Myanmar Junta Sells Resources to Neighbors in Exchange for ‘Legitimacy’

By Lin Htet Myat 15 June 2021

The Myanmar military (also known as the Tatmadaw), since staging a coup on Feb. 1 against the elected National League for Democracy (NLD) government, has encountered unexpected nationwide public protests and is also confronted by the Civil Disobedience Movement (CDM) of civil servants. These have disrupted the economy and public sector, pushing the country to the brink of state collapse and civil war. Now the junta’s State Administration Council (SAC) is trying to stabilize this situation by selling the country’s resources to friendly neighbors China and Thailand.

Coup leader Senior General Min Aung Hlaing, during his trip to Karen State on May 31, announced a plan to resume the controversial Hatgyi Dam project for power generation. The project’s sponsors are Thailand’s Energy Generation Authority of Thailand (EGAT), Sino-hydro, IGE Company Limited, which is owned by the brother of the current commander in chief of the navy, and the Ministry of Energy and Electricity (MOEE). The dam’s location is in a conflict-affected zone in Karen State where fighting recently broke out between the Myanmar military and brigades of the Karen National Liberation Army (KNLA), the armed wing of the Karen National Union (KNU).

Rumors are also circulating that the 1,400 megawatt upper Salween (Kunlone) project was approved and a memorandum of agreement (MOA) signed between the scandal-plagued Hanergy Group Holdings; Asia World, which belongs to the late drug lord Lao Hsing Han’s son; and the Myanmar government’s MOEE.

At the same time, the BRI Steering Committee and relevant committees have been revamped and now the senior general is the chairman of this committee, the highest policy-making committee on the China-Myanmar Economic Corridor (CMEC), which is the most crucial component of the Bangladesh-China-India-Myanmar (BCIM) Corridor under China’s Belt and Road Initiative (BRI). In implementing CMEC projects, which include the Kyaukphyu Special Economic Zone (SEZ) deep seaport, public consultation will not be necessary and a clause on the BRI implementation joint committee’s functions was removed. That indicates Chinese investors will not need to worry about public protest against their investments and go through a time-consuming public consultation process.

The SAC-controlled Myanmar Investment Commission (MIC) has also approved the US$2.5-billion Mee Lin Gyaing LNG to Power Project proposal submitted during the deposed NLD government’s term, which is one of China’s BRI projects in Myanmar. The mega power project will be implemented by a consortium led by Chinese companies.

Likewise, Vice-Senior General Soe Win of the SAC has become the chairman of the Myanmar Special Economic Zone (SEZ) central committee, and all working committees and SEZ management committees were recently replaced with senior army officers and pro-junta civilians. There are three SEZs in Myanmar: Thilawa, Dawei and Kyaukphyu. Only Thilawa is in the operational phase. The Kyaukphyu SEZ deep seaport project’s shareholder agreement was signed during Chinese President Xi Jinping’s visit in January 2020 between China’s state-owned CITIC and the Kyaukphyu SEZ Management Committee, and a concession agreement was signed in November of that year. It called for bids to conduct an environmental and social impact assessment (ESIA) in January 2021, just before the coup.

There are several reasons for SAC’s recent moves on BRI, SEZ and hydropower projects.

They should not be taken at face value. These moves can be considered SAC’s grand strategy to gain legitimacy with some level of governing capacity, control ethnic armed organizations (EAOs) and annihilate the opposition National Unity Government. After gaining recognition from China and some countries in ASEAN, particularly Thailand, they may predict that others in the Asia-Pacific region will follow suit, most probably Japan, Korea and India.

Therefore, the SAC is selling the country’s natural resources wholesale to China and Thailand in order to entice these countries to give recognition to them. The SAC is using the same playbook as the previous military regime, the State Law & Order Restoration Council (SLORC), in the 1990s. SLORC gave wide-ranging concessions from fishing and logging to oil and gas to Thailand and in return the Thai government reduced support for the KNU. In the same way, it signed many MOUs with Chinese state-owned enterprises to implement hydropower projects on the Irrawaddy River. The idea is that the more wholesale agreements China and Thailand decide to implement, the more support they will need to provide to the SAC and the more they will have to rein in the EAOs on their borders to ensure the security of their projects and workers.

Hydropower projects are attractive to Chinese and Thai investors because their concession agreements are so-called 90:10 contracts; investors will take the lion’s share of the profits while the host country and local communities will have to pay the cost of environmental damage and livelihood loss. In addition, 90 percent of the electricity generated from these projects will be sold back to the investors’ countries, so investors are able to control revenue flows and reduce project risks, as they will not depend on the host country’s transmission, distribution system and macroeconomic conditions.

With respect to the SEZs, Kyaukphyu is crucial to China’s China-Myanmar Economic Corridor (CMEC), which it hopes will provide its landlocked Yunnan province with an ocean gateway. Many say its geostrategic value is of more importance to China than its commercial viability. For Japan, it will be difficult not to invest in the Dawei SEZ, as China will fill the gap if it decides to leave. India will also face the same strategic dilemma as Japan, facing encirclement by archrival China—with its CMEC and BCIM corridors—and its allies.

If the SAC’s grand strategy works, China’s influence will definitely rise, possibly leading to its expansion southward, joining with its Indo-China Corridor. That will pose a security threat to ASEAN, particularly countries which have territorial issues with China in the South China Sea. In turn, this will destabilize the whole region and draw the US and its allies into an already tense game of strategic competition.

Sadly, Myanmar will never become a stable and prosperous nation under the SAC, which will act to gain legitimacy from its neighboring countries while waging war on its own people.

Lin Htet Myat analyzes public policy with a focus on economic governance and Public-Private Partnership Projects in Myanmar.

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