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Chinese Investment in Myanmar: Beyond Myitsone Dam

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Chinese Investment in Myanmar: Beyond Myitsone Dam

How national security concerns sealed the varying fates of Chinese investment projects in Myanmar.

Chinese Investment in Myanmar: Beyond Myitsone Dam

An activist holds a placard during a protest against Myitsone dam project on the Irrawaddy River in Kachin State, in front of city hall in Yangon, Myanmar, Jan. 18, 2019.

Credit: AP Photo/Thein Zaw

Almost nine years have passed since the Thein Sein administration unilaterally announced the suspension of construction work on the Myitsone dam in September 2011. The building of the controversial hydroelectric dam is a gargantuan Chinese investment project in Myanmar, with an estimated total cost of $3.6 billion, and with a planned reservoir area larger than the size of Singapore. The suspension followed increasingly severe public protests in Myanmar expressing opposition to the Myitsone dam project. Naypyidaw credited the suspension decision to the “people’s will, and many analysts have thus attributed the unexpected suspension to the victory of popular anti-China sentiments and anti-dam movements, following Myanmar’s domestic political transition. If the “people’s will” really brought the Myitsone dam project to a halt, might other Chinese overseas projects be at risk of a similar fate?

The dam project was not the only Chinese mega-project undergoing construction in Myanmar at that time. Two other multi-billion-dollar projects, namely, the Letpadaung copper mine project and the Sino-Myanmar oil and gas pipelines project, also encountered severe public opposition and pressure when Myanmar started its partial transition from military dictatorship to quasi-civilian semi-democracy.

Although the three projects have similarities in terms of their design, implementation, and the public backlash they faced, the setbacks they experienced varied greatly. Since the Myitsone dam project was unilaterally suspended by former President Thein Sein, the construction work remains shelved without any renegotiation. In contrast, the Letpadaung copper mine project experienced a two-year suspension, investigation, and renegotiation before it resumed, while the Sino-Myanmar oil and gas pipelines project was never suspended and has been operational since the completion of construction work in 2015.

To understand why these projects encountered varying degrees of success, it is necessary to take into account the contexts of the three consecutive Myanmar governments within which these projects were operational: the military government before the political transition in March 2011, the quasi-civilian government of Thein Sein from March 2011 to March 2016, and the National League for Democracy (NLD)-led government since then. Doing so reveals that the “people’s will” was not the primary reason why Thein Sein unilaterally suspended the Myitsone dam project. Rather, national security concerns led Myanmar’s leaders to make different decisions on similar projects under different contexts.

The plans for all three projects were finalized between 2009 and 2010, when Myanmar was still ruled by the military junta, known as the State Peace and Development Council (SPDC). Myanmar had experienced Western sanctions and isolation during the era of military dictatorship. China not only was Myanmar’s largest trading partner and foreign investor, but also became its biggest regime supporter in the international community at this time. The maintenance of a good relationship with China was one of the main priorities for Myanmar’s leadership, to ensure regime survival and national security. Thus, Myanmar satisfied China’s demands in this period because the cost of rejecting China was intolerable.

In March 2011, Myanmar began a controlled and peaceful power transition. The military junta officially dissolved and was replaced by a new military-backed quasi-civilian government with the former army bureaucrat Thein Sein as president. The political transition not only dramatically opened up Myanmar’s political space, but also brought an end to the international isolation that Myanmar had suffered for decades. The normalization of relations with the West greatly lessened the national security concerns of Myanmar’s leaders and diminished China’s leverage over Myanmar. The political cost of canceling Chinese investment projects and displeasing its previous regime supporter thus decreased considerably.

Out of the three Chinese-backed mega-projects, the cost of continuing the Myitsone dam project was much higher than the other two projects due to its possible security implications. The construction and operation of the Myitsone dam gave China a chance to hold control over the water flow of Myanmar’s main river, the Irrawaddy. Myanmar’s nationalist leaders perceived this as a severe threat to national security. Alternatively, the political cost of canceling the Sino-Myanmar oil and gas pipelines project was less tolerable, due to its strategic importance to China, especially in realizing China’s own energy supply needs and its energy transportation security. In their meetings with Myanmar counterparts, senior Chinese leaders clearly and repeatedly emphasized that Beijing’s tolerance for any problems in the construction of the oil and gas pipelines was much lower than for any other project.

In this sense, what determined the varying fates of the three Chinese-backed mega-projects under the quasi-civilian government was the variation in costs and benefits of cancelation or continuation attached to each project, especially whether the project would have national security implications.

Following the NLD’s election victory in November 2015, the NLD formed a new government in March 2016 and Aung San Suu Kyi became the de facto top leader. Contrary to many predictions that Chinese interests in Myanmar would suffer greater setbacks, Aung San Suu Kyi dropped her critical tone of China and has repeatedly expressed her willingness to participate in China’s Belt and Road Initiative since assuming office. Facing large-scale protests calling for the termination of the Myitsone dam, she even urged Myanmar’s citizens to “think from a wider perspective” about the same project that she herself had urged the Thein Sein government to cancel five years earlier.

National security concerns again provide the most plausible explanation for why the popularly elected government decided to protect unpopular Chinese investments. Since the NLD government took office, Myanmar has suffered a deteriorating international environment and an increasing threat to national security due to the escalation of the Rohingya crisis. In the face of mounting international pressure, Beijing has not only used the phrase “displaced people from Rakhine” to describe Rohingya refugees fleeing to Bangladesh, but has also taken a pro-Naypyidaw position and shielded Myanmar from international condemnation in the U.N. Security Council. Thus, the political cost of putting Chinese projects in danger, or putting the China-Myanmar bilateral relationship in jeopardy, has increased once again.

Across the three consecutive Myanmar governments, there is a consistent logic in Myanmar leaders’ cost-benefit calculations: the security logic. Over time, the three projects progressed relatively smoothly whenever Myanmar’s national security was threatened by international isolation and condemnation due to domestic politics. Across the three cases, the Myitsone dam project encountered the most severe setbacks because of the negative ramifications it might have on Myanmar’s national security. In other words, while other factors were also at play, the security logic strings together all the different decisions that Myanmar’s governments made on the three similar Chinese mega-projects, under different contexts.

The case of Myanmar highlights the potential implications of national security concerns on the success of China’s overseas investments. In countries such as Myanmar that experience international isolation and sanctions, actual or even perceived threats to national security could push governments into China’s orbit and make policymakers more likely to accept and protect Chinese investment projects in exchange for urgent political support. By contrast, if the host country observes a lessened threat to its national security or perceives a stable international environment, China’s veto power in the U.N. Security Council will have less importance for the success of its overseas investments.

Ruosui Zhang is a Ph.D. student in comparative politics in the Graduate School of Political Science at Waseda University, Tokyo. Her research interests include politics of Chinese outward foreign direct investments, especially in the infrastructure sector.

This article is a shorter-form version of a research paper published in The Pacific Review, a journal focused on the international interactions of the countries of the Pacific Basin. The Pacific Review has a particular interest in how the region is defined and organized, and covers transnational political, security, military, economic, and cultural exchanges in seeking greater understanding of the region.