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MYANMAR ECONOMIC SECURITY IN RELATION TO THE SUSPENSION

OF SINO FUNDED MEGA PROJECTS

Lt Col Ir. Azhar bin Hj Idris RMAF was commissioned into the Royal Malaysian
Air Force as an Engineer on 1st Feb 1993. He has a Diploma in Strategic and Defence
Studies from University Malaya, Bachelor in Aeronautical Engineering from
Universiti Technologi Malaysia and Master in Engineering Business Management
(with Distinction) from University of Warwick. He obtained his Professional Engineer
(Ir.) from Malaysia Board of Engineers in 2009. He has served in various squadrons,
RMAF Research and Development Agency and Directorate General of Technical
Airworthiness (DGTA). His last assignment prior to MAFDC was the Configuration
Manager for the Air Transport Fleet in Support Air Command in Kuala Lumpur
Airbase.

ABSTRACT

The sudden suspension of three largest China mega projects by Myanmars


government after the 2010 election had raised various reaction considering the big
amount of money invested in the country. This article examines a few issues such as
the reasons for Myanmar to suspend most of China mega projects, the pattern of
Myanmar foreign policy towards major powers and the geostrategic dependency
towards China. This qualitative study uses structural realism theory and Buzans
framework of security analysis in analysing the reasons behind the suspension. This
study argues that despite having the illiberal democracy, Myanmar is still able to have
an open economic system with supply and demand is central to assist its economic
growth and infrastructural development. The discussion concludes that the suspension
decision is made due to Chinas exploitation of Myanmars natural resources and now
it is gradually extended into Myanmar domestic problems. To avoid the dilemma of
over-depending on China, opening its market system is the sensible approach for
Myanmar. This approach was consistent historically because Myanmars leader had
manipulated their bilateral cooperation to their advantage. Finally, within the context
of supply and demand theory, the benefits of having natural resources and strategic
location were utilized intelligently by Myanmar as the mechanism for its foreign
policy to achieve its national and strategic interest.
Keyword: Sino, economy, resources, location, strategy
INTRODUCTION
After several years of being ruled by the authoritarian regime (Crisis Group Briefing
2015: 1), Myanmar eventually held her own general election on the 7 November 2010
(Burma Fund Office 2011: 5). To ensure a smooth political reform in Myanmar, there
are three key factors which have helped the reform process namely, the China factor,
the economic, and the security factor (Houtman 1999: 7). In addition, Myanmars
future path, civil society, the environment and political stability are very much
depending on the growth of foreign investments (Hilton 2013: 7). An effective action
or reaction by Myanmar towards foreign countries is essential in addressing the
economic security.

Although Myanmar practices an independent, active and non-aligned foreign


policy, there has been empirical evidence that indicates that they have been relying on
China for their political and economic support ever since 1990 (Constitution of the
Republic of the Union of Myanmar 2008: 11). Chinas strong economic support can
be seen from the significant amount of money invested in Myanmars mega projects
including the Myitsone dam, the Letpadaung copper mine, and the Sino-Myanmar oil
and gas pipeline. According to Sun, from 2008 to 2011 the total Chinese cumulative
investment in Myanmar jumped from USD $1 billion to USD $13 billion (Sun
2013:1).

Nevertheless, the strong economic support by China was reduced due to


President Thein Seins association with Myanmars political reform. The government
had then suspended the Myitsone dam project on 30 September 2011, followed by the
suspension of the Letpadaung copper mine in November 2012 (Sun 2013: 7). With
regards to the Sino-Myanmar oil and pipeline gas, despite the commencement of the
project in 2008, the project faced various issues (Sun 2013: 8). Although its
construction was eventually completed early 2015, the pipelines were yet to be
operationalised as there were still some unresolved issues. This had required a further
government to government discussions (Shin 2015) for them to find a solution. In a
recent development, a visit by Chinas Foreign Minister Mr. Wang Yi, Myanmar
made his stand to not discuss the mega projects as part of the talks (Ministry of
Foreign Affairs 2016).

PROBLEM STATEMENT
In the post-2010 election, the three largest China investments were suspended by the
Myanmars government. The projects were namely the Myitsone hydropower project
(suspended in Sep 2011, USD $3.6 billion) (Haacke 2015: 12), the Letpadaung
Copper Mine (operation has been suspended since November 2012, USD $1.065
billion) (Sun 2013:5), and the Sino-Myanmar oil and gas pipelines (under trial
operation in late 2015, USD $2.54 billion) (Sun 2013: 8).
The decision to suspend these mega projects had affected Chinas investment
significantly. Following that year, there was significant reduction of Chinese
investment into Myanmar. In the fiscal year of 2012-2013, the investment from China
had dropped to only USD 407 million (Xinhua News Agency 2012). The suspension
of the highlighted projects to a certain extent was interpreted as a form of reorientation
in Myanmar foreign policy with Beijing (Haacke 2015: 12). Based on this argument,
the paper seeks to answer reasons for Myanmar to suspend most of Chinas mega
projects despite their long-standing economic relation. Apart from the risk of losing
economic support, such decision could cause China to retaliate indirectly, which could
affect Myanmars economy.

CONCEPTUAL FRAMEWORK AND APPLICATION

Structural Realism
Structural realism emphasizes the importance of the structures and influences that
constrain a states behaviour. The theory outlines that states live in an anarchic system
and there is no higher authority for the states to turn to if they are facing issues. Thus,
states will do whatever they can to be as powerful as possible (Viotti and Kauppi
1999). This framework applies to Myanmars action of suspending all China mega-
projects based on domestic interest while offering new economic ventures with the
US.

Illiberal Democracy and Militarism


According to Zakaria (1997:28), Constitutional liberalism has led to democracy but
democracy does not seem to bring constitutional liberalism. He further argues that
there is a growing trend that most democratic countries today subscribe to illegal
democracy before transforming into a liberal democracy.

Fukuyama (1997) explains that the debate on illiberalism originated from an


East Asian context that includes countries such as Singapore and Malaysia on the idea
of Asian Democracy, Guided Democracy, and Asian forms of Human rights which are
advocated by political leaders. The political leaders from these countries argue that in
order to grow, there is a requirement for them to restrict democracy, particularly on
civil liberties (Engberg and Ersson 1999: 3).

In addition, although Myanmar had the general election held in 2010 and 2015,
the military is still holding for strong control over the government, state, and the
people. In fact, militarism controls people based on certain internal factors particularly
owing to unjust class and racial structures (Klare 1978: 39).1 With 25% seat reserved
for the military in the parliament, they live in a nationalist environment and function
as a professional socialization that is concerned with the issues of national survival
(Fidel 1975: 5).

Capitalism, State and Economic Development

Capitalism economy seems to have at least two common denominators. First, the
existence of private enterprises which are owned and managed by private citizens who
seek for greater profits through a variety of activities on their own initiative, and
market mechanism (Bartley et al., 1993: 46). Secondly, is the market freedom that is
closely related to liberalism. Collins (2013:31) described that liberalism strongly
supports private properties, free enterprises, widespread international cooperation, and
human rights.

The results of Myanmars election in 2010 and 2015 indicated that the country
is moving towards a democratic political system. In order to ensure that democracy
prevails, Myanmar needs to create a conducive economic environment which is
closely associated with capitalism. Moreover, capitalism is about the economy, and
democracy is about governance. The gap is that, in the wake of democratization, there
is a growing concern between the type of democratic practices that Myanmar would
subscribe to, and the level of private ownership and market freedom that the state is
willing to practice.

CAUSES OF THE SUSPENSION AND IMPLICATIONS TOWARDS


MYANMAR SECURITY
The causes are divided into four main categories within the scope of safety and
security in politics, economy, social, and environment, as follows;

Myanmar Illiberal Democracy and Economic Security


The transformation of the political system adopted by Myanmar has leaned towards
illiberal democracy2 because the laws, the protection of political and civil liberties,

1
In any society in which a small segment of the population owns (or reaps the benefits from) a
large share of the nations wealth, that privileged minority is likely to rely on the use of military force
to deter or overcome any threats to the prevailing order. This tendency results in what has been termed
a system of economic apartheid, wherein the privileged few live in sanctuaries of wealth
surrounded by and protected from the impoverished masses. Similarly, in any society wherein the
people of one race are subordinated and exploited by people of another race, the dominant racial
grouping tends to rely on military force to discourage and over- come rebellion on the part of the
oppressed (Klare 1978: 39).
2
In illiberal democracies basic democratic standards are generally met, but levels of
accountability remain low. Opposition parties can be expected to gain more seats due to freer and fairer
elections and to have more influence within the legislature; they are, however, predictably unable to
decisively defeat the incumbent. Elections only serve to back the ruling elites strategy for development
and the institutional separation of powers which may exist in theory but not in
practice. The transition to civilian rule remains vulnerable to other powerful state
institutions particularly the junta with the establishment of a military biased
constitution in 2008.

Nevertheless, despite heavy criticism by the US and other western countries on


the transformation, Myanmar received an abundance of financial support (Nehru
2012: 3). This strong support was consistent with Obama Administration Pivot to Asia
Policy.3 The policy was closely related to the growing concerns over Chinas
emergence as an economic power and domination in Asia. The Pivot to Asia Policy
provided a great opportunity for Myanmar leaders to take advantage of the financial
support as it had previously done during the 1960s. Myanmar at this point was facing
an economic crisis, as their Gross Domestic Product (GDP) dropped from 13.57
percent in 2005 to the lowest point at 3.60 percent in 2008 (Figure 4.1). Hence, the
underlying motives for the government's shift4 in politics were less likely to be a
genuine call for democracy, but rather as a resort to pull Myanmar out of economic
despair.

and to continue legitimising its performance, not to remove the incumbent from power. As far as
procedural issues are concerned, democracy is largely viewed as a means to justify the dominant
partys electoral victory. The individual does not fully enjoy certain liberties, such as freedom of
expression, freedom of assembly, demonstration and strike. The system of checks and balances fails to
constrain elected officials as they seek to stay in power (Zakaria 1997).
3
In the fall of 2011, the Obama Administration issued a series of announcements indicating
that the United States would be expanding and intensifying its already significant role in the Asia
Pacific, particularly in the southern part of the region. The fundamental goal underpinning the shift is to
devote more effort to influencing the development of the Asia-Pacifics norms and rules, particularly as
China emerges as an ever-more influential regional power. Given that one purpose of the pivot or
rebalancing toward the Asia-Pacific is to deepen U.S. credibility in the region at a time of fiscal
constraint. The priority includes: Alliance, Improving Relationship with Emerging Powers, Elevating
the importance of economic statecraft, Engaging Multilateral Institutions, Support for Universal Values
and Increasing US Military Presence (Manyin et al., 2012).
4
The new government led by President Sein has proposed easing restrictions on basic
freedoms, rewriting laws on taxes and property ownership, passing new labour laws allowing the
formation of unions, loosening restrictions on the media, and releasing political prisoners. The proposed
political transformation in Burma is a response to the serious sanctions that have been imposed by the
United States, the European Union and others in the international community and that have tightened in
recent years (Bergen 2012)
Figure 4.1 GDP Growth Rate
Source: International Monetary Fund 2016

While there was an abundance of financial support from the outside world, the
puzzle remains to be revolving around the things Myanmar needs to do in order to
secure their economic status. Based on a report by Mc Kinsey, one of the four areas to
secure the economy was to increase its growth and productivity via connection to the
world (Chorr et al., 2013: 100).

In the context of the mega projects, the development of the Myitsone dam,
Letpadaung Project and Oil and Gas Pipeline Project provided a substantial amount of
foreign investments and infrastructure to Myanmar. As Myanmar suspended these
mega projects, China in return issued a warning to its companies on the rising political
risk against China investment (Sun 2013:2). China felt disappointed with the
suspension treatment given by Myanmar despite the massive support given during the
junta period from 1988 to 2010. The reaction of China could be seen from the
investment trend. China investment in Myanmar peaked at USD8.3 billion in 2011 but
sharply declined after the suspension. Soon after the announcement was made, the
investment dropped to USD $4.6 billion in 2012, USD $0.4 billion in 2013 and USD
$0.3 billion in 2014 (Guangsheng 2015: 2).

Obamas foreign policy of pivot to Asia provides the opportunity for Myanmar
to engage with the western world and lessening of what is viewed as an overreliance
on China. In addition to this, an abundance of financial aids from western investors
came in as Myanmars government started to reform. Responding to the progress in
reforms, Secretary Clinton visited Myanmar in December 2011, the first U.S Secretary
of State to do so in more than 50 years (BBC News 2011). Clinton had announced that
the U.S. would ease restrictions on activities of international financial organizations
(IMF, World Bank, etc.) in Myanmar.5 The warming of bilateral ties was further

5
Washington has removed most of its sanctions against Naypyidaw, except arms embargo and
a number of economic sanctions. Washington has been open to the establishment of military ties with
Myanmar on the condition of continued reforms. However, it has been also stated that the U.S. is not
even close to the arms sales or operational training of Myanmars military (McLaughlin, 2013). The
rapid development of U.S. Myanmar ties, has eroded the so far unique Chinese position in Myanmar.
China has been Myanmars biggest source of investments, largest trade partner and supplier of military
enhanced on November 2012 with a visit to Myanmar by President Obama and
President Seins visit to Washington in May 2013.

However, Myanmar was reluctant to a complete democracy its illiberal


typed of democracy raised the suspicion among the western investors of their
underlying motives. This concern was raised by President Obama during his
November 2014 visit to Myanmar, when he described the process as by no means
complete or irreversible (New York Times 2014). The concern was translated into the
drop of Myanmars Foreign Direct Investment6 (FDI) (Figure 4.3) and GDP (Figure
4.2) after the year 2012. China again took this opportunity to fill the remaining
vacuum. Committed investments from China had suddenly rebounded, spiking to
USD3.3 billion in the fiscal year to April 2016, up from just USD56 million in 2014
(Strangio 2016). Chinas FDI eventually helped to increase Myanmars GDP which
performed consistently with an average of USD62.6 billion in comparison to
USD33.01 billion before 2012 (Figure 4.2). Although western countries started to step
in but their curiosity over the illiberal democracy adopted by Myanmar saw an
incremental behaviour (Figure 4.2) whereas China had positioned herself as the largest
trading partner and investor (Guangsheng 2015: 2).

By looking at this analysis, it is obvious that Myanmar is taking advantage of


its strength7 by manipulating the rivalry that exists between Chinas National Interest
and U.S. Foreign Policy - Pivot to Asia to secure its economic status. This is done by
utilizing the supply and demand theory. Myanmar exploited the demand for energy by
China, fuelled by their skepticism (Saunders 2014: 39) of renewed interest and
intensified involvement of the U.S. in this part of the world (U.S. Pivot to Asia
Policy). In the meantime, Myanmar also portrayed herself as shifting towards
democratization. Although Myanmar had adopted a form of limited democracy, the
country has managed to garner a certain amount of attention by the U.S as it is in line

equipment (Alam, 2013: 6). In general, though, Chinese investment in Myanmar has been seriously
damaged since Sein s government ascent to power. In FY 2012/2013 the accumulative Chinese
investment accounted for only USD407 million in comparison with USD12 billion between 2008 and
2011 (Yun, 2013: 1).
6
Foreign Direct Investment can be defined in a simple way as an investment made by a
company based in one country, into a company based in another country. Normally, Foreign Direct
Investment (FDI) is considered to have taken place if a company in one country makes a physical
investment, such as in buildings, factories, machinery and equipment in another country (Myint
2012:5).
7
Myanmars home-grown strengths include its location at the heart of Asia; rich endowments
of natural resources; and a growing labour force. Myanmar has long been cut off from political,
economic, and trading relationships and has not been able to participate in regional integration and
capitalise on its ideal position in the worlds fastest-growing regional economy. Now that Myanmars
economy is opening up, there is potential to become a major exporter, especially of agriculture and food
products, to many of its regional neighbours that are experiencing strong demand and rapid growth.
Consider the fact that Myanmar borders with Bangladesh, China, India, Laos, and Thailand - home to
40 percent of the worlds population. Bangladesh alone has a population of 150 million, and Thailand
and Laos have a combined population of 75 million people. In addition to this export potential,
observers have often suggested that Myanmar could become a trade hub on the crossroads of Asia
(Chorr et al., 2013).
with one of the main tiers in U.S Pivot to Asia - Support for Universal Values i.e.
human rights and democracy.

With the advantage of having the interest of these two superpowers, the
opening of her market and integrating with the world economy, Myanmar has the
most sensible mechanism to provide herself with the ability to choose the country that
offers the best financial option. The strategy adopted by Myanmar proved to be
successful as the FDI started to increase whilst the GDP reached the highest point
since 2010 (Figure 4.2). Although the GDP had dropped back in the following years,
it was still higher in comparison to the period of isolation.

80 M Y A N M A R G D P74.69
70 64.33 64.87
58.65
60
51.44
45.38
USD Billion

50

40 35.23
31.37
30
20.18
20 14.5

10

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year

Figure 4.2 Myanmar Booming


Source: World Bank 2015

Foreign Investment by Countries

450
400
350
300
USD Million

250
200
150
100
50
0

Countries

Figure 4.3 Foreign Investment in Myanmar


Source: Directorate of Investment and Company Administration 2016

The increase of FDI (Figure 4.3) also helped the country to boost its economy
by providing a significant number of job opportunities (Myint 2015:7). This would
help the country to ameliorate the poverty problems particularly in the rural areas
where 70 percent of the population resides (UNDP 2016). Consequently, as this area
is mainly populated by Myanmars minority ethnic groups, securing Myanmars
economy would somehow minimize the ethnic conflicts (Figure 4.4).
Total FDI Inflow
3

2.5

US Billion
1.5

0.5

0
2006 2007 2008 2009 2010 2011 2012 2013
Year

Figure 4.4 Myanmar Total FDI Inflow


Source: CIMB ASEAN Research Institute 2016

China Intervention and Political Security8


The cooperation between these two countries was spurred only by the fact that
Myanmar had sought for protection through the Security Council, asked support from
a large neighbour during the international isolation, and requested foreign funding or
sources of investments. In fact, Myanmars military never completely trusted any
external major power, including China because Myanmar leaders have deep seated
feelings of Sinophobia as well as xenophobia (Shee 1997:39). The Myanmar
politicians were interacting in an environment of political culture of distrust.
Myanmars suspicion on China eventually was proven to be true. The long standing of
independent China-Myanmar relationship under the premise of peaceful co-existence,
including mutual respect for each others territorial integrity and sovereignty and
mutual non-aggression was eventually violated by China (Kudo 2006: 265). Chinas
prominent role in Myanmar affairs following the 2007 Saffron monk-led anti-
government demonstrations (Oxford Myanmar Alliance 2016),9 and because of the
2008 Cyclone Nargis,10 (Myoe 2016) had given a wake-up call to the military regime.
It began to criticise the Myanmar government, which in turn had made the State Law
and Order Restoration Council (SLORC)/State Peace and Development Council
(SPDC) feeling more uncomfortable (Myoe 2016).

8
Political security is about the organisational stability of social orders. Their purpose may
range from pressurising the government on a particular policy to fomenting secessionism and disrupting
the political fabric of the state. The heart of the political sector is made up of threats to state
sovereignty. Since threats can also be levelled through military means, the political sector will take care
of non-military threats to sovereignty (Buzan et al., 1998: 141).
9
In August 2007 a massive increase in fuel prices sparked initial protests, which were joined
later that month by thousands of Buddhist monks, and gained the support of Burmese citizens
throughout the country. Political activists, students, monks, and ordinary citizens appeared willing to
take great risks to demand change from the military regime. Their peaceful protests were met with a
brutal crackdown as monasteries were raided, many killed and thousands arrested (Oxford Myanmar
Alliance 2016).
10
Cyclone Nargis caused the worst natural disaster in the recorded history of Myanmar during
early May 2008. The cyclone hit Myanmar on Friday, 2 May 2008, sending a storm 40 kilometres up
the densely populated Irrawaddy delta, causing catastrophic destruction and at least 138,000 fatalities.
Associated Press. Cyclone Nargis embodied the perfect storm. NBC Asia Pacific News (Myoe 2016).
The feeling was further deteriorated with the involvement of China in
Myanmars ethnic militias.11 According to Chow & Easley (Chow & Easley 2016:
539), in the recent development, China was providing arms to Kachin, Wa, and Shan
militias.12 Even more, some Chinese observers have even suggested that Beijing could
use the United Wa State Army (UWSA) and other ethnic militia as leverage over
Myanmar and push them to respect Chinas national interest (Sun 2013).

Although SLORC/SPDC had a close economic cooperation with China, they


were sensitive on the countrys sovereignty and territorial integrity issues (Kudo 2006:
6). Their concern was manifested in the Republic of the Union of Myanmar Defence
White Paper 2015. The White Paper reinforced the 1999 defence policy statement,
with the assertion of the Tatmadaw's legitimate and firm stance on safeguarding the
independence, sovereignty and national interests of Myanmar (Myoe 2016). Chinas
critic over Saffron revolution, Nargis tragedy, and support over ethnics militia had
intervened with Myanmars domestic politics. Thus, Myanmar needed to find ways to
reduce its political dependence on China.

In the context of Sino mega projects (Letpadaung Copper and Myitsone Dam
project), the investigations and interviews revealed that the main reason behind the
protest is due to the way the projects were managed and developed. The businesses
were monopolised by China (Buchanan et al., 2013:36). On top of this argument,
Myanmar citizens felt like these projects were serving the Chineses national interest
and the locals had made assumptions that they were going to lose their land (Aung et
al., 2016).

Another interesting factor is the location of these mega projects. For example,
Myitsone dam project is in the politically unstable13 area of the Kachin State (Burma

11
China has long maintained close ties with the Wa and Kachin, ethnic minorities who live in
the north and have struggled for autonomy against the government since Myanmar became a country in
1948. The relationship peaked during the 1960s, when China supported the Burmese Communist Party
(which consisted primarily of Wa and Kachin, as well as Chinese nationals) in their (partially
successful) struggle against the central government. The material and human assistance from Beijing
ceased in the early 1990s, though local governments in Chinas Yunnan province have maintained
cross-border ties on issues ranging from business cooperation to drug-related crop substitution
programs. Naypyidaw reached a peace agreement with the Wa in September 2011, but the Kachin and
the Myanmar military remain at war. On Jan. 2, Myanmar admitted that it had been using aircraft to
attack the Kachin, which still boasts an army of about 15,000 (Chow & Easley 2016: 539).
12
Observers have claimed that China unofficially supplied weapons and training to the largest
of the United Wa State Army (UWSA), noting the largest USWAs unusually sophisticated arsenal,
including heavy machine guns, artillery, and Chinese-made-surface-to-air-surface missiles (Chow &
Easley 2016: 539).
13
The Kachin conflict is among the most protracted of Burmas ethnic wars. Resistance to
central government rule has continued through all four political eras since independence. The Kachin
Independence Organisation was formed in 1961, following discontent over perceived ethnic inequality
and discrimination, government neglect and plans to make Buddhism Burmas state religion. Most
Kachins are Christians and closely inter-linked by clan traditions. In subsequent years, the KIO rapidly
grew into one of the best-organised armed opposition forces in the country, with health, education and
Policy Briefing 2013). In securing its interest, China openly stepped into the peace
dialogues between Myanmar government and Kachin Independence Organization
(KIO). During these negotiations, China played a crucial role in facilitating the
meetings between the Myanmar military regime and the UN. It was another episode
that led the military regime to become increasingly concerned with the perceived
growing of Chinas influence and prominent intervention in Myanmars local affairs.

Based on this analysis, from the political security standpoint, the suspension of
Sino mega projects was mainly due to Chinas growing involvement in Myanmar
domestic issues. Chinas support for ethnic militia, her intervention during Saffron
and Nargis incidents, indicated how the long standing inter-dependence with
Myanmar has been violated. Although the decision could contribute to Chinas
retaliation, Myanmar was determined to prevent herself from being politically
controlled and dictated by Chinas supremacy. Interestingly, the suspension also has
lured China to persuade the Myanmar militia ethnic (Kokang group, the Arakan Army
and the Taang National Liberation Army) to join a peace conference 14 (Strangio
2016) known as Panglong Conference.

Chinas Interests on the Societal Security of Myanmar


China interest on Myanmar Societal Security15 can be seen through the bilateral
cooperation between two countries. This had indicated that Chinas investments in
Myanmar were mostly concentrated in the natural resource development industry such
as hydropower, minerals, and trade, but a little effort was done for local welfare and
development (Kudo 2006: 13). In substantiating this argument, a cross check with the
Sino Mega Project was carried out. The behaviour of the Chinese companies were
more interested in profit making rather than boosting Myanmars local development
(Buchanan et al., 2013: 46).

An investment such as the Myanmar-China Oil Pipelines project should


stimulate economic progress through the introduction of capital and technology, job
opportunities, and fostering strong economic ties among the stakeholders (Myint
2015:7). On the contrary, Chinas attitude towards the locals had aggravated the

other departments across the Kachin state and northern Shan state where an estimated 100,000 Kachins
also live (Burma Policy Briefing 2013).
14
China has also shown that it is willing to help promote peace and stability along its border
with Myanmar. During the talks in Beijing, China persuaded a number of stubborn rebel groups,
including the armed-to-the-teeth United Wa State Army, to join a peace conference that Suu Kyi will
convene in Naypyidaw on 31 August. In remarks reported by Xinhua, Xi Jinping promised Suu Kyi that
his government 'will continue to play a constructive role in promoting Myanmar's peace process and
work with the country to safeguard peace and stability in their border areas'. This came on top of a USD
$3 million donation made by China to the peace process earlier this year; a recognition that peace and
stability in Myanmar's borderlands are in both countries' interests (Strangio 2016).
15
Societal security concerns the sustainability of traditional patterns of language, culture, religion,
national identity and customs (Buzan et al., 1998: 119).
situation, Sino Mega Project companies (Harvey 2011), MC Oil and Gas Pipeline
project had made little effort to develop the local labourers through job training and
knowledge-transfer, while thousands of workers from China and central Burma were
brought in as employees (Swhe Gas Movement 2011), leaving few opportunities for
locals to receive any permanent or contract employment in the project. Locals were
only given the unskilled jobs,16 and this was due to the level of skill and education
(human capital) possessed by the locals. Such argument can be substantiated with the
unemployment rate (Figure 4.4). Although the FDI recorded substantial increment it
did not commensurate with the unemployment rate.

Unemployment Rate
4.035
4.03
4.025
Unemployment Rate

4.02
4.015
4.01
4.005
4
3.995
3.99
3.985
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year

Figure 4.4 Unemployment Rate


Source: Trading Economics 2016

According to Bi (2010, 2014) to obtain approval for a project, several Chinese


enterprises had bribed the local government officials. Although there was no evidence
to relate to the accusation towards the Sino Mega Projects, the stigma that existed was
that the Chinese enterprises were acting above the law, paid no attention or respect for
local customs and the Burmese, and had a poor sense of social responsibility.

Environmental Safety and Security


The security17 and safety issues, especially on the Myitsone Dam project, had
witnessed the displacement of 15,000 people mostly being ethnic Kachin, and
destroyed the Mali-NMai confluence. The Kachin had regarded it as their cultural
heartland. Myitsone Dam offers an opportunity to acquire cheap electricity for China
while investors were not held accountable for the negative social and environmental
impacts of the dam building. The investment revenue from the sale of electricity could
provide financial and political support to the Myanmar government. It was estimated
that the dam would be able to generate USD $207 million a year (Dapice 2015:5).

16
"They promised us that they would give job opportunities, especially to the people who lost their
land," Thar Zar Gyi from Ywar Ma village said. "Yes, I got some temporary jobs, like painting and
carrying bricks during the construction period (Thant 2005).
17
Environmental security regards the maintenance of the local and the planetary biosphere as the
essential support system upon which all other human enterprises depend (Buzan et al., 1998: 72).
The China National Petroleum Corporation started the construction of a
seaport on Maday Island in October 2009. China was also set to benefit from the oil
transport pipeline, which enabled oil to be imported to China from the Middle East
and Africa. It was estimated that the pipeline could bring in revenue of over USD30
billion in the next 30 years (Juan 2013). Myanmars long isolation from
international markets and sources of financial support historically has limited her
development. Many of its natural resources remain to be relatively intact, despite an
absence of effective environmental regulations (Raitzer et al., 2015: 1). Yet, as the
country integrates into the global economy and its economic development accelerates,
resource degradation had risen rapidly. The deforestation of closed forests in recent
years has taken place at the fastest rate among major Southeast Asian countries, with
much of it driven by concessions for plantations and other large-scale projects.

Assessing the Sino Mega Project, there was a significant connection between
the environment and economic growth that would subsequently affect the politics,
society, military and human security. For the country to progress further, there will be
a certain environmental price to be paid (Sun 2013:5). The amount of damages to the
environment was widely publicized by several NGOs. Interestingly, it revealed that
the U.S. had funded the non-governmental groups which had successfully opposed the
Chinese-financed building of the huge Myitsone dam (The Guardian 2011). The
argument was further highlighted by the Observer saying that U.S. Department of
States funding of anti-dam advocacy groups in Myanmar had led to the suspension of
the Myitsone dam in 2011 (Yun 2015:1).

Despite the allegation made on China companies, they made efforts to


compromise with the locals demand. The effort was being translated by Wanbao
(Letpadaung Mine) with an allocation of USD 2 million for the environment
protection (Sun 2013:6) in their newly revised contract. Chinas Power Investment
Corp (CPIC) on the Myitsone Project had funded and commissioned the Changjiang
Institute of Survey, Planning, Design and Research (CISPDR) from China. This was
to conduct the Environmental Impact Assessment (EIA) with Burmese experts from
the Biodiversity and Nature Conservation Association (BANCA) (International Rivers
2011). In the case of oil and gas pipeline, the government had issued an environmental
guideline for mega projects to follow (Frontier Myanmar 2016). Currently, the CNPC
had issued18 several plans to minimize environmental impacts during the construction
of Myanmar-China Oil and Gas Pipelines (CNPC 2016). In other words, the
environmental security issue was eventually managed by China companies.

18
"Environmental Supervision Plan", "Specifications for the Administration of Environmental
Supervision", and "Detailed Implementation Rules of Environmental Supervision" (CNPC 2016).
RESEARCH FINDINGS
The study explicated that the main reason for suspension was due to a combination of
geostrategic and domestic factors. Despite being the beneficiary of large amounts of
investments from China, Myanmars Gross Domestic Product (GDP) had dropped
from 13.57 percent in 2005 to the lowest point of 3.60 percent in 2008 (Figure 4.1).
The economic crisis was further exacerbated with Chinas exploitation over
Myanmars natural resources, which has now gradually expanded into Myanmar
domestic problems including the act of interventions during Saffrons demonstration,
Cyclone Nargis, and the support shown over the ethnic militias particularly the Wa
and the Kokang. Thus, in order to secure the economy and safeguard her sovereignty,
opening the market was considered to be the sensible approach in managing the
downturn.

By opening her market system, Myanmar took advantage of her strength by


manipulating the rivalling superpowers namely China and the U.S. This was done
by utilizing the supply and demand theory. Myanmar exploited the demand for energy
by China and their scepticism against the renewed interest and intensified involvement
of the U.S. in this part of the world (U.S. Pivot to Asia). In the meantime, although
Myanmar practices limited democracy, they managed to attract the U.S attention as it
is in line with one of the main tiers in U.S Pivot to Asia policy, especially to be in
support for Universal Values such as human rights and democracy. With the
advantage of having two superpowers, Myanmar had the ability to choose which
country could offer her the best financial packages. Hence, the suspension of these
mega projects was a strategic reason to spark the interest from both superpowers.

The strategy seems to work well considering that Myanmars FDI started to
increase whilst GDP reached the highest point since 2010 (Figure 4.2). Although the
GDP dropped back in the following years, it was still higher in comparison to what
they had during their isolation period. This is consistent with hypothesis 1 and 2, in
which it was hypothesized that Myanmar would risk their economy with Chinas
retaliation but towards the end it will continue to bounce back due to Chinas strategic
dependency on energy and scepticism over U.S renewed interest.

Screening at the historical facts, the approach was consistent. Myanmars


leaders had actively manipulated their bilateral cooperation to their advantage. The
dissatisfaction with Chinas interference in domestic issues during Cultural
Revolution prompted Myanmar to move closer to the U.S, and this was by taking the
advantage of an economic support which was emanated from the Domino Theory.
Following Reagans foreign policy in 1980s whereby South East Asia (SEA) was
regarded as an area with low priority, Myanmar turned back to China, grabbing the
opportunity from their Open Door Policy in the mid-1980s.

The study also shows that Chinas investment in Myanmar were mostly
concentrated on the natural resource developments. A trivial effort was made on local
development. The protest against Chinese companies was a concern to China on their
interest on profit taking, rather than developing Myanmars local provisions. This can
be seen from the level of their social contribution to the local or Corporate Social
Responsibility (CSR) that is more interested in grabbing the land from local people for
project development purposes. Furthermore, the influx of workers from China and
central Burma had saturated the job market, limiting locals opportunity to work with
these Chinese companies and this aggravates the impoverished community further.

Finally, the military holds 25 percent of the legislative seats in the constitution
that enables them to manipulate the state, market, and the society to their advantage.
Apart from the perspective of economic advantage, the peace process among the
militia is attained (Panglong), and it is noted through the findings in this research that
Myanmar are strongly dependent to their military for the countrys survival. This is
particularly due to the countrys fragile situation, in sense of poverty, the low level of
education among the locals, and the chaotic nature of their plural society.

CONCLUSION
The reason behind the suspension was more than merely on environmental reason as
widely publicised in the media. In fact, Myanmar is concerned about the extent of
Chinese investment. Chinese investors are only interested in profit-making projects,
and they had even brought in their own labour force, hence diminishing the local
employment prospects. In fact, Chinese infrastructure projects, were mainly joint
ventures with companies owned by the military junta, or its cronies have disregarded
local communities development. Therefore, the suspension was a calculated risk
taken by Myanmar considering the domestic problems and geo-strategic advantages.
Additionally, as a small state, Myanmar is vulnerable to the powerful countries who
can take the benefit of her weakness. However, Myanmar has shown their willingness
to do whatever she can to boost the opportunity, and leveraging against the rivalry
between the existing superpowers, namely China and the US, to which had been used
intelligently by Myanmar to achieve its national and strategic interest.

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