Myitsone: A road block for Sino-Burmese relations?

A year and half ago this past March, one of the more the surprising events in recent Sino-Burmese relations took place. With a short letter delivered to the Burmese legislature, President Thein Sein suspended the Myitsone Dam until 2015, the end of his term. The dam, a $3.6 billion project that would sit at the confluence of the Irrawaddy’s two main tributaries, was the centerpiece of a series of seven dams on the upper reaches of the river. The project was the result of a joint venture between the Burmese government and China Power Investment (CPI) beginning in 2006 and appeared to be of great importance to both sides. However, a nationwide protest campaign against the construction of the dam supported by Aung San Suu Kyi ultimately won out.

Following the announcement, media on both sides of the Atlantic took the Myitsone incident as a sure sign of things to come between the two countries. The Economist ascribed the suspension to the Burmese’ hatred of unequal terms of trade with China and also predicted a “searing experience” for China as Myanmar undegoes political and economic reforms. However, while the suspension of the Myitsone Dam doesn’t represent the pinnacle of Sino-Burmese relations, it hasn’t proven to be China’s death knell either and its true effect lies somewhere in the middle.

To assess the actual impact of the dam’s suspension, one has to look at multiple aspects including governmental and economic relations. Officially, relations between the two states haven’t regressed since Myitsone. Following the announcement in September of 2011, Foreign Ministry Spokesperson Hong Lei responded that CPI and the Bumese should “appropriately handle the matter through friendly consultation.” In the months following, both sides traded visits in an effort to smooth over relations and the Foreign Ministry remained hopeful that a solution favorable to CPI could be found. However, it eventually became clear that construction on the dam was indeed beyond saving. Despite what could be seen as a loss of face for the Chinese in Myanmar, there wasn’t any kind of browbeating of the Burmese side that is so often seen in China’s other disputes in the region (eg. South China Sea issue). Instead bilateral relations have remained calm in the past eighteen months and haven’t displayed any tension related to Myitsone itself. However, according the Brookings Institution’s Yu Sun, the dam’s suspension appears to have shaken some officials’ confidence in Myanmar’s trustworthiness as a partner, though how these doubts are manifested remains to be seen.

Testing Myitsone’s suspension’s effect on the Sino-Burmese trade relationship is a bit more difficult, especially when Myanmar is notorious for unreliable or even non-existent statistics on its economy. However, there are a few facets of the relationship that one can look for any possible impact. One is Chinese direct investment into Myanmar. It’s a fair bet that a number of Chinese SOE’s and private investors were shaken after seeing a $3.6 billion project suspended so suddenly, and it could be expected that direct investment into the country might suffer as a result. However it appears that China’s direct investment actually increased in 2012 to almost $16 billion, marking a 14% increase from the past year and contributing to 44% of Myanmar’s total FDI. If there was an economic impact from the Myitsone incident, it certainly hasn’t been felt in the investment sector.

Another area to watch for Myitsone’s impact is in the future of China’s other large-scale infrastructure projects in Burma. First is the Shwe Oil and Gas Pipeline that stretches from the port of Kyaukpyu on the Bay of Bengal to Kunming, Yunnan. The pipeline seemed to hang in the balance for a short period. Protests and calls for its suspension in Myanmar intensified and its construction lead right through the war-torn Shan State just as anti-government tensions were heating up. However, plans for the $2 billion project, mainly financed and built by China’s Sinopec, are on track and the pipeline should finish by Summer 2013. Some observers undoubtedly saw the protests against the pipeline as a repeat of Myitsone, but the pipeline’s completion shows that while the dam’s suspension may have inspired the protesters, it didn’t affect the government’s calculations.

The Monywa Copper Mine may be a different story, however. The mine is`a joint venture between a Burmese military-owned company and China’s Norinco Corporation (an arms supplier of the Burmese tatmadaw), and has been under operation since 1998. Since 2007, the mining site has seen a series of protests in response to alleged illegal land grabs from farmers in the area. The protests gained national support last year and came to a head in November when Burmese security forces clashed with protesters, leading to dozens of injuries. The clashes involved a number of Buddhist monks were seen by some as a step backward for Thein Sein’s government. Since then, Burmese authorities have launched an inquiry into the land grabs that could threaten the continued expansion of the mine.

Looking at the Shwe pipeline and the Monywa copper mine, it’s unclear how much of an impact Myitsone has had. In both cases, the opposition to the projects has used public protests, possibly in response to the succes of the anti-Myitsone campaign. Whether or not the Burmese government itself has been emboldened by the response to Myitsone is also unclear. The pipeline’s future seems to be decided but the fate of the the Monywa mine is certainly something to watch, where a decision that harms Chinese interests would certainly give credence to the notion that Myitsone has affected Sino-Burmese trade relations. The pipline and copper mine aside, China also has other projects in the country, many related to the Greater Mekong Subregion, worth keeping an eye on in the coming months and years.

Post-Myitsone relations between Myanmar and China haven’t regressed to the point that some predicted at the end of 2011. Official relations are relatively positive between the states and trade relations, while perceived as weakened, remain strong. If anything, what Myitsone’s suspension did was give the Burmese citizenry confidence in its newfound right to protest the state’s decisions, as evidenced by the resistance to the Monywa and Shwe projects. Combined with long-simmering anti-Chinese sentiment in parts of the country, this could spell trouble for the PRC’s future plans in Myanmar. For now, however, it seems too early to tell just how big of an impact Myitsone had.