of gold on the Irrawaddy and Chindwin rivers is to be banned when existing one-year mining permits expire later this year. Discharges of mercury and the other highly toxic waste chemicals are polluting the rivers, while the open mining is eroding the top soil. We have no independent confirmation of CPI gold mining, but many gold mines in Kachin state not operated by the military and their friends are operated by Chinese interests. Truckloads of gold-containing earth are seen being driven back to China for processing.

It may be the re-evictions are to prevent interference with the gold-mining operations. One other factor to consider is the weather. Work on the dam would anyway be suspended during the rainy season, from June to October. Many workers from Sinohydro, the sub-contractor building the dam for CPI, were already off-site last year when President Thein made his announcement about suspending the project. Even if work restarted tomorrow, there would be only two months before the rains come. Yet such is the political pressure from Beijing to restart the project, a resumption of work once they cease looks a more than fair bet.

Beijing’s Common Cause With Washington In Myanmar

Myanmar stands as a good example of the cooperation and competition that characterizes the relationship between Beijing and Washington. Much of the commentary on Hillary Clinton’s visit to Myanmar, the first by a U.S. Secretary of State in half a century, has concentrated on how Washington wants to detach Beijing’s hold on Naypyidaw. This is seen as part of a grander plan on the part of the Obama administration to counter China’s growing influence in the region. Yet, to this Bystander, it seems that not only can the U.S. do no more than loosen Beijing’s grip, from tight to firm, but also that is now, on balance, in Beijing’s interest that Myanmar emerges from its international isolation.

That isolation has left China as Myanmar’s largest trade and investment partner. Construction of the Myitsone dam may have been suspended but work on six other Chinese-built dams continues. The road, rail and energy pipeline connections across between Yunnan province and Myanmar’s Bay of Bengal coast are being developed by the day. Chinese companies have a first mover advantage that could be readily exploited if international sanctions on Myanmar are lifted and its population of 60 million is provided with an opportunity to catch up with the economic progress of the rest of Southeast Asia.

Neither U.S. nor Indian firms are in any position to leapfrog Chinese ones in Myanmar, any more than Washington or New Delhi will leap ahead of Beijing politically. The security risk to China’s southwestern reaches is marginal compared to the potential economic and political gains.

Beijing certainly does not want a full-fledged democracy that is in Washington’s pocket on its doorstep. Yet it would not be adverse to a more broad-based government in Naypyidaw that could bring to an end Myanmar’s minority ethnic conflicts. These insurgencies are primarily being fought along the length of the border with Yunnan. China’s commercial interests in extracting Myanmar’s natural resources and sending cheap manufactures in the opposite direction are far better served by peace than strife. As we have noted before, Beijing does not want another flood of refugees from the fighting.

Nor would China be too sorry to see North Korea lose a fast friend and export trans-shipment point in Burma. That would only make Pyongyang more reliant on Beijing, and reduce by one the potential ranks of nuclear armed neighbors.  Meanwhile, Beijing and Naypyidaw are strengthening their military ties. Min Aung Hlaing, the new commander of Myanmar’s armed forces, may have pointedly made his first foreign visit to Vietnam, but he was in Beijing earlier this week to sign a memorandum of understanding with Chen Bingde, his PLA counterpart, to deepen military cooperation. He also met President-Assumptive Xi Jinping. Closer military ties will help China’s naval reach into the strategically important waters of the Indian Ocean.

State media has stuck an uncommonly neutral tone in its coverage of Clinton’s visit to Myanmar, highlighting her promotion of economic reforms and the need for ethnic conflicts to be resolved. Beijing has more common cause with Washington on both those fronts than those looking for a grander geopolitical game imagine.

The Troubling Trouble On China’s Southwestern Reaches

The situation just across the border from Yunnan in Myanmar’s Kachin state is becoming increasingly unstable. Beijing has moved additional troops to its side of the border to prevent a trickle of refugees into China again turning in to a flood, and to provide some moral, and possibly material support to Myanmar government forces fighting the Kachin Independence Army (KIA).

Fighting has intensified since the midyear collapse of a long-standing ceasefire between the KIA and the government. Ethnic Kachins fleeing the fighting are reportedly being turned back at the border. We hear, but have not been able to confirm, that the transport of supplies of food and medicine in the opposite direction are being hindered if they are thought to be destined for the KIA. Chinese riot police have been holding crowd control exercises within a baton’s length of crossings points on the border, while an additional 6,000 PLA troops were sent to Yunnan this month. They are being deployed opposite the KIA strongholds and refugee camps being set up for displaced Kachins that are close to the China border.

Beijing’s sympathies lie with Naypyidaw not the KIA, which has led the campaign to disrupt the expansion of China’s commercial interests in Kachin. The 17-year ceasefire between the KIA and the government had allowed Chinese companies to start logging, mining and hydropower projects in the region, such as the controversial and now suspended construction of the Myitsone Hydoelectric Dam on the Irrawaddy river. These interests are now at considerable risk.

Beijing would most like its old allies in Naypyidaw just to get the KIA under control. The hardliners in Myanmar’s army, who are close to Beijing, are happy to do that by force of arms, as they have shown in recent weeks, but President Thein Sein’s civilian government that succeeded the military junta that made Myanmar an international pariah, is more constrained. It is courting the West and the Association of Southeast Asian Nations (ASEAN) in order to return to the international fold. It cannot be seen to be Beijing’s lapdog, protecting Chinese commercial interests at the expense of a native ethnic minority and creating a humanitarian disaster to boot.

For its part, Beijing may have to take some sort of lead in brokering an end to the fighting in Kachin, uncomfortable as that might be for it now. Not only does it want neither unrest nor a humanitarian disaster on its southwestern reaches but it also does not want to create an opportunity for India or ASEAN to step, in the name of regional security, in to what Beijing considers its sphere of influence and a key corridor connecting it to the Indian Ocean.

Myanmar Said To Compensate China For Myitsone Dam Suspension

This Bystander is starting to pick up details of a settlement between China and Myanmar following Naypyidaw’s unilateral suspension of construction work on the Myitsone hydroelectric dam on the Irrawaddy river. State media report that the two countries “agreed to properly settle matters” at a meeting between Foreign Minister Yang Jiechi and his Myanmar counterpart, Wunna Maung Lwin, who had been dispatched to Beijing as a special envoy of Myanmar President Thein Sein for talks China had demanded. This followed a meeting between President Thein and Beijing’s ambassador to Naypyidaw at the weekend.

We understand, however, that Myanmar has agreed to compensate Beijing through further natural-resources concessions, including giving China an increased share of its revenues from the $2.5 billion oil and gas pipeline being built through central and northeastern Myanmar by state-owned China National Petroleum Corp to connect Yunnan to terminals it is building on the Indian Ocean. This will be done under the guise of repaying the loan agreement between China and Myanmar’s former military rulers to fund Myitsone, most of whose electricity is intended to be exported to China.

It is unclear when work will resume at Myitsone, in which state-owned China Power Investment Corp. is the main investor. The original announcement said the project would be suspended for the remainder of President Thein’s term of office, which ends in 2016. We also understand that work will continue on six other Chinese-backed hydro-power dams in Kachin State.

Trouble For China Spreads From The Irrawaddy To The Mekong

More trouble for Beijing on its unruly southwestern reaches beyond Yunnan. Pirates seized two Chinese freighters on the upper reaches of the Mekong river in northern Thailand, killing at least 11 of their 13-strong crews and purloining the vessels to run drugs from Myanmar. Some of the sailors appear to have been executed. The attacks took place on October 5. Thai river police retook both boats in a gunfight. Some 900,000 methamphetamine tablets worth more than $3 million were reportedly recovered.

Chinese vessels plying the river as it flows through the Golden Triangle have long been targets for pirates who have sought protection money or used the boats for drugs running. Thai authorities suspect that the ethnic Shan drug trafficker Nor Kham is behind the attacks, including the latest ones. Yunnan provincial authorities have now suspended all Chinese passenger and cargo shipping on the Mekong. Nine out of ten the 130 ships involved in international shipping on the Mekong are Chinese-flagged, according to Chinese authorities responsible for maritime trade on the river.

The latest incident follows a succession of attacks on Chinese-backed hydroelectric dams on the headwaters of the Irrawaddy river in Kachin State in northern Myanmar, culminating in the suspension of work on the Myitsone dam amidst growing anti-Chinese sentiment in the country and a call from Beijing to protect the interest of Chinese firms operating there.

Update: The foreign ministry on Tuesday confirmed 12 deaths with one sailor still missing.

Second Update: Thai authorities say a group of renegade soldiers have admitted responsibility for the killings.

Myitsone Announcement ‘Astonished’ Chinese Contractor

China Power Investment Corp. wasn’t given any prior warning that Myanmar President Thein Sein was going to announce the suspension of construction of the Myitsone Dam, the company’s president, Lu Qizhou, says. State media quotes him as being “totally astonished” by the news, which he says he learned through the media. Lu also says that in February, Myanmar’s Prime Minister, during an inspection of the site, had urged the company to accelerate construction. “The sudden proposal of suspension now is very bewildering,” Lu said. “If suspension means construction halt, then it will lead to a series of legal issues.” These would include the loan that China has provided Myanmar in connection with the project.

In the lengthy Q&A, Lu gives a robust defence of the dam’s environmental impact and the plans to relocate local villagers who would be displaced by the reservoir that would be created behind the dam.

Meanwhile, China National Petroleum Corp. (CNPC), which is building an oil and gas pipeline connecting Myanmar’s Indian Ocean coast with southern China, has announced that it is giving $1.3 million to build eight schools along the pipeline.