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Clengendael Institute

Xi visits Myanmar – Brings a new BRI port

The Rohingya crisis has ended the West’s love affair with Myanmar, so China moves in further still. Chinese President Xi Jinping paid a state visit to Myanmar on January 17-18, where he met Commander in Chief of the Myanmar Armed Forces Min Aung Hlaing, State Counsellor Aung San Suu Kyi, and President Win Myint.

Countries signed 33 agreements, including 13 related to infrastructure. Main topic of talks was the China-Myanmar Economic Corridor (CMEC), part of China’s Belt and Road Initiative (BRI). The CMEC is a network of road, rail, and waterways connecting Myanmar to China. The most important new agreement within the CMEC concerns the construction of a Kyaukpyu Special Economic Zone (SEZ) on the coast of the Bay of Bengal. Countries signed a first agreement to develop the Kyaukpyu SEZ in 2015, but the deal came to nothing due to political uncertainties and debt-trap worries in Myanmar. Now, the plan is back on track [Chinese President Xi Jinping wraps up Myanmar visit].

The zone’s most important asset is the Kyaukpyu deep-sea port, a perfect natural harbour at the town of Kyaukpyu in Rakhine State. The port’s strategic location is ideal for commercial as well as for military matters; Chittagong is just 216 nautical miles away, Kolkata 335, and the Andaman and Nicobar Islands are a mere 350 nautical miles to the south. Commentators in India are already worrying about the possibility of a Chinese blockade of the islands, using Kyaukpyu as a base [Is China-Myanmar Economic Corridor turning out to be another CPEC?]. Kyaukpyu also has an airport and is home to a base of the Myanmar Navy.

China is quite familiar with Kyaukpyu, as it is the starting point of the Sino-Myanmar Crude Oil and Gas pipelines, which started operating in 2014. Oil is shipped in from the Middle East and the gas comes from Myanmar’s own offshore fields. The pipelines are an important part of China’s long-running scheme, predating BRI by decades, to lessen its dependence on the vulnerable Malacca Strait for oil imports.

Under the new agreement, the Kyaukpyu SEZ includes: the port, a new industrial park, and supporting local infrastructure. The main contractor for the SEZ development is a consortium led by China International Trust and Investment Corporation (CITIC). This company will also operate the SEZ for 50 years under an “initial franchise” agreement with Myanmar. Work on the port is set to start soon with the construction of two new berths for $1.3 billion, able to handle both bulk and container freight. CITIC claims the port will provide $50 billion in tax revenues and 100,000 local jobs [Kyaukpyu port to become model project in China-Myanmar BRI cooperation].

Eventually, the port will be connected by railway to China, with a trajectory running alongside the existing pipelines. This, however, is a separate project still under negotiation. Countries also agreed to continue feasibility studies of proposed industrial zones at Yangon City and at the China-Myanmar border. Finally, China promised help to “relocate” Rohingya refugees and said it would support Myanmar on the international stage.

China and Myanmar are thus clearly getting closer to each other again, but there was one very big elephant in the meeting rooms: the gigantic $3.6 billion Myitsone Dam project which was suspended in 2011. China wants the project to be restarted and Myanmar does not. Chinese state media say the project was not discussed during Xi’s visit, indicating no progress has been made.

Even so, the go-ahead for the Kyaukpyu project is a big boost for China, BRI and navy-wise, and another headache for India in the Bay of Bengal.

Tycho de Feijter

This week's Silk Road Headlines

To increase awareness of and facilitate the debate on China's Belt and Road Initiative, the Clingendael Institute publishes Silk Road Headlines, a weekly update on relevant news articles from open sources.

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