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Yun Sun | Sep 26, 2019
OPINION | FRONTIER MYANMAR
Slower, smaller, cheaper: the reality of the
China-Myanmar Economic Corridor
Much has been said and written about the China-Myanmar Economic Corridor since it was formally
proposed by China in November 2017 as part of its global Belt and Road Initiative. Despite gaining
signiﬁcant international attention – and generating some uneasiness within Myanmar – the actual
approval and implementation of CMEC projects has been incremental, and at a speed far less
impressive than the narrative. As a result of friction between China’s massive ambition and
Myanmar’s moderate capability, the CMEC is unlikely to end up looking the way many people
imagine.
The CMEC is the second economic corridor China has embarked on with a single state under BRI,
after the China-Pakistan Economic Corridor, and this reﬂects its strategic importance in Beijing’s
plans. The basic design of CMEC is an upside-down “Y” shape that connects China’s Yunnan Province
with Mandalay in central Myanmar, and then stretches southeast down to Yangon and southwest to
Myanmar’s Rakhine State.
This piece was originally published in Frontier Myanmar on September 26, 2019. Read the full piece
here.
AUTHOR/EXPERT

Yun Sun
Senior Fellow and Co-
Director
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Slower, smaller, cheaper: the reality of the China-Myanmar Economic
Corridor
Slower, smaller, cheaper: the reality of the China-Myanmar Economic
Corridor

Since the launch of the CMEC, there have been almost no major infrastructure projects announced
publicly. (Steve Tickner | Frontier)
Thursday, September 26, 2019
Mail
Despite perceptions that it will bring a rush of Chinese financing for massive infrastructure
projects, implementation of the China Myanmar Economic Corridor has so far been
relatively cautious.
By YUN SUN | FRONTIER
MUCH HAS been said and written about the China-Myanmar Economic Corridor since it was formally
proposed by China in November 2017 as part of its global Belt and Road Initiative. Despite gaining
significant international attention – and generating some uneasiness within Myanmar – the actual
approval and implementation of CMEC projects has been incremental, and at a speed far less impressive
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than the narrative. As a result of friction between China’s massive ambition and Myanmar’s moderate
capability, the CMEC is unlikely to end up looking the way many people imagine.
The CMEC is the second economic corridor China has embarked on with a single state under BRI, after the
China-Pakistan Economic Corridor, and this reflects its strategic importance in Beijing’s plans. The basic
design of CMEC is an upside-down “Y” shape that connects China’s Yunnan Province with Mandalay in
central Myanmar, and then stretches southeast down to Yangon and southwest to Myanmar’s Rakhine
sState.
Slow progress, little investment
After the initial proposal was made in November 2017, a memorandum of understanding on the CMEC was
signed 10 months later, in September 2018. Two rounds of a CMEC Forum have been held, in Guangxi
Province in September 2018 and Yunnan Province in February 2019. In December 2018, the Myanmar
government established a Steering Committee for Implementation of the BRI in Myanmar led by State
Counsellor Daw Aung San Suu Kyi. During the second Belt and Road Forum in Beijing in April, Aung San
Suu Kyi allegedly signed agreements related to nine CMEC “early harvest” projects, despite reports that
China had proposed more than 30.
In comparison, the China-Pakistan Economic Corridor has marched forward at a much faster rate. Within
two years of the launch of CPEC, Chinese President Xi Jinping had visited Pakistan in 2015 and signed 51
agreements totalling more than $46 billion. As of May, half of the 22 early harvest projects under CPEC
were completed and operational, with the other half under construction, according to Chinese Ministry of
Foreign Affairs data.
In the five years since CPEC was announced, foreign direct investment to Pakistan increased by 240pc and
it has been reported that 17 CPEC projects have brought in tax revenues of US$930 million for Islamabad.
Implementation has not been completely smooth: when Pakistani Prime Minister Imran Khan came to
office in 2018 he promised a review of CPEC projects. More recently though, Khan has said that completion
of CPEC projects is his top priority.
In contrast, Xi is yet to visit Nay Pyi Taw or Yangon, and Myanmar’s investment figures show there has not
been a large influx of Chinese foreign direct investment. In the 2017-18 fiscal year, when CMEC was first
proposed, approved investment from China was $1.395 billion. However, in the following 12 months,
Chinese FDI dropped to $600 million ($304 million during the “transition” period from April 1 to September
30, 2018, and $296 million from October 1, 2018, to April 30, 2019). In the six months to April 2019, China
had 72 projects approved – the largest number of any single country – meaning the average size was just
$4 million.

The numbers would suggest that although China and Chinese companies are investing in Myanmar, the
investment strategy is geared toward smaller projects instead of the mega infrastructure projects
with which the BRI is associated. Indeed, this is something that distinguishes Myanmar from other BRI
recipient countries: since the launch of the CMEC, there have been almost no major infrastructure projects
announced publicly. They may come, but for the most part they are not here yet.
A few steps forward
The most notable project under CMEC to date has been the Muse-Mandalay railway project, a renewed
effort by China to build a standard-gauge rail line from Yunnan through Myanmar. Connecting the eastern
and western sides of Myanmar has long been a Chinese aspiration, and was a component of the Pan-Asia
railway network it proposed for mainland Southeast Asia.
Despite the enthusiasm China has expressed about the railway project for more than a decade,
implementation has not always been smooth. The previous incarnation of the Muse-Mandalay railway
project was aborted in 2014, after three years of failing to reach agreement on the size and interest rate of
loans from China. China Railway Group was only able to sign a MoU to conduct feasibility studies with
Myanmar’s Ministry of Transport and Communications in October 2018. The study was completed in April.
If the Myanmar side accepts the project is feasible, it would represent the first step towards what is likely
to be a long negotiation process over the design, implementation, financing and procurement of the
project. Unless there are some dramatic changes in approach, actual implementation of the railway
project is unlikely to transpire in the next few years.
One component of the CMEC that has made moderate progress is the three border economic cooperation
zones at Kanpiketee-Houqiao in Kachin State, and Muse-Ruili and Chinshwehaw-Mengding in northern
Shan State.
At almost $6 billion a year, the trade volume through the Muse gate is 10 times higher than that of
Chinshwehaw and 15 times bigger than that of Kanpiketee. Given the fact that Muse has been severely
impacted by conflict between ethnic armed groups and the Tatmadaw, Chinshwehaw and Kanpiketee are
expected to play a bigger role in future.
While all three gates are in areas controlled by the Myanmar government, it’s hoped that further
development in the surrounding area will have a stabilising effect over territory controlled by ethnic armed
groups. In a further boost to the Chinshwehaw zone, the Asian Development Bank in April issued a $250
million loan for development on the Chinese side of the border under the guise of the Yunnan Lincang
Border Economic Cooperation Zone Development Project.

The project bank
In January, the Myanmar government launched an online “project bank” of priority infrastructure
initiatives to streamline planning, decision-making and financing. The project bank is an initial step
towards healthier and more efficient infrastructure development in Myanmar.
By centralising infrastructure projects, it aims to facilitate inter-agency coordination and public-private
partnership. Public access to information should ensure more stringent checks on each project’s
environmental, social and governance impacts. However, during the initial stages, before all the
bureaucratic and public processes have been straightened out, it will also be time-consuming for foreign
investors. The rules set for the project bank will also apply to CMEC projects, which could well delay
implementation further.
The establishment of the project bank is at least partially the result of Myanmar’s experience with the
Kyaukphyu deep-sea port. The proposal for a port predates BRI; China’s CITIC won a tender in late 2015
with an initial proposal that included investment of $7.2 billion, with CITIC holding 85 percent. Kyaukphyu
was later rebranded a BRI and CMEC project.
Negotiations over the project have been excruciating, in large part due to Nay Pyi Taw’s concerns about
national security implications and concerns of being caught in a debt trap. After three years, the two sides
eventually agreed to downsize CITIC’s investment from $7.2 billion to $1.3 billion, with the port scaled
back accordingly from 10 to two berths.
Myanmar has said that the downsized version is only the first stage of the port, and two further stages will
be built after the first is completed and proven profitable. However, the Chinese have expressed deep
scepticism of Nay Pyi Taw’s assurances. Their belief is that a port in Kyaukphyu can only be profitable with
economies of scale, and the notion that it could be profitable with just two berths is either dishonest or
delusional.
The Chinese feel particularly betrayed by the fact that the Myanmar government turned to the United
States government for technical assistance on the downsizing of the Kyaukphyu deep-sea port. Potential
US involvement in the assessment of other CMEC projects is likely to have a negative effect on Chinese
interests. For the Chinese, Myanmar is not an easy place to invest due to complicated perceptions of
China. To add the involvement of another foreign country with a pre-existing bias towards BRI is unlikely
to make it any easier.
A model for development?

Tags:
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China
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For the Chinese, investing in Myanmar is not easy. The traditional Chinese approach to major
infrastructure projects – the provision of Chinese loans and contracts for Chinese companies – faces many
obstacles in Myanmar. These obstacles include the bureaucratic setups and public scrutiny to which all
foreign investment is subject to, as well as deeply entrenched historical factors and emotional reactions,
and long-lasting perceptions and suspicions that are unique to Chinese investment.
Contrary to the common perception that CMEC will bring in massive Chinese financing for infrastructure,
the level of investment, the lack of major projects and the incremental nature of project negotiations all
suggest that CMEC (either willingly or reluctantly for the Chinese) represents a different type of BRI
campaign – one that is based on genuine mutual consultation and Chinese adaptation.
Reining in Chinese ambitions so they align more closely with Myanmar’s more moderate aspirations and
capacity appears to be a key theme of the CMEC. Ironically, perhaps, this scaled-down version – a kind of
“BRI-lite” – may not only better serve the goals of Myanmar’s government and people, but also prove to
be a model for Chinese-funded development elsewhere.
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3. /Peace through development: China’s experiment in Myanmar

An armed Pan Say militiaman keeps watch on a bridge in Muse in Shan State, Myanmar's border town to
China. (AFP)
Tuesday, October 15, 2019
Mail
Recurring conflict and military stalemate in northern Myanmar have prompted China to
embark on a bold experiment – one with implications that Nay Pyi Taw might not yet even
comprehend.
WHEN VIEWING the domestic conflicts of a sovereign nation, China sees development and stability as two
mutually reinforcing concepts. Instead of focusing on the fair and just distribution of political and
economic rights, China prioritises making the economic pie larger so that everyone gets a bigger share.

This approach reflects China’s own experiences in strengthening political stability through economic
development. Enhanced economic performance validates the legitimacy of the state and improves
stability, which in turn creates conditions for further economic development.
This development-oriented approach towards conflict resolution has resulted in northern Myanmar’s
conflicts becoming intrinsic components of China’s ambitious Belt and Road Initiative,
The rationale
China has been formally involved in the mediation of ethnic conflicts in northern Myanmar since early
2013, when it established the office of Special Envoy for Asian Affairs. Six years of mediation in Myanmar –
during which there has been no agreement over the mechanisms and structure of the peace process, or
the distribution of political and economic power in the ethnic states – has shepherded the Chinese to a
few key conclusions.
First, the complicated history and the fundamental lack of trust between the Bamar-dominated central
government and ethnic minorities means it is not feasible to open negotiations on the most difficult
issues, particularly power distribution. In this climate of mistrust and hostility, it is unrealistic to expect
elites on both sides to make the concessions necessary for a peace deal.
Second, negotiations are elite-led and top-down. The general public on both sides are excluded and do
not share a strong economic or political incentive to buy in to or strengthen the peace process.
Third, since negotiations started at the elite level are unlikely to succeed, a possible alternative peace
strategy is a bottom-up approach focused on creating economic ties between people.
Last, but not least, is that public buy-in and economic development in areas controlled by ethnic armed
groups will diminish incentives for these groups to continue fighting, particularly given the risk of
economic disruption.
In summary, economic development and intra-Myanmar economic integration could have a stabilising
effect that mitigates military conflicts and eventually paves the way for political integration and genuine
peace.
This last point – of gradually weakening the ethnic armed groups’ willingness to fight – is particularly
important. In the Chinese perception, one of the key reasons for the determination of these groups to fight
is the protection of their economic interests, particularly those associated with natural resources. The fear
that the central government and the Tatmadaw will exploit such resources has convinced these groups
that a peace deal would eliminate their livelihood and leave little hope for their future. If alternative and

better sources of economic growth and income could be developed and solidified, they would look at the
natural resources issue in a new light.
The Chinese believe that strengthening economic growth in ethnic regions will also change the balance of
power between the ethnic groups and the Tatmadaw. In their reckoning, a key factor fuelling the conflicts
is the Myanmar military’s belief that the ethnic armed groups cannot afford sustained conflicts due to their
limited resources. However, the inconvenient truth for the Tatmadaw is that it is unable to eliminate the
ethnic armed groups on the battlefield. The military’s unrealistic expectations have created continued but
failed attempts to win the war decisively, leading to a dynamic of recurring conflict and stalemate.
One way to change this equation is through strengthening the capability of the ethnic groups and forcing
the Tatmadaw to accept the reality that it is impossible to win in the war. Only then could the political will
to negotiate emerge. The strengthening of the ethnic groups’ capability does not have to be through
military means, as economic development will enhance their comprehensive power while delivering the
stabilising effect mentioned above.
The action
The policy shift to economic development as a means of conflict resolution has been reflected over the
past year in China’s approach to northern Myanmar more broadly. The China-Myanmar Economic Corridor
and the peace process intersect on three border economic cooperation zones that have been approved,
named for the cities of Myitkyina, Ruili and Lincang. The three economic cooperation zones are centred on
individual land gates: the Houqiao-Kanpiketee crossing, between China’s Tengchong city and the Kachin
State capital Myitkyina; the Ruili-Muse gate in northern Shan State; and the Mengding-Chinshwehaw gate
close to the Wa and Kokang regions. They are also all in areas controlled by the Myanmar government.
These economic zones are focused primarily on enabling border trade, agricultural production and
infrastructure development between China and the ethnic areas in northern Myanmar. For the 5,000-acre
Myitkyina zone, the priority is agricultural production, especially rice and cattle, and some light industry.
The Lincang zone has received a US$250 million loan from Asian Development Bank primarily focused on
addressing constraints to border trade. China envisages significant benefits for Myanmar’s ethnic regions,
enabling farmers, traders and others to benefit from trading zones, logistics parks, schools, hospitals, and
technical and vocational education and training. In the Chinese calculation, the Lincang zone will serve as
a demonstration project of how peace and development can be achieved elsewhere in Shan and Kachin
states.
The reception

The ethnic groups in northern Myanmar warmly welcome the tilting of Chinese development attention to
ethnic areas and have applauded the diversification (if not reorientation) of China’s economic efforts away
from the Myanmar’s lowland areas. Ethnic armed groups in northern Myanmar have proposed that the
upside-down-Y-shaped design of the China-Myanmar Economic Corridor be revised to a rotated H (or工)
shaped plan, with the upper arm stretching along the China-Myanmar border with Kachin and Shan states
on either side, and the lower arm stretching toward Rakhine State and Yangon Region like in the original
CMEC plan. Although it has not been officially revised, the new border economic zones are a sign that
CMEC is heading in this direction.
The border economic zones will not only enhance border trade, but also turn ethnic areas into new
corridors for economic activity between China and lower Myanmar. This will strengthen the socio-
economic development of the ethnic regions and increase their importance in Myanmar’s national
economy. Perhaps more importantly, the Chinese willingness to focus on and invest in the economic
development of ethnic areas conveys a tacit but significant message of support and endorsement of the
ethnic armed groups and their rights. With the Chinese deepening their economic buy-in and embedding
their interests in the peace and stability of the ethnic regions, they will be much more likely to opposed
the Tatmadaw’s military offensives. Such expectations might be inflated, but it does not negate the fact
that China is publicly entrenching its interests in the conflict zones.
The grand development proposal also serves Chinese interests well. The military conflicts in northern
Myanmar have long hindered development like that envisaged in CMEC. The attacks in Shan State,
especially near Ruili, have severely disrupted border trade and bilateral economic activities. By bringing
ethnic regions into CMEC, all parties have a stake in safeguarding the stability of the region. If stabilisation
is achieved, one of the major obstacles to the CMEC through Myanmar will be removed.
Local governments in Yunnan province are keen to pursue opportunities arising from the Belt and Road
Initiative and have strongly advocated for the border economic zones as a part of the CMEC. Local
prefecture governments of Lincang, Tengchong, Baoshan and Ruili are playing up these economic
development plans to substantiate their ambition to become China’s regional transportation and trade
hubs for Southeast Asia, South Asia and the Indian Ocean.
So far there has not been any major reaction from the National League for Democracy government or the
Tatmadaw to China’s development plans in the ethnic regions. This is not necessarily surprising: economic
development is generally a benevolent concept and it would be politically incorrect for them to be seen to
oppose it. However, one does wonder whether Nay Pyi Taw realizes that China is abandoning its former
unofficial and secretive approach to the ethnic armed groups in northern Myanmar and is openly pursuing
economic ties that will strengthen their capabilities.

Tags:
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These development plans will tie the ethnic regions even more closely into China’s economic orbit and
institutionalise their positions in China’s regional plan. They will consolidate China’s political and security
influence over northern Myanmar, and in the Chinese design demonstrate the appeal of Chinese
investment in lowland areas such as Yangon and Mandalay. In the deepest Chinese calculations, if lowland
Myanmar cannot be completely trusted and counted on, at least China will maintain its solid grip on
upland Myanmar.
The conclusion
China is shifting its strategy towards conflict resolution in Myanmar and experimenting with a completely
different approach. The approach is embedded in the idea that economic development can have a near-
term stabilising effect, and economic integration will bear a long-term dividend in the form of
reconciliation. Compared to the elite-centred, top-down style peace negotiations, this development-
oriented approach is focused on the people and hopes to create momentum for genuine reconciliation
from the bottom-up. The shift represents China’s new strategic calculations, and reflects a consensus in
the various Chinese agencies.
Will this approach succeed? Nobody knows. After all, we are yet to see a single civil war that has been
resolved successfully through economic development and integration of different communities. The
fostering of economic growth runs the risk of emboldening the ethnic armed groups and deepening
hostility between ethnic regions and the rest of the country.
Even in China’s own case, economic integration between the mainland and Taiwan has not yet brought
the political reconciliation that Beijing desires. China’s record of economic development in ethnic minority
areas in Xinjiang and Tibet has not produced peace and stability. But given that other political and military
options have been unsuccessful, the longer approach of stabilisation through economic development may
not be the worst idea – and certainly deserves the attention of everyone with an interest in Myanmar’s
future.
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Yun Sun
1 Comment Sort by
Sai Wansai
This theoretical approach and way of looking at the conflict in Burma is
new, if not ground breaking, so it is a good read to stimulate more
thinking.
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Yun Sun is co-director of the East Asia programme and director of the China programme at the Stimson
Center, a Washington-based global security think tank, and a non-resident fellow at the Brookings
Institution.
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3. /Why China is sceptical about the peace process
Why China is sceptical about the peace process
Why China is sceptical about the peace process

United Wa State Army leader Bao Youxiang (left) and China's foreign ministry's special envoy for Asian
affairs Sun Guoxiang watch a military parade in April, to mark 30 years of a ceasefire signed with the
Myanmar military. (AFP)
Thursday, October 03, 2019
Mail
In the first of a two-part series, contributor Yun Sun examines the different approaches
China has taken to mediating in Myanmar’s armed conflicts, and why it has begun to adopt
a more limited – yet still important – role.
SINCE Myanmar's current peace process began eight years ago, ethnic reconciliation has become a
benchmark in evaluating progress of the Myanmar nation and state, alongside civil-military relations and
economic development.

China is undeniably a major stakeholder in this process. Many of Myanmar’s non-state armed groups hold
territory along or close to the 2,000-kilometre border that it shares with China, and armed conflict along
the border has the potential to undermine China’s national security. For China, this creates an impulse –
even a need – to intervene in and mediate the conflict.
Previously, the political justification for intervention in Myanmar’s conflicts had been a problem, especially
in the context of China’s principle of non-interference in other countries’ internal affairs. However, that
obstacle was removed long ago by citing the direct impact of the conflict on China’s core national
interests. When the internal affairs of Myanmar create instability and insecurity on the shared border, it
was seen as having become China’s business, reconciling the gap between the need to intervene and the
principle of non-interference.
Despite its recent active diplomacy, China has still limited its mediation role to that of a convener and a
logistical facilitator rather than an agenda-setter, a broker or an external guarantor. Its role is
characterised by a limited bottom line focused on a military ceasefire, rather than a political agreement
about the peace mechanism and a power distribution between the Bamar and the ethnic minorities. As
such, the process and formality of dialogue is more important than a substantive outcome.
Special envoy diplomacy
China's official intervention or mediation in Myanmar’s ethnic conflicts began in early 2013, when the
escalation of the Kachin conflict threatened China’s border security. Consequently, the Chinese
government appointed the first special envoy for Asian affairs, Wang Yingfan, to intervene by facilitating
dialogue in Yunnan Province between the Kachin Independence Organisation and the Myanmar central
government and military.
China’s intervention peaked after the Kokang crisis erupted in February 2015, when amid heavy fighting
the Tatmadaw shelled Chinese territory, resulting in the deaths of Chinese civilians. This greatly
aggravated China’s threat perception and even prompted a military response; in June 2015 China resorted
to live-fire drills on the border to pressure both sides of the conflict to force a ceasefire.
But the Kokang crisis and expansion of conflict into Chinese territory were also perceived as a failure of
China’s mediation and diplomacy, and ambassador Wang was soon replaced by Sun Guoxiang.
This appointment represented a new era in China’s role and approach to Myanmar’s peace process.
Ambassador Sun has adopted a far more patient and hands-on approach in mediating the conflict
between the ethnic armed organisations and the Myanmar government and military. But Sun’s approach
has also at times upset the ethnic armed groups – most notably when he called their representatives to

Yunnan, only to then force them onto a plane so they could fly down to Nay Pyi Taw to attend the second
21st Century Panglong Union Peace Conference in May 2017. His intervention came in response to State
Counsellor Daw Aung San Suu Kyi’s formal appeal for assistance to Chinese President Xi Jinping during the
Belt and Road Forum the previous month.
China’s current mediation strategy is clear. It prioritises the continuation of the peace talks between the
Federal Political Negotiation and Consultative Committee, led by the United Wa State Army, and the
Tatmadaw. However, what China prioritises most is the process, rather than the result. From the Chinese
perspective, as long as the peace dialogue continues and major armed conflict is prevented on the Chinese
border, China’s interests are protected.
Under this framework, one of the top achievements for China before the end of 2018 was the
“inclusiveness” of the peace process: the Myanmar authorities’ refusal to accept the involvement of three
groups – the Myanmar National Democratic Alliance Army, the Ta'ang National Liberation Army and the
Arakan Army – had been an obstacle to the peace process in the sense that the FPNCC had regarded the
inclusion of these groups as legitimate and their participation was a precondition for dialogue to move
forward.
Inclusiveness was finally achieved on December 12, 2018, after a meeting China orchestrated in Kunming
among the three groups, the FPNCC, and the Tatmadaw. In a statement that the MNDAA, the TNLA, and
the AA released right after the meeting, they agreed to “firstly stop military actions and to create a good
peace situation through political means beyond military means to achieve peace early”. However, this
commitment to peace rapidly crumbled three weeks later, after the AA began to launch attacks in Rakhine
and Chin states.
Moderate bottom lines and moderate roles
In the four years under ambassador Sun’s tenure so far, China has tested a range of different potential
roles for itself, including that of convener, broker, agenda-setter, dialogue facilitator and guarantor. Its
experience so far has prompted it to conclude that China’s most effective role is ensuring the continuation
of dialogue; in other words, China’s role lies in the process rather than the result.
Other than China’s bottom-line issues, such as a military ceasefire, China has stayed away from setting the
agenda, such as the conditions or processes that could lead to “disarmament, demobilisation, and
reintegration” or intervening on the issue of the UWSA’s request to be granted the status of an ethnic
state. The experiment China has conducted in the Myanmar peace process has fallen short of the use of
pressure to force either or both sides to accept a specific concrete result, let alone brokering a deal or

compromise between the Myanmar authorities and the ethnic armed groups. China has also refrained
from acting as an external guarantor of any deal that might be reached in the Myanmar peace process.
Although it would like to take credit as a mediator of the peace process, its achievements are primarily
limited as the convener of dialogue when both sides lack the momentum to continue.
The Chinese return to a more moderate approach reflects multiple considerations. First, China remains
deeply pessimistic and sceptical about the future of Myanmar’s peace process. Many, if not most in China
believe that the West has a simplistic understanding of the complexity of the reality of the ethnic and
national-identity issues in northern Myanmar. For them, the peace process – ambitious and important as it
is – is not guaranteed a successful ending, unlike what Western mediators would like to believe.
The Myanmar nation, in their view, has always been an artificial creation based on colonialism, deception
and exploitation of ethnic minorities by the majority Bamar since the Panglong Agreement signed in 1947.
Therefore, for the Chinese, the integrity of such a nation is not warranted and it may not even be just. In
this sense, China’s assessment of the endgame of the peace process is largely different from the West’s, in
that its expectations regarding the timing and the result are much lower.
China’s decreased enthusiasm in active mediation is also due to China’s moderate goals. China’s bottom-
line interest lies in a tranquil border with Myanmar, meaning no war and no conflict. As long as tensions
do not escalate into major armed conflict, China can afford for peace dialogues to continue without
substantive success (which, in the eyes of the Chinese, is unlikely in the first place). Ambassador Sun’s
efforts to keep the conversation open and to convene meetings regularly in China have been successful in
ensuring this bottom-line interest of China. Therefore, there is little motivation for China to increase
pressure on participants to push forward dialogue.
The Chinese identify major downsides if they were to play an enhanced, substantive role in the peace
process. The assertiveness of the Tatmadaw, especially in recent months, is believed to be linked to the
upcoming 2020 elections and the military’s need to defend its role in Myanmar’s domestic politics. China is
reluctant to appear to be taking sides in the elections as its top priority is to maintain good relations with
all political forces in the country. Therefore, there is real concern that a major intervention will be
immediately interpreted as China abandoning its non-interference principle, and could turn domestic
public opinion in Myanmar against it.
Facilitator, not enforcer
China is playing an active role in Myanmar’s peace process, facilitating the continuation of dialogue and
ensuring communication channels remain open regardless of the state of armed conflict. However, In the

Tags:
China
conflict
ethnic armed groups
international relations
Kokang
Sun Guoxiang
nationwide ceasefire agreement
Federal Political Negotiation and Consultative Committee
eyes of the Chinese government, it is not its role to draft a peace document, design a peace mechanism or
even set the agenda for political dialogue between the ethnic armed groups and the Myanmar government
and military. This has disappointed those who hoped that China might take on a guarantor role in respect
to agreements reached through the negotiation process. However, China doesn’t consider itself as capable
of extra-territorial jurisdiction or monitoring to adjudicate any disputes that do arise from these
agreements.
China’s experiment with conflict mediation in Myanmar should be encouraged, though, because its
presence even as a facilitator and witness carries strong weight. As a global great power, China is a major
stakeholder in many regional conflicts and should be seeking to influence them in a positive way. Its
experiences with conflict mediation in Myanmar will offer important lessons in other conflict issues where
China is and will be involved. In that sense, the baby steps in Myanmar have a long but important way to
go.
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11/20/2019 The ‘loose end’ of the peace process | Stimson Center
https://www.stimson.org/content/‘loose-end’-peace-process 1/7
DONATE
RELATED PROGRAM: CHINA
RELATED REGIONS: ASIA AND THE PACIFIC, EAST ASIA
Yun Sun | Sep 4, 2019
COMMENTARY | FRONTIER MYANMAR
The ‘loose end’ of the peace process
WITH FIGHTING in Rakhine State since January and escalating bloodshed in northern Shan State,
Myanmar is enduring a level of conflict unprecedented in recent years. This state of affairs has
further diminished the already gloomy prospect for any progress in the peace process before the
2020 elections. The peace process, with all its weaknesses and incapacity, may not be completely to
blame for the recent fighting. However, the timing, location and specific patterns of the conflicts
taking place in recent years require more analysis if a resolution is to be achieved in future.
With perhaps some minor exceptions, the most significant armed conflicts in Myanmar since 2011
have taken place between Myanmar’s military, the Tatmadaw, and the four organisations under the
Northern Alliance banner: the Kachin Independence Army, Myanmar National Democratic Alliance
Army, Ta’ang National Liberation Army and Arakan Army. Most of the fighting has taken place in
Kachin and Shan states, where there is often an overlap in territory among and between the ethnic
armed groups and the Tatmadaw.
The military alliance among the four groups is categorically distinct from the Federal Political
Negotiation and Consultative Committee, which is a political organisation and does not
automatically and directly carry military commitment to mutual defence – a point that was made
clear at the second Panghsang Summit in 2017. The KIA, as the leader of the Northern Alliance, has
been engaged in active conflict with the Tatmadaw since June 2011. Its support of the three other
organisations is easily understood – to distract and mitigate the military pressure it faces from the
Tatmadaw.
However, the actions of the MNDAA, TNLA and AA deserve more attention from a conflict resolution
perspective. This is not only because these groups have generated much, if not most, of the
bloodshed in recent years, but also because they represent the “loose end” in the peace process and
are indispensable for its success. Indeed, the United Wa State Army, which leads the FPNCC, and

several others have conditioned their participation in the peace process on the three groups also
being allowed to participate.
Understanding the behaviour of the MNDAA, TNLA and AA is key to charting a course forward for
the peace process. For several years, the three groups have coordinated military operations, and the
violence in Shan State and neighbouring Mandalay Region since August 15 is just the latest
expression of that coordination. They also share three key but special commonalities.
The first is status. None of them have been recognised officially as a legitimate, formal participant in
the peace process because they only emerged as serious players in the conflict after the peace
process started. The Myanmar government does not want to create any precedent that armed
rebellions will be rewarded with political negotiations or settlements.
The second is territory. None of them occupy territory that is officially settled, defined or recognised
by either the Myanmar authorities or other armed groups.
The third is revenue: Because of the lack of officially recognised territory or political status, none of
the three groups has defined, reliable revenue sources, other than financial assistance from KIA.
These three issues are interlinked and fundamentally shape the motivations and patterns of the
three groups’ military operations. The lack of official recognition incentivises continued fighting as
the means to earn official seats at the negotiation table. If they could be quickly and easily
eradicated by the Myanmar military, there would be no need for political dialogue with them to
begin with. To claim legitimacy and demonstrate viability and sustainability, these groups need to
establish consistent and uninterrupted control of territories as their revolutionary base.
But the occupation of certain territory is not only important in a political and a military operational
sense, it is also vital for reliable revenue creation through tax collection, mining, investment or trade.
To sustain the size of their military forces, the three organisations have to generate enough revenue
to pay their soldiers and buy their weapons. Relying completely on donations from sympathetic
ethnic armed groups or local populations will not guarantee their survival. Revenue generation is a
critical issue for these three groups precisely because they have no official status or territory.
Almost all fighting initiated by these three groups serve one or several of the three goals listed
above. One example is the TNLA’s conflict with the Restoration Council of Shan State for territory in
Shan State. The issue of revenue generation has been a particularly critical factor in the recent
years. The motivation for the MNDAA’s attack on Laukkai in the Kokang Self-Administered Zone in
March 2017 was to rob the Kokang casinos. At the time, the MNDAA was running out of financial
resources because its main Chinese donor, the Yucheng Group, was on trial in China for running a
Ponzi scheme.
On May 12, 2017, the three groups attacked a key border trade center in Muse and the main trade
corridor between China and Myanmar. The reasons for the most recent conflict are not yet exactly
clear, but some have suggested it is because of recent Tatmadaw efforts to crack down on drug
trafficking. Whether armed groups’ engagement in illicit activities for revenue is justified is a moral

question beyond the purpose of this discussion. One can only fairly say that it is an inevitable reality
on the ground.
What can be said with some conﬁdence is that Tatmadaw counterattacks and political rejection by
the Myanmar authorities only lead to a vicious circle of continued escalation and repeated
bloodshed.
As attention in the country shifts toward the 2020 elections, the peace process seems to have been
put on the backburner. The ethnic armed groups, too, have less incentive to negotiate with the
government at this time. The lack of attention and the diverted political priorities foster greater
opportunities to expand their territorial, economic and political ambitions.
The bloodshed since August 15 has come as a shock to many. However, it shouldn’t have necessarily
been a surprise because the question of how to respond to the rise of these three groups has never
been properly, let alone adequately, addressed.
AUTHOR/EXPERT
Yun Sun
Senior Fellow and Co-
Director
STIMSON ANALYSIS

STIMSON CENTER I
JUNE 2017
by Courtney Weatherby and Brian Eyler
Letters from the
MEKONGMEKONG POWER SHIFT: EMERGING TRENDS
IN THE GMS POWER SECTOR

STIMSON
1211 Connecticut Ave. NW, 8th Floor
Washington, DC 20036
Tel: 202.223.5956 | Fax: 202.238.9604
www.stimson.org
© 2017 The Stimson Center
All rights reserved. No part of this publication
may be reproduced or transmitted in any form
or by any means without prior written consent
from the Stimson Center.
Photo credits:
Asian Development Bank Flickr Account: cover and page 19
Brian Eyler: page 45
Courtney Weatherby: pages 7 and 17
General Electric: page 23
International Rivers Flick Account: page 26
Prachatai Flickr Account: page 2

STIMSON CENTER 1
CONTENTS
Executive Summary 3
A Shifting Landscape for the Power Sector in the Greater Mekong Subregion 5
GMS Power Profiles 9
Emerging Trends and Opportunities for Energy Planners 22
Renewable Energy Technologies 22
Climate Change Considerations 25
Mainland Southeast Asia’s Environmental Movement 27
Challenges to a Deeper Renewable Energy Transition in the GMS 29
Regional Energy Trade: Energy Interdependence as a Sustainable
Pathway to Energy Security 33
Regional Power Trade Modalities 39
Recommendations 43
Endnotes 47
About and Acknowledgements 56

Lower Sesan 2 Dam under construction in Cambodia.

STIMSON CENTER
Mekong Power Shift: Emerging Trends in the GMS Power Sector
3
EXECUTIVE SUMMARY
This issue brief, the fourth in Stimson’s “Letters from the Mekong” series, explores the
shifting terrain for power sector development in the Greater Mekong Subregion (GMS),
analyzing hydropower within the context of a broader range of emerging factors and
opportunities that could lead to a transformation in the way that Mekong countries ap-
proach energy security, regional electricity trade, and sustainable development. This
transition, if effectively implemented, could lead to substantive economic gains and sig-
nificantly reduce ecological, socioeconomic, and political risks in the Mekong Basin.
In the coming years, new GMS hydropower projects will be competing with ever-cheap-
er options, including both more competitive natural gas prices as well as increasingly af-
fordable and efficient solar and wind technologies. To provide perspective, in the United
States the average cost per unit for solar and wind fell 85% and 65% respectively between
2009 and 2016. Between 2015-2016 alone, the global average price of solar dropped 13%
and wind dropped 10.75%. In 2016, the record low price for solar power production was
broken three times with a solar farm in Abu Dhabi taking the record in September at US
$0.024/kwh. Prices for non-hydropower renewables are falling at a rate far faster than
anticipated.
There is growing anecdotal evidence that GMS hydropower projects currently in the pre-
feasibility study phase will be less economically competitive in the long-run. The price
point of Mekong basin hydropower is changing: while authorities in Laos and Cambodia
often suggest that hydropower is cheap at a price of US $0.06 to 0.07/kwh, the reality is
that new projects will likely be more expensive. Lower Sesan 2 in Cambodia sells at US
$0.091/kwh, and new projects in Laos around US $0.08/kwh. New projects are often
more remote and technically challenging, and therefore require additional transmission
line buildout as well as better and more expensive mitigation due to rising standards
from investors and increasing regulatory control.
Other factors suggest a coming sea change in GMS energy planning. Rising recognition
of climate change impacts, Mekong countries’ commitments under the Paris Agreement,
and rising environmental movements all pose a challenge to the status quo dominance
of coal and hydropower. The recent suspension of hydropower projects in Myanmar, coal
projects in Thailand, and nuclear projects in Vietnam are early signals that the tradition-
al approach to energy sector planning is growing riskier. The market itself is also chang-
ing as regional electricity infrastructure is slowly built out and cross-border electricity
trade increases. Myanmar and China will also likely emerge as robust net power export-
ers in the region. Myanmar has five times the hydropower potential as Laos and could
emerge as a power trade hub for both Southeast and South Asia. China’s current excess
hydropower capacity in Yunnan province is more than the combined current installed
hydropower capacity of the rest of the GMS, and China’s grid operators are looking for
ways to export this power to GMS markets.
The region can reap substantive efficiency gains from robust power trade, but export-
ing excess power capacity from Yunnan to markets in Bangkok, Ho Chi Minh City, or
Phnom Penh could also deliver sustainability benefits by reducing the need for future
dams in the Lower Mekong in the medium and long term. Additionally, non-hydropow-
er renewables can be plugged into the regional power market to tamp down excessive
power reserve requirements persistent throughout the GMS. The promotion of energy

WEATHERBY & EYLER
Letters from the Mekong
4
interdependence and GMS power trade has long been scoped by the Asian Development
Bank (ADB), which estimated in 2010 that the economic and environmental benefits of
regional energy integration would deliver savings of 19% of total energy consumption,
approximately $200bn. The savings resulting from interconnecting existing GMS power
systems alone are estimated at $14.3bn.1
This study was conducted without consideration
of the renewable energy revolution occurring today, which suggests even more savings
and efficiency gains are within reach. New innovations in high-voltage transmission
and distributed power generation could pave the way to this transition, and the ADB or
China’s new Asian Infrastructure Investment Bank could serve as catalytic actors bring
an integrated GMS power market to light.
Our team’s extensive engagement and analysis with policy-makers, project developers,
investors, academic experts, and civil society groups have revealed continuously rising
political risks and economic costs to traditional infrastructure approaches. Today, the
renewable energy transition and regional power market development are changing the
global power landscape at a rapid rate. However, few governments in the Mekong basin
are seriously considering these emerging opportunities or the ways that supply and de-
mand shifts may impact the national electricity market. National power plans continue
to be built around traditional models of point-to-point production and transmission
from large, centralized coal and hydropower projects. This cuts both ways; demand-
centers like Thailand and Vietnam fail to recognize the potential for efficiency, emis-
sions, and cost savings through increasing electricity trade. On the other side, countries
like Laos which predicate electricity sector development on their ability to export the
electricity find themselves no longer competitive against cheaper imports from China or
Myanmar or against increasingly cheap renewable energy in a diversified market where
supply outstrips demand.
There are significant opportunities for Mekong countries to leapfrog and ensure that
future energy mixes and grid operations take advantage of emerging technologies and
dynamism in the global electricity market. A transition to a more flexible approach that
incorporates emerging renewable technology and innovations in power transmission
models could produce more power with fewer and less impactful dams on a regional
scale. Overcoming structural obstacles in energy planning--including adjustments to
national legal frameworks as well as often opaque and behind-the-scenes processes for
decision-making--will take time, but it is vital that GMS countries consider first-steps
to support adoption of emerging technologies. Failing to consider these shifts now will
lock Mekong counties into a less than optimal development path that will damage food
and water security for the region and require significant adaptation costs down the road.

STIMSON CENTER
5
A SHIFTING LANDSCAPE FOR THE POWER
SECTOR IN THE GREATER MEKONG SUBREGION
Energy supply and demand is a moving target in most of the fast-developing economies
in the Greater Mekong Subregion (GMS), an area formed of the Mekong Basin countries
of Cambodia, Laos, Myanmar, Thailand, Vietnam, and China’s Yunnan and Guangxi
provinces. This dynamism requires updating power plans on a semi-regular basis to
consider how to respond to changes in government priorities, market shifts, and the rate
and location of demand growth. All GMS countries, with the exception of Laos, have
conducted formal review of their power development plans in recent years. Thailand
released a new Power Development Plan in 2015 with plans for updates again in 2017-
2018. Vietnam revised its Power Development Plan VII in 2016. Cambodia’s Ministry
of Mines and Energy aims to formally approve an updated Master Energy Plan in early
2017. Myanmar released a draft Energy Master Plan in December 2015 which is continu-
ing to undergo updates and revisions. China has most recently updated its plans and
goals in its 2015 Five Year Plan.
However, many of the assumptions underpinning these recent plans are questionable
and subject to change. For instance, most mainland Southeast Asian planners assume
the coal, wind, and solar prices will not significantly change in the coming years. Also,
GMS countries including China plan to expand coal fire, hydropower, and nuclear ca-
pacity despite mounting public resistance over safety risks and environmental impacts.
Finally, most GMS countries assume climate change will not significantly impact the
power sector in the near to medium term.
Globally, the metrics used to determine optimal energy mixes and inform energy plan-
ning are changing in response to significant and rapid advances in technology, produc-
tion costs, and growing accounting of the value of environmental and social externalities.
This in turn has led to a drop in the costs for non-hydropower renewables as compared to
hydropower and traditional fossil fuels. However, the subsidization of power markets, a
lack of human and technical capacity for long-term planning, and tensions between na-
tional plans and local interests stymie the ability of most GMS governments to adapt to
changing circumstances. GMS countries are missing significant opportunities and cost
savings by failing to account for such changes in their planning processes and continue
to pursue outdated development pathways for their power sectors.
GMS countries appear to be overlooking four major trends in their current power plan-
ning processes:
1. Globally, the price of non-hydropower renewables is dropping more quickly
than anticipated, making these sources of power generation more competi-
tive than traditional resources like large-scale hydropower and fossil fuels.
Globally, solar and wind prices reached record-setting lows in 2016. In the
United States, prices for solar and wind dropped approximately 85% and 66%
respectively since 2009.2
China’s economy of scale and significant investments
in and export of solar and wind technologies have played key roles in the sud-
den price drop. This global price drop has made solar and wind the most com-
petitive new power source in some locations, and many estimates predict that
rates could drop an additional 59% through 2025, making solar and wind the

WEATHERBY & EYLER
6
cheapest option in many markets globally.3
If rates continue to drop as predicted,
investor interest and market share of solar and wind production will likely in-
crease considerably, particularly in countries that utilize competitive pricing as
determining factors for building new power plants. This could disrupt current
energy mix predictions and plans in the GMS, where countries by and large
utilize historical pricing data to consider various scenarios.
2. GMS countries which once were net power importers or power neutral, name-
ly China, Myanmar, and even Cambodia, will likely shift to net-exporters as
they significantly increase domestic capacity. China has historically been a
net-importer of power, which drove Chinese investment in hydropower projects
in Myanmar and northern Laos. Over the last decade, a wave of domestic in-
vestment in hydropower, solar, wind, and nuclear has erased the need for power
imports from abroad. The shift is so drastic that much of the recently built power
capacity in China’s southwestern provinces is already underutilized due to grid
congestion and competition between localities.4
China’s state owned power dis-
tributors are exploring the possibility of exporting overcapacity to demand cen-
ters in Southeast Asia.5
While Myanmar and Cambodia will both continue to
import significant amounts of electricity in the short-term due to a lack of ener-
gy infrastructure, both have the potential to build out power generation capaci-
ties which will exceed domestic needs. This is particularly true in resource rich
Myanmar. These shifts, likely in the short term for China and in the long-term
for Myanmar and Cambodia, will impact dynamics of regional power trade and
have implications for broader regional relations.
3. Fossil fuel and hydropower externalities such as air pollution, climate change
effects, the reduction of critical environmental flows, and a range of social
impacts produce political pressure, increasingly forcing changes in the type,
location, and size of new power plants. Environmentalism is on the rise glob-
ally. This is reflected through countries’ commitments to emissions reductions
under the Paris Agreement, but equally impactful are the private sector’s reduc-
tions in response to cost savings and increasing domestic political pressure in
many countries to address air, water, and soil pollution. Governments in the
GMS are facing constraints from both sources. All of them have agreed to re-
duce emissions from a business-as-usual scenario under Nationally Determined
Contributions (NDCs) for the Paris Agreement, with most committing to raise
the amount of renewable energy in their portfolios. Domestic protests against
environmentally risky projects are also on the rise, and hydropower and coal
have faced increasing public pushback throughout the region. The suspension of
hydropower projects in Myanmar, coal projects in Thailand, and nuclear proj-
ects in Vietnam are case studies for what happens when externalities are not
considered. In the long-run, public pushback against individual projects will
likely alter the overall energy mix.
4. Innovations in energy transmission and distributed grid structures are dis-
rupting traditional infrastructure and utilities models, both globally and in
the GMS. Ultra-high voltage lines improve the efficiency of long-distance trans-
mission when power sources are located far from demand centers, improving
the economics behind long-distance transmission and regional electricity trad-
ing. This supports the traditional utilities model, but at the same time smart grid

STIMSON CENTER 7Electricity transmission lines in Laos.

WEATHERBY & EYLER
8
technology has become relatively economical and offers significant improve-
ments on supply-demand management on a real-time scale. Smart-metering
also supports distributed generation such as rooftop solar, which can be used
not only in urban areas to feed into the grid and meet local demand but also
facilitate the build-out of micro-grids in areas far from existing transmission
infrastructure. The evolution of smart metering and battery storage is disrupt-
ing the existing transmission model and will eventually replace traditional
hub-and-spoke transmission and distribution mechanisms and lead to a more
interconnected, flexible grid with long-distance transmission helping to meet
demand in high-load centers.
Eventually, the region will recognize and begin to react to these emerging trends.
However, current developments in the Mekong basin hydropower sector make explora-
tion of these opportunities more necessary and time-sensitive. Stimson’s previous re-
search demonstrates that the rate at which agreements are signed for new hydropower
projects in the Mekong basin is slowing due to rising costs and risks. However, the
existing trajectory for damming the Lower Mekong mainstream and tributaries in Laos
and Cambodia will likely severely increase risks to food and water security in the region
at large.6
In November 2016 the government of Laos officially notified the Mekong River
Commission (MRC) of their plans for the Pak Beng Dam, which will be the third proj-
ect on the mainstream of the lower Mekong when construction begins.7
In 2017, the
controversial Lower Sesan 2 Dam—built in Cambodia on a critical Mekong tributary—
will come online. The Lower Sesan 2 is predicted to reduce the volume of migratory
fish in the Mekong basin by 9.3% alone.8
While Cambodia’s Ministry of Mines and
Energy has yet to move forward with a formal Memorandum of Understanding , the
well-connected Royal Group has been given tentative approval by Prime Minister Hun
Sen’s cabinet to do feasibility studies for the Stung Treng and Sambor project, proposed
projects for the mainstream of the Mekong in Cambodia.9
While neither is likely to
move ahead before 2020, both are predicted to have devastating impacts on Mekong
fisheries and sediment distribution due to their proximity to Cambodia’s Tonle Sap lake
and Vietnam’s Mekong Delta.10
Within this context, incorporation of these broader energy sector trends into existing
planning processes could transition the region away from path dependency on damag-
ing hydropower and toward a more sustainable and energy secure future.

STIMSON CENTER
9
GMS POWER PROFILES
This section briefly profiles the current power mix, drivers of current plans, and chal-
lenges to the status quo for power planning in each GMS country. The first profile is of
Laos, which seeks to become the “Battery of Southeast Asia” through exporting hydro-
power to neighboring countries. Despite policies supporting the buildout for export, we
conclude Laos’s export potential could be crowded out by China, the second country
profiled, which increasingly is setting its sights on exporting overcapacity from Yunnan
to demand centers in Southeast Asia. Next are Myanmar and Cambodia, which have
relatively low levels of installed capacity and unmet demand but could transition into
net energy exporters in the long term given their wealth of energy resources. Last are
profiles of Thailand and Vietnam, which already have high levels of electrification but
face rising demand and limited domestically available resources, making them net pow-
er importers for the foreseeable future.
GMS Crossborder Power Transmission. Asian Development Bank. Greater Mekong Subregion Atlas of the Environment (2nd Edition).

WEATHERBY & EYLER
10
Lao PDR
CURRENT POWER MIX
Laos has a wealth of power generation resources, with an estimated
18 GW of technically exploitable hydropower potential, 8.8 GW of
solar potential, and 2.8 GW of high quality wind potential. The
country has also begun to tap into its relatively low level of coal
reserves, with a 1,878 MW coal plant already developed in Hong
Sa and additional plants under discussion. However, in 2016 the
amount of installed capacity was only 6,258.95 MW, with plans to
start construction of 55 more hydropower, biomass, and coal proj-
ects by 2020 that will produce an additional 4,130 MW.11
Despite the abundance of potential power generating resources,
electricity consumption is still quite limited, making up only 12%
of the total national energy consumption. This is largely due to its
low level of economic development and accompanying low de-
mand levels. Approximately 23% of Laos’s 7.1 million people live
below the government-identified poverty line and the current level
Lao PDR On-Grid Electricity
Production by Type in 2015
Data on total installed capacity as of 2016 drawn
from list of projects on Lao PDR Ministry of
Energy and Mines site, updated June 30, 2016,
downloadable at http://www.laoenergy.la/
download_free.php. Information on solar and bio-
energy is taken from the 8th Five Year Plan, p. 20 - 21.
of industrial development is limited by Lao’s geography and low productivity levels.12
Laos has
made rapid progress on household electrification rates rising from approximately 15% house-
hold electrification in 1995 to 87% in 2015, putting it on track to meet the goal of 90% electri-
fication by 2020.13
However, in rural areas electricity is still quite limited and often erratic, and
biomass sources of wood and charcoal are still used for approximately 69% of the country’s
total energy consumption.
As of 2013, the country’s per-capita annual electricity consumption was 500 kWh/year.14
Compared to per-capita electricity usage of 1,306 kWh in Vietnam, 2,472 in Thailand, and
3,762 in China, Laos’s consumption is magnitudes lower than most of its neighbors.15
Laos re-
mains one of the world’s fastest developing economies, with an average growth above 7 % over
the last decade, and has significant potential for growth in both domestic household and in-
dustrial electricity consumption rates. Even accounting for projected 8 to 10% annual electric-
ity demand growth, Laos has more than enough power resources to meet domestic demand
and export its surplus.16
PLANS FOR THE FUTURE
AstatedgoalofthegovernmentofLaosistoreducepovertyandgraduatefromLeastDeveloped
Country status by 2020. The rapid development of hydropower has therefore been driven not
by domestic needs but rather by the government’s plan to promote national development
through the sale of hydro-electricity to consumer markets in neighboring countries. From the
beginning of national electrification in the 1970s, most electricity produced in Laos was for
export. Even in 1992, 75-80 % of the total electricity generated in Laos—at the time only 212
MW—was being exported to the Thai grid.17
Power export revenues have contributed signifi-
cantly to the build-out to Laos’s production capacity of 6,218 MW by the close of 2016.18
As of
2017, the government of Laos has signed bilateral MOUs to supply 9,000 MW of electricity to
Thailand by 2025, 5,000 MW to Vietnam by 2030, and 1,500 MW to Cambodia by 2025.19
If
Laos does not shift from its business as usual model, most of this power will be generated from
more than one hundred large-scale dams in Laos’s portion of the Mekong basin. Currently
Laos has constructed roughly 30% of its potential hydropower capacity.

STIMSON CENTER
11
CHALLENGES AND POTENTIAL SHIFTS
Laos faces two related energy challenges. First, a lack of available financial resources largely
leaves Laos at the mercy of investor interest in individual projects. Most projects follow the
build-own-operate-transfer(BOOT)model,underwhichLaosgainsinitialbenefitsthrough
land concessions, taxes, and a small share of export revenues, but projects are owned and
managed for between 25 and 30 years by the investor, during which time the profits go to
the owners. Project ownership wil transfer to Laos after the concession ends, by which time
the dam may require extensive refurbishing and maintenance. Power purchase agreements
with neighboring countries are the vehicle through which investors can ensure profitability,
and the price and profit margin are key factors in deciding which projects move forward. In
most cases, projects are large power plants which send the vast majority of power directly
across the border to Thailand.
This has led to a second challenge. Reliance on the BOOT model has not allowed the gov-
ernment to plan national electricity production goals or transmission build-out in a strate-
gic manner. Because the government relies on investor interest to drive development and
investors are primarily interested in projects for export, the government has limited abil-
ity to prioritize projects and coordinate development. Thus far, the government of Laos
has not developed an integrated power development plan that strategically lays out goals
and targets for total electricity production and energy mix. The focus on exports has also
prevented buildout of a strong and flexible national grid, as most large projects feed power
directly across the border to Thailand rather than supporting domestic needs. Equally im-
portant, concerns over the ability of non-hydro renewable energy to ensure that Laos can
reliably meet its export commitments have prejudiced planners towards technologies with
tested track records like large-scale coal and hydropower projects rather than wind and
solar projects, despite the fact that these sources are increasingly economical.
The terms of power supply contracts are still being negotiated. Permanent Secretary
Daovong Phonekeo of the Ministry of Energy and Mines indicates that—price permit-
ting—the future supply for export would likely be a mix of inputs that includes wind, solar,
and coal as well as hydropower.20
Off-grid solar is already common in rural villages, and
the government of Laos has a 10 MW commercial-scale pilot solar project under construc-
tion with an additional 90 MW of potential solar project in the works.21
A Thai investment
firm has already started construction on a planned 600 MW wind plant in three southern
provinces.22
If these investments prove profitable, solar and wind will likely take off quickly.
Summary Data for Lao Dams (>15 MW)
Ministry of Planning and Investment of Lao PDR, 8th Five-Year National Socio-Economic Development Plan (2016-2020), p. 20-21.
Note that the Plan appears to include Hongsa Lignite Power Plant and two bioenergy plants alongside the hydro—the figure for
this chart subtracts those three projects.

WEATHERBY & EYLER
12
China
CURRENT POWER MIX
China is the world’s largest producer and consumer of electric-
ity. In 2016 China’s total installed capacity grew to 1646 GW,
compared to the US installed capacity of just over 1000 GW.23
China already has the world’s largest installed capacity in coal
(920 GW), hydropower (332 GW), wind (149 GW), and solar
(77 GW). As China’s economy transitions from a thirty-year
high-growth phase to a slower and more sustainable model, en-
ergy demand growth is slowing. China has achieved significant
gains in energy efficiency, mostly resulting from state-directed
policy initiatives that are restructuring the economy away from
investment-led growth. To illustrate, China’s economy is pro-
jected to grow at 5% between 2015 and 2035, but overall energy
demand growth will fall below 3%.24
Complementary to this
trend, China’s energy intensity is in sharp decline and almost
on par with developed countries. Because of impressive gains
delivered by a significant expansion of domestically-produced
solar, wind, and hydropower, China no longer relies on import-
ing power from neighboring countries. As China transitions
away from an overreliance on coal-fired power to further ex-
pansion of renewable energy resources, it still faces underlying
structural challenges to usher in more efficient utilization of its
renewable capacity.
China is the world’s largest producer, importer, and consumer
of coal and will continue to hold these titles throughout most
of the 21st century. This also makes China the world’s largest
current and future carbon emitter. In response to deteriorating
air quality pervading most of the country and China’s growing
carbon footprint, the Chinese government has policies in place
to support a long-term transition towards renewable energy and
has stepped up as a global leader in efforts to curb climate emis-
sions. China’s major commitment in this context is to peak its
greenhouse gas emissions by 2030, which will require substitut-
ing renewables for some of the additional coal that would other-
wise be built under a business as usual scenario. Achieving that
peak at a sooner date is dependent on how quickly the Chinese
economy can restructure, emerging innovations in renewable
technology, and the ability of China to better integrate those
innovations into its power market. China’s 13th five year plan
targets coal’s share of total energy consumption will fall from
68% in 2015 to just under 60% in 2020.25
China’s energy consumption will double between 2015 and
2040 from 5500 TWh to 11,000 TWh respectively.26
Wind, so-
China Power Consumption in 2016
China Installed Generating
Capacity in GW
Data taken from Simon Goess. “Power statistics China
2016: Huge growth of renewables amidst thermal-
based generation.” CEE News. February 9, 2017.
http://ceenews.info/en/power-statistics-china-2016-
huge-growth-of-renewables-amidst-thermal-based-
generation/.

STIMSON CENTER
13
lar, nuclear, and gas fire power will each have a five-fold increase of capacity during this
period. Hydropower could nearly double to 540 GW, but increasingly recognized environ-
mental and social risks will likely curb this growth. However, coal capacity too will grow:
China’s 13th five-year plan requires construction of an increase of an additional 90 GW
coal capacity between 2015 and 2020 bringing the total installed coal capacity to 1100 GW.
Renewables will occupy the most significant chunk of this energy expansion. China in-
vested more than $100bn in renewable energy (including large hydropower) between 2014
and 2016. In 2016 alone China added 64 GW of renewable energy: 12 GW of hydropower,
18 GW of wind, and 34 GW of solar. To put this into perspective, no mainland Southeast
Asian country currently has a total installed capacity of 64 GW. Impressively, 25% of
China’s energy consumption came from renewables in 2016: most from hydropower, 4%
from wind, and approximately 1% from solar.27
Despite the impressive buildup of China’s power resources, much of China’s existing capac-
ity is underutilized. Wind is currently curtailed at a national average rate of 15%.28
Yunnan
exports much of its hydropower to Guangzhou through world class ultra-high voltage
transmission lines, but in 2015 Yunnan’s hydropower fleet wasted 95 TWh of electricity
due to a lack of demand. For context, this is nearly as much as the total hydropower con-
sumption of mainland Southeast Asia at 105 TWh.29
China’s current feed-in tariff struc-
ture, guaranteed operating hours for coal plants, provincial-level authority in determin-
ing dispatch priorities, and the lack of a spot power market to immediately match excess
capacity with buyers discourages the dispatch of renewable energy.30
2016 energy sector
reforms and pilot programs modelled in northern China to better integrate renewables
suggest that overcoming these structural difficulties is only a matter of time.31
Grid congestion and inter-provincial competition also curb utilization of Yunnan’s power.
In China’s developed coastal zone, provincial decision-making authorities strongly fa-
vor power produced locally over that imported from other provinces. Coal fire plants in
Guangzhou employ far more workers than dams in China’s southwest, and these jobs are
important for meeting local employment needs. Coal is also widely viewed as the most reli-
able source of power generation. Renewables are intermittent, and even hydropower is sub-
ject to seasonal fluctuations. Nuclear plants currently under construction in local coastal
areas will compete with far-flung hydropower in the future and will similarly receive pri-
oritization from local consumption markets. As a result, grid operators and hydropower
developers are looking for ways to export excess capacity to markets abroad and have set
their sights on the GMS power market.
China’s hydropower developers have long viewed the rivers of mainland Southeast Asia as
potential power sources to feed China’s growing economy. However, since supply currently
outstrips domestic power demand in southwest China, these developers now seek to export
their expertise and China’s excess capacity in steel and other commodities to build dams
abroad. The same can be said for Chinese expertise in coal, nuclear, solar, and wind proj-
ects. Regional frameworks such as the Belt and Road Initiative and the Lancang-Mekong
Cooperation Mechanism promote Chinese investment in mainland Southeast Asia’s ener-
gy sector. At the same time China’s debt exposure means banks increasingly favor loans to
commercially viable projects and more stringently assess project risk. The current percep-
tion among Chinese energy firms is that the number of commercially viable hydropower
investment projects in mainland Southeast Asia is limited.32

WEATHERBY & EYLER
14
Myanmar
CURRENT POWER MIX
Myanmar’s level of electrification is the lowest in the region,
and only approximately 30% of its 53 million people have re-
liable access to electricity.33
The vast majority of Myanmar’s
total energy consumption in 2015—approximately 62%—was
provided by biomass (fuelwood and charcoal), with electricity
providing only 6.7%.34
The primary reason for this is not a lack
of resources but rather a lack of investment and transmission
connectivity. Myanmar has approximately 100,000 MW of
potential hydropower resources, 4,000 MW of wind potential,
several thousand MW of commercial-scale solar PV potential
(estimates start around 40 TWh/year), and significant on and
offshore oil and gas reserves.35
Long-term political and economic instability caused by ethnic
conflict, military coups, the nationalization of private indus-
try, and Western sanctions has historically heightened the risk
of doing business and effectively limited foreign direct invest-
ment in domestic generation and transmission. Prior to 2011,
Myanmar’s authoritarian regime viewed rural electrification
as a low priority, so most access is concentrated in urban areas
where elites live. As of 2014, Myanmar’s installed capacity was
only 4,422 MW and dominated by hydropower and supple-
mented by natural gas, coal, and oil.36
Some of this is exported
directly across the border to Thailand and China, and due
to the region’s monsoon climate, much of the hydropower is
only available seasonally. As a result, regular shortages during
peak load times cause frequent blackouts even as electricity
consumption is limited to 2500 MW a day.37
To compensate,
many rural households rely on diesel generators, and even ur-
ban areas use diesel as a backup.
Myanmar’s Installed Capacity By
Type (2014) Amount (in MW)
Nam, Cham, and Haili, p. 9
Myanmar’s Installed Capacity in
2030 by Scenario
Myanmar Energy Master Plan, p. 494.
Myanmar’s electricity demand rose 15% annually from 2009 to 2014, and high growth
rates are anticipated to continue into the future.38
Myanmar’s Energy Master Plan in-
cludes three potential trajectories for energy demand growth: low, medium, and high,
with high growth predictions estimating that demand could almost double to 4,500
MW by 2020 and rise to 13,410 MW by 2030.39
Much of the demand growth will be due
to rising living standards in urban areas, but power grid expansion into rural areas will
also play a key role. Myanmar has set an ambitious target of universal electricity access
by 2030, through both expansion of the national grid and provision of off-grid solutions
to remote areas.
As of 2015, the government’s Energy Master Plan explored five different scenarios for
meeting electricity needs: a base scenario, which includes all existing and committed
projects with heavy coal buildout after 2026 and indicates Myanmar’s current trajectory;
a balanced scenario, which seeks to eliminate some proposed hydropower and replace it

STIMSON CENTER 15
with solar PV and coal plants; and then three scenarios which respectively maximize hy-
dropower, coal, and solar PV/wind.40
The initial report indicated the balanced scenario is
optimal across a range of criteria including CO2 emissions, levelized cost of electricity,41
diversity of resources, and risk.42
It is not yet clear which development pathway Myanmar will pursue, as these plans have
undergone ongoing edits since the initial report was produced in 2015. No final public
report has been released, and public debate over the merits of various options have con-
tinued. At the same time, numerous contracts have been signed to address short-term
demand via fast deployment of solar, including a 150 MW plant, a 220 MW plant, and
a potential 300 MW plant.43
If power export is prioritized in addition to rural electrifi-
cation, Myanmar could leverage its abundant power producing resources to become a
significant power exporter to both Southeast Asian and South Asian markets.
Myanmar’s new democratically elected government led by the National League for
Democracy is facing dual pressures to rapidly address gaps in the generation capacity
while also dealing with controversy over many proposed hydropower and coal projects
previously developed under the military junta without adequate consultation with affected
communities or consideration of social and environmental impacts.44
The government
plans for regulatory changes that would increase opportunity for private-sector and for-
eign investment in the power sector and require reassessment of the regional and national
master energy plans.45
And Myanmar has various plans from which to draw reference: its
Energy Master Plan appears to be the most comprehensive, but the Japan International
Cooperation Agency (JICA) also supported an alternative analysis that recommended pur-
suing “clean” coal-fired power plants,46
and there is an ongoing Strategic Environmental
Assessment to support a national hydropower plan in coordination with the International
Finance Corporation. With the final plans still undetermined, Myanmar appears well situ-
ated to change course, but it is unclear whether Myanmar’s bureaucracy can effectively
respond to high-level policy shifts in a timely manner.
Myanmar On-Grid Electricity Demand Forecast to 2030
Myanmar Energy Master Plan, p. 630.

WEATHERBY & EYLER
16
Cambodia
CURRENT POWER MIX
Like Laos and Myanmar, Cambodia has struggled to meet ba-
sic electricity needs. Power sector development was first sty-
mied by internal conflict during the Khmer Rouge era, and
later, governance and transparency issues have limited invest-
ment from many international and multinational develop-
ment banks. Cambodia’s installed capacity at the end of 2014
was only 1,511 MW, supplied largely from hydropower (929
MW), diesel (291 MW), and coal (268 MW).47
Its potential
energy resources are significantly higher with an estimated
10,000 MW of hydropower potential, and early studies indi-
cate technically exploitable solar potential of 10.8 TWh/year
and 6.5 GW of wind potential.48
However, only approximately
58% of an estimated 15 million Cambodian citizens have se-
cure access to electricity, with access concentrated in urban
areas.49
Electricity prices in Cambodia rank among the re-
gion’s highest. Through 2012, urban residents paid up to US
$0.25/kwh in Phnom Penh and rural residents paid up to US
$0.80/kwh.50
Reasons behind the high prices are numerous,
but one factor is a high reliance on imported diesel fuel, which
are taxed at one of the highest rates in the GMS. Electricity de-
mand has been rising 20% annually since 2010, putting pres-
sure on the government to build out supply and lower prices
to make electricity more affordable.51
Cambodia Energy Mix in 2014
As of 2017, 1500 MW was distributed through the national grid which links 19 of 25
provinces. Provinces and villages that remain unconnected largely rely on micro-grids
and imported diesel.52
Cambodia’s domestic generation largely comes from eight hydro-
power dams operating and providing a stable and relatively affordable baseload, along
with thermal coal power plants and diesel generators.53
The addition of new hydropower
plants is bringing the price of electricity down, but in 2016 Cambodia still relied on
the import of 416 MW from its neighbors with 135 MW from Thailand, 277 MW from
Vietnam, and 4 MW from Laos.54
Apart from the downward impacts on price, many policy-makers view the current level
of imports—between 22 to 26 %, depending on which figures are referenced—as unde-
sirable given concerns over energy insecurity and the high level of dependency on neigh-
bors. These concerns have pushed many decision-makers to prefer domestic hydropower
over imports from neighbors, despite its widely recognized impacts on Cambodia’s fish-
eries.55
The completion of the 400MW Lower Sesan 2 dam is a case in point, as many
experts find that the dam could reduce Mekong migratory fish stocks by 9.3%.56
Cambodia’s Ministry of Mines and Energy seeks to decrease net imports to 20% by
2020, primarily through the addition of new hydropower and coal plants into the grid.57
Data taken from Energy Development Department,
Ministry of Mines and Energy. “Electricity Data
Collection.” Presentation in Paris, France, March 2,
2016. Slide 5. https://www.iea.org/media/training/
alumni/escmarch2016/Cambodia.pdf.

STIMSON CENTER 17
Cambodia has not released an updated master energy plan, although one is currently
under development by a Japanese consultant which estimates demand through 2030
and various supply options. Our discussions reveal that the new master plan is largely
an aggregation of already proposed coal projects and large hydropower dams includ-
ing the controversial Sambor and Strung Treng on the Mekong mainstream, with the
addition of natural gas projects starting in 2026.58
High global reserves and low prices
make coal imports relatively easy to obtain leaving Cambodia’s domestic coal reserves
largely untapped. As a result, energy planners prefer importing coal to importing elec-
tricity from neighbors because it is less likely to be held hostage if political differences
with suppliers arise.
The new draft master plan will be an important step forward in Cambodia’s national
electricity planning once it has been approved by the government—however, the plan
notably does not include non-hydro renewable technologies as providing a substantial
contribution into the national grid. Cambodia’s wind potential is minimal, but solar
potential is quite high at an estimated 8100 MW.59
Various government officials indi-
cate their support for renewable energy sources, particularly as solar has proven to be
cost effective in micro-grids and is significantly less impactful than hydropower and
coal. However, conversations with policy-makers revealed significant and widespread
concerns about how intermittent solar would operate when integrated into the national
grid. Solar’s historically high price is also a serious concern for most policy-makers, as
the government will only approve investments in new power projects that can deliver a
price of less than US $0.10/kwh for consumers.60
Floating village on the Tonle Sap Lake in Cambodia, powered by rooftop solar panels.

WEATHERBY & EYLER
18
Thailand
CURRENT POWER MIX
Thailand’s middle income development status is reflected
through its power sector in two ways: its electrical generation
and distribution system is by far the most built-out in main-
land Southeast Asia, and per capita electricity consumption is
the highest in the Lower Mekong region. Like most developing
countries, electricity use is locational—households in urban
Bangkok use twice as much electricity as households else-
where in Thailand, and the proliferation of energy inefficient
shopping malls and detached housing means that the Bangkok
metro area consumes approximately 40% of Thailand’s total
demand.61
Most of that electricity is currently supplied by
Thailand’s domestic natural gas reserves. As of 2014, 64% of
Thailand’s total power was generated using natural gas, 20%
was generated by coal thermal plants, 8% was renewable en-
ergy (including large hydropower), 7% was imported hydro-
power from Laos, and 1% was diesel and fuel oil.62
However, Thailand’s natural gas reserves are expected to di-
minish significantly by 2030, and this is pushing planners to
diversify away from natural gas. Thailand still has domestic
hydropower potential, but resettlement requirements and en-
vironmental impacts make building more dams highly con-
troversial and unpopular. The strength of civil society and en-
vironmental protection regulations in Thailand has prevented
additional hydropower development for decades, forcing the
Electrical Generating Authority of Thailand (EGAT)—which
acts as the sole purchaser of electricity, an investor in electric-
ity projects, and negotiator of power purchase agreements
with individual power producers—to consider alternatives.
EGAT has identified four goals that it is pursuing in the Power
Development Plan 2015-2036 (PDP 2015): to raise the percent-
age of electricity supply of “clean” coal, largely through the
construction of new plants in southern Thailand; to increase
imports—mainly hydropower—from neighboring Laos and
Myanmar to 20%; to increase non-hydropower renewables;
and to introduce nuclear electricity into the grid.63
EGAT an-
nounced in April 2017 that it would overhaul its investment
strategy and diversify into more renewable energy in the fu-
ture, but details of this update remain unclear.64
All energy mix data taken from Thailand’s PDP 2015,
p. 2-1.
Thailand’s Energy Mix in 2014

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