Burma’s President Thein Sein has suspended construction of the controversial Chinese-backed Myitsone hydroelectric dam.
In a letter read out in parliament on Friday, he said the $3.6bn (£2.3bn) dam in Kachin state was contrary to the will of the people and lawmakers.
Pro-democracy leader Aung San Suu Kyi had joined a rare protest campaign in the authoritarian country.
She had warned that it would displace 12,000 people from 63 villages.
As well as minority groups, environmentalists also opposed the project, arguing it would cause irreparable ecological damage along the country’s main river, the Irrawaddy.
The vast majority of the electricity produced would also be for the benefit of China.
“The president sent a message comprising 10 points to the parliament this morning. One of them said that the construction of the dam on the Irrawaddy will be shelved during the term of his government,” one official at parliament was quoted by Reuters news agency as saying.
“He said that his government, being born out of people’s desire, has to act according to the desire of the people,” said the official, who declined to be named because he was not authorised to speak to the media.
The U-turn will be seen as a victory for Aung San Suu Kyi, commentators say - and a blow for conservative elites with links to Chinese investors who had backed the project.
It is also a rare step against China, a key ally of isolated Burma.
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