Powering a conflict: the Kachin Independence Organisation's hydropower business

While Tatmadaw and Kachin Independence Army soldiers face off in a long-running conflict, a company owned by the Kachin armed group has been profiting from the sale of power to government-controlled Myitkyina and Waingmaw townships.

By YE MON | FRONTIER
Photos HKUN LAT

This story was supported by the Pulitzer Center on Crisis Reporting.

For nearly two decades following its 1994 ceasefire, the Kachin Independence Organisation built up a business empire that intertwined formally with the state.

The vehicle for many of these businesses is Buga Co Ltd, which the KIO’s economic department registered with the Directorate of Investment and Company Administration in early 1995.

But after the resumption of conflict in June 2011, many of Buga’s businesses unraveled or were forced into the black economy. A sugar factory in Namatee, Mogaung Township, was forced to stop operations later in 2011. A tourism office at Laiza, where the KIO is based, that sought to encourage visits by Chinese and Myanmar tourists has long ago shuttered. The company has also been forced to scale back its mining concessions, including at jade-rich Hpakant.

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But one Buga business has continued to prosper: electricity production and distribution. Since 2007, it has been selling electricity to government-controlled areas of the state under a 20-year agreement struck with the former military regime.

While a cascade of China-backed megadams has been planned for Kachin State, the projects have been stalled by local opposition and the conflict between the Tatmadaw and KIO.

As a result, the Ministry of Electricity and Energy produces only minimal amounts of electricity in Kachin State and there is little transmission capacity to import power produced elsewhere in Myanmar. Other regions are also facing their own supply shortages, particularly during hot season.

For the Myanmar government, maintaining a reasonable supply of electricity to the state capital Myitkyina and surrounding areas has evidently been more important than where the money from the power bills is going.

Still, the result is that every time a resident of Myitkyina or Waingmaw turns on the lights – including government employees – they are effectively helping to finance the war against the Tatmadaw.

The Ministry of Electricity and Energy did not respond to requests for comment.

Daw Doi Bu, a former lawmaker from Kachin State, said even the military’s Northern Command was buying electricity from Buga.

Power shortages were so acute that the government had no choice but to stick to the agreement, regardless of the conflict between the KIO and Tatmadaw.

“If the government doesn’t buy from Buga, how will we get any electricity at our homes?” she said. “It’s not about conflict, it’s just business. But I don’t know what will happen after the contract expires.”

Since 2007, Kachin Independence Organisation linked company Buga has been supplying power to government-controlled areas of Myitkyina and Waingmaw township, including government offices. (Hkun Lat | Frontier)

Since 2007, Kachin Independence Organisation linked company Buga has been supplying power to government-controlled areas of Myitkyina and Waingmaw township, including government offices. (Hkun Lat | Frontier)

The road to Laiza

To learn more about Buga’s activities, Frontier visited Laiza in March to meet senior officials from the KIO.

Despite the conflict, Myanmar citizens do not need formal permission from the Myanmar government to cross the front lines and travel to Laiza.

At a Kachin Independence Army checkpoint near Nam San Yang village, on the Myitkyina-Bhamo Highway, we provided our personal details to the soldiers. Our share taxi was soon waved through.

Before arriving in Laiza, we were stopped at another checkpoint manned by KIA soldiers and members of Pat Jasan, a grassroots Christian anti-drug movement formed in 2014.

They searched the car and all of the people in it for drugs. If they suspect any people travelling in the vehicle are drug users, they force them to take a urine test that immediately reveals whether traces of drugs are present in their bodies.

In our car, a man and his wife were tested; the man failed the test. Pat Jasan members detained him and he will be required to spend six months in a rehabilitation camp in Laiza. Our driver said the detainees are released at the end of the six months if they are considered to be “normal”. At a toll gate at the entrance to Laiza, our car was checked again.

Laiza itself has the feel of a Chinese town. Most residents and visitors use yuan rather than kyat, and Mandarin is widely spoken. A border gate links to China’s Yunnan Province.

There are two large hotels in town, the Laiza Hotel and the Shin Li Hotel; the latter is close to KIO offices and fills up with KIO officials whenever there is a meeting.

In Laiza market and the downtown area, it’s common to see soldiers from not only the KIA but also the Arakan Army and All Burma Students’ Democratic Front. Both the AA and ABSDF have headquarters in KIA territory close to Laiza.

Shortly after arriving we tried to arrange a meeting with Lieutenant General Gun Maw, vice chairman of the Kachin Independence Council, to discuss the KIO’s position on hydropower projects in Kachin State. However, he declined to meet with us, instead directing us to other KIO officials.

KIO general secretary Sara Kaba Hting Nan said the group was neutral on the Chinese-backed hydropower projects and would not get involved in discussions between the Myanmar and Chinese governments. He declined to answer questions about Buga, instead referring questions to the company’s managing director, La Taung.

Buga Co, Ltd managing director La Taung (top right) speaks to Frontier in Laiza about the company's operations, including its small plant on the outskirts of Laiza (top left and main photo). (Hkun Lat | Frontier)

Buga Co, Ltd managing director La Taung (top right) speaks to Frontier in Laiza about the company’s operations, including its small plant on the outskirts of Laiza (top left and main photo). (Hkun Lat | Frontier)

The Buga operation

When we met later at the lobby of the Shin Li Hotel, La Taung was more than happy to provide details about Buga’s electricity business.

He said the company operates three relatively small hydropower plants in Kachin State and has around 400 staff. The first plant to be completed, on Mungla Creek, has a capacity of 4 megawatts and provides power to Laiza.

Completed in 2006, the Mali Hka plant has installed capacity of 10.5MW and reportedly produces up to 53.5 gigawatt hours a year. The third plant is Dabang Hka (also known as Pajau), which has a capacity of 14MW. Both supply power to Myitkyina and Waingmaw.

During rainy season, Buga shuts down its plants because the water flow is too strong. It instead buys power from state-owned Chinese firm State Power Investment Corporation (formerly China Power Investment) for K60 a unit from the company’s 99MW Chipwi Nge hydropower plant.

Built to provide power for the construction of the now-suspended Myitsone and Chipwi megadams, Chipwi Nge has been significantly underutilised since coming online in 2011. Shortly after construction finished, the Myitsone Dam was suspended and fighting broke out, forcing work to stop at the Chipwi project.

For the most part, power has not been diverted to the national grid. Various reasons for this have been given by different sources, including low demand, damage to infrastructure and limited transmission capacity. But Chipwi Nge seems to be figuring increasingly in the government’s plans. In July 2018, a SPIC subsidiary signed a power purchase agreement with the Ministry of Electricity and Energy to buy power from the project.

“If we don’t buy power from them [SPIC], their plant [Chipwi Nge] would face problems. The generators degrade faster when they are not operating,” said La Taung.

The charges that Buga levies on customers have been controversial. In 2016, the company was forced to cut its tariff for households from K160 per unit (megawatt hour) of electricity consumed to K110. Businesses continue to pay K160, while government departments, religious buildings and streetlights incur K100 a unit.

This is significantly higher than what the state power provider charged prior to July 1, when residents elsewhere in Myanmar were paying K35 to K50 a unit and businesses a maximum of K150.

Residents have also complained about supply. When Frontier visited Myitkyina in March, there were at least two power cuts a day.

Resident Seng Awng said households in Myitkyina were unhappy at paying more than their counterparts in other regions and wanted Buga to reduce the unit rate.

“At our place, we were charged about K8,000 a month. But we understand that Buga faces some challenges to run its hydropower plants. If they don’t reduce the unit price, we can still afford to pay it,” he said.

Since the Ministry of Electricity and Energy increased power prices on July 1, the state tariff is now closer to what Buga charges.

La Taung pointed out that Buga was charging less than most other non-state power providers in Myanmar. In some other states and regions where there is no national grid access, it is common to pay above K200 a unit, he said.

He also confirmed that Myitkyina and Waingmaw suffered regular outages, which he attributed to the poor condition of the transmission lines. The company is building new transmission lines that should improve supply, he added.

But Doi Bu, the former lawmaker, said the price was still too high. “We don’t care how much other states are paying,” she said. “What we really need is electricity from the national grid.”

A small hydropower station operated by Buga Co Ltd that provides power to Laiza. (Hkun Lat | Frontier)

A small hydropower station operated by Buga Co Ltd that provides power to Laiza. (Hkun Lat | Frontier)

The politics of power

One of the challenges Buga faces is the inability of its executives to regularly visit the company’s head office in Myitkyina for fear of arrest.

La Taung said he now manages Buga from Laiza because he is concerned about being arrested under the Unlawful Association Act for links to the KIO. Under the colonial-era law, any person who is a member of an unlawful association, takes part in meetings or “in any way assists the operations of any such association” faces a minimum of two and maximum of three years in prison. Those who manage or assist in the management of an unlawful association face three to five years.

“Sometimes in the past we have negotiated with the state government so that we can go to our office in Myitkyina. [Without their approval] we are afraid to go there,” La Taung said.

The conflict has also dashed some of the company’s aspirations. La Taung said that prior to June 2011 Buga had been negotiating with the state-owned Electric Power Generation Enterprise to distribute the power across the entire state. The talks stopped when the ceasefire broke down, he said.

“Recently, the government asked us to distribute power to Hpakant and Tanai townships but we can’t do it at the moment. We are concerned that we will not have enough power to meet demand. We just want to make sure we offer a good supply to Myitkyina and Waingmaw,” he said.

La Taung said Buga generates annual revenues of K4 billion (US$2.65 million) from its electricity business but was yet to recoup its investment in the three hydro projects.

“We understand that [electric power] is a long-term investment,” he said.

But the electricity distribution business is not just about making money, he said. The KIO believes it brings a social benefit to the Kachin people by, for example, enabling children to study at night time and reducing deforestation from cutting wood for fires.

Asked why the government continued to allow Buga to sell power even while the Tatmadaw fights the KIO, La Taung said there were few other options to supply power to Myitkyina. Before it invited Buga to distribute and sell power to Myitkyina and Waingmaw, the military government was spending large amounts of money to run generators in the state capital.

“And besides,” he added, “we have an agreement.”

About this series:

This is the final installment in a three-part series examining hydropower, conflict and Chinese investment in Kachin State that was supported by the Pulitzer Center on Crisis Reporting. Earlier articles focused on a hydropower project on the front lines in Kachin State and the cascade of mega-dams that SPIC plans to build north of the Ayeyarwady River confluence.

TOP PHOTO: Buga’s first hydropower project was a 4 megawatt plant on Mungla Creek near Laiza. (Hkun Lat | Frontier)

By Ye Mon

By Ye Mon

Ye Mon started as a reporter at Pyithu Khit news journal in 2011. Prior to joining Frontier, he worked as a reporter at the Myanmar Times and on the DVB English team.
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