Burma and China: The Beginning of the End of Business as Usual?

Jamestown Foundation China Brief ^ | 11/30/2011 | Ian Storey

[bruinbirdman]

The introduction of a slew of economic reforms and political initiatives by the Burmese government in the second half of 2011 have significant implications for the carriage of Burmese foreign policy. Indeed, the surprise announcement in September suspending construction of a major Chinese-funded hydroelectric dam is an indication that China’s privileged place in the hierarchy of Burma’s foreign relations―a position it has greatly benefited from since the West shunned Burma in 1988—can no longer be taken for granted. Nevertheless, even as these changes unfold, the two neighbors will seek to maintain close and cordial relations in recognition of inescapable geographical realities and to protect important shared interests.

The Unexpected Leader, Burmese President Thein Sein

On November 7, 2010, Burma held nationwide elections for the first time since 1990. Boycotted by the main opposition party, the National League for Democracy (NLD), as well as armed ethnic minority groups along the country’s periphery, the international community dismissed the elections as fatally flawed and undemocratic. On February 4, the newly convened parliament elected retired general Thein Sein as the country’s first civilian president in nearly five decades.

Thein Sein appointed an administration composed almost entirely of retired generals from the previous military government. In his inaugural address to parliament, the new president highlighted the need to reform the economy, reduce poverty and corruption, end conflict between ethnic groups and the central government and achieve political reconciliation. Widely perceived as lacking a strong power base, few expected Thein Sein to enact anything more than cosmetic changes. Yet since April, his government has followed through on many of these reforms and reached out to Nobel Peace Prize winner and leader of the NLD, Aung Sang Suu Kyi, who was released from house arrest late last year. While no Arab Spring, Thein Sein’s reforms are increasingly being viewed as a genuine attempt to increase political plurality and end the country’s international isolation. While it remains to be seen whether the reform process is durable, it is clear that after 49 years of authoritarian rule the political landscape of Burma is shifting in a positive direction.

Initially, China viewed the political transition from military to quasi-civilian rule with satisfaction. For several years prior to the election, senior Chinese officials had privately and publically pressed the ruling junta to implement the stalled “roadmap to democracy.” China encouraged Burma to draw up a new constitution that would pave the way for elections, after which the generals could swap their uniforms for civilian garb (“Emerging Fault Lines in Sino-Burmese Relations: The Kokang Incident,” China Brief, September 10, 2009).

China was never really interested in seeing Burma transformed into a genuine multiparty democracy. Above all else, Beijing values stability in its Southeast Asian neighbor. Particularly, China’s interests are to protect its massive investments; secure uninterrupted access to the country’s rich natural resources, including oil, gas, minerals and lumber; ensure the safety of an estimated one to two million Chinese nationals living and working in Burma; and preserve peace and stability along their border, where ethnic armies maintain uneasy ceasefires with the Burmese central government.

During the first six months of the new government, it was business as usual in Sino-Burmese relations. China continued to pour money into infrastructure projects aimed at binding the two economies closer together. In April, for instance, an agreement was inked between the two countries for China to construct a railway from the western seaport of Kyaukphyu to Yunnan Province (The Irrawaddy, April 28). The railway will run parallel to twin oil and gas pipelines funded by China at a cost of approximately $2.5 billion. Once completed in 2013, the pipelines will transport natural gas from the Shwe off-shore field—for which China obtained sole purchasing rights in 2007— and crude oil from the Middle East and Africa [1]. The pipelines will not only bolster the economic development prospects of China’s landlocked southwestern provinces, but also will mitigate China’s dependence on the Strait of Malacca and other strategic chokepoints in Southeast Asia, which Chinese security analysts regard as a strategic vulnerability ("China's 'Malacca Dilemma'," China Brief, April 12, 2006).

In another indication that all was well in bilateral relations, Thein Sein paid his first state visit, and only his second overseas trip as president, to China in May. The president was accompanied by a large delegation of ministers, senior military officers and businessmen. As is customary on such occasions, Thein Sein lauded the Sino-Burmese paukphaw (fraternal) relationship, noting ties with China were its “closest and most important diplomatic relationship” (Xinhua, May 28). In a joint statement issued on May 28, the two governments upgraded their relationship to a “comprehensive strategic cooperative partnership,” and agreed to maintain close high-level contacts, expand trade and investment links and maintain “peace, tranquility and stability” along their 1,300 mile border. In keeping with its two-decade long position as Burma’s principal financial backer, the China Development Bank agreed to provide the Burmese government with a $756 million line of credit (Global Times, May 28).

There was speculation that in return for continued economic aid, Chinese leaders had requested greater access to Burma’s ports in the Bay of Bengal for the People’s Liberation Army Navy (PLAN) (The Irrawaddy, May 25). Although China has been the primary supplier of military equipment to the Burmese armed forces since 1988, the PLAN did not call at a Burmese port until August 2010. China undoubtedly would like to increase the number of naval ship visits to Southeast Asian ports so PLAN vessels can take on supplies more easily on their way to and from counter-piracy missions in the Gulf of Aden. China also may be interested in an expanded naval presence in Burma to protect its oil and gas interests in Kyaukphyu and enhance sea lane security in the Indian Ocean. It is not known how Burma responded to the reported Chinese request.

If the steadiness with which Burma and China maintained their relationship seemed normal, it only served to highlight the abrupt shift that came at the end of September. Thein Sein sent a note on September 30 to parliament announcing the construction of the Myitsone dam in Kachin State had been suspended until 2016 because it was “contrary to the will of the people.” The dam, one of seven being financed by China in Kachin at a cost of $20 billion, would have been the largest in Burma with a reservoir the size of Singapore. The project, valued at $3.6 billion and scheduled for completion in 2019, was designed to generate 4,000-6,000 MW of electricity, of which more than 90 percent would have been exported to China.

In the months leading up to the announcement, the Myitsone development had generated a groundswell of opposition from the armed Kachin Independence Organization (KIO) and intellectuals in Rangoon. Located at the confluence of the Maykha and Malikha rivers, the area is considered to be the birthplace of Kachin culture. It is also the source of the iconic Irrawaddy River, which plays a critical role in the transportation and agricultural life of the country.

The announcement blindsided China. In an interview with Xinhua, Lu Qizhou—the president of China Power Investment Corporation, which was building the dam in partnership with Burma’s Ministry of Electric Power and the well-connected Burmese private company Asia World—revealed he had been “totally astonished” by the decision and warned of possible legal consequences (China Daily, October 4).

In the weeks following the announcement, the Burmese government sought to limit the fallout. The state-run press declared that the suspension would not harm bilateral ties, and that China would be adequately compensated (Wall Street Journal, November 16). In early October, Vice President Tin Aung Myint Oo was dispatched to Nanning in an attempt to smooth China’s ruffled feathers. China’s reaction was, rather muted. The Ministry of Foreign Affairs called on Burma to “protect the legal and legitimate rights and interests of Chinese companies” (Washington Post, October 4). Meanwhile. Premier Wen Jiabao told Tin Aung Myint Oo that the two sides should “fulfill their promises…and guarantee the healthy development of China-Myanmar cooperation” (Straits Times, October 22). These comments however belie the distress felt by the Chinese government at the abruptness of Burma's unilateral decision.

Why had Thein Sein decided to suspend the Myitsone project in a move guaranteed to upset Burma’s closest ally? At least four factors influenced his decision.

First, as noted, the dam had generated widespread opposition, which had been fanned due to loosened controls on the print media and Internet. By ordering a halt to the dam’s construction, the government was attempting to show, unlike its predecessors, it was responsive to public opinion. Perhaps more importantly, the government was conscious of the need to pre-empt public demonstrations, which could so easily have turned into anti-government protests, like the September 2007 Rangoon protests that the security forces violently suppressed.

Second, the Myitsone dam site is located near KIO-controlled territory and is in an area of great cultural significance to the Kachin people. The project would have displaced 15,000-20,000 Kachins from their ancestral homeland. In March, the KIO wrote a formal letter to President Hu Jintao calling for the project to be cancelled, citing the risk of conflict should construction continue (The Irrawaddy, June 24). These warnings proved prescient: in June armed clashes erupted between KIO forces and the Burmese military, after the former had tried to prevent materials from China reaching the construction site. As part of the government’s policy of fostering peace with the ethnic insurgents, the suspension of the dam may have been designed to placate the KIO. In this respect the decision may have paid off: fighting between the two sides has since ended, and in mid-November the KIO participated in informal talks with the government regarding a renewal of their ceasefire.

Third, Burma is attempting to repair relations with the West, particularly the United States. It is keen to demonstrate it is not a client state of China and is capable of making decisions in its own national interest, even if these decisions are inimical to Chinese interests. Moreover, Burma—which will assume the rotating chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2014—wants to show its ASEAN partners that it is not beholden to China and that membership of the organization is the cornerstone of its foreign policy. In another signal to ASEAN, this year Burma has pointedly refused to toe Beijing’s line on the South China Sea dispute. China intensively lobbied Burma not to send representatives to a September meeting of ASEAN legal experts in Manila, which was for the purpose of discussing the Philippine proposal to transform the South China Sea into a “Zone of Peace, Freedom, Friendship and Cooperation” [2]. Despite China’s wishes, Burma sent a representative—only Cambodia and Laos did not.

Fourth, the decision was also motivated by a desire to reduce China’s influence in Burma. Even though the two countries forged a close partnership after 1988, Burma’s generals have always been uneasy about their dependence on China. Over the years, they have tried to reduce this dependence with only mixed success [3]. The Myitsone decision clearly marks the beginning of a concerted effort to lessen China’s political and economic influence. Furthermore, the government also seems to be reacting to increasing Burmese public anti-China sentiment, provoked by concerns over Chinese dominance of the economy and the social and environmental impact of its infrastructure projects, such as the Myitsone dam.

Is Burma in the process of reverting to its pre-1988 policy of neutralism and equidistance from its two giant neighbors China and India?

While this might be the government’s long-term aim, it is important to keep the Myitsone episode in perspective. The project has been suspended, not cancelled, and work could resume in 2016, possibly on two smaller hydroelectric dams that could supply Yunnan with electricity. China remains Burma’s most important economic partner. Bilateral trade reached $4.4 billion in 2010, up 53 percent on 2010, second only to Thailand (Xinhua, May 28). China is also the primary source of foreign investment in Burma, which amounted to $9.6 billion between 1988 and 2010 (Straits Times, February 23). The two governments have shared interests in border stability. China still exerts some influence over ethnic armies in northeast Burma, including the Wa and Kachin, and has played a behind the scenes role in brokering peace talks. China needs Burma’s cooperation to stem the flow of illegal drugs into Yunnan, and to address trans-boundary crime, an issue highlighted by the murder of 13 Chinese nationals on the MekongRiver in October.

Aung San Suu Kyi recently highlighted the important place China occupies in Burma’s foreign relations when she said that despite “bumps and kinks” in the relationship she was “particularly anxious” for good relations with Beijing (South China Morning Post, November 15). This suggests that even if the NLD is given a greater voice in the country’s political affairs, relations with China will still be accorded an important priority.

In view of the tyranny of geography, even as Burma moves to diversify its foreign relations and have Western economic sanctions eased, it will want to keep China on its side and ensure its interests are protected. Bolstered by the Myitsone decision, Burmese environmentalists have called for work on the oil and gas pipelines to Yunnan to be suspended, but such a move is highly unlikely given the economic and strategic importance of the pipelines to China. Yet even as this and other Chinese-funded projects remain untouched, China must surely be anxious that the days of its political and economic primacy may be numbered. When U.S. Secretary of State Hillary Clinton’s makes her two-day visit to Burma later this week, Beijing will likely be watching closely and judging its implications for Sino-Burmese relations.

[Cronos]

India has been warming up to Burma with its “look east” policy. The Burmese govt may find this the right time to rebalance itself instead of completely falling into the Chinese sphere

[SunkenCiv]

Thanks bruinbirdman.