In the wake of the Myanmar coup, questions have been raised about the future of China’s multi-billion-dollar Belt and Road Initiative (BRI), how the crisis and conflict could affect related progress and Chinese investment in the Golden Land, and the wider implications this has for efforts by Beijing at world strategic dominance.

The Chinese communist government was initially cautious in how it reacted to the Myanmar military coup last year, appearing to sit on the fence before eventually throwing its weight behind the Myanmar junta.

In part the Beijing decision-making process was affected by direct threats in Myanmar to both its BRI infrastructure and factories, mines and other investments, including the crucial China-Myanmar Economic Corridor (CMEC).

The threats are real, including arson attacks on factories, and, only last month, People’s Defence Force (PDF) attacks on China’s controversial Wanbao copper mine in Letpaduang, and local government-related infrastructure nearby, including a police station. Junta forces have responded against local villages in the copper mine vicinity with artillery and arson attacks.

WORLD PLAN

The Myanmar crisis poses an acute dilemma for China and affects Chinese President Xi Jinping’s plan to dominate the world through this BRI infrastructure, trade and investment mega project.

The CMEC corridor from China’s southwest Yunnan Province through Myanmar to the Indian Ocean is an important piece of the grand BRI puzzle.

The BRI scheme is under pressure globally due to a range of setbacks, including security problems in Myanmar, the implosion of the Sri Lankan economy and government, and further afield the lack of confidence in Beijing and its investment projects in certain African countries. China’s sluggish economy, partly due to its draconian “Zero-Covid” lockdowns, also has not helped.

In addition, the BRI scheme is under direct pressure from the West. The G7 group of rich democracies last month announced an attempt to compete with China's BRI by raising some $600 billion for global infrastructure programmes in poor countries.

The Partnership for Global Infrastructure and Investment, unveiled with fanfare by US President Joe Biden and G7 allies from Canada, Germany, Italy, Japan and the European Union, aims to fill a huge gap left as communist China uses its economic clout to stretch diplomatic tentacles into the furthest reaches of the world, as the AFP news service put it.

Biden said the target was for the United States to bring $200 billion to the table, with the rest of the G7 another $400 billion by 2027.

While this Western driven Partnership for Global Infrastructure and Investment is in no way are strategically planned as China’s BRI, it still presents a challenge for Beijing.

The announcement from the US and its Western allies comes in part due to the political polarization caused by the Russian military operation in Ukraine, with China siding with Russia in a modern-day version of the Cold War.

In simple terms, the world’s political and economic axis is shifting eastward.

Given this polarization, the progress of China’s BRI should be kept in sharp focus.

MYANMAR MATTERS

In the greater scheme of things, Myanmar is a crucial piece of the puzzle for China’s drive for world dominance.

Myanmar is particularly important to Beijing, given the transport corridor from China’s Yunnan to the Indian Ocean and the deep-sea port of Kyaukpyu (also written Kyauk Phyu).

This is a crucial short-cut in terms of transport of fuels and commodities that helps reduce the need to use the Malacca Strait shipping bottleneck, with its security concerns.

In an effort to understand the gravity of the Myanmar crisis is for Beijing, the NGO Engaged Development (EDI) has followed up on an earlier report with a recently-released post-coup assessment entitled: “The Belt and Road Initiative in Myanmar - A review of developments in 2021-2022 in Kyaukpyu and Kachin”.

In their latest assessment, focusing on the period in the wake of the 1 February Myanmar coup, the report notes there was immediate speculation that the coup would end China’s commitment to BRI projects. However, while it initially maintained plausible deniability and room for maneuver, over time China has fully committed to the Myanmar military.

Rather than backing away from the CMEC across Myanmar territory, China has shown itself committed to the original plans and has ratcheted things up, signing multiple deals for new projects with the less bureaucratically-encumbered Myanmar military – compared with the quasi-democratic era under Aung San Suu Kyi.

As the EDI report notes, Myanmar’s cohesion in the wake of the coup is fragmenting, moving towards full civil war between the military or Tatmadaw, local People’s Defense Forces (partially linked to the National Unity Government (NUG)), and a wide range of Ethnic Armed Organizations (EAO).

These conflicts in which control on the ground is contested leads to the creation of complex legally-plural situations through which individuals, communities, and civil society must skillfully navigate. It also generates new pressures and opportunities for ethnic political groups including the Arakan Army (AA) and the Kachin Independent Organization (KIO). As these groups assume greater control of territory, circumstance will force them to abandon their previous “constructively ambiguous positions” regarding BRI projects. Who will work with whom and under what circumstance is a delicate and evolving balance of forces, incentives, needs and priorities caught in tight-knit feedback loops as each move recalibrates other relations.

As the report says, Myanmar communities and civil society spent the last year in the wake of the coup struggling to hold space, stay out of the immediate view of the military, and build their capacity in order to be able to respond when opportunities arise.

EDI, which has continued to work with civil society groups in the Kachin and Rakhine, notes that the fallout from the coup has played out in starkly different ways. The situation in Kachin halted most of the previous government-dependent pathways of working, whereas in Rakhine the work continued, relatively speaking, along similar lines as in the pre-coup period.

CHINA’S FOOTPRINT

As the report notes, the CMEC corridor truly began on 18 January 2020 when Chinese President Xi Jinping signed 33 agreements with then State Counsellor Aung San Suu Kyi on a State visit to Myanmar.

Myanmar’s hybrid civilian government under the leadership of Aung San Suu Kyi was proceeding cautiously with the plan and was primarily focused on the nine so-called “early harvest” projects. A mere year and thirteen days later the balance struck by this deal was thrown into confusion when the military conducted a coup d’état on 1 February 2021. Given that China had invested significant effort over many years to build relations with Aung San Suu Kyi’s government and the military’s evident displeasure with these efforts the coup opened, for a brief window, the possibility of radical changes to the CMEC.

The report notes that in the immediate post-coup period China hedged while acting to secure its strategic interests, including the safety of its pipelines.

In the immediate wake of the coup, on 15 February 2021, China’s ambassador to Myanmar stated the current political situation was “absolutely not what China wants to see” and dismissed social media rumours of Chinese involvement in the military coup as “completely nonsense”.

The Myanmar military wanted Chinese support for the coup but its priority was taking control within Myanmar. Once the military had largely secured control or rather demonstrated they controlled the fate of Chinese investments, China came to fully back the military. While these maneuvers were largely opaque, with only some elements visible publicly, it seems reasonable to assume that by mid-May and certainly by June of 2021 China was fully supportive of the military.

The relationship has grown ever closer since then with deals for new CEMC projects signed. However, all of this comes at a price. With China having sided with the Myanmar junta and against the people, anti-China sentiment is high and rising and there are increasing threats and attacks against Chinese infrastructure, factories and other investments.

China blocked a UN Security Council Statement condemning the coup. A few weeks after the coup, at a time when there were very few flights in or out of Myanmar, five planes landed in Yangon from China. The official reason given, that they contained seafood for Chinese New Year, was dismissed out of hand and anti-coup protestors surrounded the Chinese Embassy in Yangon. On 23 February Chinese officials met the military to ask for extra security for the oil and gas pipelines and for better media coverage.

A core issue for Beijing were the oil and gas pipelines, critical for China as they transport 6 billion cubic metres of natural gas and 10 million tons of crude annually. In mid-March the facilities of 32 Chinese companies were damaged and two Chinese citizens injured in Hlaing Thar Yar when they were looted.

REJIG OF BRI COMMITTEES

Starting in March 2021, the Myanmar junta began to reorganize the committees which control the development and implementation of China’s BRI projects. This included removing all the civilian government members from the crucial CMEC Joint Committee in March and replacing them with Military-appointed Ministers and State and Regional Officials.

The Joint Committee plays a central role in conducting government-to-government negotiations on projects and signing Memorandum of Understandings. Critically the Myanmar military or Tatmadaw removed the clause which encouraged the participation of the people of Myanmar in the CMEC. The junta also replaced the members of the Central Committee for the Implementation of the Myanmar-China Cross Borders Economic Cooperation Zones (CBECZ) and members of the CBECZ Working Committee. These bodies oversee the implementation of the zones in the Shan and Kachin states, including the CBECZ in Kanpiketi. Personnel have also been changed to bring the Special Economic Zone Committees, national and local, under control of the military – this includes this Special Economic Zone or SEZ at Kyaukpyu.

With the bureaucratic machinery firmly under military control and even the paper commitment to involve the people of Myanmar in CMEC removed, China and the Myanmar junta moved several projects forward and signed new deals.

UNCERTAINTY

Despite all the bureaucratic maneuvers and expression of “special friendship” it is clear that China hesitated, throughout 2021, to begin implementation of many of the agreed upon projects, the report notes.

This hesitation stems from two primary factors - the first is the obvious chaos in the country as people resist military rule by all possible means – including local armed resistance. The second is the huge rise in anti-China sentiment which threatens attacks against Chinese-built infrastructure.

Under such conditions even the most cursory risk-assessment would suggest a wait-and-see approach for what is said to be a deeply unpopular railway – from the Chinese border to the Indian Ocean - passing though large swathes of highly contested Myanmar territory.

In December 2021 the Myanmar junta, recognizing China’s hesitance, watching as foreign investment in Myanmar predictably dried up, and the economy shrink by some 18 per cent, tried to sweeten its deal with China. In addition to claiming the situation was normalizing, junta leader Min Aung Hlaing implicitly guaranteed the safety of Chinese infrastructure saying: “We will protect all foreign funded enterprises.” Finally, the junta agreed that the Renminbi would be the official settlement currency for cross-border trade.

Despite a small attack on the oil pipeline in February 2022 by members of a local People’s Defense Force (PDF), China seems to be moving ahead with the Cross Border Economic Cooperation Zones and the multiple projects in Kyaukpyu. Survey work for building the bridge to Maday Island from Ramree started in March 2022, though other more exposed projects such as the railway remain in limbo.

On 1 April 2022 China’s Foreign Minister, Wang Yi, met with the Myanmar junta Foreign Minister Wanna Maung Lwin in China where they spoke of speeding up the implementation of the CMEC.

On 8 May 2022 the Kyaukpyu SEZ committee announced that Myanmar Survey Research, a Myanmar based company, would conduct the Environmental Impact Assessment for the SEZ and deep-sea port.

As EDI notes in their report, threats have been made against Chinese mines in Sagaing, and a warning has been sent by more than 500 civil and political organizations in Myanmar via an open letter of possible attacks on its investments in Myanmar if Beijing maintains ties with the military regime.

Analysts recognize that this public push-back poses a threat to Myanmar section of the BRI.

ETHNIC REGIONS

With the fracturing of authority in Myanmar, Ethnic Armed Organizations (EAOs) will play an increasingly important role in decision-making in the territories they actually or purport to control, according to the EDI report. Most EAOs have taken highly ambiguous positions on Chinese investments and the CMEC in general. This is because while their people are not generally very keen on the investments and in some cases deeply opposed - such as the Myitsone Dam - the groups have relied on China for support and in some cases banking, weapons, or a safe haven. Thus, the most prudent course of action, hitherto, has been to avoid the question whenever possible and mouth platitudes when forced.

In its role as an NGO, EDI is working with a number of groups across Myanmar, including in the CMEC areas in Rakhine and Kachin states.

From EDI’s research and interviews, their report includes insight into the complex challenges and interactions that could in one form or another positively or negatively affect the ability of the Chinese government to push through its BRI projects in Myanmar.

RAKHINE UNCERTAINTY

As part of the report, EDI spoke with a representative from the Arakan Army (AA). Historically the AA has been close to the Kachin Independence Army (KIA). They have trained together in Kachin State and initially, during its formation, the AA used the KIA’s headquarters on the Chinese border at Laiza.

EDI spoke to Khaing Thukha, Arakan Army spokesperson in February 2022.

The AA has dramatically increased its influence and control in Rakhine since the coup. In part this is because the Tatmadaw has redeployed its forces from Rakhine as people rise-up and resist the coup across Myanmar. The Tatmadaw withdrew its designation of the AA as a terrorist group in March 2021.

The AA has been exercising its administrative and judicial mechanisms as well as its taxation system through the Arakan People’s Authority, the administrative body run by the local people and backed by the group in Rakhine State over the past two years. However, the AA admits that urban areas are still under the tight control of the junta’s current administrative mechanism.

The AA say their political goal is self-determination and greater autonomy though perhaps it wants outright independence. “We have made it very clear that we, if possible, want to stay in the union, but self-administration status is not what we are fighting for. We cannot govern our region by using laws that were drafted and approved by outside players. We know what our region needs better than anyone else. So, we will make laws and will govern the region by using them,” the spokesperson said.

As the last option the AA is also preparing to make Rakhine state a totally independent state if there is no way to stay in the union. “We know that the world, especially ASEAN countries and some neighbouring countries such as India and China, do not want to see an independent country emerging, but it is not something impossible.”

According to the report, the AA does not talk about Chinese investment in isolation but views the international investment in the future as coming from Bangladesh, India, and/or China. They are particularly keen on investment and good relations with Bangladesh as they are the only state, in addition to Myanmar, with which they would share a border.

“If we are going for an independent state status, we anticipate that we can’t get much help from India and China, but we hope Bangladesh will be much helpful to us if we make clear policy for solving Rohingya issues,” the spokesman said.

India and China will however play a bigger role regarding the investment in Rakhine state, no matter if it becomes an autonomous region or a totally independent state.

“China has a strong interest in Rakhine state because of its two oceans policy, and already heavily invested in Kyaukpyu projects. Meanwhile, India is developing its Kaladan projects in Sittwe. Whatever the political situation, their interest will remain and they will continue their projects by engaging with the regional player (be that the Junta or AA),” he added.

According to Khaing Thukha the AA welcomes any kind of foreign investment if the deals seem fair and could bring benefits to local communities.

“It’s not difficult to answer your question (the AA’s view on Chinese investment). We value Chinese investment in Rakhine state. We will protect Chinese investment, but some deals will be required to be re-negotiated when we are in a position to govern our region independently.”

KACHIN AND THE KIA

Meanwhile, Kachin State matters when considering both the CMEC and Chinese investment and projects as a whole.

EDI spoke with KIA spokesperson Colonel Naw Bu in February and March 2022.

The KIA probably have the least room for maneuver concerning Chinese investments. They are deeply reliant on Chinese goodwill in order to operate, as since 1994 their headquarters has sat on the Myanmar-China border at Laiza. The picture is further complicated as the Kachin people live on both sides of the Myanmar-China border.

In general Colonel Naw Bu deflected questions about Chinese investment for now, as they see their primary task as eliminating the Myanmar junta.

Much like the AA, Colonel Naw Bu said the group has benefited from the anti-junta movement following the coup. Before the coup, KIA found it hard to recruit new members, but it is not a problem anymore.

“Since the coup, we are able to expand the areas we control a bit. We are expanding beyond Kachin State.”

When pushed on Chinese investment the Colonel responded: “It is a bit early to talk about the post-revolution era. Don’t you think it is too early? The chaotic situation will be years. So, it is too early to talk about it at the moment. We are expecting the best, but well prepared for the worst too.

Whatever the result will be, we are in the middle of the process and can’t say much on the policy and plan. Principally, the terms and conditions of the projects and investments will be reviewed case by case once or when we are in the situation to govern the region ourselves. If necessary, re-negotiation will be made.”

The KIA appears pragmatic.

“China is our neighbour, and they are quite flexible. I mean they have the ability to adapt whenever they are. If the host environment is bad, they are bad. But they can be good in a good host community. We do not have many worries about Chinese investments and businesses here. Whatever the deal was, it can be amended via re-negotiation.”

As the National Unity Government (NUG) and allied ethnic rebel groups principally agreed that the stakeholders have the right to manage the respective regions, KIA admitted that any businesses including jade mining and foreign-direct investments in Kachin State will be in their hands once or when the revolution prevails.

“We realize that Kachin State is of major interest to China in Myanmar. Kachin State is not that much if compared to Shan State. Kachin State has some big Chinese projects including Myitsone, Kanpiketi zone and Myitkyina Economic Development Zone. China wants stability along its border so that it can expand investment and businesses properly. China will have trust and will be willing to work together with those who can maintain stability. So, we need to win first, then we can sit and talk about business with China.

“Principally, we should not make friends our enemy. We can’t stay away from China and it would be super hard to make the region develop without Chinese investment. On the other hand, China can’t stay away from us too. We need mutual respect for mutual benefits, and we believe we can do it.”

DIFFERENT FALLOUT

Kachin and Rakhine have experienced the fallout from the Myanmar coup in starkly different ways. In Kachin State, there has been significant fighting between the KIA and Tatmadaw whereas in Rakhine, and in Kyaukpyu in particular, the AA reached a fairly peaceful modus vivendi with the Tatmadaw.

These distinct situations have impacted how civil society has been able to work to support those already or potentially affected by Chinese infrastructure projects. The situation in Kachin halted most of the previous government-dependent pathways of working. That is of using the law and government systems to either seek redress for existing problems or to take measures within the system to ensure that future threats are minimized (for example by formally registering land).

In Rakhine civil society has been able to continue working, relatively speaking, along similar lines as in the pre-coup period – though their situation is now legally plural as both the AA and the central government, under the military, claim control of territory.

STOP OR GO

While the unfolding political disaster will mean that China halts or pauses much of the implementation of CMEC, projects in Kachin and Rakhine are very likely to move ahead in 2022 and beyond, the report says.

EDI anticipates the projects that will move forward will include the deep-sea port, Special Economic Zone, and power plant in Kyaukpyu, Rakhine and the Cross Borders Economic Cooperation Zone in Kanpiketi, Kachin. Projects which cross highly contested terrain, such as the proposed China-Mandalay railway are likely to be paused until there is stability – which could be years or decades away.

The Kyaukpyu projects are likely to move ahead because of the relative calm in Kyaukpyu, the existing infrastructure on Maday Island, the high strategic value of access to the Indian Ocean, and it takes many years to build a port by which time the situation across Myanmar may be very different. The Kanpiketi project is likely to move ahead because it is on the border with China.

China needs alternative land routes into Myanmar in case existing crossings become unstable, and because it is under the control of a militia with close ties to the Tatmadaw.

WORKING WITH CHINA?

Last year civil society in Kachin State focused on maintaining community cohesion, conducting research into Chinese projects, and producing materials to better understand the situation of communities in the shadows of incoming projects, the report notes.

On the ground, because of the instability, there were very few changes and CMEC projects did not advance over the last 14 months. The situation in Kyaukpyu was markedly different. The movement of tankers to and from the oil terminal on Maday Island has continued to prevent fishermen from earning a livelihood. However, the situation of dumping waste from the facilities near villages on Maday Island has improved after civil society was able to present its case to local government and meet with company officials.

Meanwhile, farmers in the south of Maday Island have continued to push for their land to be registered. This case was made all the more relevant when, in November 2021, it transpired that some 22 farmers on land that will become the SEZ, who thought their land was already theirs, discovered that it is all “legally” registered in the names of just three people who do not live in the area.

Such technical land grabs are likely to continue when the land will become so valuable and will have to be resisted by civil society and communities. Attempts to register fishermen as fishermen, to protect their interests when the deep-sea port is built, have not progressed as the local government office has largely ceased to work. In March 2022, measurements and a survey for a bridge to connect Ramree and Maday Island started and in May 2022 it was finally announced who will lead the Environmental Impact Assessment for the deep-sea port.

CIVIL SOCIETY INVOLVEMENT

As so often happens with development projects, the local people get left behind or ignored.

China’s BRI and related investment projects have been no different. And the fact that the Myanmar junta has removed reference to civil society participation does not augur well.

EDI suggests civil society in both Kachin and Kyaukpyu will have to pull out the stops.

The primary tasks will include building community cohesion so people stay together under pressure, building the communities’ knowledge and understanding of their legitimate rights and how to obtain them, to start process of self-acknowledgement and documentation – where there is no functioning

government (that is to record and document the situation), to support the community to conduct cases where the system is still functioning, and lastly to talk to EAOs so they ensure projects carried out under their control are not harmful to local communities.

As EDI points out, in Kyaukpyu civil society will have to operate in a legally plural environment and carefully decide which systems to use and in some cases using both the government and the AA systems.

Finally, civil society will need to prepare the community so that it has a voice in the upcoming Environmental Impact Assessment (EIA) and help coordinate other Civil Society Organizations so they all effectively pull together.

China’s conundrum is that it has to work with a country that is currently in a state of civil war with hostile forces that view the junta’s friend as their enemy.

Beijing will have to work on its BRI development with the junta but also recognize that local society participation is a crucial part of the puzzle.

Reporting: Mizzima, EDI

Originally published in Mizzima Weekly as CHINA’S MYANMAR CONUNDRUM: The Belt and Road Initiative and other Chinese investment in Myanmar are under threat