CSR Blog: A Tale of Two Dams in Southeast Asia

By Qihan Zou

This article analyzes two cases of China’s overseas hydropower station construction: the suspended Myitsone Dam project on the Ayeyarwady River in Myanmar, and the successfully constructed Lower Sesan 2 Dam on the Sesan River in Cambodia. It explains why the Sesan 2 project was successfully constructed while the Myitsone was suspended. This article will be organized as follows: first, I briefly describe the evolution of China’s overseas hydropower projects in the past years; second, I discuss the backgrounds of the two projects; third, I compare the similarities and differences between them; fourth, I summarize my findings.  

I identify two main reasons why the outcomes of the two projects are drastically different: domestic political stability, and electric power allocation. First, Myanmar was much more politically unstable than Cambodia when the two projects were planned and carried out respectively. Second, while the Myitsone project was planned to transmit most of its power generation to China, the Sesan 2 project mostly serves the domestic Cambodian market, making the latter a more economically attractive proposal from the perspective of the recipient country.

Prelude: China’s overseas hydropower ambitions

Hailed as a promising alternative to coal power, hydropower is the second-largest source of China’s energy output and has significant development potential as China vows to realize carbon neutrality by 2060. From an economic perspective, it is reasonable for China to leverage its manufacturing and infrastructure might to explore overseas hydropower markets. From a political perspective, infrastructure has been a traditional diplomatic tool employed by China to utilize excess capital and strengthen commercial and diplomatic interests abroad. As of 2018, China’s total installed hydropower capacity was approximately 350 million kilowatts. China’s hydropower companies occupied over 70 percent of the overseas hydropower construction market, especially in large and medium-sized markets, and participated in the construction of over 320 hydropower projects globally. 

Two Dams: an Overview 

The Myitsone Dam in Myanmar 

The Myitsone Dam is part of the Confluence Region Hydropower Project (CRHP), including seven dams with a total installed capacity of 20,000 MW. CRHP accounts for 41 percent of the total power capacity proposed by a 30-year strategic plan. The Myanmar government scheduled the project in 2001 and negotiated with Japanese and European companies for investment, both of which turned down the offer. Eventually, the state-owned China Power Investment Corporation (CPI Group) agreed to invest in the project through a joint venture formed with the Burmese government and the Asia World Group, the largest conglomerate in the country. The majority of the total construction cost – US$3.6 billion – would be covered by the CPI Group through the joint venture. Once the project was completed, the Burmese government would retain 10 percent of the electricity generated while China would receive the remaining 90 percent. It would also charge a tax on electricity exported to China. The Burmese government would gain total ownership over the project after a fifty-year period.

The project sparked concerns across the country due to its perceived environmental damages and social disruption. Notably, the dam was expected to flood 447 square kilometers, displacing forty-seven villages near the construction site and about 11,800 local people. Some also argued that the dam would alter the hydrological characteristics of the river, affecting soil fertility downstream, and destroying cultural and historical sites important for the local Kachin minority. Since the onset of dam construction, political activists both within the country and overseas organized protests, calling for the suspension of the project. In September 2011, facing pressures from the public, Burmese President Thein Sein suspended the project. Although China recalled its construction teams and equipment in 2013, it has tried fruitlessly to negotiate with Myanmar to restart the construction since then.

The Lower Sesan 2 Dam in Cambodia 

The Lower Sesan 2 Dam is located on the Sesan River, a major tributary of the Mekong River in northeastern Cambodia. Similar to the Myitsone Dam project, the dam reservoir was expected to flood numerous villages upstream, causing widespread concerns about its social and environmental impacts. In October 2014, eighteen organizations issued a joint statement, condemning the negative impacts of project construction on downstream biodiversity. Some villagers of Kbal Romeas and Srekor in the reservoir area also expressed their opposition to the resettlement plan and refused to relocate, believing that the plan did not take their concerns and demands into consideration. The project was nonetheless carried out smoothly and was completed in November 2017. One of the largest hydroelectric dams in Asia, the project was constructed by a joint venture of the Royal Group of Cambodia and China’s Hydrolancang International Energy, a subsidiary of central state-owned Huaneng Group, with its electricity sold to the state-owned utility company, Electricité du Cambodge (“Cambodia’s Biggest Hydropower Dam”). The project would provide Cambodia with an estimated 2 billion kilowatt-hours of clean energy each year, and the total installed capacity would account for around one-fifth of Cambodia’s national power generation. After its completion, Chinese state media hailed the project as a “crown jewel” of the China-Cambodia relationship in the Belt and Road Initiative and a model for future energy cooperation.

Two Dams: A Comparison

Similarities 

The two projects discussed share a number of similarities that make them suitable for cross-case analysis. First, both are state-sponsored projects located in low-income countries in the Indochinese Peninsula, which have huge market potential for hydropower due to their underdevelopment and abundant water resources. The ASEAN Connectivity 2025 report points out that Myanmar’s potential hydropower capacity is 108 GW, but only 2.6 percent of the nation’s hydropower potential has been fulfilled as of 2017. Similarly, less than 20 percent of Cambodia’s hydropower potential has been developed. 

Second, Cambodia and Myanmar have both maintained strong and stable diplomatic ties with China for decades. Myanmar was the first non-Communist country to recognize the People’s Republic of China after its founding in 1949. After Myanmar crushed the pro-democracy protests in 1988 – which led to increasing western condemnation and pressures – the country sought to further deepen its relations with China. Currently, China is Myanmar’s most important supplier of military aid and maintains extensive strategic and military cooperation with it. Likewise, China-Cambodia relations were also strengthened considerably after the Cambodian-Vietnamese war. Since 1997, China has been cultivating strong ties with Hun Sen, the current Cambodian Prime Minister. For China, Cambodia serves as a regional balance to Vietnam’s influence. For Hun Sen, China’s aid and investment have been crucial for the nation hamstrung by international isolation after the 1997 coup that brought him to power. China is also one of Cambodia’s largest creditors and trading partners. Both Myanmar and Cambodia have expressed support of China’s “counter-terrorism” efforts in Xinjiang and China’s passage of the National Security Law in Hong Kong.

Third, both projects were controversial from the very beginning, as they involved the displacement of local residents and environmental degradation, thus sparking widespread domestic and international concerns. Finally, both projects were spearheaded by large power generation SOEs under the direct control of the State-owned Assets Supervision and Administration Commission (SASAC), which demonstrates the high-profile of the two projects and their importance to Chinese central leadership.

Differences

The two projects have two key differences that may explain why the Cambodian project is a much more successful showpiece of China’s overseas infrastructure project than the one in Myanmar. First, Myanmar was less politically stable than Cambodia over the last two decades. This instability can be explained by at least two factors, including domestic ethnic tensions and political reforms to transform from a military-led government to a civilian liberal democracy.

From 1988 to 2011, Myanmar was run by the State Peace and Development Council, a military junta consisting of senior members of the Burmese Armed Forces. Lacking representation and public support, the regime was accused of extensive repression of political activities and human rights abuses. In 2003, Myanmar rolled out plans for a transition to democracy, and held a nation-wide election to replace the military government in 2010. Since then, the military-backed Union Solidarity and Development Party, under the leadership of Thein Sein, embarked on a gradual reform toward liberal democracy and reconciliation. During this period, the country was also plagued by deep-rooted ethnic conflicts: the Kachin state, where the dam was planned for construction, has experienced clashes between insurgents of the Kachin people with government forces since the 1960s.

Myanmar’s domestic political dynamic affected reaction to the Myitsone project. As the dam is located in the heartland of Kachin state, it was caught up in heated Kachin-Burmese tensions. For many Kachin people in the region, the project site is a cultural symbol important to their identity: local legends see Myitsone as the imperial residence of the Father Dragon and his two sons, Hkrai Nawng and Hkrai Gam. The Kachin people were further angered by the fact that the project would inundate many temples, churches, and other Kachin cultural heritage sites. The Kachin Independence Army, a non-governmental armed force long calling for the independence of the Kachin state, was also involved in the issue: the Myitsone Hydropower Station is within the control area of the Kachin Independence Organization (KIO), which means that the area inundated by the dam would impair KIO’s strategic position in the region. In March 2011, KIO wrote to the Chinese President Hu Jintao, saying that KIO had notified the military government that KIO should not be held responsible if a civil war erupted due to the Myitsone hydropower project. In fact, skirmishes had already broken out in the area when the construction began. On April 17, 2010, three bombs set by the Kachin army exploded close to the site of the dam, reportedly killing four Chinese workers.

Meanwhile, the ongoing political reform in Myanmar pressured the administration to be more responsive to public concerns over ethnic tensions, environment, and resident displacement surrounding the dam. A year after the 2010 election, which marked the gradual end to the Burmese military junta rule, the newly elected Burmese president Thein Sein issued a letter to the parliament, emphasizing that his government “is elected by the people and should respect the people’s will”, and that the “construction of Myitsone Dam will be suspended in the time of our government”. Regarded as a rare case in which the Burmese government had listened to the people in face of public opposition, the message was interpreted as a gesture to show Myanmar’s sincerity to further promote democratization and was well received by the international community. 

In comparison, Cambodia did not experience the level of  political turmoil and democratic transition as seen in Myanmar. First, ethnic tensions are less striking in Cambodia, and Cambodian minorities lack organized armed forces similar to the Kachin Independence Army in Myanmar. The country did not see boiling domestic ethnic tensions on the verge of a civil war. Interest groups did not frame the dam construction issue into a topic of ethnic and cultural clashes like political activists did in Myanmar. Although environmental concerns were raised, they never escalated into widespread public opposition.

Second, Hun Sen has served as Cambodian Prime Minister since 1985, the longest-serving head of the government in the country. Although the Cambodian regime has been accused of political repression and human right abuses like Myanmar, Hun Sen and his Cambodian People’s Party (CPP) have maintained unchallengeable control of both the executive and the legislative branch. In fact, many observers have commented that the Cambodian regime has gradually become more authoritarian. In 2017, Cambodia’s Supreme Court, an ally of the ruling CPP, dissolved the opposition Cambodia National Rescue Party, further consolidating Hun Sen’s grip on the Cambodian regime. As Hun Sen consolidates his political power and pushes the country towards authoritarianism, the Cambodian government lacks strong incentives to listen to public concerns like the elected Burmese government did. Also, the dissolution of the Burmese military junta, which approved the project, allowed more leeway for the succeeding elected administration to halt the dam construction. The stability of Hun Sen’s rule nonetheless meant that his administration needed to honor signed contracts and drafted construction plans.

The third and final difference between the two projects is the allocation of generated power after completion. Power generation from Sesan 2 project is for Cambodia’s domestic use only. Considering that about 15 percent of Cambodia’s electricity must still be purchased from neighboring countries in 2018, the Sesan 2 project would bring significant economic benefits by closing domestic energy supply gaps. Consequently, the Cambodian government and the public are better motivated to promote this project from an economic perspective. In contrast, the Myitsone project would only deliver 10 percent of its electric power to Myanmar after its completion. Even though 10 percent power output from the dam can still ease the energy  shortfall in Myanmar, it is still seen as a “foreign” project built mainly for the purpose of China’s domestic energy consumption.

Two Dams: A Conclusion

While the Lower Sesan 2 Dam is now seen as an epitome of Sino-Cambodian friendship, the outlook of the abruptly suspended Myitsone Project seems dim in the short term. I conclude that several key factors accounting for the different outcomes of the Myitsone Dam and the Lower Sesan 2 Dam project lie within the recipient countries themselves. 

First, Myanmar was hamstrung by ethnic tensions andis on a path towards democratization. Facing public concerns, the government chose to suspend the project, sending a signal to the international community that its dedication to political reforms was sincere. The dissolution of the military junta, with which China signed the contract for the Myitsone project, also left the succeeding elected government less burden to honor the agreement made. In comparison, the Cambodian government is relatively stable. Domestic ethnic tensions are not as drastic as in Myanmar.  the government is not as responsive to public concerns as the Burmese one since it has no will to further its political reforms. Its regime stability also implies that the administration needed to uphold the earlier agreement made by itself. 

Second, the Myitsone project would deliver most of its power output to China, while the Sesan project is for domestic use only. Electricity supply is imperative for Cambodia, which has suffered from an energy supply shortfall for a long time. From an economic perspective, the Sesan project is a more attractive proposal for the Cambodian government and the public alike.

Admittedly, these factors may not sufficiently account for all the differences in these two cases. It is certainly reasonable that China may have learned lessons from the failed Myitsone project while lobbying Cambodian officials. Chinese officials also likely paid more attention to PR management throughout the construction process. Furthermore, the Sesan 2 project is part of the ambitious Belt & Road Initiative, which means that the central government in Beijing might have more resolution to directly manage and track this project. However, domestic issues of recipient countries remain the most direct causes of the difference in project outcomes. The recent turmoil in Myanmar adds another layer of uncertainty surrounding the Myitsone project, as it is unclear whether the junta would use the halted project as a bargaining chip to seek Chinese support against the backdrop of increasing pressure from the west. 

To conclude, the juxtaposition of these two dams demonstrates the crucial role that domestic attitude plays in foreign energy investment and serves as a lesson for China’s future BRI projects. The Chinese government and SOEs should dedicate more care and attention to domestic political institutions, public opinion, and cultural factors within the recipient countries. 

Qihan Zou is a first-year M.A. student at Johns Hopkins SAIS concentrating in International Political Economy and Energy, Resources &Environment. Prior to attending SAIS, he interned at the United Nations in Bangkok and worked at the Deutsche Bank in its Hong Kong office. Qihan received his B.A. from the Johns Hopkins University, majoring in International Studies and Economics. He is broadly interested in renewable energy, climate change, foreign policy, and their interactions.

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