Losses in Rakhine State will deal devastating economic blow to Myanmar junta

The military junta is on course to lose billions of dollars in revenue from resource-rich Rakhine State after losing a series of towns to the Arakan Army (AA) since last year, based on ministry data. As the Rakhine ethnic armed group continues to gain ground in the state since launching an anti-junta offensive in November 2023, the military stands to lose more than territory and naval bases on the Bay of Bengal. The ongoing battles are also jeopardising valuable economic assets and lucrative foreign trade relationships and investment partnerships. If the coast and border with Bangladesh fall under the control of the Arakan Army, the junta will lose revenue from beach tourism, customs, and taxes on border trade. Trucks at a trade zone in Maungdaw Township, Rakhine State near the border with Bangladesh (Photo – Rakhine Chamber of Commerce and Industry Facebook) Moreover, pipelines running through the state—partly backed by Chinese and other foreign investment—are needed to transport oil and natural gas extracted from offshore fields on the western coast through central Myanmar to refineries in China’s Yunnan province. Myanmar earned nearly US $43 million from gas pipelines and over US $64 million from oil pipelines in the 2018-2019 fiscal year. There is heavy investment from China in Rakhine State. The Chinese state-owned Power China Resources and Supreme Group co-owns a natural gas power station in a joint venture with a Myanmar company. The Hong Kong-based V Power company operates three other gas-fired power plants in the state, although the company announced plans last year to cease operating the power plants due to political unrest and economic instability in the country. There are also as many as 28 currently active foreign investment projects in Rakhine State—worth US $9.2 billion altogether, according to data from the junta-controlled ministry of investment and foreign economic relations. Clashes between the AA and Myanmar military have broken out recently in Rakhine State’s coastal townships including Kyaukphyu, the site of a planned deep sea port and special economic zone development project with a value of at least $7 billion, financed by Chinese investment. Junta officials touted a new, “supplementary” contract for the project in December last year, holding a signing ceremony with representatives of Chinese state-owned enterprises. China’s influence has been visible in both AA and junta officials’ decisions in the ongoing conflict, and Chinese officials have taken enough of an interest in Myanmar’s internal conflicts to mediate negotiations between the Myanmar military and ethnic armed organisations including the AA. The AA has held back from launching full-blown assaults on Kyaukphyu without at least tacit approval from China. In an apparent bid to assuage mostly Chinese investors’ concerns, the AA vowed in a March public statement to “protect lives and the security of investment projects, businesses, and personnel” from foreign countries in Rakhine State. Since a truce brokered by Chinese officials in January 2024 brought a temporary halt to hostilities in northern Shan State between the Myanmar military and the Brotherhood Alliance—of which the AA is a member—talks aimed at achieving the same in Rakhine State have been ongoing, but the most recent round of talks has failed to yield any tangible agreement. The AA has now captured nine townships in Rakhine State—namely, Myebon, Minbya, Mrauk-U, Kyauktaw, Pauktaw, Rathedaung, Buthidaung, Ponnagyun, and Ramree (Yanbye)—as well as Paletwa Township, Chin State. If its recent efforts to capture Maungdaw prove successful, the AA will control all of the 270-km Bangladesh-Myanmar border. According to Soe Thura Tun, the minister of energy and electricity for the publicly mandated National Unity Government—the shadow cabinet formed after the military coup to oppose the junta—the battlefield situation in Rakhine State could change the bearing of China’s and other foreign countries’ influence on Myanmar politics. “As the AA acquires control over more territories, it will be able to reduce the coup regime’s flow of income, if not completely cut it off, as well as raise more funds for the revolution. Another factor is the fact that India and China now have no choice but to acknowledge AA’s dominance over the region,” the minister said. The AA has stated in the past that its fight against the military is motivated by the desire for greater autonomy in Rakhine State, and by the injustice that the state is one of Myanmar’s most impoverished areas despite its wealth of resources. The Arakan Army leadership’s stated aim is to achieve autonomy for the people of Rakhine State within a “confederation.” They have pointed to the Wa territories in Shan State, where the Wa ethnic community exercises a high degree of legal and de facto autonomy, as an example.

Losses in Rakhine State will deal devastating economic blow to Myanmar junta

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