Oct 10 (Reuters) - China and Myanmar have agreed to "properly settle" a dispute over Myanmar's suspension of a dam built and financed by Chinese firms as a Chinese leader hoped "friendly consultations" would bring a solution to ensure cooperation and stable ties.

Myanmar's new civilian president, Thein Sein, suspended the $3.6 billion Myitsone dam in northern Myanmar on Sept. 30 after weeks of rare public outrage over the project in the reclusive and repressive country also known as Burma.

The shelving of the project, agreed by Myanmar's then ruling generals in 2006, was also an unprecedented challenge to China's extensive economic interests in Myanmar, which has long been shunned by the West because of its poor human rights record.

Last week, China called for talks over the dam, which was being built mainly to serve China's growing energy needs but had become a symbol of resentment in Myanmar over China's influence.

Myanmar Foreign Minister Wunna Maung Lwin, visiting China as a special envoy of Thein Sein, met China's Vice President Xi Jinping, who is expected to be China's next president, and Foreign Minister Yang Jiechi.

The two ministers "agreed to properly settle matters" related to the project, and both sides pledged to increase cooperation, the Xinhua news agency said, citing the Chinese Foreign Ministry, without giving details.

"On the problems that have emerged during the course of cooperation, (I) hope both sides, through friendly consultations, will seek a proper solution to ensure China-Myanmar cooperation in various fields and a healthy and stable development of relations," the Foreign Ministry quoted Xi as saying in a statement on its website.

It was the first meeting between officials from China and Myanmar since the project was suspended.

The seniority of the officials involved in the talks and the speed with which the meeting was arranged apparently underscored the importance that China places on the project.

The dam at the confluence of the Mali and Nmai rivers, whose waters flow down into the central Irrawaddy river basin, would flood an area about the size of Singapore.

Many people in the area, which is close to the border with China, as well as environmentalists, have opposed it.

Chinese officials have called the project environmentally safe and a boon to development in Myanmar, struggling with poverty and isolation after years of military rule.

Myanmar's vice-president, Tin Aung Myint Oo, will visit China this month to discuss the dam, a senior Myanmar official said on Friday.

In recent years, Myanmar's leaders have embraced investment from China as a deep and lucrative market for the former British colony's energy-related resources and to counterbalance the impact of Western sanctions.

While China and Myanmar have close economic and political ties, including the building of oil and gas pipelines into southwestern China, there are also deep mutual suspicions.

Thein Sein became president after elections late last year that officially restored civilian rule in Myanmar after nearly 50 years of military rule.

He is due to make his first state visit to another important neighbour, India, from Oct. 12 to 15.

(Reporting by Sui-Lee Wee; Editing by Robert Birsel)

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US diplomat Campbell notes 'dramatic' Burma change
By Rachel Harvey
BBC South East Asia Correspondent

Mr Campbell said meaningful dialogue between the government and Aung San Suu Kyi was taking place
Continue reading the main story
Burma: Battle for Democracy

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Viewpoint: Change one step at a time
Burma sets up human rights panel
Burma's exiled satirists go home
A senior US diplomat has described recent moves in Burma as "dramatic".

Kurt Campbell, assistant secretary of state for East Asian and Pacific affairs, told an audience in the Thai capital, Bangkok, that the United States wanted to see further progress on issues such as political prisoners.

But he promised that concrete steps taken by the Burmese government would be matched by Washington.

His comments came almost a year after Burma's first elections in 20 years.

'Consequential dialogue'
There can no longer be any doubt that things are shifting in Burma. The question is how far any reforms might go and how permanent they might be.

Mr Campbell, a seasoned diplomat with long experience in Asia, chose his words carefully.

There are, he said, "dramatic developments under way" including what he called a "consequential dialogue" between the new civilian-led, military-backed government and the pro-democracy leader Aung San Suu Kyi.

But, Mr Campbell made clear, Washington still wants to see concrete progress on issues that have long been of concern - political prisoners, human rights abuses and continuing conflicts with armed ethnic minority groups.

The Burmese government has hinted that some prisoners will be released soon.

If any such amnesty were to include a substantial number of political detainees - and if it were welcomed by the moral authority of Aung San Suu Kyi - the United States and its European allies may feel they have to offer something substantial in return.
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Lessons in Democracy _Bur_ Incorporating Change July 2011