Where giants jostle

March 1, 2008 - Northern Burma is being transformed by China and India. Hamish McDonald reports from behind the bamboo curtain. Photographs by Kate Geraghty.

Sittwe is a mouldering port of 200,000 people on the neglected Arakan coast of Burma, visited by a few foreigners heading upriver to the ruined pagodas and palaces of an ancient kingdom inland. In five years from now, it promises to be transformed into one of the strategic hubs of Asia, figuring in the calculations of planners and analysts all the way to Washington.

"Think of it as a new Panama Canal," says one well-connected businessman in Rangoon.

A multibillion-dollar deepwater port on a nearby island will receive giant oil tankers from the Middle East and Africa, pumping their cargoes into pipelines that will stretch inland to energy-hungry China, avoiding the choke points of the Strait of Malacca controlled by the US Navy and its allies. Other pipelines will take natural gas from the huge reserves being defined off the Arakan coast and Burma's Gulf of Martaban.

Meanwhile, the Indian Special Minister Mani Shankar Aiyar has just been in Rangoon, nailing down agreement on a new all-weather highway from India's Imphal via Kalemyo to Mandalay, which by 2010 will give India's restive and isolated north-eastern states an alternative outlet to the tenuous route to Kolkata through the "bird's neck" of territory along the Brahmaputra valley.

Across the top of Burma, the Indians are also pouring huge investments into restoring the World War II "Stillwell Road" that once took supplies to the Chinese nationalists fighting the Japanese, relinking the Indian town of Ledo to Myitkyina, north of Mandalay, from where the road leads into China.

At Sittwe, India is also contesting Chinese dominance or any plans to add this port to Beijing's "string of pearls", strategic ports across the Indian Ocean. India plans to dredge the Kaladan River flowing to Sittwe from the north and turn it into a transport corridor for its isolated state of Mizoram.

India is quietly trying to warn Burma's ruling generals about the dangers of too close an embrace by China, a traditional enemy.

"There are sufficient reasons to suspect the junta would prefer to contain, if possible, the overwhelming influence of China," says the veteran New Delhi diplomatic analyst Subhash Chakravarti, a confidant of successive Indian prime ministers. "Its natural choice to seek to do so is to encourage a larger Indian presence in the country."

In return, Burma is helping India suppress its own insurgencies.

"India is hopelessly vulnerable to tribal insurgency in its north-east frontier," Chakravarti says. "We can hardly ensure security there without full co-operation with Burma, which has lately been a splendid success. As a result, India's earlier open criticism of the junta [in diplomatic statements and on All India Radio] is more muted."

But so far, China is winning hands down. Recently, New Delhi was stunned when the Burmese junta ruled that gas from the massive Block A-1 field, being opened up by two Indian state energy firms with South Korea's Daewoo group, would be sold to China instead of going to India by undersea pipeline, and probably (diplomats in Rangoon say) at concessional prices.

We crossed from the gleaming Chinese border city of Ruili into Burma, escorted by a travel agent designated by the Burmese Government. From boom-time China, which had mobile phone coverage and automatic teller machines even in this far corner, it was a short walk into the 1970s: shabby shops fronting shanty houses; old ex-Japanese cars; cycles.

Down the old Burma Road and through five checkpoints to the town of Lashio, where our travel agent minder left us, the economic invasion by China was apparent all around.

Just outside Burma's border town of Muse, facing Ruili, long convoys of 10- and 12-wheel trucks rolled into an export-import checking station extending over a kilometre in length. Stacks of teak logs from Burma's forests waited marked and graded in a lumber yard, ready for shipment into China.

Truckloads of watermelons and other high-value produce, grown by Chinese farmers on rented land with hired Burmese labour, were heading towards China, while young Burmese men, sheepish at being photographed, were driving smuggled Chinese-made motorcycles without numberplates down towards Mandalay. Vast tracts of land, some controlled by the Tatmadaw (Burma's military), were planted with sugar cane, pineapples and cassava (for biofuel) for sale or processing in China.

Later, on the Irrawaddy River outside Bhamo, another town close to China, our boat was packed with polythene-wrapped motorbikes, probably brought across the small, locals-only border crossing nearby.

The Burma Road from the Chinese border to Mandalay is now the toll-collecting fiefdom of Asia World, a construction company run by Stephen Law, son of the former heroin warlord Lo Hsin Han, who was brought into the fold by the junta in 1992 and given the road concession as reward.

Deep in the Shan hills off the road, the Burmese authorities claim to have reduced the opium-growing area to a small fraction of its heyday when the Cold War gave a measure of protection to the country's anti-communist regime. The main illegal game is now the amphetamine laboratories hidden in the eastern corner of Shan state.

But this is well out of sight, like the casinos and brothels that used to attract customers from Chinese border towns slipping across on day passes. Locals in Muse said these had shifted to northern Laos.

In this consciously cleaned-up relationship, China's links with Burma are more pervasive than any simple trade-off of munitions and diplomatic backing for the Burmese generals in return for oil and timber (at the official level) and drugs and trafficked women (in the black markets).

As well as being the planned outlet to the Indian Ocean, Burma has become an open market for China's hungry entrepreneurs and traders, like Mr Lin from the manufacturing powerhouse of Wenzhou. He crossed the border with us on the way to his factory in Rangoon, where 40 Burmese workers earning the equivalent of $30 a month make metal shop awnings and shutters.

In the former British hill station of Maymyo (now Pyin Oo Lwin), one of the 5000 Chinese residents celebrating the lunar new year at the town's Chinese pagoda said the Chinese had emerged in 1996 from intense suspicion provoked by Beijing's Cultural Revolution-era support for the now defunct Burmese communist parties (which included a cross-border invasion in 1968-71). "Things are much better now," he said, to the sound of firecrackers.

In the tourist town of Bagan, an ethnic Chinese businessman talked of plans to help open a Confucius Institute in Burma, part of Beijing's drive for "soft power" by teaching its language and culture. Of Burma's efforts to persuade the world it is moving to democracy, he said: " I hope it doesn't happen. As long as this country doesn't open to the Western countries, people like me will benefit from the strong China-Burma relationship."

FOR the Sittwe plans to materialise, very big natural and political obstacles have to be overcome. For one thing, northern Burma and China's neighbouring Yunnan are cut by soaring mountain ranges running north-south to the eastern end of the Himalayas, with massive rivers such as the Salween and Mekong cutting into chasms thousands of metres deep. Putting roads and pipelines across this country will be fraught with engineering obstacles and expense.

Right from the Arakan shoreline, Burma teems with ethnic groups that have many reasons to hate the ruling junta and disrupt its economic underpinnings.

North of Sittwe live as many as 1.5 million Muslims known as the Rohingya who are denied citizenship or ethnic identity in Burma and neighbouring Bangladesh. Subject to harsh surveillance and restrictions (including a requirement to get permits for local travel), the Rohingya would seem a fertile recruiting ground for violent groups.

Further inland, the Tatmadaw has run a network of local truces with a score of rebel armies and their splinter groups since the mid-1990s, often giving them a slice of cross-border duty collection.

On a road junction between Myitkyina and Bhamo, leading off to a small frontier post, was a large two-storey office signposted as

belonging to the Kachin Independence Organisation, a former separatist movement that signed a truce in 1994.

In the small town of Hsipaw we encountered General Saing Lo, the weather-beaten chief of the Shan State Army, which ended hostilities in 1996. He was supervising a tournament among his men at the local Dodhtawaddy Tennis Club to celebrate Shan Independence Day, his new-model Toyota LandCruiser parked outside with his army's sticker on the windscreen. "Did you watch the Australian Open?" he asked. "We could only see it on a DVD here."

The deals have allowed the Tatmadaw to focus its efforts on crushing the remaining holdout rebel groups along the Thai border, based among the ethnic Karen, Karenni, Shan and Mon. More than doubled in size since the 1988 student uprising, the Tatmadaw is now 450,000 strong and rated as one of the most capable armies in the region.

In recent years, mainstream offensive units have kept up the pressure on the rebels in an unrelenting "four cuts" strategy aimed at denying them food, money, information and recruits. The civilian population has borne the brunt of this pressure, maintained now through the wet and dry seasons, with some 140,000 people pushed into refugee camps. The Karen have just suffered a devastating blow in the assassination of their promising new leader, Pado Manh Sha, in the Thai border town of Mae Sot, apparently by a hit squad who fled into Burma.

While the population remains among the most miserably poor in Asia, the Tatmadaw sequesters between 40 and 70 per cent of government revenue, plus cuts from business associates, and is re-equipping itself with modern arms including MiG-29 fighters from Russia, better artillery and communications.

Western intelligence agencies are intrigued by reopened negotiations with Russia for a small nuclear reactor, satellite images of uranium mining and a mysterious delivery of containers by North Korean ships that Burma insists were just allowed to make port calls as "vessels in distress".

One question is whether the ethnic minorities can be permanently bought off or whether new splinter groups will emerge to pose a violent challenge, if only to shake the money tree. A bigger mystery is the ultimate stability of the deeply unpopular Tatmadaw regime and whether it can rely indefinitely on violent suppression.

Security in the central belt of the country north from Rangoon depends on a pervasive and permanent counterinsurgency-style campaign against its own people, involving thousands of Military Intelligence personnel running informer networks and muscle squads throughout the country.

Random checks are mounted on ordinary households for unregistered guests and jailing is automatic for any lapses. Official tirades assail the "lies from the skies" broadcast by Voice of America, the BBC and the Democratic Voice of Burma, which recently began direct satellite TV signals.

Diplomats say the apparent hesitation to crack down on protests sparked by fuel price rises in August and September was deliberate, not a sign of weakness. The delay allowed a massive intelligence operation in which thousands of undercover agents took pictures and identified demonstrators and sympathisers.

Two of the generals said in some reports to have refused to order troops to open fire on crowds have since been promoted, hardly a sign of dissent. Rank-and-file troops showed no hesitation storming monasteries across the country in the midnight crackdown of September 26 against what they were told were "fake monks" acting "contrary to their dharma [spiritual duty]". About 4000 monks and known dissidents were hauled off, of whom most were released after two weeks. About 1100 political prisoners are still in jails and labour camps around the country.

Little escapes the military. On February 12, Burma's official Union Day, the Herald took some photographs of a brass band of the Tatmadaw's White Arrow Division in Bhamo practising by a public road. Three hours later we were hauled off a boat down the Irrawaddy and held for two hours while officers studied our cameras, radioed headquarters for instructions and finally deleted what images of the band they could find. "Anything about the army is very sensitive at this time," an officer explained through a local high-school English teacher called in to interpret.

Than Shwe, the "senior general" heading the State Peace and Development Council (as the junta calls itself), has a firm grip, though at 76 he is showing the effects of diabetes and minor strokes. A former chief of psychological warfare, he employs terror and surprise. In October 2004 he mounted a lightning internal putsch against his powerful but unsuspecting intelligence chief, General Khin Nyunt, now serving a 44-year jail sentence. Just recently, on December 31, Than Shwe underwent an operation for pancreatic cancer in Singapore, leaving the country for two weeks without any move against him.

Although the junta is not sentimental about its dumped leaders (the founding general Ne Win died in 2002 with no state funeral, his daughter in jail and the family banned from publishing eulogies), its power transitions have been bloodless so far. Its No. 3 general, Shwe Mann, 60, is poised as heir apparent.

ON the tarmac at Rangoon's airport sit two new Airbus passenger jets, painted in the white and turquoise colours of the private carrier Air Bagan. The planes began a regular service to Singapore last October, but two weeks later were grounded when a Singapore bank withdrew the purchase credit from the company.

Tay Za, 40, the owner of Air Bagan, is the most visible victim of the "targeted sanctions" imposed by several Western countries after the September crackdown, including Australia, which lists 418 senior regime figures, family members and associates for denial of banking facilities. Described by one Rangoon-based diplomat as the "junta's No. business crony", his Htoo Trading group is said to have a son of General Shwe Mann on its board and to be the channel for Russian military sales, although Tay Za denies any government connections or illegitimate activities.

It was an early strike for a largely untested weapon, showing that the risk of a US Treasury black-listing was enough even for banks in Singapore, a notorious private banking sanctuary for South-East Asia's dubious characters and a member of the Association of South-East Asian Nations cautious about the regional group's no-interference taboo, to cut off a rich Burmese customer.

On February 9, the junta chief Than Shwe surprised diplomats and even tightly controlled local newspapers by announcing that a referendum on a new constitution would be held in May, followed by multiparty general elections in 2010, putting some dates on a vague "road map" to democracy talked about for 14 years.

Subsequent details contain fewer surprises. Enshrining no fewer than 104 "basic principles" laid down by Than Shwe, the constitution will give overwhelming powers to the president, a quarter of seats in the legislature to the military and bar the Nobel Peace Prize winner Aung San Suu Kyi from standing because she had been married to a foreigner.

Some welcome this as movement of sorts, at least formalising some non-government politics. But with Suu Kyi and the ageing clutch of ex-generals running her National League for Democracy under house arrest and most of the "1988 Generation" of former student leaders back in jail, prospects for anything but a sham democracy are thin.

Many expect the junta to quickly form some token opposition parties to its own civilian cheer squad, the Union Solidarity and Development Association, which claims to have 25 million members (out of Burma's 54 million people). After the shock of the last elections - held in 1990, in which Suu Kyi's party won more than 60 per cent of the vote (a result ignored) - fewer chances will be taken.

But if Than Shwe's decision results from external pressure, it probably came from China, whose leaders have urged the regime to speed up democratisation and which could be worried that Burma will join Darfur on the list of blackmail acupuncture points for the Beijing Olympics.

Western governments are trying to influence China and, to some extent, India to go further. The line is that the stability apparently guaranteed by the Burmese generals is fragile: with the civilian economy running down, poverty widespread in a country once the rice bowl of Asia, HIV and avian influenza menacing and an education system that once attracted students from other regional countries deliberately dumbed down under military rule, Burma could descend into chaos.

But this is close to the argument the West uses to try to persuade China's communists to relax their own monopoly on power. And the same nightmare breakdown scenario is used by the influential historian Thant Myint-U, to argue in his book The River of Lost Footsteps for a policy of engagement, not isolation.

Sanctions don't work against generals who care nothing for the outside world and are obsessed with the risk of multi-ethnic Burma falling apart. "There are no easy options, no quick fixes, no grand strategies that will create democracy in Burma overnight or even over several years," Thant Myint-U wrote. "If Burma were less isolated, if there were more trade, more engagement - more tourism in particular - and this were coupled with a desire by the government for greater economic reform, a rebuilding of state institutions, and slow opening up of space for civil society, then perhaps the condition for political change would emerge over the next decade or so."

But the Tatmadaw, at least, is taking seriously Western fantasies about military intervention. During our journey we asked often whether Sylvester Stallone's new Rambo movie, a gory tale of a rescue mission into Burma, has any underground currency. "Please, you not ask," said one pirate DVD peddler in Rangoon. "The Government not laugh. Four years jail."

Sydney Morning Herald