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70 Maung Zarni

the objective nature of those who hold power, their self-perception, their

power instruments, and their historical narratives can do serious disservice

to the country’s oppressed public. A flawed peacemaking process can be

worse than no peacemaking at all.Second, practical reflections among reconcilers is one way to address this

intellectual deficit. Current analytical paradigms and historical understand-

ings might be subjected to a collective critique by bringing together a group

of local and external reconcilers, in a mentally and physically safe setting,

with a group of expert mediators whose views of Myanmar and her con-

flicts have not been tainted by firsthand involvement. The current domi-

nant state-centered narrative, coming from both the regime and the United

Nations system, needs to be held up to serious intellectual and empiricalscrutiny. The colonial, hegemonic, racist, class-based, sexist, and predatory

nature of the military-ruled state in Myanmar needs to scrutinized. The state

is the elephant in the room. Regrettably, most peacemakers for various rea-

sons have chosen not to discuss this beast.

Third, an in-depth comparative study of similar conflicts might yield use-

ful results. With massive investment by the regime in weaponization of the

already thoroughly militarized state, Myanmar today is moving away from,

not toward, a democratic, peaceful political system. It is deepening its exis-

tence as a state in which national security is coterminous with survival of

the leadership and the regime, with no space to develop along the lines, for

example, of the East Asian Tigers. Conflict-soaked Myanmar could usefully

be examined against two alternative sets of states: developmentally success-

ful states in East Asia, such as Taiwan and South Korea, and developmen-

tally failed states, such as Iran and North Korea. Additionally, a comparative

study could be done between Myanmar and the Southeast Asian states that

have moved or are moving away from past militaristic, authoritarian rule,

such as post-Marcos Philippines, post-Suharto Indonesia, post-MahathirMalaysia, and pseudo-communist Vietnam.

Finally, the wisdom of intellectual activism, if peacemaking or reconcilia-

tion can be called that, needs to be made accessible to the people of Myanmar

in their local languages. Without an enlightened population, peace deals at

the elite level, while valuable and welcome, will remain elite power-sharing

deals. They will not transform society to accept peace as an intrinsic value. A

systematic translation initiative devoted to peacemaking and conflict analy-

ses could be developed and funded.The elite-driven peacemaking of the past sixty years has failed in part

because elite peacemakers are confronted with two major obstacles. First, if



An Inside View of Reconciliation 71

they move too far from the collective position of the community they rep-

resent, the community grows suspicious of their mission, and they stand

accused of being co-opted by the regime in exchange for personal gain. Sec-

ond, some peacemakers, though their efforts are grounded in humanitarianand development experience, do not have a grassroots base. While Myan-

mar is not the West Bank and her communities are not up in arms against

one another, the long-standing elite-level conflicts, both between and within

ethnic groups, have a deeply negative social and psychological impact at the

grassroots level across the country. There is no silver bullet for Myanmar’s

conflicts; a spiritual, intellectual, and political transformation of society is

the only ultimate solution. Elite-level peacemaking can help trigger this pro-

cess, but ultimately it is human beings, not states or multinational corpo-rations or multilateral institutions, that make peace. Power does not make

peace; it only manipulates, exploits, deceives, controls, and dominates.

An initiative that brings people into the peace process needs to do seven

things: address prejudicial ethnic, class, and gender attitudes and norms;

revise official historical narratives; enable communities and individuals to

negotiate peace in their localities; empower people by providing them with

productive and sustainable livelihood opportunities; transform people into

independent thinkers who are less susceptible to ideological manipulation;

give communities greater control over natural resources and the environ-

ment in their localities; and enhance individual and communal capabili-

ties to resist the centralizing power of a modern nation-state that serves the

largely imperial world order.

Global Dimensions of Peace and Reconciliation

The turmoil in Myanmar is taking place not simply within the country’s

domestic landscape. Those who claim that the domestic landscape mustchange before peace or prosperity can be established are categorically flawed

in their understanding of the nature of both the conflicts within the country

and the external world order. The turmoil is taking place within a process

of regressive globalization, a negative form of globalization that strengthens

systems of political oppression and economic exploitation at the expense of

peace, stability, and citizen rights in natural resource–rich and geopolitically

strategic countries. The Myanmar people are not merely up against their

country’s unsavory rulers. Their struggle for peace is in fact against someof the world’s most powerful ideological, economic, political, and military

forces. For example, their oppressor enjoys reliable support from China and



72 Maung Zarni

Russia, the two members of the UN Security Council that have used their

veto to block efforts to push for reconciliation in Myanmar.

The global resource extraction industries are deepening their ties with

the Myanmar military regime. Among the global exploiters of Myanmar’snatural resources are Total of France, Chevron of the United States, Ivanhoe

Mines of Canada, China National Petroleum Corporation, Daewoo Interna-

tional of South Korea, the Oil and Natural Gas Corporation of India, Petro-

nas of Malaysia, and Thailand’s PTT Exploration and Production. They all

fill the military regime’s coffers and in effect fund the SPDC’s oppression.

Until the external equation changes fundamentally, reconciliation in Myan-

mar, not just human rights and human dignity, will remain a victim of glo-

balization. The military regime is simply the local proxy in a process that isseeing the country’s economic sovereignty slip away.

Notes

1. I use Myanmar as the country’s name only to be consistent with other chap-

ters in this book. In 1989 the ruling military junta changed the country’s name from

Burma to Myanmar , arguing that the old name, the Anglicized word for Bama,

which refers specifically to the country’s dominant Buddhist tribe, did not reflectthe country’s ethnic diversity. Besides the dictatorial manner in which the generals

changed the country’s name, the new name, Myanmar, is linguistically incorrect,

because the word Myanmar has no meaning without the suffix Lu Myo, to denote

the Bama ethnicity, or Tai or Pyi, to refer to the polity (which belongs to the Bama).

Nor does it remotely capture the country’s ethnic diversity, as the generals claim.

Finally, the correct transliteration of the new name from written Burmese to English

is “Myanma”—that is, without the final consonant r .

2. My conversations and meetings have ranged across civil society opinion mak-

ers, business elites, and high-ranking military officers. Key regime officers includeLieutenant General Myint Swe (widely known as Senior General Than Shwe’s pet

and the first chief of the newly created Military Affairs and Security Department,

the military intelligence unit), former brigadier general Than Tun (head of coun-

terintelligence under Khin Nyunt and chief regime liaison with Aung San Suu Kyi),

former colonel Hla Min (spokesperson of the SPDC), and former colonel Tin Oo

(the right-hand man and first personal security officer of Khin Nyunt, not the NLD

chairman and former defense minister Tin Oo). Opposition leaders whom I met

and held discussions with include the late P’doh Saw Ba Thin, chair of the Karen

National Union; P’doh Mhan Sha La Phan, the KNU general secretary, who wasassassinated in the Thai-Burmese border town of Mae Sot in 2008; other top KNU

leaders (KNU defense chief General Tamala Paw, Major Tu Tu Lei, and P’doh Kwe

Htoo); and high-ranking brigade commanders and strategic advisers in the Karen




National Union in the low-intensity war zone of Kawthoolei or Karen state. I also

had substantive conversations with various local and foreign mediators who have

made attempts at peacemaking in Burma. Among these individuals were the Rev-

erend Saboi Jum (a Kachin Baptist pastor), Dr. Simon Thar (a Karen neurosurgeonand politician), and Dr. Christian Peter Hauswedell, who headed the Asia Division at

the German foreign ministry.

3. Maung Aung Myo, “The Future of the Tatmadaw’s Political Role in Myan-

mar: Prospects and Problems,” unpublished manuscript.

4. For the most recent discussion of the military’s refusal to address histori-

cal grievances across the board and its consequences, see my forthcoming essay,

“Bottom-Up Pursuit of Justice in Burma,” in Global Civil Society 2011: Globality and

the Absence of Justice, ed. Martin Albrow and Hakan Seckinelgin (Basingstoke, U.K.:

Palgrave-Macmillan, forthcoming).5. Aung San, Aung San Suu Kyi’s martyred father, and his closet nationalist col-

leagues, who founded the Burma Independence Army or the Tatmadaw’s nucleus,

were all leftist radicals and agitators who admired Stalin’s Soviet Union. This helps

explain the fact that military commanders were answerable to underground nation-

alist agitators who served as political commissioners during the Tatmadaw’s first

battle—the revolt against its Japanese masters.

6. In-depth interviews across Southeast Asia with a number of Tatmadaw defec-

tors, both officers and other ranks, between January and June 2010.

7. See Maung Aung Myo, “Future of the Tatmadaw’s Political Role in Myan-mar,” p. 35. Maung Aung Myo’s observation has been repeatedly confirmed by a half

dozen army officers of varying ranks who deserted the Tatmadaw as late as spring

2010, during the time of my interviews with them.

8. Personal communication with Arthur Win (not his real name), a Rangoon-

based local writer and political analyst, Bangkok, January 2010.

9. The treaty was known as the Panglong Agreement, named for a small ethnic

Shan town where it was signed by a group of Bama and other ethnic leaders. Despite

the treaty’s central original flaw—that it does not fully protect the interests and con-

cerns of its diverse ethnic population—its modern-day adherents continue to cher-ish its federalist ”spirit” while acknowledging its limitations and hence the need for

significant modifications.

10. This observation is based on my personal communication outside Myanmar

with a diverse group of local businesspeople over the past five years.

11. See my analysis of Burma’s intra- and inter-group ethnic politics in “Confronting

the Demons,” June 19, 2010 (www.irrawaddy.org/opinion_story.php?art_id=17011).

12. The team members were drawn from different ideological and organizational

backgrounds. They were Aung Saw Oo, Naw May Oo, Aung Thu Nyein, and Min

Zaw Oo.13. We were not the only team of dissidents who were assigned to seek West-

ern support for renewed armed resistance. Concurrently, KNU leader General

Saw Bo Mya also sent his son, Colonel Nada Mya, to Western capitals on a similar






confirming that we had pressed for a meeting with Aung San Suu Kyi but that his

side, that is, the prime minister’s office, decided against it, citing the tense political

atmosphere.

20. At the Bi-annual Conference of the Burma Studies at Northern Illinois Uni-versity, DeKalb, Illinois, in October 2004, Matthew Daley remarked publicly that

there was nothing personal about the U.S. State Department’s support for my trip

and went on to justify such support on grounds that the U.S. government’s Burma

policy is to encourage and support dialogue among Burmese citizens in political

conflicts.

21. Besides our track-two dissident team, the intelligence camp also made contact

with several other influential dissidents such as Harn Yawnghwe, then top opposi-

tion lobbyist based in Brussels, and Dr. Thaung Htun, a New York–based representa-

tive of the Burmese exile government headed by Aung San Suu Kyi’s first cousin, Dr.Sein Win. However, no follow-up activity was taken by either side. Personal com-

munications with Harn Yawnghwe and Dr. Thaung Htun, November 2006 and June

2010, respectively.

22. Even if the regime were to allow him into the country, Fassino is not believed

to be the right man to advance the European Union’s unspoken Myanmar policy

objective of high-level dialogue with the generals. Personal communications with

both European Commission officials in charge of Burma and Southeast Asia and

ambassadors to Burma from key EU countries, 2008–10.

23. Personal communications with Thai security analysts at Chulalongkorn Uni-versity, Bangkok, as well as with the Tatmadaw defectors in two Southeast Asian

capitals, 2010.

24. In May 2006 I served as a facilitator and interpreter for a meeting in Rangoon

between Professor Johan Galtung and a senior military official in the Military and

Security Affairs Department. The department chief and his deputies wanted me to

assure them that Galtung came to see them because he wanted to befriend the mili-

tary government.

25. In June 2010 a senior Chinese scholar and administrator from China’s

National Academy of Social Sciences told me about his experience interacting withMyanmar academics, who are also civil servants. According to him, at the scholarly

exchange forum held in Rangoon in 2008—and initiated and funded by a German

political foundation—the academics, handpicked by the Myanmar regime, explained

to foreign visitors that Aung San Suu Kyi was a major obstacle to the Myanmar mili-

tary government’s desire for wanted peace and reconciliation because she continued

to insist on transfer of power on the basis of the NLD’s election victory two decades

ago, a verifiably incorrect assertion. During my two-and-a-half-hour meeting with

them in Rangoon in May 2004, even Khin Nyunt’s deputies, who were relatively

open minded compared with the officers who replaced them, were more keen onheaping blame on Aung San Suu Kyi for the country’s political stalemate than on

jointly exploring potential solutions to break the political deadlock.



76 Maung Zarni

26. These reports have culminated in the Harvard Law School’s May 2009 report

“Crimes in Burma,” a powerful indictment of the regime’s atrocities both in areas

under its direct rule and in the country’s armed conflict zones. Crimes in Burma,

report by the International Human Rights Clinic at Harvard Law School, 2009 (www.law.harvard.edu/programs/hrp/documents/Crimes-in-Burma.pdf [July 2010]).

27. In one of my meetings with Lieutenant-General Myint Swe, then head of mili-

tary affairs and security, he told me directly that he was observing sabbath for the day

despite his busy schedule and indicated that his bosses and senior colleagues were

also doing the same. He even exhorted me to go and pay homage at the Shwedagon

pagoda after the late afternoon meeting to build up my karma.

28. Charles Tilly, “War Making and State Making as Organized Crime,” in Bring-

ing the State Back In, ed. Peter Evans, Dietrich Reuschemeyer, and Theda Skocpol

(Cambridge: Cambridge University Press, 1985), pp. 169–91.29. Maung Aung Myo, “The Future of the Tatmadaw’s Political Role in Myanmar:

Prospects and Problems,” p. 39.



77

4

david dapice

Recapitalizing the Rural Economy

In January 2009 I met with groups of farmers from areas just north

of Mandalay down to areas in the Ayeyarwady Delta that were still recover-

ing from the devastation caused by Cyclone Nargis in May 2008. I was part

of an assessment team facilitated by International Development Enterprises

Myanmar, a nongovernmental organization focused on social entrepreneur-

ship. We were able to meet with many farmers, usually without any officials

present, so they were able to speak freely about the challenges they faced.

This chapter does not recount in detail the findings of our team, which

were delivered to International Development Enterprises and the Myanmar

government.1 Suffice it to say that we found many farmers, even those with

considerable land holdings, wanting to borrow at 10 percent a month inter-

est and unable to do so. Virtually all families we talked to were deeply in debt.

They had great trouble financing inputs for rice and other crops. To save

labor they were broadcasting rice seed instead of transplanting, even though

broadcasting results in lower yields than transplanting. Farmers were also

using much less fertilizer than they would have if credit had been available.Even pulses, legumes, and crops other than rice, one of the great recent

successes of agriculture in Myanmar, had been hit by collapsing prices.2 It

was reported that a group of well-connected traders in Yangon had prom-

ised high prices to local buyers and farmers but asked them to provide credit

by deferring payment. Their attempt to corner the market evidently failed,

and they were unable to pay after they had taken the product, leaving many

of the local buyers without capital. Reports conflict over how well the situ-

ation with these major cash crops is evolving, but the main food product ofMyanmar has always been rice, and this chapter focuses on rice, even though

pulses are often an important cash crop for rice farmers.





Recapitalizing the Rural Economy 79

the country’s ancient milling equipment, mixed varieties, poor drying, and

unreliable export reputation. But part of the story is high costs of transport,

shipping, and trading. At one time, the problem could be blamed on regional

military commanders who, being responsible for their troops, were taxingfarmers by buying paddy at low prices. This practice is less common now,

but there is another kind of tax on farming going on—effectively, not offi-

cially: the possibility of exporting is not really open to all. Existing require-

ments for exporting rice include a regulation that the exporter has to have

several thousand tons of rice not meant for export in a warehouse before

applying for an export license. This requirement effectively excludes many

potential exporters.

The exporters who are able to amass large stocks or get export permits arelikely to be well connected to the government. They are effectively monopo-

lists, or nearly so. They are able to offer low prices to local traders, who have

to accept what is offered and, in turn, offer even lower prices to farmers.

Even the state exporters in Vietnam offer far better prices, though their rice

is typically of better quality, reflecting more modern milling equipment and

better overall post-harvest systems. There is no equivalent in Myanmar of

BULOG, the rice logistics agency, the entity that, while not without prob-

lems, has stabilized rice prices for both consumers and farmers. Price stabili-

zation in Myanmar often uses physical restrictions on the movement of rice

rather than sales or purchases of rice or paddy. This creates enormous uncer-

tainty for traders and depresses export prices because of the uncertainty of

actually obtaining rice.

It is hard to fully communicate what years of policies like these have done

to the capital stock of the rural economy. When farmers and the rural landless

are hard pressed, they do whatever they can. They use up natural capital. They

overcut firewood, depleting forests. They overfish, depleting future catches.

They use the land too intensively, planting on steep slopes that erode, or forgoplanting crops that produce little immediate income but turn organic matter

and nitrogen back into depleted soils. Indeed, government policy has forced

farmers to plant back-to-back paddy fields, creating pest problems, reducing

soil fertility, and crowding out crops that would enrich the soil and that farm-

ers would prefer to plant. Of course, improvements to the soil are out of the

question when policy is pushing in the other direction.5 The result is that farm-

ers are slowly destroying the agro-ecological system on which they depend.

The destructive impact of Cyclone Nargis was also a result of the widespreaddeforestation of mangrove forests, a natural buffer against cyclones.

Severe underinvestment in physical capital such as roads, production

equipment, or processing equipment (for example, rice mills) is part of the



80 David Dapice

problem. Fuel is also very expensive. We visited one rice mill using a boiler

from the early twentieth century to generate electricity from rice husks. No

reliable central electricity was available—and this was in a city. Other rice

mills were powered by nineteenth-century steam engines. These systems,though ingenious, are not likely to compete effectively with the Thai or Viet-

namese equipment, which is run off of a central power grid. The amount

of irrigated land has increased, driven largely by government investments.

However, the effectively watered area of these projects declines over time

as irrigation system maintenance is neglected. Actually, data on the acreage

planted or harvested, as well as on production, are of uncertain quality. Nev-

ertheless, it is abundantly clear that the entire rural economy has undergone

many years of massive disinvestment.While the production situation is lamentable, malnutrition is likely to

have the most lasting impact on the future growth of the Myanmar economy

and the welfare of its population. Recent household surveys measuring mal-

nutrition suffer from the same problems as rice production surveys. Per-

sonal communications with some involved with these surveys suggest that

the results reported are too optimistic by a substantial margin. An objective

nutrition survey of children is badly needed.6 If our own observations are

representative, there is already a very serious problem.7 Children who are

poorly nourished do not learn well and also have much higher mortality

rates. Quite aside from the quality of schools, unless there is a substantial

improvement in food intake, it will be difficult to produce a generation of

workers suited to any but the most basic tasks.

The January 2009 visit was only to central lowland Myanmar, not to any

of the ethnic minority areas. It has been reported that in many of those areas

conditions are worse than in areas with a Burman majority. In particular,

the seventeen-year flowering of bamboo in some regions has led to severe rat

infestations, and there has also been a severe drought in other states. This isnot precise information but suggests that the problems for all of Myanmar

may be even greater than for the areas visited. If so, Myanmar faces a vast leg-

acy of problems to be dealt with on top of the substantial current problems.

Production and incomes depend on land, labor, capital, and technology.

It is hard to identify any of these inputs in which the trend in recent years

has not been stagnation or worse in Myanmar’s rural economy. There is no

doubt that farmers will respond with alacrity when prices favor their efforts,

as proven by the great rise in pulse production earlier in the decade. Butfarmers need inputs, and these are hard to come by. Official lending through

the Myanmar Agricultural Development Bank in 2009 covered less than 10




percent of the requirement for rice production inputs. If commercial credit

is not available for other inputs, many farmers will use fewer inputs because

informal credit is very expensive, if available at all.

The government has lately been making large grants of land to companiesthat promise to grow rice. While this amounts to tens of thousands or even

(in the aggregate) hundreds of thousands of acres, it is not yet a substantial

fraction of the total rice area.8 Past experiments with rice estates in other

Southeast Asian nations have not had promising results. It is troubling that

a major response to concerns about food security or production has been

to promote the development of a parallel system of production instead of

improving conditions for ordinary farmers. It is unlikely that industrial rice

estates will ultimately prove to be competitive.On the other hand, a new program has been announced recently to pro-

vide credit for rice production and, to some extent, sesame and pulses. Rice

millers and traders with ties to the government are being urged to lend at 2

percent a month to farmers with holdings of more than five acres who are

also in a good financial condition. The amount lent is well over the seven

dollars an acre provided by the Myanmar Agricultural Development Bank,

but the total credit provided by all companies is less than $20 million, while

billions of dollars are needed and only the best-situated farmers get credit.

These agricultural development companies, formed by Yangon tycoons and

local millers and traders, are a small step forward, but most farmers will still

have to rely almost entirely on informal credit, when it is available.9 Some

estimates are that only 5–10 percent of farmers will meet these two condi-

tions (enough land and financially stability), so most will remain without

access to credit on sustainable terms.

Capable microfinance programs are operating in various townships and

villages now, and it is reasonable to ask whether they could be part of a solu-

tion to the severe credit shortage that was observed. A careful answer wouldtake more work, but horseback speculation is that in the near future, at least,

they can play only a small part. The required aggregate credit is on the order

of $2 billion, and individual loans would be thousands of dollars in many

cases. Operating at this scale is well beyond the current capacity of micro-

credit programs. Opening hundreds of offices and training thousands of per-

sonnel is a work of many years, even if such a program were well resourced.

This does not mean that microcredit cannot play a useful role, but unless

these schemes can attract large amounts of deposits and control risk whileexpanding rapidly, it is likely that other institutions will play a larger role in

any near-term solution.



82 David Dapice

Some urban banks have expressed interest in agricultural lending on

behalf of the government, with a 100 percent guarantee if the loans go bad.

Past experience suggests that this is not a sound approach. When nothing is

at risk, the tendency is to lend freely and not carefully, and bad debts oftensoar. It would be better to work out a risk-sharing arrangement and allow

interest rates high enough to cover the higher costs of operating in rural

areas and normal default rates. No urban bank is positioned to operate in

many rural areas, so expansion would be a slow process, though perhaps not

so slow as with microfinance.

A third possibility is to reinvent the government-owned Myanmar Agri-

cultural Development Bank by separating it from the Ministry of Agriculture

and allowing it to gather deposits at realistic interest rates and make loans atabout 3 percent a month, but only to those likely to repay. This would require

new rules, salaries, training, and accounting. It would be a large undertaking

and could not happen immediately, but such restructuring could follow the

example of Bank Rakyat Indonesia, which was in a similar situation in the

early 1980s and became a profitable lender to millions of rural borrowers at

market rates.

If the 2010 elections and other developments create an opening for interna-

tional aid to the rural sector on a substantial scale, the first thing to do (if the

situation has not improved by then) is to provide credit to farmers. This alone

would lead to higher production and increased employment of rural labor.

The interest rate should be 2 percent a month in real terms—enough to cover

the costs of administration, bad loans, and the interest on deposits. If farmers

are prepared to borrow at 10 percent a month but cannot, then a loan at 3

percent a month, the nominal rate including inflation, will be very welcome.

Ensuring the viability of lenders for future cycles of lending is more important

than reducing the interest rate from levels in the range of 3–5 percent a month.

Because the amount of aid is unlikely to equal the demand for credit at 3 per-cent a month, aid donors and the government might work out joint funding

of banks in a position to provide agricultural credit. Financial reserves exist

within Myanmar that could be used for this purpose.

Labor-intensive construction projects could repair rural roads, build

small bridges, clean out irrigation ditches, and construct rural markets or

water storage ponds. Local governments could be tasked with identifying

and bidding out such projects. While supervision and guidelines would be

needed to prevent “leakages” (that is, corrupt or wasteful use of funds), thedouble injection of income to the landless and capital to the villages would

be an essential step in getting many households back on their feet. Pilot pro-

grams with village grants of up to $5,000 have had initially promising results.




But simply producing more rice or other crops will not help much if they

fetch little when sold. A comprehensive push is needed to reduce monopoly

power among exporters, lower port and internal transport costs, improve

milling and drying, and get farmers a fair price (similar to prices in neigh-boring nations) for their production. These steps could yield a large leap in

household income, even if physical output is stable.

While the residue of competence in the bureaucracy is fast fading, it

would be wise to build on it. Training programs for irrigation engineers, rice

specialists, banking officers, and many others should be part of any large-

scale aid effort.10 Getting learning materials in Burmese and teaching teach-

ers who would lecture in Burmese (and some minority languages) would be

a wise early step. If the past disinvestment in human skills and knowledge isnot soon reversed, Myanmar will fall even further behind as the rest of the

world moves on.

As long as world prices for raw materials stay relatively strong, Myanmar

will have vital sources of income while its rural economy catches up with

the rest of the region. Natural gas revenues could be used to recapitalize the

rural sector and its population, should the priorities of the government shift

in that direction. But it is hard to see how adequate progress can be made

without some external assistance. Support for significant levels of assistance

will depend in part on perceptions in aid-giving nations that their aid funds

will be well used. Changing perceptions will be a tough sell during the cur-

rent era of fiscal retrenchment if foreign aid, never very popular, is seen to

be going to a nation that has a poor reputation. While the donor countries

in the Organization for Economic Cooperation and Development may need

a more flexible policy toward Myanmar, there will also need to be some flex-

ibility from the Myanmar side if a rapprochement is to occur.

Given current and likely future circumstances, it is probably desirable

for donor agencies initially to provide grants rather than loans, even if theamounts transferred are much smaller. There are many moving parts to real-

istic cost recovery, and the mass debt forgiveness of very-low-interest loans

from multilateral institutions to African countries is a warning that large

amounts of lending in weak administrative environments is not promising.

Building up absorptive capacity can set the table for lending, but grants are

a better first step. In any case, the problem is first one of allocation and sec-

ondarily one of resources. Until a better use of domestic resources is appar-

ent, it would be unwise to add debt.The severity of the problems described in this chapter may or may not

create domestic political pressures to push the Myanmar government

toward closer relations with countries beyond China and, perhaps, India.



84 David Dapice

But unless significant policy attention, administrative resources, and fund-

ing are focused on the rural sector, it will continue to lag badly and be a drag

on the Myanmar ship of state and its economy. A fuller understanding of the

sources of national security and unity and a decent concern for the broaderwelfare of the population would in itself create more pressure to deal with

the rural decapitalization problem. It remains to be seen whether history will

continue its old pattern or a new one will emerge, perhaps encouraged by

any changes that 2010 might bring.

Notes

1. The full report, Assessment of the Myanmar Agricultural Economy, is availablefrom the Ash Center for Democratic Governance and Innovation, March 2009 (www.

ash.harvard.edu/Home/Research-Publications/Publications/Occasional-Papers).

2. Production of sesame, pigeon peas, chickpeas, groundnuts, and dry beans

rose from 3.36 million tons in 2002 to 4.12 million tons in 2007, according to the

UN’s Food and Agricultural Organization. This is a 4.1 percent annual growth rate.

Exports of grams (dal) and other pulses rose from 831,000 tons in 2000–01 to 1.14

million tons in 2007–08, a growth rate of 4.6 percent. This supports the rate of

reported production growth.

3. The UN Food and Agricultural Organization estimates 32 million to 33 mil-lion tons of paddy and, at a 56 percent milling rate, 18 million tons of rice. Rice

consumption is said to be about 200 kilograms per capita per year in the food balance

sheet but 160 kilograms per capita in food surveys from a few years ago. Population

in 2007 was estimated to be 57.5 million.

4. The fraction of landless laborers varies from a quarter to more than half of

the population, depending on region and village, but many farmers with very small

holdings are facing similar problems since they cannot support themselves with such

limited farmland at their disposal. At least half of rural families depend on wage labor

for their livelihood.5. Official data show a 30 percent increase in rice yield from 2000 to 2007, but

this may be as illusory as the production estimates. Farmers’ reported yields depend

mainly on weather, irrigation, and fertilizer. The U.S. Department of Agriculture

reports fluctuations but a stable long-term trend in Myanmar rice yields from 1988

to 2008.

6. UNICEF, in cooperation with the Myanmar government, completed a nutri-

tion survey in 2008–09, but the results are not yet available. Many months of process-

ing will be required to analyze the results for the 8,000 households surveyed.

7. I have served on both national and international committees concerned withnutrition surveillance.

8. Official data report paddy area sown is 8 million hectares, equivalent to about

20 million acres.




9. Each of the twenty-nine agricultural development companies operates in one

township and has a leading firm that makes large loans, providing capital; smaller

amounts are added by township millers and traders. However, the capital of the lead-

ing firm is guaranteed by the millers or traders who lend it out. The 2 percent amonth interest rate is too low to attract much capital or cover the expenses of lend-

ing to risky smaller farmers, but it is higher than the controlled urban lending rate of

about 1.5 percent a month. There is an understanding that those who participate in

these agricultural development companies will have access to export quota, and this

will help defray the expenses of lending.

10. Of course, some efforts along these lines have been made in the past, but they

are considerably fewer than are needed.



86

Boom on the Way from

Ruili to Mandalay

xiaolin guo

5

Despite the artificial boundary lines and modern infrastructure that

set present-day Myanmar and China apart, trade across the historical fron-

tiers dominated by local forces in the absence of central control has shown

no fundamental change over time. After decades of civil war and class strug-

gle impeding economic development in the two countries, market activities

and cross-border trade resumed in the 1990s, benefiting local communities

on the border and beyond. Cross-border trade today continues to be an indi-

cator of harmony as well as tension in bilateral relations.

As much as economic prosperity and political stability are mutually rein-

forcing, one is by no means a guarantee for the other. The cross-border trade

described in this chapter underscores an imbalance between the two coun-

tries in economic strength and an uneven political development with regard

to bureaucratic capacity and central policymaking toward ethnic minorities

on the periphery. A major challenge to the government of Myanmar that

aspires to consolidate its control over the country’s historical frontier areas is

to balance economic development and political integration. To be sure, theongoing cross-border trade can assist as well as upset the desired process.1

Historical Context

Legend has it that once upon a time, the king of Bagan, Anawrahta, led his

men in tens of millions on a mission to obtain a Buddha’s tooth relic from

the Utibwa of the Tarop country.2 The legendary Tarop country would have

been the Dali kingdom (937–1253), although the mission from Bagan is notmentioned in Chinese records.3 By the time Bagan was overrun by the Mon-

gol army, Dali had already been captured by Kublai Khan and subsequently



Boom on the Way from Ruili to Mandalay 87

became the thirteenth province of the empire ruled by the dynasty under

the Chinese name Yuan (1271–1368). The province was given the name

Yunnan—“south of the clouds”—which conveys a sense of remoteness in

relationship to the center.Political integration of this newly conquered frontier was facilitated by a

special administrative device, the court-appointed aboriginal chieftainship,

which was duly adopted by the succeeding Ming and Qing governments.

Inevitably, from time to time there emerged overlapping claims by Beijing

and Mandalay primarily over the native Dai-Shan inhabited territories.

When the Konbang dynasty sought to expand its influence eastward into the

Qing borderlands in the mid-eighteenth century, China retaliated. During

the Burma Campaigns (1765–69), the Qing army—Han soldiers and Man-chu cavalry—sustained heavy losses, not the least to tropical diseases and the

unfamiliar climate. In the end, the Qing court imposed sanctions on trade,

adversely affecting not only the livelihood of local residents but also the cof-

fers of local officials. Smuggling continued, nonetheless.4

Mechanisms of Border Development

The People’s Republic of China and its predecessor, the Republic of China

(1912–49), inherited from the Qing dynasty a historical frontier inhabited by

ethnically diverse peoples, as did the independent Union of Burma from its

British colonial rulers.5 Good neighborly relations facilitated the demarca-

tion of boundaries between the two countries.6 Across these artificial bound-

ary lines, the peoples of the intermingling communities—the Dai, Jingpo,

Lisu, De’aung, Bulang, Wa, Lahu, as well as the Han—found themselves

overnight becoming, technically, citizens of separate nation-states. On the

Chinese side, nation building proceeded with incorporation of ethnic elites

into the new government, in tandem with a series of socialist reforms thatplaced a specific emphasis on development.7

By contrast, the political process in postindependence Burma was inter-

rupted at the outset by a civil war in which the population in the border

areas played a large part. Chinese Communist Party support for the Com-

munist Party of Burma in the 1960s, enlisting various ethnic minorities in

the border communities, pushed bilateral relations to their lowest point.8

After the Chinese Communist Party cut its ties with the Communist Party

of Burma in the 1980s, former military supply routes came to serve a boom-ing cross-border economy. The last two decades have seen life in the border

communities transformed, which would have been inconceivable without



88 Xiaolin Guo

significant, albeit quite distinct, political developments on the two sides of

the border.

Yunnan province had long been administratively integrated with the rest

of China by the time the People’s Republic of China was founded in 1949. Aperipheral province, whose ethnic minorities make up a third of its 40 mil-

lion-plus population, Yunnan in its economic development enjoys preferen-

tial treatment from the central government in the form of fiscal arrangements

that have at different times included a range of revenue-sharing devices and

in the form of financial subsidies in support of public spending and projects

of economic construction and social relief.9 The fiscal system and its reforms

at the national level have had a decisive impact on the pace and direction of

economic development in this southwestern province. Equally important isthe local strategy of drawing attention and investment from Beijing by mak-

ing the economic development of Yunnan a national priority.10

Like other landlocked provinces, Yunnan experienced a slow start in

the early period of economic reform, owing to its inferior economic infra-

structure and a central policy favoring foreign trade in the costal regions.

Significant signs of an economic breakthrough in Yunnan emerged in the

mid-1990s, following two major developments at the national level: the fiscal

reform implemented in 1994 to divide revenue and expenditure responsi-

bilities between the central and local governments and a policy shift to redi-

rect the central government’s investments to China’s less developed western

region (of which Yunnan is a part).11 Turning its geography and multiethnic

population to its advantage, Yunnan set out on a development course to

build a great province of ethnic cultures, the center of which was tourism.

As reforms deepened, this provincial development strategy came to include

an even more ambitious design to build a major gateway to Southeast Asia,

seeking ultimately to become a future hub of commerce and trade between

coastal China and Southeast Asia and beyond.The same period saw the political landscape shifting in Myanmar. After

the 1990 elections in which the National League for Democracy won a

majority in parliament, the country found itself still under military rule.

Faced with domestic challenges on all fronts as well as international isola-

tion, the ruling State Law and Order Restoration Council/State Peace and

Development Council (SLORC/SPDC) made tactical policy alterations to

achieve national reconciliation. Following the disintegration of the Com-

munist Party of Burma in 1989, the military government embarked on along-overdue process of negotiating ceasefire agreements with ethnic armed

forces across its border regions.12




On the economic front, the government’s control of certain areas of trade

was gradually relaxed to allow diversification of economy and generate des-

perately needed revenue. Availing themselves of the peace and of local con-

nections, the ethnic leaders in the border communities went into business,trading with and drawing investment from Yunnan. A moderate degree of sta-

bility in the east and northeast of Myanmar, which had for decades remained

impenetrable owing to widespread antigovernment insurgencies and perpet-

ual local competition for dominance, now made it feasible for the SPDC to

introduce and implement its own seven-step roadmap to democracy.

The China Factor

The ethnic armed forces that have reached ceasefire agreements with the

SLORC/SPDC are primarily based along the border with China. Thus it is

doubtful that political stability and an ensuing economic boom in this area can

be viable without a degree of cooperation from the Chinese side. This may have

inadvertently provided some international observers with grounds to call on

the Chinese government to take the lead in efforts to break the political dead-

lock inside Myanmar. The Chinese government’s consistent position vis-à-vis

Myanmar as an immediate neighbor, seemingly at odds with that of the West-

ern powers, has only served to draw more media attention amid growing inter-

national frustration over the apparent failure of the existing sanctions policy.

Reflecting on the situation, Chinese academic and policy circles have debated

among themselves China’s standing in international affairs.13 Ultimately, they

conclude, what China can do is no more than what Asian democracies such

as Singapore, Thailand, and India—with whom Myanmar has amicable rela-

tions—are prepared to do in their individual capacities, rhetoric aside.14

Because China is a major economic powerhouse and regional rising

power, however, its economic interest in Myanmar has, over the years, beensubject to intense international scrutiny. The deal made by China National

Petroleum Corporation with Myanmar’s Ministry of Energy in 2009 to

build crude oil and natural gas pipelines from the west coast of Myanmar

to Kunming by way of Ruili came to highlight for Western observers the

Chinese strategic interest in maintaining good relations with Myanmar, in

addition to a long-standing concern for border security.15 At the conclusion

of his trip to Myanmar in August 2009, U.S. senator Jim Webb published a

statement in which he asserted that sanctions by Western governments hadallowed China “to dramatically increase its economic and political influence

in Myanmar, furthering a dangerous strategic imbalance in the region.”16



90 Xiaolin Guo

The growing Chinese commercial influence in Myanmar, he warned, could

easily lead to a military presence. The awareness of, and to some extent the

emphasis on, the strategic interests of China and those of other world powers

has provided the momentum for reviews of policy toward Myanmar, espe-cially in the United States, as a way to overcome the apparent moral dilemma

confronting politicians who call for the lifting of sanctions imposed on a

regime once officially labeled as an outpost of tyranny.

The smart U.S. policy toward Myanmar today seeks to engage the govern-

ment in Naypyidaw. Weeks after the August 2009 visit by Senator Webb, the

State Department’s assistant secretary for East Asian and Pacific Affairs, Kurt

Campbell, visited Myanmar and held high-level talks with its government.

A few days later, in mid-November, President Obama addressed the leadersof all ten ASEAN countries, including the prime minister of Myanmar, on

the occasion of the Asia-Pacific Economic Cooperation summit. The new

U.S. policy toward Myanmar puts a specific emphasis on deepening ties with

Southeast Asia, a region perceived to have come within the sphere of China’s

influence in the past decade. To what extent future international involve-

ment from outside the region may have an impact on the existing pattern

of economic development (and bilateral relations) is, for the time being, an

open question. Any comprehensive assessment would require factoring in

ongoing economic activities across the historical frontiers.

Cross-Border Trade

Myanmar is endowed with rich natural resources, and a large proportion of

its population works in the agriculture sector. Fertile land and a tropical cli-

mate provide favorable growing conditions for a great variety of crops, with

harvests up to three times a year. The self-sufficient lifestyle of the ordinary

people has been essential for Myanmar’s military rule to survive more than adecade of economic sanctions imposed by the United States and the European

Union, with or without support from China and other neighboring countries.

On the other hand, trade with China and other countries in the region has

enabled Myanmar to obtain consumer goods that it cannot produce domes-

tically, and growing trade has eased revenue constraints on the military gov-

ernment. Indeed, the period in which international sanctions intensified saw

a boom in cross-border trade not just with China but also with other coun-

tries in the region. A recent estimate shows that goods exported from Myan-mar to its neighbors accounted for two-thirds of the total value of Myanmar

exports in fiscal year 2007–08.17




Characteristic of cross-border trade is a lack of regulation, evident on both

sides of the border. Some preliminary research on the Myanmar side has

identified informal practice as common in trade with its neighbors, namely,

China, Thailand, India, Bangladesh, and Laos. The pattern of exploiting legalloopholes is said to be of long standing and locally accepted; reasons for the

prevalence of such practice are many, but most relate to circumvention of

lengthy licensing processes and restrictions on export and import goods and,

not the least, tax evasion. In this environment of cross-border trade, brokers

with connections to outlets of goods in demand and to markets understand-

ably play a key role. Needless to say, local contacts are indispensable. The

value of undocumented goods traded across the land border is, therefore,

considered many times the value recorded in official statistics.18

Cross-border trade, by China’s definition, is a component of foreign

trade that includes state-to-state trade by air and sea, settled in U.S. dollars

or euros; trade across land borders, settled in local currencies; and trade in

goods of necessity between villagers of border communities.19 Yunnan shares

with Myanmar a 2,000-kilometer border, along which are six prefectures;

three of these are autonomous and linked to ethnic minorities: Nujiang

(the Lisu), Dehong (the Dai-Jingpo), and Xishuangbanna (the Dai). Some

twenty officially designated land ports in Yunnan are currently in opera-

tion, of which a dozen or so are national level and the rest provincial, mostly

along the border with Myanmar. Up to 60 percent of Sino-Burmese trade is

channeled through Yunnan province, and exports and imports to and from

Myanmar constitute 80 percent of the foreign trade in Dehong Dai-Jingpo

autonomous prefecture. Ruili is the most important and busiest of all land

ports in Yunnan and one of the four (two national and two provincial) ports

in Dehong prefecture.

Ruili Taking Off

Named after the river separating Yunnan from upper Shan state, Ruili is a

county-level city under the jurisdiction of Dehong Dai-Jingpo autonomous

prefecture. It has a population of more than 160,000, about half of which

work in agriculture. The ethnic Dai, Jingpo, De’aung, Lisu, and Ah-chang

together make up 46 percent of the local population.

The boom in Ruili has largely resulted from gemstone trade with Myan-

mar, which took off after the mid-1990s. The self-designated title Jewel Cityof the East is designed to attract investors as well as tourists. Despite its

decline since 2004 as the result of a ban by the government of Myanmar,



92 Xiaolin Guo

jade-related businesses continue to provide jobs for some 35,000 people,

amounting to more than 40 percent of the labor force in Ruili. As many

as 80 percent of the craftsmen and dealers come from Fujian, Guangdong,

Henan, Zhejiang, Sichuan, and Hunan provinces, in addition to Hong Kongand Taiwan. Most foreign nationals come from Myanmar, Pakistan, India,

and Nepal.20

Ruili owes its economic boom largely to the intra-boundary, extra-

customs status granted by the State Council in 2000 to Jiegao, an area of

2.4 square kilometers (including water surface) located on the Myanmar

side of the Ruili River, sharing a land border with Muse. Not long ago, this

Old Town (Jiegao in the Dai language) was merely a village, and the local

residents relied on bamboo rafts for transportation. The officially registeredpopulation in Jiegao is currently 3,000 and predominantly engaged in agri-

culture; temporary residents (mostly in businesses related to cross-border

trade), however, number more than 4,000, and the population constantly

floating in and out Jiegao is estimated at 12,000.21

The Jiegao economy is divided into four zones—commerce, manufac-

turing, storage and logistics, and tourism—all tax exempt. Here, for exam-

ple, gemstones imported from Myanmar are processed and motorcycles

exported to Myanmar are assembled. The main tourist attractions are, first

and foremost, jewelry shops, followed by village sightseeing and ethnic cui-

sine. Linked today by a bridge to the inland city of Ruili, Jiegao is a point

where flows of goods meet and depart.

The total value of foreign trade carried out in Ruili in 2007 was more

than 5 billion yuan; exports represented over two-thirds of the total. The

major commodities imported from Myanmar are agricultural products (for

example, rubber, pulses, and other oil-bearing crops) and forestry products,

followed by minerals and fishery products. Exports to Myanmar range from

textiles, machinery, and building materials to electric appliances, householdnecessities, and foodstuffs. Goods passing through customs are documented,

which by no means suggests that all documented goods are actually exported

or imported.22 Similarly, not all imported and exported goods are docu-

mented by customs. Smuggling, like corruption, is a slippery concept, and

the specific local circumstances make it even harder to define.

The growth in cross-border trade during the past decade has stimulated

Ruili’s urbanization. Property development is booming, and roads in and

around the city are constantly being upgraded. The major investor in con-struction and infrastructure is not the local government, which relies on the

higher levels of government for much of its spending, but the private sector.23




A prominent local entrepreneur is the boss of the Jingcheng Group,

owner of a landmark four-star hotel in the city center (in business since

2004), a hot-springs holiday resort (currently under construction) on the

outskirts of the city, and—allegedly—as much as 10 percent of the land inRuili city. A native Jingpo-Kachin from a mountainous village in a neighbor-

ing county, he made his first fortune from timber trade with his kinsmen on

the Myanmar side of the border in the 1980s. Like many others, he went into

the gemstone trade in the mid-1990s, and his business has since diversified

to include land development, infrastructure construction, and a wide range

of operations. His massive wealth has turned the Jingpo tycoon into a local

patron, bigger than the city government itself. The recent inauguration of

his private bank, specializing in microcredit, marked yet another businesssuccess, allowing him to collect additional social and political capital. Busi-

ness empires like his (and he is by no means alone) could not have been built

without tacit support from the local government.

In one decade, Ruili has been transformed from an agricultural backwater

to a commercial center, a place where “money talks” to such an extent that the

normal bureaucratic clout is irrelevant. Here one is expected to either make

a fortune or spend a fortune. In the eyes of the local officials (among whom

there is no shortage of Communist Party members), personae gratae are those

who are loaded and spare no expense in the local jewelry shops. Paradoxical

to the apparent wealth is a steady decline in the revenue from cross-border

trade going to the prefecture government coffers.24 This situation reflects, in

addition to the general passivity of local officialdom, imbalanced develop-

ment between the eastern and western regions of China. According to the

local officials, more than 90 percent of the goods exported from Dehong

are produced in Guangdong and Fujian provinces; Dehong (and Yunnan,

for that matter) basically provides a land corridor for those goods to pass

through, thus allowing the business enterprises from the coastal provincesto take the lion’s share of profits.25 Looking on the bright side of all this,

however, Dehong, being a land corridor, benefits from growth in the service

sector as well as from tourism; in so doing, as some officials say to console

themselves, Dehong assists “economic growth in other Chinese provinces,”

which adds to the “political achievements” of the local government.

The Road to Mandalay

From Jiegao, goods exported to Myanmar enter Muse. The main transfer

point between Muse and the interior cities is Lashio (184 kilometers from



94 Xiaolin Guo

Jiegao), a district-level government seat in the Shan state and a strategic mili-

tary outpost since independence. Under British rule, this peripheral town

boomed with the development of silver mines. In the 1990s it experienced

a second boom as trade between China and Myanmar normalized. As far asinfrastructure is concerned, Lashio, unlike Ruili, is mostly rural. Large num-

bers of local residents make a living, directly or indirectly, from cross-border

trade. Some are internal migrants from other parts of Myanmar, whereas

others come from across the borders to the north and east. Life here is mul-

tiethnic. Burmese is the lingua franca, though the Yunnan dialect (and the

Dai) by no means sounds alien. Temples dot the hills and streets, and many

are brand new, Chinese and Shan styles blending together. On the outskirts

of the town, there are three brand-new institutions of higher learning.26

Roadconditions in and out of Lashio are probably the best in the country.

Lashio is not a tourist destination, and local accommodations serve pri-

marily the simple needs of business travelers. The Lashio Motel is conve-

niently located and the most adequate in town, with an exterior typical of

township government guesthouses in Yunnan. The owner of the property is

the Asia World Group, a contractor reported to have built the highway from

Muse to Mandalay.27 Highland Lashio is a different world to the lowlanders

of, for instance, Mandalay. That particular reputation strikes home when

an accidental tourist like myself arrives at the checkpoint at the foot of the

mountain, where the historical frontier meets Burma proper. All vehicles

without exception are pulled over for inspection. Drug trafficking is appar-

ently far from a thing of past, and trade in prohibited goods is only too real,

as one can tell from the vigorousness of the inspectors in action.

The journey from Ruili to Mandalay is an all-day drive along a seemingly

endless winding road: three to four hours to Lashio and another five or six

hours to Mandalay. The seat of the Konbaung dynasty is today a major com-

mercial hub where wholesalers and retailers from all over Myanmar con-verge. Two adjacent multistory concrete buildings are packed with hundreds

of stalls handling everything from spices to household utensils, from fabrics

to electric appliances, and much more. Some of the goods are domestically

produced, but most are imported from neighboring countries. During busi-

ness hours, the streets are jammed with pickup trucks, tractors, and cars, and

the sidewalks crammed with parked motorcycles, carts, and pedestrians. The

gemstone market is separately located on an open ground, surrounded by

dozens of tool shops. An ordinary scene in a local commercial bank is strik-ing: stacks of 1,000-kyat notes more than half a meter high spread out on a

surface the size of ping-pong table encircled by counters, behind which half




a dozen cashiers are feverishly counting money under the stares of queuing

customers. The volume of daily transactions is considerable.

The boom on the old Burma Road today is impressive, considering that

not long ago this rugged terrain was inundated by insurgencies and miredin poverty. However informal it may be, the cross-border trade has its own

order, which incidentally goes a long way back in history. In the past decade

or more, cross-border trade has stimulated economic development in the

local communities and also social mobility. With the flow of goods, people

move from one place to settle in another. As dealers from the Myanmar side

set up shop in Ruili and Jiegao, Yunnanese (Han, Dai, Jingpo, and others)

entrepreneurs venture to Lashio and beyond, all making a living on what

there is to offer. Whatever their ethnic background may be, once they puttheir feet down on the other side of the national border, the migrants are

identified as citizens of China or Myanmar. These national identities tend to

complicate things more than ever before, as international politics is becom-

ing increasingly intertwined with economic competition.

Chinese Presence in Myanmar

Business in Mandalay is flourishing, owing to cross-border trade. Chinese

entrepreneurs—old and new immigrants—play their part. Streets in Man-

dalay are full of signs in Chinese—on petrol stations, jewelry stores, restau-

rants, and temples. One street called the “ethnic market” opens after six in

the evening and is packed with stalls selling vegetables (big in the Chinese

diet, say the local residents). Around the corner, there is a Yunnanese food

quarter, featuring “cross-bridge rice noodles,” chickpea jelly, and other spe-

cialties. Menus are written in both Chinese and Burmese; customers are

mixed. Chinese cuisine is as popular as the kung fu movies. DVDs and VCDs

(video CDs) originally in Chinese with Burmese subtitles are available on thestreet at the price of twenty for a U.S. dollar. In Mandalay, it is not unusual to

find Burmese youth speaking some Chinese (usually a mixture of Cantonese

picked up from kung fu movies and the Yunnan dialect from local shopkeep-

ers). Chinese language schools are reportedly attractive to young men and

women in Mandalay, who are eager to become competitive in business.

Chinese temples are conspicuous, as they tend to be spacious and bear

Chinese characters all over their surface. In addition to a venue of worship,

a Chinese temple often functions as a meeting place for fellow townsmen. Inthe absence of an official census, estimating the size of the Chinese popula-

tion in Myanmar is very much guesswork. Some put the number of legal



96 Xiaolin Guo

Chinese immigrants registered with the government at around 300,000, and

illegal Chinese immigrants at as many as 2 million.28 In Mandalay, Yunna-

nese-Chinese are estimated to make up 20 percent of the local population,

whereas in Lashio the share is as high as 50 percent.29 The early generationsof Chinese immigrants have been largely assimilated, in the sense that Bur-

mese is their first language, and many are naturalized Burmese citizens.30

Anti-Chinese sentiment, although often publicly denied, has been a per-

sistent part of ethnic conflict in Myanmar. The riots against the Chinese-

speaking population that broke out in the streets of Yangon in the sum-

mer of 1967 nearly severed diplomatic relations between the two countries.

Today, Chinese descendants continue to be subject to discrimination, not

least in education and employment. This reality makes the growing Chinesepresence in cities like Mandalay ever more sensitive.31

The Chinese immigrants are said generally to stick to their own way of

life, which seldom bothers anyone, but their business ventures are not always

appreciated. Besides, the difference between government-funded projects

and private operations is not often acknowledged. Many private entre-

preneurs from Yunnan prefer to deal with local bosses in their designated

autonomous districts, circumventing red tape and inconveniences result-

ing from the discrepancy between official and market currency exchange

rates.32 Trade of natural resources in the border regions sometimes upsets

the national government of Myanmar, which claims rights over all natural

resources within its territorial bounds. At the same time, growing awareness

of adverse environmental impacts is increasingly becoming a source of local

resentment toward foreign enterprises, especially in large cities.33 Since 2005,

reacting to complaints from Naypyidaw, Beijing has sought to tighten border

inspection, curtailing the outflow of illegal migrants and banning Chinese

illegal logging and mining activities in Myanmar. One immediate conse-

quence of this policy was the return to Yunnan of 20,000 Chinese workers.34 Such ad hoc administrative measures, however, can have only limited effect

in the face of unrelenting market forces.35

Prospects for Cross-Border Development

When the Qing government at the end of its Burma Campaigns in the 1760s

imposed a transfrontier trade embargo, the immediate victim was the local

population, which relied on trade for a living. But that was not all. Watch-ing their coffers shrink, county officials in Yunnan could hardly sit still

anymore. Someone from Gengma (the present-day Dai-Wa autonomous




county)—wearing two hats, as a Qing native official and a Burmese saw-bwa

(native chieftain)—came up with a cunning plan to trick Beijing into lifting

the trade embargo. He allegedly sent gifts to the Burmese king under a forged

letter from the Qianlong emperor; in due course, the Burmese king dispatcheda tribute mission to Beijing, and thereafter the trade routes were reopened.36

This historical anecdote illustrates the resilience of cross-border trade and

the degree to which local officials can maneuver for their own benefit, availing

themselves of their strategic geographic position. This situation continues to

challenge Naypyidaw and Beijing today. The formation of nation-states in the

twentieth century has not fundamentally altered the relationship between the

central government and the periphery; nor has the demarcation of boundar-

ies terminated the socioeconomic ties across the border. It is the same todayas yesterday: a link to national interests is a blessing for local development.

Yunnan is now envisioning itself as having been transformed over the

past two decades from China’s southwestern window to its southwestern

gateway, and an even more ambitious development is already under way.

Further attracting attention and investment from the central government,

the governor of Yunnan boasts of his plans to build the third Euro-Asia Con-

tinental Bridge, linking coastal China to the Indian Ocean and in the process

creating a new southern Silk Road.37

In this bold vision, Myanmar is going to be indispensable. Equally, con-

tinued economic development in Myanmar and to some extent political

stability in its border regions will be difficult to sustain without sufficient

goodwill from China. Two decades of ceasefires have brought a degree of

economic prosperity to the local communities along the Chinese border, in

which investments from and through Yunnan have played an essential part.

Six decades after the country gained its independence, however, the national

government of Myanmar shows only limited capacity in administering its

periphery.38 The existing ceasefire agreements are yet to be translated intoa lasting peace, and the government’s policy circumscribing the economic

rights of local authorities in the delineated autonomous districts can hardly

be conducive to political integration.

Facing the incumbent government of Myanmar and its successor after

the general elections is the daunting task of economic reform, in addition to

nation building. Without economic development, political stability may be in

jeopardy. On the other hand, economic development alone cannot solve all

political problems. Peace and prosperity on the extended historical frontiersrequire efforts from both sides of the border. In this process, cross-border

trade will continue to serve as a barometer of progress, for better or worse.



98 Xiaolin Guo

Notes

1. This paper is essentially a report on the author’s trip to Myanmar in the spring

of 2009 and fieldwork conducted later in the year in Yunnan, China. Accounts ofRuili, Lashio, and Mandalay are the author’s own observations, unless otherwise

noted.

2. Pe Maung Tin and G. H. Luce, trans., The Glass Palace Chronicle of the Kings

of Burma (Oxford University Press, 1923), pp. 80–83.

3. Mou Li and others, eds. and trans. (from the Burmese into Chinese) Liuligong

shi [The glass palace chronicle of the kings of Burma] (Beijing: Shangwu yinshuguan,

2007), editor’s note, 1:208.

4. C. Patterson Giersch, Asian Borderlands: The Transformation of Qing China’s

Yunnan Frontier (Harvard University Press, 2006), pp. 100 –07.5. At the fall of the Qing dynasty, the government of the Republic of China

(1912–49) claimed sovereignty over the territory of Qing China in its entirety,

including what historians call China proper and the former outer domains (that is,

Mongolia, Tibet, Qinghai, and Xinjiang) of the Qing Empire. These outer domains

became autonomous regions after the People’s Republic of China was founded.

6. The boundary treaty that settled all territorial disputes between the Union of

Burma and the People’s Republic of China was signed in 1960.

7. For more on the People’s Republic of China nationalities’ work as part of

nation building in relation to the Chinese Communist Party’s rhetoric of develop-ment, see Xiaolin Guo, State and Ethnicity in China’s Southwest (Leiden, Nether-

lands: Brill, 2008), pp. 5–9, 41–61.

8. This was a party-to-party rather than country-to-country relationship. For

a brief history of that period, see Xiaolin Guo, “Towards Resolution: China in the

Myanmar Issue,” Silk Road Paper (Uppsala, Sweden: Central Asia-Caucasus Insti-

tute, March 2007), pp. 37–47.

9. The preferential treatment targets Yunnan, Guizhou, and Qinghai—the three

provinces that have a large percentage of ethnic minority populations—in addition

to China’s five large ethnic minority autonomous regions, namely, Inner Mongolia,Xinjiang (Uighur), Guangxi (Zhuang), Ningxia (Hui), and Tibet. Different regions

and provinces have specific arrangements with the central government, depending

on the prevailing local conditions.

10. For an analysis of the interaction between national development plans and

local strategies in different periods of China’s economic reform, see Guo, State and

Ethnicity in China’s Southwest , pp. 98–107.

11. These mechanisms simultaneously intensified the central government’s efforts

to alleviate poverty in China’s western region.

12. For more on the ceasefire movement and the political implications, see Mar-tin Smith, State of Strife: The Dynamics of Ethnic Conflict in Burma (Washington:

East-West Center, 2007), and Mary P. Callahan, Political Authority in Burma’s Ethnic




Minority States: Devolution, Occupation, and Co-existence (Washington: East-West

Center, 2007).

13. Chenyang Li and Jianwen Qu, eds., Miandian “jiasha geming”: Qiyin, qushi,

yingxiang yu duice yantaohui lunwenji [Collected papers from the conference “Myan-mar’s ‘saffron revolution’: origin, trend, impact, and policy adjustment”] (Kunming,

China: Yunnan University Institute of Southeast Asian Studies, 2007).

14. Chenyang Li and Lye Liang Fook, “China’s Policies towards Myanmar: A Suc-

cessful Model of Dealing with the Myanmar Issue?” China: An International Journal

7, no. 2 (2009): 255–87.

15. Markets, energy supply, and access to the Indian Ocean bypassing the Straits

of Malacca are said to be China’s major concerns. David I. Steinberg, Burma/Myan-

mar: What Everyone Needs to Know (Oxford University Press, 2010), pp. 159–60.

16. Jim Webb, “We Can’t Afford to Ignore Myanmar,” New York Times, August25, 2009.

17. Winston Set Aung, “The Role of Informal Cross-Border Trades in Myanmar,”

Asia Paper (Stockholm: Institute for Security and Development Policy, September 2009).

18. Ibid.

19. The third category is officially endorsed and legal on the Chinese side of the

border (where it is known as bianmin hushi) as part of the preferential treatment

accorded to ethnic minority communities along the national border. On the Myan-

mar side of the border, the economic rights enjoyed by the autonomous districts

populated by ethnic minorities are far more restricted, and such economic activitiesmay be viewed in a very different light.

20. Ruili nianjian 2008 [Ruili yearbook 2008] (Ruili, Yunnan: Ruili Municipal

People’s Government, 2009); Liu Liu, Zhang Ying, and Li Shaoming, “Ruili, Xiangyu

haineiwai de ‘dongfang zhubaocheng’” [Ruili: The famed Jewel City of the East],

Yunnan Daily , September 24, 2009.

21. Ruili nianjian 2008, p. 109.

22. For example, goods for export that are exempt from the value-added tax—

cigarettes, among others—do find their way back to Yunnan for a huge profit.

23. Presently, the Dehong prefectural government relies on funds allocated fromthe provincial (and, by extension, central) government for up to 60 percent of its

expenditures.

24. The cross-border trade currently contributes five percent of the total revenue

of the prefecture government.

25. In addition to selling their products, exporters enjoy tax breaks granted by the

central government to encourage exportation.

26. They are Lashio University, Lashio Technological University, and the Com-

puter University of Lashio.

27. The owner of the Asia World Group is one of three Myanmar tycoons who alleg-edly have close ties with the military government and with China. Brian McCartan,

“On the March to Do Business in Myanmar,” Asia Times, August 26, 2009.



100 Xiaolin Guo

28. Steinberg, Burma/Myanmar: What Everyone Needs to Know, p. 121.

29. Ibid.

30. The Chinese-speaking population also includes those from Taiwan, who are

more culturally affiliated with Fukien-Cantonese than with Yunnanese. A furtherbreakdown of these categories presents even more difficulties.

31. For more on Chinese migrants (legal and illegal) in Myanmar, see Li and

Fook, “China’s Policies towards Myanmar,” pp. 274–76.

32. In 2009 the official foreign exchange rate between the Chinese yuan and the

Myanmar kyat was 1:8 and that between the U.S. dollar and the kyat was 1:6, whereas

the market rates were 1:200 and between 1:1,000 and 1:1,200, respectively. In part to

overcome problems caused by the discrepancy, China Construction Bank and Myan-

mar Economic Bank signed an agreement to formally settle cross-border trade in

Chinese currency starting in October 2009.33. Reportedly, university students in Yangon have taken to the streets pro-

testing against illegal timber trade. Guangsheng Lu and Chunmeng Zou, “Border

Trade between Yunnan and Myanmar: Current Situation and Significance,” paper

presented at the conference Political Development and New Challenges for Interna-

tional Relations in Southeast Asia, Yunnan University, Kunming, China, July 19–21,

2009, pp. 147–58, 155.

34. Li and Fook, “China’s Policies towards Myanmar,” p. 266. The complaint

from the Myanmar government may have been prompted by a Global Witness report

on illegal timber trade. Amy Barry and Jon Buckrell, “Dramatic Decrease in IllegalTimber Trade between Burma and China but Smuggling Continues,” press release ,

Global Witness.org, October 21, 2009.

35. According to the Global Witness report, China may be a main destination, but

not the only one, for timber smuggled out of Myanmar, and the companies involved

in the illegal timber trade include some based in the United States and the European

Union. Barry and Buckrell, “Dramatic Decrease in Illegal Timber Trade.”

36. Giersch, Asian Borderlands, pp. 107–08.

37. Zhang Yixuan, “Yunnan: Cong ‘xinanchuangkou’ dao ‘guojiamenhu’” [Yun-

nan: From “southwestern window” to “China’s gateway”], People’s Daily, overseased., June 26, 2009; Xu Yuanfeng and Zhang Yixuan, “Dichu kaifang de mingpian”

[Opening up is the policy], People’s Daily, overseas ed., June 26, 2009.

38. The so-called liberated zones are said to “have often been politically admin-

istered, with networks of schools, health clinics, and regular armies.” Smith, State of

Strife, p. 12.



101

6

michael vatikiotis

Three Scenarios for Myanmar’s Future

M yanmar’s relationship with Southeast Asia has been problematic

for most of the postcolonial era. It did not start that way. When the British

left Burma in 1949, the splendid colonial capital of Rangoon was the region’s

most developed and progressive city, a regional hub for communications,

education, and finance, and the country it represented was Southeast Asia’s

most dynamic export economy. But as the rest of Southeast Asia emerged

from the cold war and grew prosperous, Myanmar became detached and

withdrawn from the region.

With all the international concern about Myanmar’s torturous internal

political struggle, the country’s changing position in the region over time is

rarely the focus of scrutiny. But for a brief effervescence of economic reform

and openness in the early 1990s, Myanmar’s relationship with Southeast

Asia has mostly been colored by growing criticism of military rule and cross-

border fallout from the ongoing internal conflict that besets much of the

country’s hinterland. Today, even conservative states of the Association of

Southeast Asian Nations (ASEAN) like Malaysia and Singapore quietly regretthe decision to admit Myanmar as a member, and most people in the region

have given up waiting for the reclusive military regime to either relinquish

power or open up the country with gradual economic and political reform.

Without a substantial change to the internal status quo, it begins to look

like Myanmar will remain suspended between India and China, neither con-

tributing to nor benefiting from close ties with its Southeast Asian neighbors.

This chapter explores the strategic and geopolitical dynamics of Myanmar’s

relationship with Southeast Asia and attempts to project future scenariosbased on Myanmar’s possible trajectory in the next few years.



102 Michael Vatikiotis

Three Scenarios

The term Southeast Asia was coined relatively casually toward the end of

World War II to help define a theater of operations and an allied militarycommand. This Southeast Asia has always been an imprecise geographi-

cal combination of territories that carries a good deal of colonial baggage.

Myanmar’s inclusion in the entity called Southeast Asia was mostly deter-

mined by the Japanese invasion and occupation, which extended across all

of Europe’s colonial territories east of India and south and west of Japan. In

fact, Myanmar was annexed and governed by the British and became known

as part of Farther India when viewed from the colonial seat of Calcutta.

However, in its precolonial form as a kingdom, Myanmar was one of astring of states that owed loose but diligently acknowledged allegiance to

China. In this sense, precolonial Myanmar had a great deal in common with

Siam, Annam, the Malay Peninsula, and the sprinkling of princely states in

between. In terms of Myanmar’s contemporary relations with Southeast

Asia, the precolonial period is therefore of rather more importance than the

colonial one, since the memory of Burmese military aggression up and down

the mainland has helped define not just contemporary boundaries but also

perceptions of cultural affinity and enmity.

That said, Myanmar has developed in virtual isolation from the rest of

Southeast Asia for much of the past half century. From the 1960s onward,

countries like Thailand and Indonesia, together with Singapore and the

newly established Malaysia, were emerging from the early vicissitudes of

their struggles for independence and embarking on more open policies of

trade and investment, turning away from radicalism toward mainstream

pluralistic politics, initially with a firm stamp of authoritarianism. Myanmar

by contrast was moving in the opposite direction: embracing socialism and

turning inward on self-reliance and isolation as a measure of defense againstexternal enemies real and perceived. The trend continued through the early

economic boom years of the 1970s and 1980s as economic growth advanced

in ASEAN countries and they shook off the image of being poor and under-

developed. Foreign investment poured in, and stock markets in the region

boomed in the 1990s, but Myanmar’s economy trailed behind the others.

Even when Myanmar was eventually admitted to ASEAN in 1997, the con-

trasting socioeconomic indicators were shocking.

During a brief period from the late 1980s to the mid-1990s, Myanmarseemed to be limbering up to open its doors to foreign investment on a

grand scale and poised to transform itself from a largely closed economy into







Three Scenarios for Myanmar’s Future 105

government can be perpetually promised and planned for but somehow

“lost in committee” in an endless process of consultation and preparatory

work.4 However, the 2008 constitution in fact establishes a significantly dif-

ferent government structure: a presidential system supported by a bicamerallegislature and fourteen regional governments with their own military com-

mands and a degree of autonomy.

True, the army has a reserved block of seats in the new legislature, and the

army commander will exercise considerable authority through a powerful

national security council, but the new structure opens up potential space for

the kind of gradual economic openness and reform that characterized the

last decade of the authoritarian New Order regime in Indonesia.5 It is often

forgotten that the seeds of Indonesia’s democratic transition were sown inthe decade of economic growth and prosperity that preceded the 1998 fall

of Suharto. There is congruence between the economic liberalization that

started in Indonesia in the late 1980s and the gradual opening up of the polit-

ical sphere, which allowed figures such as Abdurrahman Wahid to establish

early forums advocating democratic reform. If market opening and liber-

alization start to happen in Myanmar, the economy will begin to gravitate

toward Southeast Asia and its traditional export markets. This in turn will

start to have an impact on the political landscape.

If the Indonesian experience is anything to go by, Myanmar’s military

power brokers will first be tempted to explore more economic openness

because it leads to enrichment without any significant loss of power. Tech-

nocrats will draw up reform measures that open up Myanmar’s market and

create a better climate for investment. Initially, ownership of large corpora-

tions will be concentrated in the hands of the military, as was the case in

Indonesia. But as the range and diversity of investment grow, so will the

need to take on additional shareholders from the domestic and international

business community. Myanmar will attract considerable interest from com-panies in Japan and Korea but also in countries like Singapore, Thailand,

and Malaysia, which are looking for better margins in terms of labor costs.

Much new infrastructure needs to be built in Myanmar, so a construction

boom will ensue.

In terms of developing new roads, airports, and ports, the current stra-

tegic emphasis on serving the access interests of India and China will be

tempered by the opening of more border crossings along Myanmar’s bor-

ders with its Southeast Asian neighbors, thus enhancing links with theregion, where more open trade and investment regimes will make it easier

to import and export goods. These openings will primarily help develop a




more sophisticated consumer market, which in turn will act as a stimulus

for further investment. Tourism will also receive a big boost and gener-

ate additional income for consumer spending, opening up the country to

greater scrutiny and installing modern forms of access and communication.In short, Myanmar’s economy will start to resemble that of countries like

Vietnam a decade or more ago, with the rapid influx of regional investment

in such areas as mobile communications, airport and transport services,

consumer products, and so on.

The interesting point about this scenario is that it is the one most likely to

lead to substantive political change. There are two reasons why this process

of economic growth and development more integrated with Southeast Asia

will start to impact on politics. First, Myanmar’s growing economic integra-tion with the rest of Southeast Asia will enable the movement of labor and

capital, which will accelerate demands for openness and transparency (right

now Thailand and, to a lesser extent, Malaysia and Singapore already ben-

efit from significant outflows of Myanmar labor, much of it illegal). These

demands for a more open trade and financial regime can be dealt with to

some extent, as they were in the case of Indonesia, by tailoring reforms to

satisfy the business community. From the late 1980s onward, as pressure

for political reform started to swell in Indonesia, the Suharto regime’s pol-

ished Western-trained technocrats kept external political pressure at bay by

delivering economic reforms that made investment very attractive to foreign

investors, which in turn made stability and security more important priori-

ties than social and political reform and upheaval.

What makes political change inevitable is the extent to which the ruling

elite seeks to enrich itself at the expense of the rest of the population. In the

case of Indonesia, the key to Suharto’s fall was the resentment felt by his

own supporters that he had allowed his family to acquire too much wealth at

their expense. It is highly likely, given current and traditional patterns of elitebehavior in Myanmar, that the rapid opening of the Myanmar economy will

lead to corruption on a massive scale. Of course, members of the junta are

already allegedly up to their necks in business interests with all the attendant

opportunities for enrichment. But having in this partial transition scenario a

form of government that allows some political activity—a limited degree of

space—will inevitably lead to the channeling of discontent and the manipu-

lation of corruption charges by competing political factions.

Given the greater stake the Myanmar population will have in a moreservice- and consumer-oriented economy, the likelihood of protest will also

be greater because there is more to lose. Eventually, the regime will be forced




into political reform and its leaders asked to share more power, laying the

basis for a transition to a civilian-led democracy. This process of course will

take time and could take longer in Myanmar than it did in Indonesia over the

decade from 1989 to 1999. However, technology is a great driver of change,and the mobile phone and the Internet cannot be underestimated as factors

collapsing the time frame of political change.

Simply put, this scenario suggests that while the 2010 election and subse-

quent implementation of the 2008 constitution will not bring about a signifi-

cant transformation of the political landscape and will sustain the military in

power, the inevitable economic opening to the region it allows will sow the

seeds of more profound change, just as the economic reforms that opened

up Indonesia’s economy in the 1980s and 90s helped set the stage for demo-cratic transformation.

To be sure, the process is by no means guaranteed. Vietnam has enjoyed

the fruits of economic openness for two decades and there has been virtu-

ally no political change, although communist officials have been forced to

become more transparent and accountable. But Vietnam is perhaps a special

case, a Confucian outlier with a strongly disciplined political culture rooted

in a cadre-based Communist politburo that is capable of adjustment and

renewal to avoid the impact of popular pressure for change.

Myanmar’s political culture and society more approximate the Indone-

sian context: authoritarian rule based on strong ties of patronage rooted in a

paternalistic culture. As sure as night follows day, the opening and develop-

ment of Myanmar’s economy will tempt the power holders into amassing

great wealth, and without the cultural and ideological discipline of the Viet-

namese, they will surely allow greed to blind them to the need for prudence.

State Collapse: Everything Changes

Southeast Asia has experienced the effects of failed states, mostly in the partof the region formerly known as Indochina, where the decolonization pro-

cess was prolonged and violent. The case of Cambodia is perhaps the most

important and instructive example. In the space of three decades, Cambodia

was transformed from a relatively stable monarchy through a brutal revolu-

tion that imposed a murderous totalitarian rule, to a vicious civil war, an

international recovery effort spearheaded by the United Nations, and finally

to a struggling multiparty democracy under the thumb of an authoritarian

but elected strongman. What would happen in Myanmar if the military lostpower, either through internal elite struggle or, less likely, through popular

overthrow?




An internal military power struggle is likely to see the immediate threat

of fragmentation, as the new constitution allows for the creation of powerful

military commands in the regions. This could lead to a state of civil war and

the abandonment of formal government, creating a huge threat to humansecurity. The principal outcome of the inevitable breakdown of authority

would almost certainly be some kind of attempt at international recovery,

led by the United Nations and ASEAN. This could only happen with China

and India’s blessing, but since neither power would want to see the other

gain advantage, some kind of hybrid international effort spearheaded by the

United Nations and ASEAN would most likely prevail. Given the acute sen-

sitivities in Myanmar about sovereignty, not to mention the concerns about

infringement of sovereignty among neighboring states, this internationalrecovery effort would be implemented through economic and development

aid programs under the control of the International Monetary Fund, the

World Bank, and the United Nations Development Program.

Peacekeeping and armed intervention to maintain security in highland

areas would probably be mooted but not tolerated. Unlike the case of Cam-

bodia, Myanmar’s internal strife has been marked less by violence and dis-

ruption to human security and more by accommodation and prolonged

ceasefire. It is possible that well-armed Kachin, Shan, and Wa forces in the

remote northeast of Myanmar would seek to establish independence by force

of arms, but this would not be in the interests of powerful border states such

as China. Therefore the priority will be repairing Myanmar’s neglected econ-

omy in the hope that prosperity promotes unity and reconciliation.

Although state failure and collapse would seem to invite suggestions of

further marginalization and isolation, in fact, given the formal enshrinement

of intervention based on the idea of a responsibility to protect, the oppo-

site may occur. For those looking for a precedent, the recent international

response to the devastation of Cyclone Nargis in 2008 offers a useful guide.Cyclone Nargis struck the Ayeyarwady Delta region of coastal Myan-

mar on May 2, 2008. The severe cyclone devastated the region, killing more

than 140,000 people and displacing hundreds of thousands of others in an

already impoverished region of the country. Amid the anxiety and threats

from the international community about the Myanmar government’s initial

reluctance to allow in international aid and relief for the victims of Cyclone

Nargis, ASEAN secretary-general Surin Pitsuwan stepped in with an offer

to send a less intrusive ASEAN Emergency Rapid Assessment Team. Thiswas a groundbreaking step in the sense that it put officials from the ASEAN

Secretariat on the ground in a crisis situation. This response quickly led to




the creation of a coordinating mechanism named the Tripartite Core Group

to facilitate international aid.6 The Tripartite Core Group enabled interna-

tional organizations like the World Bank to operate under a less threaten-

ing ASEAN umbrella. For the Myanmar army, which was initially resistantto the idea of an international relief effort on the ground, it soon became

apparent that by being seen to direct and channel foreign aid, it projected an

image of protecting the people. In a state of chaos following the collapse of

the centralized regime, one might imagine individual military commanders’

welcoming international relief as a way of shoring up support on the ground

in their areas.

Conclusion

Of these three scenarios for Myanmar’s future, the one most likely to hinder

the country’s engagement and integration with Southeast Asia is continuance

of the status quo. The current mix of access to lucrative primary resources,

mainly benefiting two competing regional powers, offers the sclerotic mili-

tary regime an almost perpetual source of support by playing one off against

the other. Neither China nor India is as yet sufficiently engaged with the

international community to permit universal norms of political behavior

and human security to trump narrow strategic interests.

The scenario most likely to bring about rapid change and transforma-

tion—although in quite what way remains uncertain—is a full-blown col-

lapse of the state. To be sure, the immediate aftermath of such an outcome

would be chaos that threatens the national integrity of Myanmar, but based

on recent events and given the way the world works today, the pressure for

international intervention would very soon become overwhelming. And we

must assume that neither China nor India would tolerate border instability

and insecurity for long.However, the most likely scenario to actually unfold, based on current

estimates of the situation, would seem to be the partial transition estab-

lished by the 2010 election. It is not that the election itself will create a per-

fect environment for the normalization of political life in Myanmar. The

pullout of the National League for Democracy has further delegitimized the

junta’s measured approach to political change. Moreover, the process of eco-

nomic reform and integration with the rest of the region will take some time.

Given what we know about similar situations elsewhere in Southeast Asia,two points seem clear: a political transition has rarely happened overnight,

and economic prosperity and well-being of the populace is a significant




prerequisite for stable democratic progress. For this reason, although the

process will take some time, it is probably important for the international

community to encourage rather than hinder the gradual process of transi-

tion laid out by the military, however flawed it may seem for now.One final issue in this scenario is worth noting, one that derives directly

from the theme of this paper: Myanmar’s evolving relationship with South-

east Asia. While it may be that the 2010 election and its aftermath will set

Myanmar on the path to closer integration with the region, which may help

promote progressive political change in the long run, there will be pluses and

minuses for the rest of Southeast Asia. Thailand could end up being a big

loser. Currently, Thailand benefits, much like China and India, from cheap

imports of natural gas; it also benefits significantly from the almost 3 millionMyanmar workers whose wages are kept low by their illegal status. It is not

hard to imagine a more open Myanmar economy pushing up the costs of

its primary resources and its labor and therefore affecting the costs of doing

business in Thailand. At the end of the day, despite the ASEAN rhetoric of

regional integration and inclusion, it is not only China and India that benefit

from Myanmar’s isolation.

Notes

1. Michael Vatikiotis, “Catching the Wave,” Far Eastern Economic Review 158,

no. 7 (1995): 48–52.

2. Michael von Hauff, “Economic and Social Development in Burma/Myan-

mar,” Economic Studies on Asia (Marburg, Germany: Metropolis-Verlag GmbH,

2007), 1:163–71.

3. U.S. Central Intelligence Agency, The World Factbook (www.cia.gov/library/

publications/the-world-factbook/geos/bm.html [July 2010]).

4. Michael Charney, A History of Modern Myanmar (Cambridge University

Press, 2009), p. 205.5. International Crisis Group, “Myanmar: Towards the Elections,” International

Crisis Group, Asia Report 174, August 2009 (www.crisisgroup.org/home/index.

cfm?id=6280&l=1).

6. The Tripartite Core Group was formed after the May 19, 2008, special ASEAN

foreign ministers meeting in Singapore and the May 25, 2008, ASEAN–United

Nations International Pledging Conference held in Yangon. The aim of the Tripartite

Core Group was to act as an ASEAN-led mechanism to facilitate trust, confidence,

and cooperation between Myanmar and the international community in the urgent

humanitarian relief and recovery work after Cyclone Nargis hit Myanmar on May2 and 3, 2008. See First Press Release of the Tripartite Core Group, June 28, 2008

(www.aseansec.org/21691.htm).



part

IIOutside Interests





113

7

li chenyang

The Policies of China and

India toward Myanmar

M yanmar has the same strategic importance for China and India in

both the geopolitical sense and the geoeconomic sense. After the Myanmar

military seized power in September 1988, the Chinese and Indian govern-

ments both endeavored to expand their influence in Myanmar to protect

their national interests. Their policies toward Myanmar had many simi-

larities, but there were also important differences in content and results.

This chapter compares the objectives, content, characteristics, process, and

results of the policies of China and India toward Myanmar. It assesses the

influence of China and India in Myanmar as well as the trend of their rela-

tions with Myanmar.

Objectives of China’s Policies since 1988

Myanmar has played an important role in China’s foreign policy calculations

since the People’s Republic of China was founded in 1949. China’s policy

objectives in relation to Myanmar include access to the Indian Ocean, sta-bility along the border it shares with Myanmar, energy security, economic

cooperation between the two countries, and its relations with developing

nations. These can best be understood by bearing in mind China’s foremost

desire to develop peacefully while pursuing its strategic, political, economic,

and security objectives. In other words, the objectives of China’s policies

toward Myanmar are multidimensional.1 These objectives were formed

gradually, with changes and refinements made over the years.



114 Li Chenyang

Access to the Indian Ocean

Located between China, India, and other ASEAN nations, Myanmar is Chi-

na’s best shortcut to the Indian Ocean. A core objective of China’s policy

toward Myanmar is to establish a strategic route from Yunnan province

in southwest China through Myanmar to the Indian Ocean. This route is

expected to include a comprehensive set of road, rail, and air connections as

well as water, oil, and gas pipelines; it will be crucial to the economic develop-

ment of southwestern China. According to Voon Phin Keong, the director of

the Centre of Malaysian Chinese Studies in Kuala Lumpur, “An outlet on the

Indian Ocean would add a new dimension to China’s spatial relations with

the world. It would enable China to overcome its ‘single-ocean strategy’ and

to realize what would constitute a highly significant plan for a ‘two-oceanstrategy.’”2 Many Chinese scholars and officials have urged the government

to pursue an Indian Ocean strategy and build international channels to the

Indian Ocean, but so far the Chinese government has kept quiet.3

Stability in the Sino-Myanmar Border Areas

A peaceful and stable neighborhood is essential for China’s development.

The Myanmar-China border is estimated to be 2,204 kilometers long.4 There

are more than 40,000 soldiers in relatively independent minority groupsin the north and northeast border regions of Myanmar. Moreover, serious

nontraditional security issues like smuggling, crime, illegal immigration,

environmental degradation, illegal currency circulation, and money laun-

dering exist along the border. These pose challenges to China’s efforts to

establish a stable frontier and harmonious region.

Energy Security

China became a net oil importer in 1993. Its dependence on imported oilreached 50 percent of total oil consumption in 2008, from 29 percent in

2000, and is expected to reach 60 percent by 2020.5 About 80 percent of its

imported oil passes through the Malacca Straits, and China’s oil security

would be severely threatened if the Malacca Straits were rendered impass-

able by opposing forces.6 Chinese scholars have advocated importing oil

from the Middle East and Africa by pipeline through Myanmar to south-

west China. The proven natural gas reserves in Myanmar are about 2.5 tril-

lion cubic meters, which equals China’s own proven natural gas reserves.7

On March 26, 2006, an agreement on the construction of a gas pipeline was

i d b h f Chi d M Th i f h

Documents

91 Myanmar Burma