BANGKOK – Myanmar’s longest-standing ethnic minority militia, the Karen National Liberation Army (KNLA), has forced a halt to the construction of a key roadway link to the US$8 billion Dawei port and industrial estate mega-project. The blockage comes amid recently intensified fighting between government forces and insurgent groups in areas scheduled for massive foreign investment initiatives.

The Thai-financed Dawei project aims to jump-start Myanmar’s moribund industrial sector through better integration with Thailand’s more developed economy and infrastructure. It also aims to leverage into fast growing trade and investment enabled by the recently enacted China-Association of Southeast Asian Nations (ASEAN) free trade agreement and to which Thailand has major regional hub ambitions.

According to Karen News, an ethnic media group which first broke the story last week, an unnamed KNLA commander said that Karen villagers have been adversely affected by the 160-kilometer road which will run from Tavoy on Myanmar’s west coast to the Thai border through Kanchanaburi province where it will link to Thailand’s existing road network. Myanmar has some of the region’s poorest road infrastructure.

Asked by Asia Times Online about the stand-off between the KNLA and Italian-Thai Development Company, the Thailand-based conglomerate that won the right to develop the 250-square-kilometer Tavoy project, Karen National Union (KNU) secretary-general Naw Zipporah Sein would only confirm that negotiations have been taking place since July 16 but would not elaborate on details. The KNU is the political party linked to the KNLA.

Saw Ehan, a journalist with Karen News (, told Asia Times Online that at least 2,000 households comprised of ethnic Burman and Karen families have been told that they will have to leave their homes to make way for the now-contentious roadway. “Villagers are awaiting compensation for this and have been told they have to move. But they do not when they have to go or where they will go,” he said. “Some people are excited by the roadway but these are not the people being forced to move out.”

A Bangkok-based spokesperson for Ital-Thai Development told Asia Times Online on Monday that the company is currently “doing a survey of the area around the project, to determine who the affected people are” and said that compensation arrangements would be implemented once the survey is complete. The spokesperson also played down the apparent stand-off between the company and KNLA, saying that ITD believes that “everything will go head as planned”.

Land around the highway has apparently been sold by the Myanmar government to private investors close to the country’s military-dominated political elite. As the newly elected government moves to reform the economy, including through privatization of state-held assets, land rights are a legally nebulous area.

The news of the KNLA’s blockage of road works marks the latest controversy surrounding major foreign investment projects in Myanmar, which formally ended decades of military rule in March by inaugurating a nominally civilian government. Prime Minister Thein Sein’s “civilian” administration is dominated by former military officials.

Prior to that transition, on January 20, 2011, the Myanmar government enacted a China-style “Dawei Special Economic Zone” law. The law promises tax breaks for investing companies, fast-tracking of work and trade permits, and a pledge from the Myanmar authorities not to nationalize any industry or project established in the Dawei SEZ. Consulting firm Baker & McKenzie wrote that the law “seeks to encourage increased foreign investment to the country by offering a series of incentives and promises of stability”.

Political stability in Myanmar’s ethnic regions is far from assured, with fighting between the Tatmadaw, the name for the country’s armed forces, and various ethnic militias intensifying since the country’s parliamentary election on November 7, 2010. Many Karen-populated areas close to the Thailand-Myanmar border are also heavily mined, and the Myanmar army and KNLA clash regularly in the area close to the new highway, according to Karen researchers. It is a situation complicated by intra-Karen rivalries, with some Karen fighters working and fighting alongside the Tatmadaw.

Foreign investment-linked fighting is not confined to Karen regions, however. In Myanmar’s northern Kachin state, the Tatmadaw has been battling the Kachin Independence Army (KIA) since June 9, breaking the terms of a 1994 ceasefire. Casualty numbers are unknown but Kachin diaspora groups in Thailand say that 16,000 people have recently been displaced by the fighting in Kachin and in northern Shan state.

Myanmar’s government has repeatedly demanded that the country’s armed ethnic militias merge with the Tatmadaw under a so-called Border Guard Force. However, almost all of the country’s more powerful non-state armed groups have rejected the proposal. The Myanmar government has argued in support of the program that ethnic groups’ political aspirations can be addressed via new mechanisms created as part of the country’s transition from military rule, including the establishment of regional parliaments.

The fighting in Kachin territory has been complicated by China-backed investment projects, including the proposed dam and hydropower plant near Myitsone as well as eight other Chinese-funded dams in the region. All told there are 25 “mega-dam” projects in place or being planned for Myanmar’s ethnic minority borderlands, according to the Burma Environmental Working Group. The watchdog group claims that 90% of the electricity generated will be sold abroad, earning the Myanmar government an estimated US$4 billion per annum.

A 2,800 kilometer-long oil and gas pipeline corridor is being built from Myanmar’s western coast to China’s southern Yunnan province that is designed to cut through Kachin State territory. The pipelines will enable China to pipe gas from Myanmar’s offshore Shwe Gas Field while a Chinese-built port on Myanmar’s west coast will serve as a drop-off point for some of China’s oil and gas shipments coming from Africa and the Middle East.

Some analysts doubt whether the recent upsurge in fighting inside Myanmar is being driven solely by the border guard issue. Some of the heaviest fighting in Karen State in recent years took place near the border town of Myawaddy on the day of last year’s parliamentary elections. The upsurge in fighting came just five days after Italian-Thai Development and Myanmar’s central government signed the multi-billion dollar Dawei deal. Over 30,000 refugees fled into Thailand as a consequence, though most of these were swiftly repatriated by Thai authorities.

Naw La, a researcher with the Kachin Development Networking Group, an advocacy group, says some of his family members have been driven from their homes during the recent Tatmadaw-KIA fighting. Speaking at a press conference in Bangkok on Monday, he said that “the KIO sent letters to China and to the Naypyidaw government, objecting to [the] Myitsone [dam] and saying that if the dam is not stopped then civil war will ensue”. He said that the KIO is opposed to the dam as “most of the electricity will be sold to China with no benefit for local people, and local people were not consulted at all during the planning of this project”.

The government’s heavy-handed approach to establishing security in commercially-important ethnic minority regions could yet undermine several big ticket foreign investments. Italian-Thai Development and Naypyidaw are hopeful that investors from Thailand and elsewhere will establish facilities at Dawei, although recent signals from some of Thailand’s corporate heavy-hitters, including energy giant PTT, have been cautious due to security concerns.

PTT company advisor Chainoi Puankosoom was quoted in the Bangkok Post on June 26 saying that “investment risks are normal but I think the private sector needs some kind of guarantee that their investments in Dawei are secure.”

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