Home MMBIZ News Salween Investors: Remember Myitsone

Salween Investors: Remember Myitsone

The companies developing contentious dams along Myanmar’s Salween River should provide communities with electricity as a way to gain a social license to operate. The dams’ developers should learn from the tribulations of the Myitsone Dam, China’s large investment project that was unexpectedly suspended for facing similar local resistance.

Myitsone’s lessons

Western media has recently alleged that a string of dams along the Salween river may destabilise ceasefires between Naypyitaw and ethnic militias. The local dissatisfaction with the dams echoes similar resistance that was faced by China’s Myitsone Dam. Myitsone was suspended in the wake of protests in 2011, stunning China, which was until then Myanmar’s preeminent foreign investor.

As was the case with Myitsone, critics complain that most of the Salween dams’ electricity will be exported outside of Myanmar. Myanmar has a 30 percent electricity access rate and projected growth in electricity demand of 13 percent per year. In this context, investors who export power to neighbouring countries can expect troubled relations with local communities.

The Chinese-Thai joint ventures building the Salween dams should improve electricity access for local communities. Doing so would assuage negative perceptions of the dams, which are being built in one of Myanmar’s most energy-impoverished regions. If increased electricity access were coupled with the provision of job opportunities and professional development, local resentment could quickly dissipate.

Improving electricity access is more easily said than done, however. As Myitsone shows, projects that improve Myanmar’s electrification are not immune to local resistance or political and financial risk. The Salween investors should study Myitsone, which offers three major lessons on how to provide electricity access in order to gain a social licence to operate.

Clearly communicate the benefits

First, the Salween investors must effectively and honestly communicate how they will improve electricity access. A common criticism of Myitsone was that 90 percent of its electricity would go to China. In fact, Myitsone representatives stated that the electricity would be delivered wherever there was market demand. This message was lost amongst criticism of Myitsone and was diluted by distrustful perceptions of Chinese companies.

There was actually a strong rationale for Myitsone to keep its electricity in Myanmar. Chinese media reports that Yunnan Province, through which Myitsone’s electricity would flow, is over capacity in terms of electricity production. There is therefore little demand for electricity in Yunnan. There is, however, demand in China’s energy-hungry coastal regions, but to reach the coast would require competing with Yunnan’s power companies. Furthermore, given the distance of the coast from Myanmar, transmission costs and losses reduce the profitability of exporting electricity there. This economic argument assumes, of course, that companies in China’s transmission sector are acting competitively.

The Myitsone consortium needed to clearly communicate the points listed above in order to explain why Myitsone’s electricity would not necessarily flow out of Myanmar. It also needed to convince Myanmar that it was being truthful. If its talk of allowing electricity to follow demand were interpreted as propaganda, community relations would worsen.

Build a grid for the electricity

A second lesson for the Salween investors from Myitsone is that besides building power plants they must also build transmission infrastructure. Myanmar’s grid is simply not up to the task of allowing electricity to flow to wherever there is market demand.

It is not clear that the electrical grid of Kachin State, where Myitsone is located, could absorb even 10 percent of Myitsone’s electricity. It is similarly uncertain if the grid could take on electricity from as maller 99MW Chibwe Nge Dam that was built to facilitate Myitsone’s construction; Chibwe Nge was eventually intended to service the provincial capital of Myitkyina.

To strengthen its relationship with local communities, the Myitsone consortium should have developed the region’s transmission infrastructure. Doing so would have ensured that electricity from the Myitsone and Chibwe Nge dams could follow demand and be absorbed by local markets.

Include local stakeholders

Myitsone’s third lesson for the Salween investors is that  they should include local communities when assessing the impacts of their projects. Electricity access alone does not ensure investors a social licence to operate. Although Myitsone would have arguably improved electricity access in Myanmar, its social and environmental impacts outweighed this benefit in the eyes of many affected communities.

Approximately 10,000 individuals were resettled to make way for Myitsone. They were supposed to receive compensation, but at least some of this was reportedly diverted. Some individuals argued that they were not consulted about the dam and that it would destroy cultural artifacts and ways of life. Ecologically, the reservoir would obliterate farmland and damage the spawning habitats of migratory fish. There were also concerns that the dam would harm agricultural flood plains downstream.

Before investing, the Myitsone consortium should have carried out social and environmental impact assessments that were fully transparent and open to participation from affected stakeholders. Employing a reputable third party would have enhanced these assessments’credibility.

Learning from the past

The Salween investors should learn from the difficulties faced by the Myitsone consortium. As Myanmar continues its political and economic transformation, investors must make efforts to maintain positive relations with local communities. Improving electricity access is one way to do this. If Salween investors choose to pursue such a community engagement approach, they should remember the lessons of Myitsone: they must effectively and honestly communicate their dams’ electrification benefits, develop transmission infrastructure, and include local communities in the dams’ development.

 

Nicholas Borroz is an independent analyst of energy geopolitics and investment strategies, specialising in energy-related infrastructure. He works for a DC-based risk consultancy and has previously worked for the US government in international affairs with a focus on development, energy and economics. You can reach him on Twitter at @NBorroz or on his blog, www.nicholasborroz.wordpress.com.

Yiyi Fan is a MA candidate in Johns Hopkins SAIS. She is a specialist in Southeast Asian Studies and focuses on Myanmar studies. Her research areas includes Myanmar’s political and economic transition, as well as China's foreign policy and investments in Myanmar. She is studying Burmese and travels to Myanmar and China frequently

The views and opinions expressed here are the authors' own and don’t necessarily reflect Myanmar Business Today’s editorial opinion.

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