After five years of cozy cooperation with Burma’s ruling generals, China Power Investment Corp. got a shock in September when it sent a senior executive to Naypyidaw, this destitute Southeast Asian nation’s showcase capital, a Pharaonic sprawl of empty eight-lane highways and cavernous government buildings.
Armed with a slick PowerPoint presentation and promises of $20 billion in investment, Li Guanghua pitched “an excellent opportunity,” a mammoth, Chinese-funded hydropower project in Burma’s far north.
Then came the questions: What about the risk of earthquakes, ecological damage and all the people whose homes would be flooded? Is it true that most of the electricity would go to China?
Two weeks later, Burma, also known as Myanmar, scrapped the cornerstone of the project. President Thein Sein, a former general who took office in March, announced that he had to “respect the people’s will” and halt the $3.6 billion dam project at Myitsone, the biggest of seven planned by China Power Investment, or CPI.
As the world’s biggest consumer of energy, China has hunted far and wide in recent years for sources of power — and of profit — for state-owned corporate behemoths such as CPI. The result is a web of deals with often-repressive regimes, from oil-rich African autocracies such as Sudan and Angola to river-rich Burma.
But coziness with despots can also backfire.
Amid a dramatic, though still fitful, opening in Burma after decades of harsh repression, public anger has swamped China’s hydropower plan. The deluge threatens not only hundreds of millions of dollars already spent but also China’s intimate ties to what had been a reliably authoritarian partner, its only East Asian ally other than North Korea.
Beijing still has big interests in Burma, including a multibillion-dollar oil and natural gas pipeline that is under construction. But a partnership forged with scant heed to public opinion has been badly jolted by a barrage of no-longer-taboo questions.
CPI “thought that making an agreement with the regime is good enough. They don’t realize that the circumstances have changed,” said Ko Tar, a Burmese writer and anti-dam activist who traveled to Myitsone early this year. He has since rallied opposition to a project that he says shows China is “only concerned with its own energy needs, not with Burma’s ecological needs.”
China has plenty of rivers itself and is the world’s largest producer of hydroelectric power, which accounts for about 16 percent of its electricity and 7 percent of its total energy consumption. It plans to increase hydro-generating capacity by nearly two-thirds over the next five years.
But under pressure from environmentalists at home and crimped by new legislation, China’s dam-builders have in recent years also looked to rivers abroad. They are constructing about 300 dams overseas.
Most of these will not help China meet its energy needs: They are too far away, in places such as Ethiopia and Sudan. But Chinese-built dams in Laos and especially Burma will pump electricity into China’s power grid. The dams under construction by CPI on Burma’s Irrawaddy River and its tributaries would, if completed, be capable of generating roughly as much electricity as China’s gigantic Three Gorges Dam. Ninety percent of that energy would go to China.
CPI, which for years shunned pleas for information about its Burma dams, has reacted angrily to assertions that the project will benefit mainly China. “People who hold such a wrong viewpoint either don’t understand the situation or have ulterior motives,” Lu Qizhou, the company’s Beijing-based Communist Party secretary and president, said in remarks posted on CPI’s Web site last month. He cited hundreds of miles of new roads, better flood control and other benefits for Burma.
But China’s own government, in an August report by the State-Owned Assets Supervision and Administration Commission, hailed CPI’s Burma venture as a model of party-led overseas expansion in pursuit of Chinese interests. The report noted that the dam project “principally serves our nation’s southern power grid” in a national strategy to boost electricity supplies to boom towns in China’s east.
In a written response to questions, CPI said that Burma’s market is not big enough to “digest all the electricity” due to be generated. The company declined to say whether it had halted work at Myitsone, as demanded by the Burmese president, saying only that “we are negotiating on the relevant issues” with Burma’s government. Burma’s foreign minister and vice president have visited Beijing recently and have been told by senior Chinese officials that Burma should honor its commitments to CPI.
China started looking at hydropower ventures in Burma in the early 1990s. In 1994, then-Premier Li Peng, an avid dam-builder and an architect of the 1989 Tiananmen Square massacre, met Burma’s then-leader, Senior Gen. Than Shwe, in Rangoon. The two discussed a possible Chinese loan for a dam on the Paunglaung River initially proposed by European companies active in Burma.
But that dam, which China eventually funded and finished building itself in 2005, did nothing to sate China’s surging appetite for electricity: The power it generated came here to Naypyidaw, a vast new city hacked from forests that Than Shwe declared Burma’s new capital in 2006. In Naypyidaw, unlike the rest of Burma, lights blaze night and day.
China’s consumption of electricity has increased more than tenfold since 1980, when the Communist Party was just beginning to dismantle a Soviet-style command economy, and is second only to that of the United States. In 2000, with demand for power surging along China’s east coast, Beijing launched a policy known as “sending electricity from west to east,” pushing for new dams on rivers in Tibet, Sichuan and Yunnan, the Chinese province next to Burma.
China’s powerful hydropower lobby argued that dams also offered a clean way to reduce the nation’s dependency on power plants fired by carbon-belching coal, which generate about three-quarters of China’s electricity.
In 2002, however, the industry hit an obstacle — a new law that required an environmental impact assessment for each project before work could start. Under pressure from emboldened environmentalists, Premier Wen Jiabao ordered Huaneng, a state electricity company then run by Li Peng’s son, to suspend a huge dam planned for the Nu River in Yunnan.
Frustrated at home, China’s electricity giants looked across the border, where Than Shwe’s regime had many big rivers and paid no attention to environmentalists. Burma’s generals, who had battled communist and ethnic insurgents trained and armed by Beijing in the 1960s and ’70s, didn’t particularly trust China. But, ostracized by the West, they were desperate for Chinese money and diplomatic support.
In 2005, CPI, whose vice president is Li Peng’s daughter, Li Xiaolin, formed a partnership with Asia World, a Burmese conglomerate close to the military, in preparation for the Irrawaddy hydropower project. The U.S. Treasury Department in February 2008 blacklisted Asia World, describing its founder, Lo Hsing Han, as the “Godfather of Heroin.” Treasury put Lo and his son, Steven Law, who controls the company, on a list of “specially designated nationals” because of their “history of involvement in illicit activities.” The family has in the past denied drug links.
In 2009, Than Shwe’s regime gave CPI a final green light for a cascade of dams capable of generating nine times as much electricity as the Hoover Dam. Their location: Kachin state, a cauldron of ethnic and political conflict in Burma’s far north. Terms of the deal were kept secret. Put in charge of the design was China’s Changjiang Institute, which had designed the problem-plagued Three Gorges Dam.
At Myitsone, the site of the main dam on the Irrawaddy, protests began even before construction. Local Kachins, many of whom want their own state and have a long history of battling the military, resisted forced resettlement and accused CPI of colluding with Burmese troops.
In October 2009, the Kachin Development Networking Group, an opposition group, sent an open letter to CPI demanding that it halt the project “to avoid being complicit in multiple serious human rights abuses associated with the project.” CPI, according to the group, did not reply. The company declined to comment for this article.
Christian Kachins held prayer meetings, calling for divine intervention against CPI. “We prayed that God will favor the right and defeat the wrong,” said Dai Lum, secretary of the Church of Zion in Myitkyina, the regional capital.
U.S. diplomats, in a January 2010 cable released by WikiLeaks, noted with surprise the “growing strength of civil society groups.” Some of these, according to the cable, had received “small grants” from the U.S. Embassy.
China, Burma’s biggest foreign investor, still had far more pull.
Villagers in Tanphre, the settlement nearest the planned Myitsone dam, were ordered to leave their homes and move to “a model new village,” a treeless expanse of newly built houses. Each family received a color TV set, rice rations and a steady supply of electricity for several hours a day, something unavailable in Tanphre.
But, said one resident who spoke on the condition of anonymity for fear of retribution, “nobody wants to live here. Everyone wants to go back home.”
A CPI-commissioned study of the environmental and social consequences of the project acknowledged “some unavoidable adverse impact” but said that overall, it would have “significant benefits in terms of society, economy and the environment.” It blamed opposition to the project on “fake propaganda by partial organizations.”
The company’s secrecy also stirred suspicions in Burma. But it won plaudits in Beijing. The report by China’s state-owned assets agency praised CPI’s Communist Party units for their “closed management” and described the project site as “an isolated island floating above the national soil of Burma.”
This isolation increased after mysterious bomb attacks in April, which Burmese authorities blamed on Kachin separatists. The rebels denied involvement. The attacks, coupled with a surge in clashes between Burmese troops and rebels, spooked the Chinese, and some workers left for home.
By this summer, local anger had swelled into a national movement, assisted by a relaxing of rigid media control by government censors. Previously cowed journalists, emboldened by the new mood, denounced the dams and China’s tightening grip on Burma’s economy. Artists, poets and opposition activists joined, their voice amplified by Facebook and exile Web sites.
At stake, said Tin Oo, a former military commander who is vice chairman of the National League for Democracy, was not only the fate of the Irrawaddy, but also whether Burma would become “not just China’s satellite state but China’s vassal state.”
Eleven Media, a private Burmese media group that had focused mostly on sports and other safe topics, embraced the anti-dam cause. Its chairman, Than Htut Aung, said that he “didn’t want to ignite anti-Chinese sentiment” but only wanted to make clear to China and Burma’s new government that if the project went ahead, “there would be an uprising.”
Aung San Suu Kyi, the standard-bearer of Burma’s resistance to repression and leader of the National League for Democracy, then threw her moral weight behind dam critics. She wrote an open letter calling on authorities to reconsider CPI’s project and appeared at a Rangoon art gallery for an exhibition of pictures celebrating the Irrawaddy.
After months of ignoring the clamor, CPI on Sept. 17 set up a Web site, www.uachc.com, to give its side of the story and finally released a previously secret environmental impact study. The Web site featured photos of new homes, a new hospital, a new church and monastery, and new roads. The head of CPI’s Yunnan branch, meanwhile, traveled to Naypyidaw to explain that the dams would provide jobs, “boost the rapid development of the local economy” and give Burma some electricity “free of charge.” The Chinese Embassy sponsored a supplement in a Rangoon newspaper and trumpeted Chinese investment: “Yes to Corporate Social Responsibility!”
It was too late. On Sept. 30, Thein Sein, the Burmese president, sent a letter to parliament in Naypyidaw announcing that, because of “public concerns,” he was suspending the Myitsone dam project. Caught by surprise despite increasingly loud alarm bells, CPI’s boss in Beijing declared: “I was totally astonished.”